Another toll road goes south...
Indiana toll road value plunges from $3.8 BILLION to $445 MILLION
Indiana taxpayers were sold a bill of goods. Despite the public outcry, Governor Mitch Daniels sold the Indiana Toll Road to two foreign entities, Cintra of Spain and Macquarie of Australia, for $3.8 billion in 2006. Now the value of the toll road has plunged to a paltry $445 million.
How do these companies avoid foreclosing on their "asset"? Aggressively higher toll rates, which, in turn, risks pricing yet more motorists off the road. It's the same song the North Texas Tollway Authority (NTTA) is singing. The NTTA just hiked its toll rates 32% to cover its debt service payments due to its failure to meet traffic projections.
This push for toll roads that puts taxpayers on the hook for massive multi-generational debt, particularly the sale our public infrastructure to private corporations so that politicians can go on a spending spree today, is a recipe for economic disaster. Cintra and Macquarie thought they bought a cash cow and now they're scrambling to cover their enormous debt load.
The Indiana Business Journal article dated August 1 says, "With so much invested, the companies have an incentive to milk the lease, taking advantage of language in the agreement that could permit annual toll increases of 5 percent or higher. That's exactly what House Speaker Pat Bauer, D-South Bend, an outspoken critic of the Indiana Toll Road lease, feared from the start. 'It was never meant to be a profit center or to make money,' he said of the highway, which opened in the mid-1950s. 'It was meant to be low tolls for maintenance and, eventually, a free road.'"
Given the abject failure of elected officials to protect the public interest and keep these hogs at the public trough at bay, now taxpayers are faced with the loss of control over their public infrastructure and relentless toll hikes by irresponsible, short-sighted private corporations.
The more things change the more they stay the same...these foreign entities failed to plan for economic downturns thinking the world of cheap and easy credit would last forever. And once again, the taxpayers become the piggy bank to bail out corporations for their own fiscal mismanagement.
A book entitled Outsourcing Sovereignty: Why Privatization of Government Functions Threatens Democracy and What We Can Do About It by Paul Verkuil, a free market proponent and professor, warns about outsourcing public duties to the private sector.
He says: "Not every public solution is wrong and not every private solution is better."
Privatization of government functions obviously breeds greed and reckless fiscal policy that feeds the perception that the taxpayers are the source of easy money. Financial experts John Goldberg and Jim Chanos were early critics of the so-called "Macquarie model" of financing, and warned that these deals were a house of cards that would come crashing down. And here we are.
In Goldberg's paper, "The Fatal Flaw in the Financing of Private Road Infrastructure in Australia," he predicted investors would experience heavy losses due to excessive valuations of toll roads that are monetized and spun off into funds sold to pension funds and other investors.
He also cautioned that government guarantees are buried in the voluminous and confidential financial section of public private partnership (PPP) contracts. The taxpayers and even most public officials are kept in the dark about the details and possible public liabilities. It's not hard for the government to get "out-lawyered" by these sharks.
With politicians like Mitch Daniels and Rick Perry, who can blame these companies for sticking their hands into the public treasury? All it takes is a willing vessel in public office and they're set for life. We must toss out such bought and sold politicians who fail to protect the public interest and sell-out the taxpayers for quick cash for the state, or even worse, for campaign cash.
Comments
Why not publish facts in your article? I Was apposed to the LEASE a few years ago but my then dyeing father reminded me to base my opinions on facts. So I read the lease. Based on what I read I learned the company, an Indiana company based out of Granger Indiana, can only raise the inflation based tolls after 2016, until then the rates are locked in based on the States rate schedule as predetermined in the lease. And think about it, if they should raise the rates later on, it would never be yearly, who would raise them 3.5% or some other strange percent? Why make a toll $1.83 and have to pay to count and store pennies? THINK ABOUT IT! I have also learned and researched, 78% of all toll roads raised or are about to raise their tolls last year or next. I bet those roads are not private. So why single out the Indiana road? If you look at the toll rates in EVERY other toll road you will see Indiana is in the top 3 least expensive per mile even after toll increases! Learn before you speak!
"How do these companies avoid foreclosing?" Foreclosing? Huh? Lenders foreclose when people don't pay their debts. Let's say that you, Terri Hall, Moron, lease a car from Hertz for $2000 a day for a year and also agree to change the oil once a week. Later you figure out that you should have paid $150 a day. Can you "foreclose?" Uhh ... no. The best you can do is give the car back to avoid having to pay for the oil changes. Which is also the only option that McQuarrie-Cintra has. If they give the road back to Indiana, the state keeps the original money AND gets the road back early. They didn't lend money; "foreclosure" isn't even relevant. Indiana has the money. They are keeping the money. The toll schedule is fixed for 10 yrs and then indexed in the lease. The governor of Indiana did the deal of the century. And morons like you are holding Texas back.
Dear Moron Police -- do you really want to pay exorbitant tolls forever for a road that has already been paid for, and could have been built for a fraction of what it would cost as a toll road? And no, giving the road back will certainly not happen. As Terri said, they have the option to raise tolls. If they can't pay their debt, then someone else will buy the asset -- and we will still have tolls. I do not see how this scenario could be an advancement for Texas.
Terri is not holding Texas back. She is holding the government to a reasonable standard. Toll-road till paid for -- what's wrong with that? Maintaining the road after that would cost little more, if any, than maintaining the existing roads. Right?
I am dismayed to see comments criticizing Terri Hall, our Texas heroine for leading the opposition to tolling existing highways to create an eternal "revenue source". C'mon, guys! We citizens are being held hostage on our paid-for highways, to fund an ever-increasing government bureaucracy. Tolling selected highways is inefficient, discriminatory, and manipulative. It condemns our kids and grandkids to perpetual road tax payments every time they use the highway. I have seen the pro-toll forces lie, manipulate, and obfuscate, whatever it takes to win the pot-of-gold perpetual tolls. Terri deserves a medal, not criticism.
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