Study to explore privatization of Ohio turnpike raises questions about bias
$2.85M study of turnpike on panel's agenda
Kasich administration proposes private operation
By DAVID PATCH
BLADE STAFF WRITER
FEBRUARY 13, 2012
TOLEDO BLADE
Gary Tiboni has no uncertainty about a $2.85 million Ohio Turnpike study that the Ohio Controlling Board will consider funding when it meets on Monday. To him, it's a sham.
"It's a foregone conclusion, as far as I'm concerned, as to what the results will be," Mr. Tiboni, business manager for Teamsters Local 436, said. "There will be a lease, or it will be turned over to ODOT."
Larry Davis, the Ohio Trucking Association's president, professes having shared Mr. Tiboni's belief until recently. But he said he changed his mind after another Kasich administration study, concerning prison privatization, came back recommending selling just one of five prisons identified for possible sale and contracting for operating two of the four others.
"They took the results of the study, and reacted to that," Mr. Davis said. Consequently, he said, "we are willing to wait and have our input with this group" that has been chosen to study ways the turnpike might be "leveraged" to generate revenue for Ohio.
"This group" is KPMG Corporate Finance LLC of Washington and Austin. It was selected from among 14 firms that submitted letters of interest, which officials narrowed to five that gave detailed proposals and presentations to an Ohio Department of Transportation committee.
Mr. Tiboni, whose union represents turnpike toll collectors and maintenance workers, cites KPMG's involvement when the Indiana Department of Transportation in 2006 leased the Indiana Toll Road to a Spanish-Australian consortium as evidence that the Ohio Turnpike's days as an independent public agency are numbered.
Indiana got $3.8 billion in exchange for a 75-year lease, under which the concessionaires agreed to keep up with maintenance but also have the right to increase tolls annually by 2 percent or more, based on any of three formulas, and were allowed a one-time increase in 2008 of more than 50 percent on the Toll Road's main stem between the Ohio border and Portage, Ind.
Complaints
Since then, critics have complained not only about the higher fares but also declining maintenance -- both of the roadway and at service plazas -- and longer toll booth lines because of some lanes' conversion to electronic toll collection.
Ken Blackwell made turnpike privatization a platform plank in his unsuccessful 2006 Ohio gubernatorial campaign, while Ted Strickland, who won that election, ruled it out.
Within months of taking office last year after defeating Mr. Strickland's re-election bid, Gov. John Kasich revived the idea, initially predicting a 50-year lease could raise as much as $3 billion for Ohio but then retreating from such specifics.
At a Toledo news conference in July, the governor merely said Ohio should explore revenue-generating options from what he considers a "very underutilized asset" that, if properly exploited, could generate new income both for the state and a private operator.
Weeks later, ODOT and the state Office of Budget and Management began its search for a consultant team, following a procedure spelled out in the biennial state budget law that grants the Ohio General Assembly veto power over any request for proposals that might be issued to seek turnpike investors.
Controversy erupted in early October concerning federal grant funding for the study, then estimated to cost $1.5 million, when five Democratic party members of Ohio's congressional delegation persuaded the U.S. Department of Transportation to revoke the funds because a state request for proposals cited privatization as the only outcome to be evaluated in the turnpike study.
Study's reinstatement
A letter from the delegation's Republican side and revised language from the transportation department led to the study's reinstatement for federal-funds eligibility later that month, and in November the state chose KPMG as the lead consultant.
Since then, the study's price tag has swelled to as high as $2.85 million, which Steve Faulkner, a spokesman at department headquarters in Columbus, said occurred because of more detailed work the state will ask KPMG and its subcontractors to do.
"Since KPMG was selected … we've had detailed conversations about the thoroughness and level of detail it will take to conduct the type of independent, objective, third-party analysis the state will need in order to make the most informed decisions going forward," Mr. Faulkner said, adding that $2.85 million is a maximum, not a guarantee to the consultant.
Besides leasing the turnpike or other ODOT options, the possible study recommendations include contracting part of the turnpike operations or keeping it status quo.
Expanded scope
The study's scope has been expanded to include a look at options for privatizing non-Interstate rest areas in Ohio, such as by selling gas stations, convenience stores, or even fast-food restaurants that the state franchises to set up shop at those locations, the ODOT spokesman said. Federal law has forbidden the operation of commercial food or fuel businesses at Interstate highway rest areas built since 1960.
The grant's entire cost still will be funded from federal transportation planning funds assigned to Ohio, Mr. Faulkner said.
While cautious to note that the Ohio Controlling Board, which statutorily must approve adjustments to the state budget, still must act to release the federal funds, the ODOT spokesman said he knows of no reason why the seven-member board would not do so. The board's members include the director of the Office of Budget and Management or designee; the chairs of the House and Senate finance committees, and four members-at-large from the General Assembly, one each from the majority and minority party in each house.
Misinformation?
Rick Hodges, a former state representative from Delta who was appointed the turnpike's executive director, said debate about the turnpike "leveraging" issue has been rife with misinformation -- particularly concerning the study having a set outcome and, if privatization is chosen, a private operator's ability to raise tolls at will.
"The scope of work is very broad," Mr. Hodges said. "Leasing is not the only option. The people doing this study are very serious about exploring all options."
Tolls, he said, are constrained by the availability of parallel free highways like U.S. 20 and State Rt. 2, roads that in the past have received surges of truck traffic when turnpike fares went up.
Low rates
"We now have among the lowest, if not the lowest, commercial toll rates," Mr. Hodges said. "But we also have good parallel routes, and the only way you can make money on the turnpike is for people to drive on it."
Among KPMG subcontractors listed in its proposal is the University of Toledo's Intermodal Transportation Institute, which will provide the consultant with background knowledge and research on local transportation operations and issues.
"We're very pleased that KPMG selected us," said Rich Martinko, the institute's director and a past ODOT senior manager during the administration of Gov. Bob Taft. "We are a neutral asset for transportation stakeholders. … We have knowledge and insight on the specific issues in northern Ohio, and especially northwest Ohio. Understanding the asset is important to making a good decision."
Officials said they did not know how much the UT institute would be paid for its contribution.
Mr. Hodges says he views himself and turnpike staff also as sources of information for KPMG researchers.
"I'm not providing policy on this, and I shouldn't," he said.