Thursday, February 13, 2014

Urbanophile: Illiana Expressway Turning Into A Boondoggle

The Urbanophile's Aaron Renn is great at catching the fiscal implications of major public infrastructure improvements that aren't mentioned in the rosy press releases of our government leaders or the news analysis, or lack thereof, by the mainstream media the public relies on for much of its news. He did an outstanding job catching the one-sided bridge deal Indiana entered into with Kentucky, which benefits Kentuckians greatly at the expense of Hoosiers. That public rip off was largely ignored by the Hoosier media. Now he turns his attention to the Illiana Expressway.

Gov. Mike Pence has been gushing over what a tremendous economic boost the proposed Illiana Expressway project which Indiana and Illinois are undertaking pursuant to a public-private partnership will have for Northwest Indiana. As is too often the case, things are not as they appear. Because the two states are relying on a private developer to construct and operate the new expressway, it will be funded with tolls. Renn discovers a report by Crain's Greg Hinz that those tolls could cost motorists at least three to four times the rates they pay to use other toll roads in the region. You can guess what happens if not enough motorists use the toll road and pay those exorbitant fees.

The project is being financed through availability payments, which means the states of Illinois and Indiana are guaranteeing an agreed upon return for the developer of the toll road and assumes all the risk in the event the toll revenues prove inadequate to cover the developer's guaranteed return on investment. Quoting from Hinz' story in Crain's:
Any company that tried to sell a product at up to four times the competition’s price likely wouldn’t stay in business very long. Customers would walk right away, and management at a minimum would find itself out of a job. But things work differently in the wonderful world of government.
The story is that, based on documents recently, and quietly, released by the Illinois Department of Transportation, it appears the road quite probably would have to levy tolls two, three and even four times those charged on other Illinois tollways.
Yes, you read that right. Four times now charged elsewhere in the metropolitan area by the Illinois Tollway. A cool $11.81 for an auto to drive the road’s entire proposed 47-mile length, and an icy $58.13 for a 16-wheeler.
With no toll at all on the nearby I-80, an existing expressway that runs about 10 miles or so north of the proposed Illiana, guess where the trucks are likely to end up?
Renn figures that each state will be required to tap their respective state highway funds to make up any shortfalls, which in this case seems all but certain if the tolls are truly going to be that high. That means less money to fund highway projects elsewhere in the state. Please, do you think people will pay those kind of tolls when there are alternate routes that are less costly or require no tolls? This is what happens when we have a governor who makes the state's transportation decisions based on what's best for the bond lawyers, road contractors and others who are contributing large sums to his campaign committee and who reap great financial rewards from those policies instead of what's in the best interest of the state's citizens.


Anonymous said...

where does that run relative to the Gary Airport?

Gary R. Welsh said...

It's much further south. It would connect I-65 in Lowell, Indiana to I-55 in Wilmington, Illinois.

Paul Botts said...

The airport that this turkey would serve and enable is Illinois' long-dreamed-of Peotone "third airport". That plus the construction jobs (which will be mostly in Illinois) explain why Illinois' governor is so eager to build the Illiana. Why first Gov. Daniels and now Pence would be so enthusiastic about it remains a mystery though. This thing is truly a poster child for the sort of stupid Illinois pork that Indiana has generally tried to avoid.

Flogger said...

This reads about the same as the CIB Deals. Taxpayers will be on the hook if the Private Entity fails to make a profit.