Raw Deal: Private toll company weasels sweetheart deal out of Cibolo

So what’s in that controversial private toll road contract?
By Terri Hall
March 9,2017

After a controversial decision by the Cibolo City Council to give development rights for a private toll road to a corporation that's never even built a road last week, Cibolo Mayor Allen Dunn has been busy shooting the messenger. The Development Agreement, kept secret from the public prior to its approval last week, was finally made public and it verifies and validates citizen concerns. When the terms of an exclusive 50-year development agreement was negotiated in secret and handed to a single private firm in a no bid contract, it shouldn't surprise elected officials when the public is irate.

The city signed an irrevocable development agreement with, Cibolo Turnpike, an entity created by the investors of Texas Turnpike Corporation. The draft operating agreement requires the city to repay all the company's debt and the net present value of future distributions (anticipated revenues) if it wants out of the deal -- after it's built. There is no other way out for the city, however, there are lots of exit strategies for the company.

So what are some of the other red flags? First, the agreement seeks to give operational control of the non-toll portion of FM 1103, a state highway, to the private company.
Read more: Raw Deal: Private toll...

Secret agreement handed private toll firm control of public roads

How sad that this happened just days before we celebrate Texas Indepenence Day, March 2.

City hands control over public roads to private firm
By Terri Hall
March 1, 2017

In a stunning betrayal of open government, the Cibolo City Council voted 6-0 to approve a 50 year development agreement with Texas Turnpike Corporation (TTC) granting it the exclusive right to build, operate and maintain what’s been dubbed the Cibolo Parkway — a tollway linking I-35 to I-10 through mostly rural farmland northeast of San Antonio. The agreement was negotiated behind closed doors and was kept secret from the public until it was approved last night.

Even worse, the city council gave TTC the rights to develop a project the taxpayers have already paid for, the expansion of FM 1103, the city’s primary connection to I-35. By doing so, they’ve granted a private corporation a virtual monopoly over the existing non-toll competitor to its private toll road. TTC can intentionally slow down the free option to force more cars onto its for-profit toll road by manipulating speed limits, access points, and stop lights. It’s a developer’s dream and a commuter’s worst nightmare.
Read more: Secret agreement handed...

Lone Star Rail survives through link to I-35 toll lanes

Link to article here.

Lone Star Rail resurrected by link to I-35 toll lane debacle

By Terri Hall
Selous Foundation for Public Policy Research
August 24, 2016

The saying that two things are inevitable — death and taxes — just got expanded to three things: death, taxes, and government boondoggles that never die. Yesterday, the day after the Alamo Area Metropolitan Planning Organization (AAMPO) unanimously rejected funding further study of the Lone Star Rail which was on the heels of the Capitol Area Metropolitan Planning Organization (CAMPO) pulling its funding, the Bexar County Commissioners Court passed a resolution to transfer the Lone Star Rail environmental study from the Lone Star Rail District to the Texas Department of Transportation (TxDOT). So now, not only will every Texan’s state gasoline taxes be paying for this rail boondoggle at the state level, the resolution also called for moving the rail corridor over to Interstate-35, despite the Texas GOP platform's plank opposing rail.

The Lone Star Rail project envisions a 77-mile commuter rail between Austin and San Antonio, and it’s been studied since the creation of the Lone Star Rail District by the Texas Legislature in 1997. Over $20 million in taxpayer funds have already been spent on studying the feasibility of the corridor, and the price tag is somewhere between $2-$3 billion (that’s a big range). Union Pacific announced in February it would not allow the rail project to utilize its tracks. The feds passed on granting the project federal funding. Then the Chair of CAMPO, Will Conley, decided enough is enough and led the charge to have the board vote to defund the project August 8, leading all to believe it was the death knell for the Lone Star Rail.
Read more: Lone Star Rail survives...

Report reveals private equity toll roads a bad deal for taxpayers

Link to article here.

Public private partnerships are one thing both liberal and conservatives can agree on - they're a BAD deal for taxpayers.

Report Examines Equity In Toll Road Deals
Policy paper from the Center for American Progress addresses misconceptions about the way toll roads are financed.
The Newspaper.com
August 12, 2016

States have increasingly turned to tolling as a solution to heir funding and infrastructure problems. Private tolling companies end up with very little skin of their own in the game when making deals to take over roads, according to a report released Wednesday by the Center for American Progress, a liberal think tank. The group reviewed the US Department of Transportation's Transportation Infrastructure Finance and Innovation Act (TIFIA) federal loan program and found that the two dozen toll road projects it financed with taxpayer dollars had an average value of $1.3 billion, but the average equity investment was just $183 million, or 14 percent.
Read more: Report reveals private...

Cintra hands SH 130 to its creditors

Link to article here.

Texas’ first foreign-owned toll road handed to its creditors

By Terri Hall
August 15, 2016
Selous Foundation for Public Policy Research

It was so predictable. The people of Texas revolted against former Governor Rick Perry’s grand network of toll roads, once dubbed the Trans Texas Corridor, and many grassroots groups that sprung up to oppose it predicted its eventual demise. The press, always eager to jump on the ribbon cuttings, seldom show you the angling inside bankruptcy court, yet that’s where State Highway 130 Concession Company ended up. As part of its Chapter 11 bankruptcy, Spain-based Cintra and San Antonio-based Zachry ceded the delinquent toll project to its creditors Friday.

The southern 41-mile stretch of SH 130, a bypass designed to avoid Austin traffic from Mustang Ridge to Seguin, opened with much fanfare in November of 2012, including an appearance by Perry who hailed this first public private partnership (or P3) as highway nirvana and ‘visionary.’ But crony capitalism is as old as dirt and taxpayers didn’t see it as anything other than graft.
Read more: Cintra hands SH 130 to...

Cintra's SH 130 toll road goes bankrupt

Link to article here.

Texas’ first public-private toll road goes bankrupt
By Terri Hall
March 2, 2016
Examiner.com

It's appropriate that on Texas Independence Day, March 2, Texans got to formally declare independence from its bondage to a tremendously unpopular, anti-liberty public private partnership (P3) contract as a result of Cintra's bankruptcy on SH 130 (segments 5 & 6, the southern 41 miles of the 86-mile tollway). It's been just over three years since former Governor Rick Perry's grand toll road experiment began on this stretch of highway.
Read more: Cintra's SH 130 toll...

Problems with ‘market driven’ road maintenance approach

Link to article here.

Though this is a very partisan viewpoint, her points about the pitfalls of road privatization are spot-on.

Problems with ‘market driven’ road maintenance approach
By Judy Ferro
Idaho Press
February 16, 2015

Recently Sen. Jeff Siddoway helped me realize that not all Republican legislators who’ve supported measures designed to destroy the public schools want to destroy the public schools. Now I’m hoping that Idaho also has Republican legislators who don’t realize that measures they support are designed to end public ownership of roads and bridges.

Sound impossible? Check out this headline from Bloomberg.com, “CPP Investment Board to buy 10 percent of 407 Toll Road for About $878 million.” That’s right. Corporations with $2 trillion sitting in banks are seeking profitable investments. Maybe people can’t afford to buy new things, but they’ll pay for necessities like roads.

Republicans claim that we can’t take care of roads and bridges today because we can’t pay for them. Never mind that in the 1950s — definitely not boom years — we embarked on an interstate highway system that was the envy of the world. Republicans then supported building roads because such long-term investments would help both businesses and people. For Democrats, there was the added bonus of good-paying jobs. Today’s Republican leadership, however, is more interested in making the rich even richer.

Since 2008, the transportation policy of ALEC — the American Legislative Exchange Council — has called for a “market-driven highway system” and “private investment in highway projects.”

“Tolling,” charging to use roads, is the subject of five of its seven principles. Do I need to remind you that several Idaho legislators are ALEC members? Loyola University economics professor Walter Block published a major book urging privatizing roads in 2009. Ted Stossel, Peter Samuel, David Klein and Linda and Morris Tannehill have echoed his call. Most cite “reducing congestion” as the No. 1 argument for privatizing.

Road crowded? Just charge more. Make those who can’t afford a $5 toll each day to crowd into side streets so the paying customers can cruise without delays. Economics professor Bruce L. Benson suggests privatizing even those side roads and giving the owners the power to police the environs so they can guarantee the safety of their customers.

Just how high would tolls have to be to provide a private police force? Powerful people who crusade against “one more cent” in taxes aren’t worried about your pocketbook. They have no qualms about you having to pay whatever the market will bear to corporations like Toll Road Investors or CPP Investments. And toll supporters don’t have to convince the public to support privatization. They just have to prevent us from maintaining our decaying roads and bridges long enough that fear of death or injury builds.

A collapsing bridge killing a dozen or more and embroiling the state in lawsuits would be a boon for them. And once we let our roads and bridges go, the chances of buying them back are nil. How do we retain our public infrastructure? To start off, we should follow Siddoway’s lead and give maintaining our roads and bridges a higher priority than new tax cuts. Idaho already collects the least taxes per person of any state.

Then we should spread the cost over a number of measures. Legislators are considering increasing user fees for long-haul trucks, vehicle registration fees and the gas tax. (It’s doubtful congressional Republicans can increase the federal gas tax; the Koch brothers and other oil billionaires are against it.)

There is also talk of increasing the sales tax another cent. Or we could add a new income tax bracket, perhaps charging an extra 0.5 percent for those making over $140,000 a year. None of these options is appealing. But paying tolls to visit the kids in Moscow could be a lot worse.

* Judy Ferro is the state committeewoman for Canyon County Democrats.

5 ways privatization is fleecing American taxpayers

5 ways privatization is fleecing American taxpayers
Salon.com
February 2015

Government outsourcing goes horribly wrong more often than not. Here are a few representative horror stories

For decades we’ve been subjected to constant propaganda that government is inefficient, bureaucratic and expensive. We’re told that the answer is to “privatize,” or “outsource” government functions to private businesses and they will do things more efficiently and everyone comes out ahead. As a result we have experienced decades of privatization of government functions.

So how has this wave of privatization worked out? Has privatization saved taxpayers money and improved services to citizens? Simple answer: of course not. If a company can make a profit doing something the government had been doing, it means that we're losing out one way or another. It’s simple math. And the result of falling for the privatization scam is that taxpayers have been fleeced, services to citizens have been cut way back and communities have been made poorer. But the companies that convinced governments to hand over public functions have gotten rich off of the deal. How is this a surprise?

To read the rest of the story, click here.

CNN: Secret world of toll collection, focuses on Harris County, Texas

The secret world of government debt collection
By Blake Ellis and Melanie Hicken
CNN Money.com
February 17, 2015

Government agencies across the country are hiring private debt collectors to go after millions of Americans over unpaid taxes, ancient parking tickets and even $1 tolls.

It’s a good deal for cash-strapped states, cities and other local governments. By outsourcing this dirty work and letting private companies charge debtors sky-high fees, government agencies can get these collection services free of charge.

And it's a great deal for debt collectors. In an industry already known for bad behavior, debt collectors that work for government agencies usually don’t have to work within the confines of consumer protection laws – opening the door for higher fees and even more aggressive tactics.

Their government bosses can give them the power to threaten debtors with the suspension of their driver’s license, garnishment of their wages, foreclosure and arrest to get them to pay up.

To read the whole story, click here.

Montgomery County rails against High Speed Rail plan

Link to article here.

Texans oppose high speed rail through their communities, as they did when it was packaged as part of the Trans Texas Corridor. Impacts deemed 'catastrophic'!

Montgomery County leaders, residents rally against proposed high-speed rail
by Liza Winkler
Impact News
February 3, 2015

An estimated 800 Montgomery County officials and residents gathered Feb. 2 at the Lone Star Community Center in Montgomery to speak out against the proposed construction of a 240-mile high-speed rail project between Houston and Dallas by 2021.

“[The high-speed rail] is one of the biggest threats to Montgomery County in many, many years,” retired Montgomery County Judge Alan Sadler said. “Once those [assessed property value] decreases take place if this train hits this route in Montgomery County, the entirety of the county will pay the tax differential to make up for the loss. It is extreme.”
Read more: Montgomery County rails...

Multiple segments of Texas 130 eyed for truck toll discounts

Link to article here.

Why should a single Texas taxpayer pay for truckers to have toll discounts when we all have to pay full price to take the failing SH 130 tollway? This is not good policy and only prolongs the inevitable - bankruptcy for an ill-conceived toll road. This taxpayer subsidy should never happen.

Multiple segments of Texas 130 eyed for truck toll discounts
By Keith Goble
Land Line state legislative editor
January 9, 2015

Truckers traveling through central Texas could soon get another enticement to avoid driving on Interstate 35.

In an effort to reduce congestion on I-35 through the Austin area, multiple Texas state lawmakers are behind an effort to reduce truck tolls along a 49-mile stretch of state Highway 130.



The 90-mile highway connects the state capital with San Antonio to the south. It is split into six segments. Segments 1 through 4 link Georgetown to south Austin and are run by the state Department of Transportation. Segments 5 and 6 are closest to San Antonio and are run by a private group.



Sens. Kirk Watson, D-Austin, and Judith Zaffirini, D-Laredo, and Rep. Celia Israel D-Austin, have filed bills for consideration during the session that begins Tuesday, Jan. 13, that would reduce the expense for truckers to travel along segments 1 through 4.
Read more: Multiple segments of...

P3s cost Canadians $8 billion more than public-run roads

Link to article here.

Privatizing highways using P3s (called AFPs in Canada) cost Canadians $8 billion more than if the government had done the toll projects. Bottom line, P3s cost far more than the quicker delivery is worth.

Government-managed projects could save Ontario money: Auditor-General
By Adrian Morrow
The Globe and Mail
Tuesday, Dec. 09 2014

Public-private partnerships have cost Ontario taxpayers nearly $8-billion more on infrastructure over the past nine years than if the government had successfully built the projects itself.
Read more: P3s cost Canadians $8...

P3s come at a high cost

Link to article here.

When will governments figure out that they’ll never come out on top on a P3 deal? Never. These special interests have armies of lawyers to write these contracts in a way where taxpayers will always be on the hook for the losses and will guarantee the profits of these corporations. This example in Ontario is just another in a Texas-sized stack of examples of P3s that fleece the public.

Public-private partnerships come with a high cost
North Bay Regional Health Centre
By Rebecca Zanussi
December 26, 2014
North Bay Nipissing News

ALMAGUIN – An initiative meant to save the province money is actually costing more — $8 billion more to be precise.

Auditor General Bonnie Lysyk released her annual report on Tuesday, Dec. 9, reviewing a number of initiatives led by the Ontario government. One of the areas she examined in detail was private-public-partnerships, known as P3s or Alternative Funding Procurements (AFPs).

“For 74 projects that were either completed or under way under Infrastructure Ontario, tangible costs, such as construction, finance and professional services, were estimated to be nearly $8 billion higher under the AFP approach than they were estimated to have been if the projects had been delivered by the public sector,” Lysyk said following the release of the report.

“About $6.5 billion of this is due to higher private-sector financing costs.”

The North Bay Regional Health Centre was one of the first AFP projects built in Ontario. And Dave Smits, vice president of corporate and support services for the health centre, believes that the process was worth the investment.

“In a traditional method of funding, you would bid the work for the new hospital project, pick a general contractor, and after the new building was built undergo a typical warranty period of about a year,” Smits says.

“But after that the contractor’s work is essentially done and you’re responsible for the maintenance of the building for the rest of its life cycle.”

That could give way to complications, Smits says, because while the costs for constructing the building were approved, maintenance issues had to be dealt with as they arose, and sometimes the funding wasn’t there.
But in an AFP hospital the onus of maintenance — and the estimated cost over the hospital’s mortgage — is on the contractor.

“With AFP hospitals, the government realized the traditional approach to funding ongoing maintenance hadn’t been particularly successful,” Smits says.

“Over the life, the buildings were falling into a state of disrepair. Certain systems were maybe not maintained or kept in line.”

And that’s where AFPs come in. The contractor bids a capital cost for building the new project, but also includes the maintenance costs. And if any of it isn’t maintained — whether it’s walls needing a new coat of paint, or equipment being out of commission — the contractor could face a financial penalty written into the contract.
However, Lysyk said in her report that a typical AFP project almost always costs significantly more than if governments just put up the money themselves and hired contractors to build the same infrastructure, under conventional contracts.

But Smits says it’s not quite that simple.

“What we’ve seen in the past, often from a life cycle perspective, is that the cheapest isn’t necessarily the best,” he says.

Smits provided his personal opinion that before using the AFP model, a hospital would have to consult on a design, submit it to the ministry for approval, and likely be told to cut down the cost. That meant either shrinking the space, or compromising on value of equipment upfront. The practical example Smits gave for this is choosing a vinyl flooring over tile because the vinyl would cost less, even though the tile would last longer. In the long run the cost of maintaining and replacing would actually be more, but that wasn’t the ministry’s focus: the upfront costs were deemed the priority.

“The difference with AFP is the contractor has been given that responsibility to come up with the best accommodation of finishes, quality of equipment, etc. that they as experts have to figure out how to balance the upfront costs and maintenance,” Smits says.

“So, it makes them think really hard about, ‘Am I going to just cheap out on all the finishes because I’m going to have to replace them,’ versus, ‘No, I’m going to go with better finishes that will last longer.’”

P3s began appearing on the provincial landscape in 2001, when the then-Minister of Finance announced that public-private partnerships would have to be seriously considered before the Ontario government would commit any funding for new hospitals that were needed at that time.
 
In November of 2001, the government approved the development of two new hospitals (in Brampton and Ottawa) using the P3 approach.

According to Lysyk’s report, as of March 31 there were almost $23.5 billion in liabilities and commitments that current and future governments will have to pay for AFP projects. The province has also borrowed money to pay AFP contractors when projects were substantially completed. The Auditor General estimates these borrowed amounts to be an additional $5 billion, included as part of the total public debt recorded in the Public Accounts.

Lysyk also found that two of the risks Infrastructure Ontario used in its assessments for P3s should not have been included. Without them, public-sector delivery for 18 of the 24 projects would have been assessed as $350 million cheaper than delivery under AFP.

Infrastructure Ontario estimated that this $8-billion difference was more than offset by the risk of potential cost overruns if the construction and, in some cases, maintenance of these 74 facilities was done by the public sector.
 Smits says while there are some complications that arise with AFPs, such as different sets of complexities, he has found the model much less stressful than the previous method.

“At the end of the day I’m getting funded to keep this building in what I consider a very good state of repair,” he says.

“And I’ve been guaranteed that funding in my contract. It gives me a certain comfort I couldn’t have had in old delivery model. In past, you weren’t sure where the money was going to come from to keep your building up to date and looking good and functioning well.

Chinese to fund road project in exchange for residency

Link to article here.

This is a seriously risky proposition. All foreign investors are not created equal. Giving residents of a hostile Communist country like China permanent residency in the U.S. in exchange for money is disgusting! Nothing like buying your way into our country. Public private partnerships (P3) are a threat to our sovereignty over our own public infrastructure, but this takes even a P3 to new heights.


Chinese investors to fund I-95 interchange in exchange for U.S. residency
By David Tanner, Land Line senior editor
12/2/14

The Pennsylvania Turnpike Commission not only has gone outside the box, but has gone outside the country to find funding for a new interchange with I-95. Turnpike officials are capitalizing on a law that allows Chinese investors to fund half of the project cost in exchange for permanent-residency visas from the U.S. government.

The EB-5 Immigrant Investor Pilot Program was enacted by Congress in 1990 and is overseen by the U.S. Customs and Immigration Service. It allows foreign investors to chip in at least $500,000 for U.S. projects of regional significance in exchange for residency.

In 2012, the Turnpike Commission paid $50,000 to study whether EB-5 financing would be a viable option.

The commission signed an agreement with the Delaware Valley Regional Center to attract up to $250 million in EB-5 financing. The DVRC successfully applied to the U.S. Customs and Immigration Service to be designated as an EB-5 regional center – one of the stipulations for attracting foreign investment.

The mainline Pennsylvania Turnpike is designated as I-276 in Bristol County. Interstate 95 currently passes over the turnpike in Northeast Philadelphia with no interchange. Officials have been planning an interchange there for years.

The first $150 million to jumpstart the project came from the Federal Highway Administration and the Turnpike Commission. It is being used to widen four miles of the Turnpike in Bristol County and to lay groundwork for three new bridges and piers for future ramps. According to officials, that will take about four years.

Future phases will reconfigure traffic patterns and connect the Pennsylvania Turnpike with the New Jersey Turnpike.

A turnpike official previously told Land Line that the entire project would cost about $1.4 billion. Tolls and other sources will complete the financing.

Toll roads going belly-up

Link to article here.

When good toll roads go bad
By Keith Benman
NWI.com
December 27, 2014

Northern Indiana is not the first region in the nation to be subject to fallout from a toll road bankruptcy, with a number of other privatized roads and bridges going belly up across the nation in the past few years.

The good news is those roads have continued to carry traffic with little disruption. The bad news is there is usually little communities can do to influence the bankruptcy process, except in cases where roads revert to government ownership.
Read more: Toll roads going belly-up

Double digit tolls to fund I-70 in Missouri

Link to article here.

OUTRAGE: As punishment for voters rejecting a sales tax hike to pay for state highways, Missouri politicians seek to impose $20-$30 in tolls per trip to use I-70.

Report: Double-digit tolls could fund I-70 repairs
By SUMMER BALLENTINE
Associated Press
Wednesday, December 31, 2014

JEFFERSON CITY, Mo. (AP) - Motorists on Interstate 70 would need to pay $20 to $30 in tolls to travel one way across Missouri to pay for the minimum in needed repairs on the roadway, according to a state Department of Transportation report released Wednesday.

Possible solutions suggested in the report, commissioned in early December by Gov. Jay Nixon, include using tolls to repay public bonds or to recoup expenses in a public-private partnership.
Read more: Double digit tolls to...

2014: Year of public backlash to tolls

Link to article here.

Maybe the political class and special interests are excited about rail since road funding has been lackluster for the last few years and they’ll latch onto any black hole needing taxpayer subsides and guarantees anytime they can get it. However, North Texas residents are angry at the prospect of more of their road funding being diverted to rail projects while being asked to pay double digit daily toll bills all over the Metroplex.

2014 in transportation: Toll projects garnered furor while rail projects drew excitement
By BRANDON FORMBY
Transportation Writer
Dallas Morning News
December 28, 2014

North Texas this year moved closer to becoming home to the nation’s largest network of managed toll lanes, as the second phase of LBJ Freeway’s massive renovation opened.

The region’s proliferation of toll lanes and roads expanded into Tarrant County with the opening of three projects — the DFW Connector, the North Tarrant Express and the Chisholm Trail Parkway. And in Dallas, the long-planned Trinity Parkway toll road once again emerged as one of the city’s most contentious topics.
Read more: 2014: Year of public...

Ginned up traffic forecasts for Northeast Gateway

Link to article here.

Dallas Transport Agency Cooks Up Fishy Traffic Projections for a New Road
by Angie Schmitt
DC Streets Blog
Thursday, October 16, 2014

We’ve reported on the way state agencies justify spending on expensive road expansions by overestimating the traffic that will materialize in the future. In an encouraging sign, one local press outfit is calling out the fishy traffic projections before a project gets built.

The regional transportation agency for Dallas justifies this highway project with traffic projections that far exceed even the estimates from the notorious sprawl enablers at Texas DOT.

Brandon Formby of the Dallas Morning News‘ Transportation Blog (yes, it’s a long-time member of the Streetsblog Network) has been taking a critical look at traffic projections from the North Central Texas Council of Governments, the Big D’s regional planning agency. Residents who oppose the 28-mile Northeast Gateway-Blackland Prairie toll road – planned for a rural area between Garland and Greenville — question the assumptions behind the project.

The numbers certainly do look suspicious.

Here are some excerpts from Formby’s reporting (emphasis added):

    •    “Some of the council of governments predictions are hundreds of percentage points higher than the Texas Department of Transportation’s forecasts.”
    •    “NCTCOG predicts that 72,300 drivers will use State Highway 66 at County Road 6 in Lavon in 2035. That’s six times as many as the 12,000 drivers the agency says used it last year. It’s also more than triple the 22,880 drivers TxDOT estimates for the same spot in 2030, the closest year to the NCTCOG estimates for which the state has forecasts.”
    •    “While the regional agency’s traffic estimates for spots in the corridor predict anywhere from a 70 percent to 503 percent increase in drivers, the state predicts population increases in the four counties to be between 23.3 percent and 65.1 percent.”
 
Formby reports that NCTCOG has been reluctant to divulge how its traffic projections were developed. No wonder, because they seem to be practicing highway voodoo.

Availability payment P3s eschewed by Indiana politicos

Link to article here.

TURF worked hard to defeat the availability payment model of P3s in Texas during the 2013 legislative session. We were successful, but we must remain vigilant since special interests will be working 24/7 to find ways to make taxpayers pay for their potential losses.

Financing strategy for roads hits bump
November 22, 2014
Kathleen McLaughlin
IBJ.com

A standard-bearer of public-private partnerships since former Gov. Mitch Daniels’ toll road lease, Indiana might be turning away from at least one form of the P3s.



Indiana Department of Transportation Commissioner Karl Browning doesn’t think the state should commit to any more so-called availability payments, which financed Indiana’s share of the Ohio River Bridges project and section five of Interstate 69.



“It’s a lot like borrowing,” Browning said in a recent conference call with the Indiana Chamber of Commerce. “I would be more than cautious about the notion of doing public-private partnerships of the nature of some of them that we’ve done.”



Browning’s remarks might come as a surprise, considering the way Daniels, his former boss, embraced P3s. Appointed to his second stint as INDOT chief by Gov. Mike Pence, Browning is concerned about debt payments consuming too much of a limited budget, which is needed to tackle a mountain of road and bridge work.



The term “availability payment” is P3 industry lingo for annual payments that come from available budgeted revenue sources. A developer can use a government’s long-term commitment of annual payments to finance a project.



Availability payments are gaining popularity as governments look to finance projects that can’t be tied to a dedicated funding stream, such as tolls. The city of Indianapolis plans to use availability payments to finance a criminal justice complex that could cost as much as $600 million.



While Indiana isn’t carrying the debt from the Ohio River Bridges project or I-69 on its books, the P3 deals still mean INDOT has to set aside money for 35 years.



Debt burden grows


The share of revenue INDOT spends on debt obligations is set to grow. Currently, about 10 percent of its $1.6 billion in state and federal revenue goes to debt service. That will rise to 17 percent in 2018, according to INDOT projections through 2030.



“In my view, that’s a manageable number,” Browning told the chamber. “If we let it get higher, we’re going to be mortgaging our grandchildren.”



A critic of Daniels’ toll-road lease and the I-69 project, Rep. Matt Pierce, D-Bloomington, said he’s pleased to hear a member of the Republican administration talk about P3s in frank terms.



“Where have you been all these months?” he asked.



Browning isn’t eschewing P3s in general. He said he would support a deal for new construction if it can be sustained by a known revenue source.



“Tolling comes to mind,” he said.



Tolls were not an option for Section five of I-69, in which State Road 37 from Bloomington to Martinsville will be upgraded to freeway standards. So in 2013, the Legislature approved language in the budget bill allowing the Indiana Finance Authority to pursue an availability-payment scheme.

Once the road is operational, Indiana will pay $21.8 million a year for 35 years.

Indiana’s first availability-payment P3 was the East End Crossing, a toll bridge under construction over the Ohio River at Utica. Availability payments are $33 million a year from 2016 through 2050.



Toll revenue will offset the availability payments, but Indiana does not expect it to cover the bridge’s $763 million cost.



With Browning resisting more of those deals, it’s unclear how Indiana will pay for the final leg of I-69 from Martinsville to Indianapolis, which is a priority for Gov. Mike Pence.



“It is not feasible to toll only the remaining I-69 Section 6, and INDOT has no plans to pursue this tolling approval with the Legislature,” Jim Stark, deputy commissioner for innovative project delivery, said in an emailed statement. 

“Right now, no funding has been identified for final design or construction of I-69 Section 6.”



Nevertheless, INDOT is pursuing a Tier 2 environmental study, which includes examining different road paths and developing a preliminary cost estimate. The study is expected to take two to three years, Stark said.


Future revenue 

The lease of the Indiana Toll Road generated $2.6 billion for Daniels’ 10-year transportation plan, Major Moves.

Now, Browning hopes to rally taxpayer support for a lasting solution to the transportation funding gap caused by declining gas-tax revenue, aging infrastructure and escalating construction costs.



The average Hoosier spends less than $20 a month on the state highway system through BMV fees, sales tax, and state and federal gas taxes, according to a presentation Browning made to the Joint Transportation Committee this summer.



Meanwhile, roads and bridges built 50 years ago are approaching the end of their useful lives. INDOT spends an average $273 million a year on bridge preservation, but 12.5 percent of bridges will be in poor condition by 2024, Browning told the chamber audience.



Likewise, the state is spending $400 million a year on roads, but 11.5 percent of highways will be in poor condition by 2024, he said.



Browning does not think the federal government will come up with the answer.

“If we’re going to be the crossroads of America,” he said, “our existing highways have to be in pretty dang good shape. We have to persuade 6 million people that it’s worth it to them, and not rely on the federal government.”



Pierce said the billions Daniels generated with the toll-road lease masked the transportation funding problem.



“Most of the legislators haven’t focused in on the issue of funding and how that impacts their own districts,” he said.



Indiana Chamber transportation lobbyist Cam Carter predicted the Legislature won’t consider any tax increases or new revenue sources until INDOT reveals a consultant’s study, due out in August.



There is no P3 deal that will make up for the fact that the federal gas tax hasn’t risen since 1993, cars are becoming more fuel-efficient, and Americans are driving less.



“What you have to understand with public-private partnerships in the transportation realm—they’re a financing mechanism,” Carter said. “They’re not a funding mechanism.”

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