Toll Road Tales: Good News for Taxpayers, Motorists

TReactions were varied recently when the company operating the Indiana Toll Road filed for bankruptcy. A researcher at the Harvard Kennedy School emphasizes the positive aspects of how that deal was structured and focuses on the continually evolving role of each party in such an agreement. Governing reports:

n 2005, two companies came together to form the Indiana Toll Road Concession Co. (ITRCC), which won the right to operate the toll road in exchange for a $3.8 billion up-front payment. The deal limited how much tolls could rise and included a trigger requiring the consortium to expand the roadway if certain congestion benchmarks were reached. The $3.8 billion threw off about $250 million that was used to fund other state transportation priorities.

Like so many other enterprises, ITRCC was done in by the Great Recession. Its financing structure called for large debt payments at the end of the first decade, which proved overwhelming in the face of revenues that didn’t meet projections when the downturn hit and traffic volume fell.

But what’s reassuring is that motorists will see no interruption in service or toll increases as a result of the bankruptcy. The roadway is still subject to the same performance metrics, and there will be no taxpayer bailout. State officials will first try to find a new operator to take on the remainder of the concession deal. If that doesn’t work out, the ITRCC will likely be recapitalized with an altered debt schedule.

In either case, customers will retain the benefits from the $458 million ITRCC has invested since 2006 in road, bridge and pavement improvements and a new electronic tolling system.

While it appears that the Indiana Toll Road deal has succeeded at protecting taxpayers and motorists, that doesn’t mean there aren’t lessons to be learned from the bankruptcy. To maintain a true public-private partnership, governments might want to avoid taking the entire concession payment up front.

Chicago completed a similar deal just before the Indiana Toll Road agreement and couldn’t resist the temptation to use the upfront windfall to plug other holes in the city budget instead of using interest from the concession payment to maintain transportation infrastructure. More recently, public-private partnerships for Virginia’s Pocahontas 895 parkway and Colorado’s Northwest Parkway featured smaller upfront payments but give taxpayers a cut of the ongoing toll revenue.

I-69: Time to Take Full Advantage

cropped-another-i69-headerProgress on the construction of Interstate 69 from Evansville to Indianapolis continues to take place. Among the next steps is taking economic advantage of this expansion.

The I-69 Regional Summit…Driving Opportunity is a one-day event for businesses and organizations interested in tourism, defense, economic development, government, trade and logistics, commerce and education.

Hoosier Voices for I-69 and The Greater Bloomington Chamber of Commerce are serving as hosts. The Bloomington/Monroe County Convention Center is the location on October 21, with a pre-summit welcome reception on October 20 at Indiana University’s Stadium Club.

Indiana Lt. Gov. Sue Ellspermann will deliver an opening keynote. Also included are an I-69 congressional caucus panel, full corridor perspective from Canada to Mexico and economic development discussion. Breakout sessions include site selection perspectives, local planning, trade/logistics and public private partnerships.

Access full details and registration.

IFA, INDOT Address Transportation Committee About Toll Road, Future Plans

The Interim Committee on Roads and Transportation heard from both the Indiana Finance Authority (IFA) and the Indiana Department of Transportation (INDOT) on the Indiana Toll Road and current and future road infrastructure needs on Sept. 23. IFA Public Finance Director Kendra York and INDOT Commissioner Karl Browning testified.

York reviewed the status of several public-private partnership (P3) projects around the state, but most of the interest and questions concerned the pre-packaged Chapter 11 bankruptcy of the private operator of the Indiana Toll Road, ITR Concession Company, LLC (ITRCC) and its affiliates. ITRCC filed for bankruptcy on September 11.

York testified that the bankruptcy proceeding is expected to result in either the sale of all assets of ITRCC (including lease rights to the toll road) to a new entity or a restructuring of the existing debt. Under either scenario, the toll road will continue to be owned by the IFA on behalf of the state of Indiana. IFA will continue to have the rights it negotiated in the original lease agreement including the right to approve any new operator and that operator will be strictly held to the same operational standards set forth in the original lease agreement. There will be no change to the current toll rate structure under the lease agreement. Road operations will continue as usual during the bankruptcy process without impact to drivers, employees, vendors and the communities served by the road.

York said IFA will continue to monitor the bankruptcy and work with related parties to protect the public interest. In other words, any concerns about adverse effects of the bankruptcy proceeding on the toll road or the state of Indiana are misguided at best, misleading at worst.

Browning provided a broad overview of the state of Indiana’s roads and bridges during his testimony. When adjusted for inflation, INDOT is operating much more efficiently than in years past: Operating expenses in 2014 are approximately $74 million less than in 2005, but while INDOT is operating more efficiently, the state needs more revenues to address a growing need for maintenance of existing infrastructure, let alone expansion of the state’s highway network.

Within the next five years, all fuel excise tax revenues from the state’s highway fund will be required for maintenance of existing infrastructure; no funding will be available for expansion projects. Additionally, more than half of the state’s bridges are in the last 25 years of their useful life (50+ years or older) and will need significant reconstruction or remediation.

Both federal and state highway revenues are expected to remain flat or slightly decline due to a number of factors, including increased fuel efficiency standards and alternative-fuel vehicles. This will cause the state to have to look for creative ways to finance projects (such as P3s) or find new sources of revenue. INDOT is in the middle of a legislatively-mandated two-year study of needs and funding sources.

In short, while the state did well in the Major Moves era with strategic investments, it is facing increasing challenges to pay for future upgrades to its surface transportation network. New sources of revenue need to be found and the Indiana Chamber looks forward to the final analysis by INDOT in the two-year study.

Transportation’s Future Focus of Summit

08Solving the National Transportation Crisis is the theme of the 12th annual Indiana Logistics Summit. More than 300 participants are expected from the transportation, logistics, distribution and manufacturing industries.

Indiana Lt. Gov. Sue Ellspermann and former Indianapolis Mayor Stephen Goldsmith are among the speakers. Innovator Lawrence Burns, who spent 40 years with General Motors, will deliver a presentation on The Future of Transportation.

Purdue University, Conexus Indiana and the Ports of Indiana are the hosts for the Oct. 7-8 event at the Indiana Convention Center. Learn more and register.

Congress Seeks Short-Term Fix to Highway Trust Fund Dilemma

The U.S. Congress voted last week to provide $10.9 billion to the U.S. Department of Transportation to fund the Highway Trust Fund in order to reimburse states for repairs and infrastructure improvements for roads, rails and airports.

The nearly $11 billion was cobbled together from general fund revenues by any number of budgetary gimmicks not rationally tied to the fuel (gasoline and diesel) excise taxes that normally go into the trust fund (e.g., an extension of customs fees as well as so-called “pension smoothing”).

Few lawmakers in the Indiana delegation (and the entire Congress for that matter) are happy that it is not a longer-term solution; those we spoke with were frustrated by the delay and the funding mechanisms. The Indiana Chamber agrees this is no way to conduct the people’s business, but it is better than the alternative of the highway fund going broke, work stoppages and the idling of hundreds of thousands of construction workers across the country. We will work with the delegation to secure a more rational bill and reauthorization of the multi-year surface transportation bill in coming months.

Foreign Investment Pays Off in Jobs

The Indiana Chamber has touted the advantages of foreign-owned establishments numerous times over the years. A new study looks at jobs generated by the foreign investment in the largest U.S. metro areas over the past 20 years.

In 1991, Indianapolis ranked 36th nationally with 21,190 jobs tied to foreign direct investment. In 2011, those numbers improved to a 22nd-place ranking and 49,910 jobs.

How about industries and locations? Aircraft products and parts topped the 2011 list (thanks largely to Rolls Royce), accounting for 7,600 jobs. Motor vehicle parts followed with 4,800 jobs. In line with those numbers, London and Tokyo, respectively, were the leading global cities serving as home for the Indianapolis-area investment.

The Brookings Institutions and JPMorgan Chase combined efforts on the research.

Chamber Comments on State’s Blue Ribbon Panel on Transportation Infrastructure

Indiana Chamber of Commerce President and CEO Kevin Brinegar on the release of the report from the state’s Blue Ribbon Panel on Transportation Infrastructure:

“The recommendations of the Blue Ribbon Panel on Transportation Infrastructure are an important first step. The group has identified priority projects and clearly defined the funding challenges. Equally important will be the work called for in HEA 1104 (2014), legislation outlining an Indiana Department of Transportation study of financing alternatives that will help meet future funding needs.

“In addition, it’s time for Washington to get its act together and assure that federal funding shortfalls are addressed. Some states are already cutting back on important projects in fear of Highway Trust Fund deficiencies as soon as August 1. What is truly needed – instead of short-term, crisis-avoiding extensions – is a multi-year renewal of the federal transportation plan.

“Superior infrastructure is one of the four drivers of the Indiana Chamber-led Indiana Vision 2025 and strong transportation via road, rail, air and water is critical to our state’s economic future.”

Electric Vehicle Charging Station Program Begins in Northwest Indiana

In an effort to encourage more use of alternative fuels in Northwest Indiana, the Northern Indiana Public Service Company (NIPSCO) has partnered with South Shore Clean Cities to launch a pilot program making electric vehicle charging stations available to more public entities.

South Shore Clean Cities is a Crown Point-based public/private organization that promotes the use of alternative fuels and technology.

Through the end of January 2015, the IN-Charge Around Town Electric Vehicle Program offers financial incentives to help defray the costs of putting in charging stations on public buildings. NIPSCO is offering up to $1 million in incentives for the program, according to a press release.

This program is the second part of NIPSCO’s recent alternative fuel push; the IN-Charge at Home Program gave an instant credit for residents to install a charging station on their property. Additionally, NIPSCO will buy an equal amount of renewable energy certificates for every unit of electricity used through the program.

“Electric vehicles are becoming an increasingly popular alternative to gasoline-powered cars,” explains Carl Lisek, executive director of South Shore Clean Cities, in a press release. “They offer fuel cost savings, produce no tailpipe emissions and help reduce reliance on imported oil.”

Charging station owners can choose to charge for using the station, but will operate free of charge for the owners.

Indy Still Miles Behind on Mass Transit Compared to Other Cities

While mass transit in Central Indiana finally received a somewhat-limiting go-ahead from the Indiana General Assembly in the recently completed session, others with long-established systems are moving forward.

A recent Governing article noted:

  • Boston plans to extend weekend transit service until 3 a.m. Young professionals gave an enthusiastic thumbs-up to the longer hours for subways, light rail, streetcars and buses.

And here, it took three years to get state permission to have a local referendum to approve a system that would likely only include some faster buses (light rail not allowed). Just saying that despite Indiana being a great place to live, we’re way, way behind on this amenity.

  • London plans 24-hour weekend service on some subway lines in 2015. Chicago, New York and Philadelphia already do the same.

Why is this so important? The article notes: “As young professionals, many of whom are car-free, seek out vibrant cities in which to live and work, this is seen as a way to attract them. … Transit at all times ensures that mobility is available to everyone.”

Park in One Country, Fly Out of Another

Fascinating facts while scanning a New York Times article on efforts to build a bridge in San Diego that would serve as a direct pedestrian border crossing to Tijuana International Airport:

  • At three other airports, passengers can park their car in one country for a flight out of another country. They are two airports on the Swiss-French border and a shuttle that runs passengers between airports in Hong Kong and Shenzhen, China.
  • Annually, 2.4 million U.S. travelers use the Tijuana airport, nearly 60% of the airport’s traffic. Why? Fees are up to 50% less to fly throughout Mexico.
  • Mexico widened the San Ysidro crossing to 34 lanes in 2012; yet, substanial delays await those traveling between the two countries and at the five other border crossings in California.

The story notes that funding delays in Congress must still be overcome for development on the U.S. side of the border. Although not finalized, bridge fees are expected to range from $13 to $17. Passengers would park on the U.S. side and walk across an enclosed 325-foot passageway directly to the airport.

We’ll keep an eye on what could be an innovative solution to what is described as a too small, landlocked Lindbergh Field in San Diego.