Indiana Toll Road update
Several years ago, as Pennsylvania was considering the merits of selling or leasing the Turnpike, proponents pointed toward Indiana as a successful example of leveraging transportation funding through privatization. That grass is always greener on the other side of the fence, right?
In 2006, Indiana entered into a 75-year lease with a consortium of foreign investors, who paid $3.8 billion to operate the Indiana Toll Road. The state then embarked on an ambitious highway construction program.
According to the Fort Wayne Journal Gazette this week, nearly all of the $3.8 billion will have been spent or allocated by the time the state’s next governor takes office in January, portending a significant drop in the highway program and putting Indiana back in the same boat as many other states, including Pennsylvania.
Many opponents of the Pennsylvania Turnpike’s privatization cited the challenges of protecting the principal once the up-front payment was received. In fact, and in retrospect, the 2008 economic crash almost certainly would have resulted in significant erosion of the principal and significantly lower returns on the investment than had been projected.
To many in Pennsylvania, it is not clear why Indiana never even attempted to preserve the proceeds of its toll road lease, and instead began a short term construction initiative.
“Some suggest that Indiana is right back where it started, but in some ways it’s even worse off,” said PHIA Managing Director Jason Wagner. “Besides facing a major funding gap in the near future, Indiana won’t be able to leverage its toll road to generate revenue again until 2081. PHIA has long held to its position that only a long-term, comprehensive funding solution will solve the transportation crisis we face. Enacting short-term solutions such as this will do little but delay the inevitable realization that additional, growth-oriented funding is the only way to solve our infrastructure woes.”
To read the Journal Gazette article, click here.