Indiana makes ‘Major Moves’

In 2006, Statewide Mobility Partners, a joint venture between Spain-based Cintra Concesiones de Infraestructuras de Transporte and Australia-based Macquarie Infrastructure Groupe, took over management of the Indiana Toll Road (ITR) with an up-front payment of $3.8 billion on a 75-year lease. Cintra and Macquarie formed the Indiana Toll Road Concession Co. (ITRCC), which operates and manages the 157-mile roadway.

The Indiana project, along with Chicago's 2005 sale of the concession on its Skyway Toll Bridge to the same two companies, are mentioned in a letter to state officials from the House Committee on Transportation and Infrastructure urging states to be cautious about entering PPPs that may not serve the long-term public interest. “These deals make good business sense to the companies that are investing in the projects, but we have serious concerns about whether these transactions offer a net balance of benefits for the American people,” the letter states.

Indiana officials maintain that the state is benefiting from the arrangement. “[The ITR] was an under-performing state asset that had not made money in five years,” says Andy Dietrick, communications director for the Indiana Department of Transportation (IDOT). Indiana Gov. Mitch Daniels looked at Chicago's deal as a model and proposed the lease, Dietrick says.

The state used the $3.8 billion from the lease agreement to fund new road infrastructure as part of IDOT's 10-year construction plan. “When Gov. Daniels came on board as governor there was a transportation funding gap that was identified by a series of meetings around the state [with] local officials,” Dietrick says. As a result, projects were identified and assessed according to their feasibility, connectivity and economic development impact.

The list was narrowed to more than 400 projects in three main areas: new construction, major preservation and resurfacing. “The problem was that construction program, which was dubbed ‘Major Moves,’ had a price tag of $2.8 billion, which the state of Indiana did not have,” Dietrick says.

Rather than raising taxes or turning to traditional sources of funding, Daniels began looking for alternatives. Daniels and state officials chose to lease the ITR to Statewide Mobility Partners.

Along with covering the $2.8 billion cost of Major Moves, the $3.8 billion lease provided $500 million that was placed into the “next generation” fund that builds revenue for future projects. “There were disbursements to all 92 counties [in the state] to help them with their local infrastructure,” Dietrick says.

While the ITRCC may raise the cost of tolls, the state would have done that, too, to cover the toll road cost, Dietrick says. Having money in the bank from the ITR lease gives the state more flexibility to build new infrastructure and keeps costs down by allowing IDOT to avoid paying more for material as prices increase over time, Dietrick says. Also, ITRCC must meet strict requirements, including making improvements, such as adding lanes and implementing electronic tolling, or forfeit its claim to the toll road.

While the state will not see any revenue from the ITR for the next 65 years, Dietrick says the immediate investment will provide huge benefits to the transportation system and any industry that requires transportation infrastructure. “We would not have been able to do what we're doing without the infusion of cash from the lease of the toll road,” Dietrick says.

Texas says no to PPPs

In May, Texas issued a moratorium on comprehensive development agreements (CDA), which are a type of contract used in PPPs. The same legislation also gives the Harris County, Texas, Toll Road Authority (HCTRA), the first option to build local toll roads in the heavily populated county, which includes Houston. Both actions are connected to the controversy about the state's proposed Trans-Texas Corridor, says Harris County Judge Ed Emmett.

Emmett says the problems began when the state sold its first toll facility, TTC-35, to Cintra and San Antonio-based H.P. Zachary. “The local farmers and ranchers and a lot of people in Texas just went ballistic over the concept of the Trans-Texas Corridor because it was taking up far too much land, and the fact that the very first project was a 50-year lease to Cintra,” Emmett says.

At the same time, Harris County was considering selling its toll roads, which have been in existence for about 20 years, but decided against it. “We thought maintaining control of our toll roads was a better thing,” Emmett says. “So, we went to the legislature this past session and had bills signed to say [only HCTRA] has the right to develop toll roads in Harris County, period.”

Meanwhile, when the chairman of the Texas House Transportation Committee would not hold a hearing on the CDA moratorium, the bill's sponsors decided to attach it to the Harris County bill as an amendment. They were able to do so, Emmett says, because of the 150 members of the Texas House, 110 were co-sponsors of the moratorium. The bill later passed 139 to 1. Emmett says that, while some PPPs are still being considered, the state legislature “has made it real clear that they are not real enamored with [CDAs].”

Keeping control over the HCTRA allows the county to use revenue from the toll road to develop others, such as connector roads and free lanes. “It allows us to control the timing and the order in which these get built, and, in the long run, it allows us to control the price, as opposed to having a private interest that has a profit motive [as a partner],” Emmett says.

With or without PPPs, Emmett says, toll roads will continue to grow in popularity, at least in Texas. The increasing number of fuel-efficient vehicles has led to a decrease in revenue from the state's flat fuel tax because less gasoline is being sold. As a result, the Texas Department of Transportation has announced that all of its revenue will now be used for maintenance only. “[Toll roads are] the only way major highways are being built now, simply because there are no funds,” Emmett says. “Nobody's in the mood to go in and massively increase taxes, so as long as that's what's coming out of Austin, we'll be doing toll roads.”