Should the states lease their toll roads to the private sector?

[cpzilliacus]

[  Note that Reason has promoted the idea of private toll roads for a long time - I believe their previous efforts led to the privatization of the Indiana Toll Road and Chicago Skyway. ]

Study: States Can Lease Toll Roads to Fund Other Infrastructure, Pay Off Debt

Why Governments Should Lease Their Toll Roads - The nine states studied here would have significant net proceeds from leasing their toll road systems via long-term public-private partnerships–even after paying off outstanding tax-exempt toll road bonds.

Frequently Asked Questions: Why Should States Consider Leasing Their Toll Roads?
Why lease an asset? Won't toll rates go up? Isn't this a terrible time to consider leasing infrastructure?

Pittsburgh Post Gazette: California foundation pushing for Pennsylvania to lease toll roads to private operators

[ilpt4u]

This idea has worked out SOOOO well for the Indiana Toll Road and Chicago Skyway...

[cpzilliacus]

This idea has worked out SOOOO well for the Indiana Toll Road and Chicago Skyway...

Reason (not me) would respond by stating (correctly) that the bankruptcy of the first owner of the Indiana Toll Road concession contract cost Indiana taxpayers nothing, though bondholders (bondholders could have lost money, and probably did).

[Rick Powell]

The ITR deal wound up a boon to the taxpayers, because the state got a second bite at the leasing apple and the improvements that had been made by the original lessee. The continued construction of I-69 in particular was a beneficiary of the ITR deal(s).

[NWI_Irish96]

This idea has worked out SOOOO well for the Indiana Toll Road and Chicago Skyway...

As others have noted, the company that leased the ITR went bankrupt because they overpaid so much, meaning that the state got way more money than it was worth. That money went towards finishing I-69 and upgrading US 31.

If you regularly use the ITR, you may not think the massive toll increases and poor road conditions are worth it, but for everybody else it's been a great deal.

[hbelkins]

Personally, I'd be more in favor of leasing toll roads to fund projects elsewhere (like what was done in Indiana, and would be logical in some other states where the toll roads are used more for cross-country travel than by local state residents) than the privatization of toll lanes like has been done in the DC area, which results in restrictions on improvement/widening/capacity-increasing projects the state DOT can do in surrounding areas or adjacent roads.

[vdeane]

Yeah, given what's happened in Indiana, we really shouldn't privatize toll roads at all.  High tolls, shit infrastructure.  That's what private industry does.

Also see: ON 407.  Sure, the infrastructure is actually good in that case, but the toll rates are very high and structured in a way that is downright predatory.  If you bill by mail, you get huge surcharges for that.  If you have a transponder, you have high fees for that.  All users pay a per-trip fee in addition to the actual toll rate for the section traveled.  The only "good" way to deal with ON 407 is to avoid it entirely.

If you regularly use the ITR, you may not think the massive toll increases and poor road conditions are worth it, but for everybody else it's been a great deal.

Toll roads shouldn't be used as cash cows to maintain unrelated infrastructure.  Full stop.  The feds stopped PA's plan to toll I-80 for very, very good reasons.

Personally, I'd be more in favor of leasing toll roads to fund projects elsewhere (like what was done in Indiana, and would be logical in some other states where the toll roads are used more for cross-country travel than by local state residents) than the privatization of toll lanes like has been done in the DC area, which results in restrictions on improvement/widening/capacity-increasing projects the state DOT can do in surrounding areas or adjacent roads.

If I remember right, Indiana's deal with I-90 has the same restrictions.

[ilpt4u]

Personally, I'd be more in favor of leasing toll roads to fund projects elsewhere (like what was done in Indiana, and would be logical in some other states where the toll roads are used more for cross-country travel than by local state residents) than the privatization of toll lanes like has been done in the DC area, which results in restrictions on improvement/widening/capacity-increasing projects the state DOT can do in surrounding areas or adjacent roads.

InDOT has that restriction on the ITR lease. It has been discussed on posts about the Illiana and a potential upgraded US 30 across Northern Indiana

Gotta love it when introducing the Private Sector limits competition!

If I-69 in Indiana needs toll money to subsidize its construction, it should have been built as a Toll Road, not taking value from the ITR lease in far Northern Indiana and spending it in Southern Indiana

[cpzilliacus]

Personally, I'd be more in favor of leasing toll roads to fund projects elsewhere (like what was done in Indiana, and would be logical in some other states where the toll roads are used more for cross-country travel than by local state residents) than the privatization of toll lanes like has been done in the DC area, which results in restrictions on improvement/widening/capacity-increasing projects the state DOT can do in surrounding areas or adjacent roads.

A few thoughts:

If cash from toll road leases is used to build or improve highways (as it was in Indiana), fine.

But in many states, there will be enormous pressure on elected officials to pour those dollars into transit subsidies (either capital or operating) - a potentially large expenditure of money to fund what often has little or limited benefit.

Regarding non-compete clauses, I think the first was in Orange County, California in the CA-91 (Riverside Freeway) corridor.  In the D.C. area, these currently apply only in the Virginia part of the region, though they could be coming to Maryland as well.

[jeffandnicole]

Personally, the report had a sloppy feel to it. There was a big debate on privatizing roads about a decade ago, and most of the proposals went nowhere.  I think the Indiana example shows that there's also a hazard to the investors, and every company and private equity group out there is well aware of it, so don't expect them to bid for billions on these roads as well. 

When I read it, they would mention the "New Jersey Turnpike", not the New Jersey Turnpike Authority.  There's a big difference between the two, because the GS Parkway's revenue is several hundred millions of dollars.  The numbers seem to say NJTA, not just the Turnpike, and later on in the report it did allude to both the Turnpike and Parkway.

There was also a big tie-in to Covid-19, basically to say that this will infuse the states with much needed money.  This is the EXACT reason why toll roads shouldn't be privatized.  What if they decided to go private in 2009?  There wouldn't be any opportunity to make up the money now or when the next big disaster strikes.  What if the agreement stated that if a certain level of revenue wasn't reached, tolls could be raised higher?  That would certainly be true this year.  What if a key component of the infrastructure had an issue, like the NJ-PA Turnpike Bridge's crack?  How fast would that have been responded to?

And finally...the report threw out a bunch of numbers in terms of what privatization would get the state...but did they really mean anything?  It's not like the report stated what the private companies would actually offer the states in exchange for running the toll road.

[Rothman]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

[NWI_Irish96]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

Not sure where you're getting that from. Neither of those things has anything to do with the other. The ITR lease paid for new terrain of I-69 and US 31, among other things. The decommissioning of state routes is so INDOT can focus on highways rather than city streets.

[Rothman]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

Not sure where you're getting that from. Neither of those things has anything to do with the other. The ITR lease paid for new terrain of I-69 and US 31, among other things. The decommissioning of state routes is so INDOT can focus on highways rather than city streets.

Pfft.  Baloney.  Decommissioning is to save the state money and dump road mileage onto municipalities as an unfunded mandate.

[NWI_Irish96]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

Not sure where you're getting that from. Neither of those things has anything to do with the other. The ITR lease paid for new terrain of I-69 and US 31, among other things. The decommissioning of state routes is so INDOT can focus on highways rather than city streets.

Pfft.  Baloney.  Decommissioning is to save the state money and dump road mileage onto municipalities as an unfunded mandate.

I'm trying to figure out if you actually know anything at all about Indiana. Every road decommissioned has come with an agreement between INDOT and the city/town/county, where in most cases the state pays the locality a lump sum to take over the road. Not a single time has INDOT "dumped" road mileage onto anybody without an agreement. In some cases, localities have asked to take over roads in order to do construction projects that weren't going to be on INDOT's radar.

[Rothman]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

Not sure where you're getting that from. Neither of those things has anything to do with the other. The ITR lease paid for new terrain of I-69 and US 31, among other things. The decommissioning of state routes is so INDOT can focus on highways rather than city streets.

Pfft.  Baloney.  Decommissioning is to save the state money and dump road mileage onto municipalities as an unfunded mandate.

I'm trying to figure out if you actually know anything at all about Indiana. Every road decommissioned has come with an agreement between INDOT and the city/town/county, where in most cases the state pays the locality a lump sum to take over the road. Not a single time has INDOT "dumped" road mileage onto anybody without an agreement. In some cases, localities have asked to take over roads in order to do construction projects that weren't going to be on INDOT's radar.

Heh.  How is it Hoosiers are so easily duped into thinking a one-time lump sum for a perennial cost is a good deal?

[NWI_Irish96]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

Not sure where you're getting that from. Neither of those things has anything to do with the other. The ITR lease paid for new terrain of I-69 and US 31, among other things. The decommissioning of state routes is so INDOT can focus on highways rather than city streets.

Pfft.  Baloney.  Decommissioning is to save the state money and dump road mileage onto municipalities as an unfunded mandate.

I'm trying to figure out if you actually know anything at all about Indiana. Every road decommissioned has come with an agreement between INDOT and the city/town/county, where in most cases the state pays the locality a lump sum to take over the road. Not a single time has INDOT "dumped" road mileage onto anybody without an agreement. In some cases, localities have asked to take over roads in order to do construction projects that weren't going to be on INDOT's radar.

Heh.  How is it Hoosiers are so easily duped into thinking a one-time lump sum for a perennial cost is a good deal?

For someone who is so simple-minded that they only see that, it's not a good deal. For someone who understands that a locality can take that lump sum and invest in the area to bring in a larger tax base through business and residences, it can be a good deal.

[ilpt4u]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

Not sure where you're getting that from. Neither of those things has anything to do with the other. The ITR lease paid for new terrain of I-69 and US 31, among other things. The decommissioning of state routes is so INDOT can focus on highways rather than city streets.

Pfft.  Baloney.  Decommissioning is to save the state money and dump road mileage onto municipalities as an unfunded mandate.

I'm trying to figure out if you actually know anything at all about Indiana. Every road decommissioned has come with an agreement between INDOT and the city/town/county, where in most cases the state pays the locality a lump sum to take over the road. Not a single time has INDOT "dumped" road mileage onto anybody without an agreement. In some cases, localities have asked to take over roads in order to do construction projects that weren't going to be on INDOT's radar.

Heh.  How is it Hoosiers are so easily duped into thinking a one-time lump sum for a perennial cost is a good deal?

Same way Big Business does it. Next Quarter/Short Term thinking, without Long Term concern. Usually with Elected Officials the concern is at least the next 2-6 years, depending on Term Length

Public property/assets leased to a private For-Profit operation should be illegal, and that goes beyond Roads. But heh, give the Hoosier State credit. They got paid!

[TEG24601]

Only if the roads are completely paid off.


I would be much more amenable to private companies building new toll roads themselves, paying a fee to lease numerical designation, rather than taking over existing roadways.

[sprjus4]

If I-69 in Indiana needs toll money to subsidize its construction, it should have been built as a Toll Road, not taking value from the ITR lease in far Northern Indiana and spending it in Southern Indiana

Tolls on I-69 would likely not be able to be self sufficient due to lower traffic volumes, and largely in state traffic until the whole corridor is built out, whereas the Turnpike is heavily traveled, mostly by out of state, and has excess revenues.

Granted, I would like to see the Turnpike eventually widened to 6 lanes and revenues diverted to I-69 could've helped pay for that. Either way, as a toll road, if widening is desired, more bonds can be issued to pay for its construction to be repaid by continuing toll revenue.

[ilpt4u]

I thought the Tolls on SW Indiana I-69 were killed for Political reasons. I thought the tolling study showed they would work?

I'm just going by what I remember reading, years ago. I wasn't a member here on the forums so I wasn't part of any discussion at the time

I'll try searching the forums, see what I can dig up

[Rothman]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

Not sure where you're getting that from. Neither of those things has anything to do with the other. The ITR lease paid for new terrain of I-69 and US 31, among other things. The decommissioning of state routes is so INDOT can focus on highways rather than city streets.

Pfft.  Baloney.  Decommissioning is to save the state money and dump road mileage onto municipalities as an unfunded mandate.

I'm trying to figure out if you actually know anything at all about Indiana. Every road decommissioned has come with an agreement between INDOT and the city/town/county, where in most cases the state pays the locality a lump sum to take over the road. Not a single time has INDOT "dumped" road mileage onto anybody without an agreement. In some cases, localities have asked to take over roads in order to do construction projects that weren't going to be on INDOT's radar.

Heh.  How is it Hoosiers are so easily duped into thinking a one-time lump sum for a perennial cost is a good deal?

For someone who is so simple-minded that they only see that, it's not a good deal. For someone who understands that a locality can take that lump sum and invest in the area to bring in a larger tax base through business and residences, it can be a good deal.

A pittance of a one-time payment can't do all that.

[NWI_Irish96]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

Not sure where you're getting that from. Neither of those things has anything to do with the other. The ITR lease paid for new terrain of I-69 and US 31, among other things. The decommissioning of state routes is so INDOT can focus on highways rather than city streets.

Pfft.  Baloney.  Decommissioning is to save the state money and dump road mileage onto municipalities as an unfunded mandate.

I'm trying to figure out if you actually know anything at all about Indiana. Every road decommissioned has come with an agreement between INDOT and the city/town/county, where in most cases the state pays the locality a lump sum to take over the road. Not a single time has INDOT "dumped" road mileage onto anybody without an agreement. In some cases, localities have asked to take over roads in order to do construction projects that weren't going to be on INDOT's radar.

Heh.  How is it Hoosiers are so easily duped into thinking a one-time lump sum for a perennial cost is a good deal?

For someone who is so simple-minded that they only see that, it's not a good deal. For someone who understands that a locality can take that lump sum and invest in the area to bring in a larger tax base through business and residences, it can be a good deal.

A pittance of a one-time payment can't do all that.

Hammond took over IN 312 from the state. They've upgraded the road and already have new businesses opening.

[wanderer2575]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

Not sure where you're getting that from. Neither of those things has anything to do with the other. The ITR lease paid for new terrain of I-69 and US 31, among other things. The decommissioning of state routes is so INDOT can focus on highways rather than city streets.

Pfft.  Baloney.  Decommissioning is to save the state money and dump road mileage onto municipalities as an unfunded mandate.

I'm trying to figure out if you actually know anything at all about Indiana. Every road decommissioned has come with an agreement between INDOT and the city/town/county, where in most cases the state pays the locality a lump sum to take over the road. Not a single time has INDOT "dumped" road mileage onto anybody without an agreement. In some cases, localities have asked to take over roads in order to do construction projects that weren't going to be on INDOT's radar.

And are there possibly additional payments on top of that?  I probably know only enough to be dangerous, but when a Michigan state route is decommissioned and the road transferred to a county or other local jurisdiction (like Indiana, it requires an agreement between the state and locality), not only is there a one-time payment for immediate repairs/improvements, or the state repaves or reconstructs the road, but usually there also is a small annual Act 51 payment to the locality specifically to fund maintenance for that road.

[NWI_Irish96]

ITR lease was a failure.  Indiana's decommissioning of state routes to save bucks because they got suckered is enough evidence for me.

Not sure where you're getting that from. Neither of those things has anything to do with the other. The ITR lease paid for new terrain of I-69 and US 31, among other things. The decommissioning of state routes is so INDOT can focus on highways rather than city streets.

Pfft.  Baloney.  Decommissioning is to save the state money and dump road mileage onto municipalities as an unfunded mandate.

I'm trying to figure out if you actually know anything at all about Indiana. Every road decommissioned has come with an agreement between INDOT and the city/town/county, where in most cases the state pays the locality a lump sum to take over the road. Not a single time has INDOT "dumped" road mileage onto anybody without an agreement. In some cases, localities have asked to take over roads in order to do construction projects that weren't going to be on INDOT's radar.

And are there possibly additional payments on top of that?  I probably know only enough to be dangerous, but when a Michigan state route is decommissioned and the road transferred to a county or other local jurisdiction (like Indiana, it requires an agreement between the state and locality), not only is there a one-time payment for immediate repairs/improvements, or the state repaves or reconstructs the road, but usually there also is a small annual Act 51 payment to the locality specifically to fund maintenance for that road.

Whenever a transfer is made, the only information released is that the locality receives money in exchange for taking over the road. Nothing more specific than that is mentioned, and I haven't bothered to dig around for it. I just know that there are several cases where localities immediately improved those corridors and attracted businesses.

[triplemultiplex]

Privatization means higher cost to road users and less flexibility for transportation planning so hell to the no.

Once Indiana is done spending the cash they got from the ITR, they'll be broke again and unable to afford the maintenance on all the shit they built with that money.  So they'll either have to raise taxes/fees or let the roads go to hell.  Meanwhile, ITR users will still be getting jacked by a private company because they are/will put profit over their captive market of users. A decade from now, it will be the worst of both worlds for drivers in Indiana all to placate some short-term political agendas.