Sunday, October 19, 2008

"They are taking our power of taxation, tolling, and they are making money off of it."

After privatization, Indiana Toll Road's biggest difference is the price

October 19, 2008

The Dallas Morning News
Copyright 2008

ELKHART, Ind. – The welcome signs still say "Indiana." The truck stops sell the same greasy hamburgers. And the road still carries thousands of drivers daily across the far northern part of the state between Ohio and Illinois.

But motorists on the 157-mile Indiana Toll Road have noticed one big difference since it came into private hands: They are paying higher tolls for the first time since 1985.

Fees for cash-paying car motorists who drive the whole road nearly doubled recently. Truckers pay even more. Toll rates, which the state partially regulates, are expected to double again within 10 years.

"The American trucker would like to thank Indiana for raising our tolls," Bruce Mansavage, a 51-year-old trucker from Pine City, Minn., said sarcastically during a recent stop in Indiana.

Texans need look no further than the Hoosier State for a glimpse at what private toll roads might mean for them.

While the models are different, the concept is the same. Texas is looking at private firms to build and run new roads, while Indiana privatized a highway that opened in the 1950s. But both states are outsourcing toll roads in exchange for upfront cash, using that money to build new highways.

Profit vs. maintenance

Indiana became the first state to privatize a major highway in 2006, when it handed over the toll road's operation and profits to an overseas consortium through 2081.

The firms, Cintra of Spain and Macquarie of Australia, gave Indiana $3.8 billion, which the state is using for roads.

The deal drew fire from critics who believed the firms would value profits over maintenance. Indiana Gov. Mitch Daniels said the road eventually will be "dramatically better." Supporters in Texas have used the same argument.

Mr. Daniels, a Republican, said his state would never have been able to generate nearly as much cash if the operation had stayed public. The Indiana Toll Road has not made a significant profit since the 1950s, Mr. Daniels said.

The governor believes lawmakers did not have the resolve to pass regular toll increases. Privatization will, in effect, outsource that problem, he said.

Roger Skurski, a retired economics professor at the University of Notre Dame, dismisses that argument.

"It took a lot of political will to come up with" privatization, Mr. Skurski said.

Indiana's Democratic House speaker, B. Patrick Bauer, an outspoken critic of both the road deal and the governor, said the road was never intended to turn a profit. Tolls were kept low and used only to subsidize the road's operation.

"They are taking our power of taxation, tolling, and they are making money off of it," Mr. Bauer said of the consortium.

No clear advantage

The few visible changes on the road have diminished arguments that either the private or public sector has an advantage in road maintenance.

The road carries more than 50,000 vehicles daily on its busiest sections and has neither crumbled into ruin nor gotten substantially better in the consortium's first years.

The state requires the companies to repave rough patches and make other upgrades as part of a maintenance agreement.

Crews have resurfaced long stretches. And aging, full-service rest stops also are slated for a redo.

"If you see work being done, patrons in general are more likely to accept [toll] increases," said Matt Pierce, an Indiana Toll Road spokesman.

Fears that the consortium would fire many of the toll road's 550 employees also appear unfounded, though the firm has trimmed jobs through attrition.

The first two years have seen some setbacks. When the consortium took over, it installed barriers at median turnabouts to discourage U-turns, causing some motorist confusion. And the consortium had trouble clearing the road of snow after storms in early 2007.

Mr. Pierce acknowledged a few early hiccups but rejected suggestions that the consortium has not lived up to its side of the bargain.

"If [the private operators] don't maintain it, guess what? They lose it," he said.

'Not there yet'

Tolls – and tollbooths – have undergone major changes, however.

The consortium has spent $40 million upgrading the tollbooths, which now have more lanes and pay-without-stopping technology.

Rates for motorists who pay cash and drive the whole road rose to $8 from $4.65. Tolls for semitrailers are $27.25, up from $14.55 in 2006.

The contract also allows the consortium to raise rates slightly every year, starting in 2010. Those increases could average 2 percent to 5 percent annually.

Indiana is subsidizing prices for some motorists through 2016, at a cost of $190 million.

The new toll rates have doubled the road's revenue to about $160 million a year.

Tom Martin, 65, a retired sales executive who lives in the Milwaukee suburbs, questions whether the improvements are worth higher tolls.

"That was technology that was coming, regardless of who owns this thing," said Mr. Martin, who stopped recently at a service area here.

Ronald Hopkins, a 55-year-old bus driver, said he enjoys traveling on the adjacent Ohio Turnpike more. Tolls on that publicly run road are slightly lower, and the road is in better condition, he noted.

He cares little about who's running the Indiana Toll Road, as long as tolls are reasonable and he gets something in return.

The road "is not there yet, but it's better than it was," he said.

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