GRANGER, Ind. (AP) Like its motto, Indiana was at a crossroads a year ago.
In need of money for major road improvements, the state dubbed “The Crossroads of America” decided against raising taxes or selling bonds. Instead, by a narrow General Assembly vote, it leased the Indiana Toll Road to a private, Spanish-Australian company for $3.8 billion. In exchange, the company will keep the tolls for the next 75 years.
The wisdom of that decision is still being debated in Indiana and other states as the June 29 lease anniversary approaches.
Gov. Mitch Daniels, who lobbied hard for the lease to pass, points to the $11.9 billion in road construction expected in Indiana through 2015 made possible with money from the deal. He also said the upfront money Cintra-Macquarie paid for the road has earned $174.5 million in interest, which will help the state’s finances.
Opponents counter that the lease is a quick-fix dead end. They argue the money will be gone within 10 years and future generations will be left to pay the bill.
The arguments are familiar.
“What’s changed in the past year?” said House Speaker Patrick Bauer, one of the proposal’s staunchest opponents.
Motorists who drive the highway that stretches 157 mi. from the Illinois to Ohio borders say not much.
“It’s just easy to make an easy assumption that it was negative or positive, but I don’t know,” said Nina Howard of Elkhart at a rest stop in her hometown.
But the Indiana deal and the $1.83 billion Chicago will receive for a 99-year lease of the Chicago Skyway have changed the way states look at toll roads as revenue producers. Other states, including Pennsylvania and New Jersey, have considered leasing major toll roads, but so far none has followed the lead by Indiana and Illinois.
And change along the toll road is under way, said Matt Pierce, a spokesman for ITR Concession Co., the private firm that runs the road. Electronic tolling began June 25 from Illinois to Portage, and the lease calls for a third lane to be added in that area to relieve congestion.
Thomas Gresik, an economics professor at the University of Notre Dame, said leasing roads to private companies can work.
“The idea itself is a very sound idea. But like any other economic transaction, whether it is ultimately good or bad depends on the price,” he said. “Having that money up front makes the actual economic benefit much larger than $4 billion because we can make improvements today that are going to attract new companies.”
Bauer said the problem with the deal is the state will have money for road projects for 10 years — although he doubts it will last that long — while ITR will be making profits for the next 65 years.
“Our hands are tied for four generations,” Bauer said.
However, Daniels argued that the deal is an investment.
“The money won’t be gone in 10 years. It will be here in billions of permanent assets we leave for our children,” he said.
Road projects that would have been on the drawing board for years will be completed using lease money, Daniels said.
The state is expected to steadily increase the amount it spends on road projects. According to the state Department of Transportation, Indiana spent $775 million in road construction for fiscal 2004.
It dropped to $686 million a year later. During the past year, the department spent $788 million on roads, which was expected to increase to nearly $1.5 billion by 2015.
Not everyone agrees with Gresik and Daniels that it is a good deal.
Tim Lynch, senior vice president of American Trucking Associations, said his group opposes most such leases because they take money away from roads. The fact that Indiana is pouring the money back into roads helps some, he said. But ATA is still concerned that tolls could get too high and cause truckers to find alternate routes through Indiana towns.
Tolls already have increased for truckers. Rates for trucks with five axles increased in May 2006 for the first time in more than 20 years, from $14.55 to $17.90. It now costs $22.60 and will increase to $27.30 on April 1 and to $32 in 2009.
Trucker Don Finstad of Eau Claire, Wis., who drives the toll road regularly, said he’s not too concerned about the rates.
“If they get high enough, the owner-operators, we’ll get off the toll roads and go around,” he said. “And I don’t think people are going to want big trucks going through their small towns.”
The tolls for passenger vehicles were expected to rise from $4.65 to $8 when electronic tolling is fully implemented by November.
That’s when Bauer expects to hear a public outcry.
“The hostility will be there because then it will be more visible that you’re contributing to this foreign corporation,” he said.
Daniels believes that as people see the benefits of the roads being built around the state they will realize the value of the lease deal.
“Billions of dollars of new assets we buy without a penny of tax increase, without a penny of borrowing left for our kids,” he said. “Look at what they’re doing in 49 other states where they’re raising the gas taxes, borrowing ungodly amounts of money just to pay for today and you’ll see what a great deal we got.”