Ohio Turnpike will not be privatized.

[The Premier]

My how things have changed since I last logged on...

Back on topic... Anyway, state officials decided not to privatize the Ohio Turnpike. In fact, it will take on new responsibilies regarding vital projects across Northern Ohio.

Link

[bugo]

Good.

[hbelkins]

I'm not so sure that's a good thing, seeing that Indiana's toll road lease paid for a lot of projects elsewhere in the state. Looks like any off-system improvements in Ohio are going to be localized in the vicinity of the turnpike under this plan. Why shouldn't the whole state benefit from the out-of-state through traffic that pays to use the road?

Compare the success of Indiana's efforts through Major Moves vs. Pennsylvania's HB 44 and judge for yourself.

I'm still not thrilled with the idea of independent toll road commissions. I'd much rather seem them as part of the state DOTs, to cut down on bureaucracy and make improvements involving the two systems easier to facilitate.

[JREwing78]

Kasich decides against leasing or selling Ohio Turnpike
http://www.ohio.com/news/break-news/kasich-decides-against-leasing-or-selling-ohio-turnpike-1.357620

This is closer to what I had advocated for the Indiana Toll Road, though one hopes they don't try to over-leverage it like Pennsylvania is doing with their toll road. Given a lot of what I've seen Kasich and the Ohio legislature do, I'm not optimistic.

What is wrong with Indiana's lease plan is that it all got spent in one big wad, without any thought put into building on those highway improvements, or even raising gas taxes enough to pay for the maintenance of the new roads. They're now stuck with 90+ years of a private entity controlling the highway, with every incentive to raise tolls and every incentive to provide poor maintenance of the Indiana Toll Road. That's probably a big reason Ohio legislators balked at a lease.

There's no reason Indiana couldn't have done what Ohio is proposing. They simply lacked the political will to leverage the toll road themselves. That same lack of political will to raise revenue for maintaining and improving their highways will become very evident as the maintenance bills for these new roads come due.

I'm far from the only one pessimistic about the idea of leasing the Toll Road:

New study: Indiana Toll Road 75-year lease was bad deal
http://posttrib.suntimes.com/news/16931937-418/new-study-says-indiana-toll-road-lease-bad-deal.html

[hbelkins]

Kasich decides against leasing or selling Ohio Turnpike
http://www.ohio.com/news/break-news/kasich-decides-against-leasing-or-selling-ohio-turnpike-1.357620

Kasich made the decision? So much for the idea that Republicans want to privatize government.

What is wrong with Indiana's lease plan is that it all got spent in one big wad, without any thought put into building on those highway improvements, or even raising gas taxes enough to pay for the maintenance of the new roads. They're now stuck with 90+ years of a private entity controlling the highway, with every incentive to raise tolls and every incentive to provide poor maintenance of the Indiana Toll Road. That's probably a big reason Ohio legislators balked at a lease.

There's no reason Indiana couldn't have done what Ohio is proposing. They simply lacked the political will to leverage the toll road themselves. That same lack of political will to raise revenue for maintaining and improving their highways will become very evident as the maintenance bills for these new roads come due.

You must remember that for every mile of new road Indiana builds and puts under the state system, they give equal mileage to the local governments under Indiana's statutory state road mileage cap. No doubt, signs will come down off some state road(s) to make room for the new I-69.

[NE2]

Repubs want to privatize government.

[mukade]

This is closer to what I had advocated for the Indiana Toll Road, though one hopes they don't try to over-leverage it like Pennsylvania is doing with their toll road. Given a lot of what I've seen Kasich and the Ohio legislature do, I'm not optimistic.

What is wrong with Indiana's lease plan is that it all got spent in one big wad, without any thought put into building on those highway improvements, or even raising gas taxes enough to pay for the maintenance of the new roads.

I am not sure what the first sentence in the quote means - I guess I don't know what you advocated or if it made any sense. The plan was to spend the money over ten years. Because the economy was poor and the bids were lower than expected, they sped things up to take advantage of the low costs. It never had a thing to do about gas taxes. That is a different issue completely, and would have been impossible to pass especially with that money in the bank.

The new highways should not need major maintenance for 25-30 years. It may cause financial strains then, but by and large, the increased traffic on new highways will be balanced by decreased traffic on the old ones. Anyway, do other states take this into account any differently when they build new highways?

They're now stuck with 90+ years of a private entity controlling the highway, with every incentive to raise tolls and every incentive to provide poor maintenance of the Indiana Toll Road. That's probably a big reason Ohio legislators balked at a lease.

Huh? How did a 75 year lease that began almost seven years ago become over 90 years now? It remains to be seen whether there will be poor maintenance, but so far, the surface is good at least. Furthermore, they widened portions in Gary and Hammond which is better than what the state did. If they don't perform adequate maintenance, I would guess that they will lose customers so I think you are speculating a bit.

There's no reason Indiana couldn't have done what Ohio is proposing. They simply lacked the political will to leverage the toll road themselves. That same lack of political will to raise revenue for maintaining and improving their highways will become very evident as the maintenance bills for these new roads come due.

I think Ohio would have leased their turnpike if they would have gotten a comparable deal to Indiana. The market is not there today. If it was, Ohio should have gotten $6 billion or so, and I am sure Kasich would have jumped at that chance.

I am not getting what your point is on lack of political will. If Indiana maintained control of the highway and then raised tolls substantially to pay for highways throughout the state, I don't think that would have played very well in northern Indiana (and for good reason). Remember, the ITR crosses the northern end of the state. If Indiana had several toll roads around the state, I might understand the point. Furthermore, the amount of money would have been a lot less in any case.

What was done was pretty smart. The northern counties received the most money, but every region in the state received some. All major metro areas received enough money for at least one major project. When Major Moves was proposed, I would say opinion was bipartisan against the idea. After people saw what it accomplished, I would say it was bipartisan for the program by a large margin.

They did make mistakes, in my opinion, by using some of the money for regular resurfacing projects, but all in all, the promise to keep the money for improving the highway and road system was kept. That was in stark contrast to the Chicago Skyway lease which was a 99 year lease and the money went to the general budget of the city.

I'm far from the only one pessimistic about the idea of leasing the Toll Road:

New study: Indiana Toll Road 75-year lease was bad deal
http://posttrib.suntimes.com/news/16931937-418/new-study-says-indiana-toll-road-lease-bad-deal.html

The points in that article are speculation and poorly supported. What is fact is that the ITR was losing money for the state. It seems that most of the opposition to Major Moves is from outside Indiana, and the article is yet another example. Maybe it is envy.

I would be interested in what the other Hoosiers in the forum think about Major Moves. I personally don't know anyone who is against it anymore, but there is probably at least 20% of the people who hate progress no matter what.

You must remember that for every mile of new road Indiana builds and puts under the state system, they give equal mileage to the local governments under Indiana's statutory state road mileage cap. No doubt, signs will come down off some state road(s) to make room for the new I-69.

I don't think that is true. There is a 12,000 mile cap, but the system is only around 11,000 miles. That said, the state wants to shed more miles, but I don't think it has anything to do with that law.

[NE2]

It remains to be seen whether there will be poor maintenance

Closing a major exit indefinitely isn't poor maintenance?

off topic: lol (got this as a popup on the NWI Times site)

[Brandon]

Good.  The Indiana Toll Road lease and the Chicago Skyway lease were bad ideas, IMHO (and to lay to rest the R vs. D crappola - they both made the deals).  When leasing the road, you hand it over to a for-profit corporation beholden to shareholders.  There are somethings (roads, schools) that should be non-profit whether public or private.  Then, you lose control of the road for a specified period of time to said corporation.

As for the "Repubs want to privatize government" nonsense, look no further than the Chicago Skyway lease and the parking meter lease in Chicago for Dems doing the same exact thing.

[Stephane Dumas]

A bit off-topic but wasn't once some proposal then some Ohio counties could operate some regional toll roads like FL and TX?

Then if OH Tpk take new responsabilities, will it inherit the responsability to maintain some free roads like NYS Thruway did once with I-84 and I-287?

[cpzilliacus]

TOLLROADSnews: Ohio Gov Kasich chooses borrowing $1.5b on the Turnpike over getting $3.3b - $4b from lease/concession for state treasury

Governor John Kasich prefers to "unlock the value" of the state Turnpike for increased borrowing for tax-supported roads over a P3 longterm lease and concession. Kasich rejected the concession even though a KPMG report suggested it would bring the state treasury between $3.3b and $4.03b while allowing the state to set the terms.

The 'takeaway' from today is that Gov Kasich won't upset status quo interests in a state Turnpike and will tout $3 billion of new projects based on $1.5b new borrowing on the security of Turnpike revenues and matching borrowing or taxes by counties and cities.

The KPMG report says that confidential interviews with a number of potential concessionaires, together with financial modeling on behalf of the Kasich administration suggested that the concession or 'public-private' option would yield an upfront concession payment of $2,624m by a concessionaire to the state. $735m of that would be used to defease state turnpike debt and $65m would go to the IRS as a penalty payment for receiving a share of concession revenue over time rather than all upfront.

[cpzilliacus]

Compare the success of Indiana's efforts through Major Moves vs. Pennsylvania's HB 44 and judge for yourself.

Comparing anything to the unmitigated financial disaster that is Pennsylvania's Act 44 is unfair to anything.

Though I understand that the people that own the Indiana Toll Road concession overpaid (great for the state of Indiana, not so great for the concessionaires).

See this from TOLLROADSnews from 2008, where the ITR concession value was written-down by several million dollars.

[mukade]

Good.  The Indiana Toll Road lease and the Chicago Skyway lease were bad ideas, IMHO (and to lay to rest the R vs. D crappola - they both made the deals).  When leasing the road, you hand it over to a for-profit corporation beholden to shareholders.  There are somethings (roads, schools) that should be non-profit whether public or private.  Then, you lose control of the road for a specified period of time to said corporation.

Other than your humble opinion, can you provide a little analysis on why you think these were bad ideas?

Do you think the ITR and Skyway moves were the same? I would maintain they were motivated for very different reasons.

I guess because I grew up somewhere where highways and passenger railways were often in the private sector, I don't see the problem. I also have no problem with the state owning and maintaining many highways if they can do it efficiently, but I don't think this  Government control model has to be universal.

[mukade]

Though I understand that the people that own the Indiana Toll Road concession overpaid (great for the state of Indiana, not so great for the concessionaires).

This is fact. The timing for the deal for the State of Indiana was perfect, and unfortunately Ohio made their move when the economic conditions were quite different. This is really why I don't understand all these people that say the ITR deal was a bad one for Indiana.

The other side of it is that there is a lot of new critical infrastructure to show for it in Indiana (in contrast to what the City of Chicago did). The money from the ITR lease was not blown.

[vdeane]

But now they have to deal with a private company owning the road until we're dead and gone.  There's no benefit there.  Note that the ITR proposes to close a major interchange, one that carries interstate designations at that, because they don't want to pay to rebuild a bridge.

[StogieGuy7]

Repubs want to privatize government.

Right!  Like when Mayor Daley sold Chicago's parking meters to a private company for over $1 Billion, only to blow that money within a few months (I think he lit a cigar with it).  And it was such a bad deal that the city is required to lose millions of dollars per month....for the next 73 years.

Those damn Repubs like Daley.   Oh, wait..........   

[NE2]

Hey look, we've got someone who doesn't understand logic.

[tdindy88]

While I do wonder about what happens now that the money from the Toll Road lease is about out, and will not return for the next 70-or so years that the toll road is privately owned, I do think that the lease has helped us out. There are several big projects that have more or less been completed (US 31, SR 25, US 24, 1-465 on the Westside, Operation Indy Commute projects, I-465 on the north side and some new interstate in SW Indiana) that are no longer on the list of "possible projects." We are further down the road now then we would have been if he had to continue paying through traditional means. Would all of those projects listed earlier have been completed or mostly completed by this point without Major Moves. I do worry that this will all catch up with us in the long run when we can't pay for many more projects, but what is done is done and it's not like we can "unbuild" I-69. In any case, what works for Indiana may not be best for Ohio, so that state should presue what is best for Ohio.

[theline]

As an Indiana resident, I'm currently enjoying the fruits of the Toll Road lease, but I fear for our grandchildren. It makes as much sense to spend all the money reaped from a 75 year lease in a few years as it does to take a second mortgage on my home and spend it all on a vacation to Fiji. I may enjoy the vacation, but I'll not be able to afford anything else for the next 25 years. How will Indiana pay for new roads over the next 65 years or so?

Meanwhile, we who live in Northern Indiana will be at the mercy of the tolls set by the concession. In spite of what was stated upthread, the ITR isn't driven exclusively by out-of-staters. If we want to get anywhere to the east or west of South Bend, the toll road is the only reasonable route. You'd be surprised how many use it for commuting.

Ohio made the right choice.

[Brandon]

Though I understand that the people that own the Indiana Toll Road concession overpaid (great for the state of Indiana, not so great for the concessionaires).

This is fact. The timing for the deal for the State of Indiana was perfect, and unfortunately Ohio made their move when the economic conditions were quite different. This is really why I don't understand all these people that say the ITR deal was a bad one for Indiana.

The other side of it is that there is a lot of new critical infrastructure to show for it in Indiana (in contrast to what the City of Chicago did). The money from the ITR lease was not blown.

Short term gain at a long term expense.  They were short-sighted in exchanging long term control and income for a short term windfall.  Granted that Indiana spent the money more wisely than Chicago, it still is a short term windfall at the expense of long term income and control.

[mukade]

Short term gain at a long term expense.  They were short-sighted in exchanging long term control and income for a short term windfall.  Granted that Indiana spent the money more wisely than Chicago, it still is a short term windfall at the expense of long term income and control.

The new roads will be here for decades. That is long term gain both from an economic growth and safety perspective.

The new roads that were just built will require less maintenance for a long time. That is less expense than maintaining the old and outdated roads they replaced.

Finally, why do you think a road that was losing money for the state for so long would have turned around finally? You definitely cannot assume that.

[theline]

Short term gain at a long term expense.  They were short-sighted in exchanging long term control and income for a short term windfall.  Granted that Indiana spent the money more wisely than Chicago, it still is a short term windfall at the expense of long term income and control.

The new roads will be here for decades. That is long term gain both from an economic growth and safety perspective.

The new roads that were just built will require less maintenance for a long time. That is less expense than maintaining the old and outdated roads they replaced.

Finally, why do you think a road that was losing money for the state for so long would have turned around finally? You definitely cannot assume that.

The new roads will be here for decades, but they will need maintenance long before the ITR lease is up. More roads will need construction in the interim as well. Where will that money come from?

More revenue could have been raised by increasing the tolls. Since the toll road is no longer under state control, that's no longer an option. You can bet your bottom dollar that the concession will be raising tolls.

As a user of the toll road, I may not have been cheerful about paying higher tolls, but I would have at least been pleased to know that my higher tolls were going to improve either the toll road or nearby roads. Over the next 60+ years while I and my descendants pay those higher tolls to the concession, it will be through clenched teeth, knowing the the money is going largely to enrich foreign investors.

[hbelkins]

Prior to the lease, was Indiana diverting toll road revenues to off-system projects?

As a user of the toll road, I may not have been cheerful about paying higher tolls, but I would have at least been pleased to know that my higher tolls were going to improve either the toll road or nearby roads. Over the next 60+ years while I and my descendants pay those higher tolls to the concession, it will be through clenched teeth, knowing the the money is going largely to enrich foreign investors.

I'm sure there are certain standards of maintenance and usability that are written into the contract. If the leaseholder fails to maintain the road at an acceptable or contractural level, I'd be willing to bet that would give the state an "out" or at very least, grounds for a breach of contract lawsuit.

[mukade]

Short term gain at a long term expense.  They were short-sighted in exchanging long term control and income for a short term windfall.  Granted that Indiana spent the money more wisely than Chicago, it still is a short term windfall at the expense of long term income and control.

The new roads will be here for decades. That is long term gain both from an economic growth and safety perspective.

The new roads that were just built will require less maintenance for a long time. That is less expense than maintaining the old and outdated roads they replaced.

Finally, why do you think a road that was losing money for the state for so long would have turned around finally? You definitely cannot assume that.

The new roads will be here for decades, but they will need maintenance long before the ITR lease is up. More roads will need construction in the interim as well. Where will that money come from?

Yes, but that ongoing maintenance would be needed whether or not these new highways were built. I don't understand why this situation is any different than any construction plan. All in all, less maintenance will be needed in the remaining 68 years than if nothing was done.

More revenue could have been raised by increasing the tolls. Since the toll road is no longer under state control, that's no longer an option. You can bet your bottom dollar that the concession will be raising tolls.

Yes, they will raising tolls, but the state sets the limits and if the tolls go above what the market will bear, the ITR concession will end up defaulting. Then the state gets the highway back, but I doubt that would happen. If the 75 year lease agreement had not been signed, the state would also have had to raise tolls. No one will know what the difference (if any) would have been.

As a user of the toll road, I may not have been cheerful about paying higher tolls, but I would have at least been pleased to know that my higher tolls were going to improve either the toll road or nearby roads. Over the next 60+ years while I and my descendants pay those higher tolls to the concession, it will be through clenched teeth, knowing the the money is going largely to enrich foreign investors.

As it turned out, the state got a lot more money than they should have. I don't think the foreign investors (largely Australian pension funds?) are being enriched. Sad for them, I agree. So you could say that profit Indiana made funded a good chunk of the downstate projects. In the meantime, South Bend and Elkhart have gotten or will get more highway and road improvements per capita than any part of the state. Certainly, many of these projects would not have happened without the ITR lease. Those improvements include the US 31 freeway, SR 331, SR 23, US 33 widening, Elkhart CR 17, and others.

It was not a perfect deal for everyone in Indiana, but all in all it was pretty good.

[JREwing78]

There's no reason Indiana couldn't have done what Ohio is proposing. They simply lacked the political will to leverage the toll road themselves. That same lack of political will to raise revenue for maintaining and improving their highways will become very evident as the maintenance bills for these new roads come due.

I am not getting what your point is on lack of political will. If Indiana maintained control of the highway and then raised tolls substantially to pay for highways throughout the state, I don't think that would have played very well in northern Indiana (and for good reason).

<emphasis added>

Raising tolls is unpopular. Politicians couldn't stomach doing it themselves. They got someone to flash them some cash in exchange for taking profits over a longer period of time. Now the politicians don't have to raise tolls, or deal with toll hikes not playing well with voters. Plus, they get to look good for getting new roads built, and don't have to deal with the fallout until they're long out of office.

That's not leadership. That's passing the buck.

You must remember that for every mile of new road Indiana builds and puts under the state system, they give equal mileage to the local governments under Indiana's statutory state road mileage cap. No doubt, signs will come down off some state road(s) to make room for the new I-69.

I don't think that is true. There is a 12,000 mile cap, but the system is only around 11,000 miles. That said, the state wants to shed more miles, but I don't think it has anything to do with that law.

Pretty sure all the new 4-lanes built across the state are more expensive to maintain than the 2 lane roads they replaced. And the roads the state sheds are thrown to the counties to maintain. They don't go away just because the state pawns them off.

Fact is, none of this gets to the core issue - Indiana legislators can't stomach raising fuel taxes to properly fund their road ambitions. There's no reason they couldn't do this except political will. By contrast, Wisconsin has been at work on a massive expansion of their major highways for the last two decades (WI-29, US-53, US-10, US-41, WI-26, US-151, etc), in large part funded by fuel taxes that are an extra dime or so per gallon.