With Governor Mitch Daniels’ term ending in January, Indianans are looking to a fresh crop of candidates — Republican Mike Pence, Democrat John Gregg and Libertarian Rupert Boneham — to provide innovative answers for how to fund highway construction projects. Daniels’ privatization bug resulted in the lease of Indiana’s toll road to a foreign consortium for $3.5 billion. The 75-year deal netted the funds needed for Daniels’ 10-year construction plan but, as is often the case with toll road privatization, the situation is now a bit bungled with funds already low and options tapped out. Many are realizing that Indiana has a major problem that forthcoming Governors are going to deal with for decades:
Jack Basso, director of Program Finance and Management at the American Association of State Highway and Transportation Officials, said Indiana will soon be as cash-strapped as other states and with few options on the table.
“The next governor is going to have to face the reality that the money isn’t going to materialize out of the air,” Basso said. “There really aren’t other options. The two big revenue generators for transportation are the fuel tax and vehicle registration fees.”
Aside from those two streams, few options exist to generate funding.
There aren’t any more toll roads to lease, so Indiana’s funding options will be limited, said Dennis Faulkenberg, president of APPIAN, a transportation consulting firm based in Indianapolis.
“My big question is what needs to be done and that tells me how concerned I should be. There are needs out there,” he said.
Rep. Win Moses, D-Fort Wayne, said road construction projects are cyclical and won’t stop just because the money dries up. He said that funding will certainly be an issue in the upcoming election.
“We have built some important roads. But we did so by mortgaging heavily the future and allowing the tolls to go up quickly,” he said. “This was not a clear win-win. And now we are back where we started.”
There is still $1.7 billion left in the construction fund gaining interest, but it is not enough to sustain growth and improvement plans. Yet, neighborly folly has not influenced Ohio and its Governor, John Kasich, who is spending $3.4 million to study the idea of privatizing part of their turnpike.
Ohio residents are angered not only by the fact that the plan is failing for nearby Indiana, but because the money raised by turnpike privatization would go to the entire state while the higher fees would be paid by residents living in Ohio’s Northern region.
The Cleveland Plain-Dealer Editorial Board recently questioned the administration’s thinking:
But the more fundamental question is, why fork over any taxpayer money to study privatization before the state has resolved the underlying fairness issues raised by using what’s effectively a regional asset to raise one-time money for roads elsewhere in the state. Whatever fiscal benefit might come from a turnpike lease or sale, it should go wholly or primarily to northern Ohio — but that hasn’t been promised. Far from it.
In plain English, Kasich is searching for a politically palatable argument for leasing the 241-mile toll road to a private operator or for borrowing against future turnpike tolls. Either way, the state would use any proceeds to build or fix Ohio’s non turnpike highways.
State officials have said the study isn’t designed to reach a foregone conclusion in favor of leasing the turnpike or encumbering its tolls to fund non turnpike road work. Still, long term, either mechanism would limit Ohioans’ input over future toll rates.
Whether you’re a Greater Cleveland commuter or a cross-state trucker, you don’t need $3.4 million worth of financial analysts, lawyers and publicists to tell you that’s not good.
Ohio is also in a similar jam as Indiana in that its traditional sources of road revenue — user fees and gasoline taxes — are not enough to makeup the shortfall. Simply raising these taxes could help but would go against any anti-tax pledges Kasich may have made to his GOP colleagues and faithful Buckeye conservatives. With a lack of innovative ideas, it is likely that they will take the high-risk, low-reward money the leased turnpike would bring in:
So what’s motivating the Kasich administration? Simple: flat gas taxes, which are creating a problem in maintaining non turnpike roads.
Ohio relies on the gasoline tax, now 28 cents per gallon, to build or fix non turnpike roads. But revenue from that tax ($1.76 billion in the year that ended last June 30) is essentially flat; four years earlier, the annual total was just 2 percent less ($1.72 billion).
Increasing the per-gallon tax is off the table because holding down taxes is one leg of Kasich’s gubernatorial platform.
Another leg, interestingly, is opposing the use of one-time money to finance continuing state responsibilities.
But that, in effect, is what a turnpike deal would do, at least in part: spend one-time money on road work that wear and tear make perpetual. That makes it a bad deal not just for northern Ohio, but for all of Ohio, and spending $3.4 million to try to show otherwise won’t change those fundamentals.
The first time we wrote about Ohio’s privatization efforts, the post had a really good title.