Tuesday, May 27, 2014

Indiana Media Slow To Pick Up On Pitfalls Of Illiana Expressway Bi-State Deal

It is quite remarkable how little media scrutiny was given to the public-private partnership between Indiana and Illinois to build the Illiana Expressway, a private toll road that will primarily benefit access to a third airport for the Chicago metropolitan area in rural Peotone, Illinois. It is unclear what benefits, if any, will accrue to residents in Northwest Indiana, but it will be a boon to highway contractors who contribute heavily to the politicians' campaign committees and the foreign-led consortium that will be chosen to build the Indiana portion of the highway. Unlike Gov. Mitch Daniels' P3 long-term lease of the Indiana Toll Road, this project will require massive sums of money flowing out of state highway funds to the private operator of the road. A story last week by the Northwest Indiana Times' Keith Benman is slowly being reported elsewhere around the state as an AP report discusses the shift in funding of privatization agreements, but it's too little too late to make a difference with the potential boondoggle of a deal Gov. Mike Pence already approved for construction of the Illiana Expressway:
Former Indiana Gov. Mitch Daniels appeared to strike the best deal since the Dutch bought Manhattan for beads when he landed a $3.8 billion windfall by leasing the Indiana Toll Road to a private consortium in 2006.
One recession and eight years later, privatizations are again the rage in the region. But the tables have turned, with most of the risk in the deals shifting to government and windfall payments becoming a thing of the past.
Nationally, that trend has played out most predominately on road-building projects. Investment teams are demanding states guarantee them fixed annual payments, known as availability payments, before they will build anything . . .
The prime example of that shift in this region is the bi-state Illiana Expressway, which has five private investment teams vying to build all or part of the 47-mile toll road.
In early 2013, hopes were high investors might pay the entire cost of the road for the right to keep the tolls. But that idea was dropped. Indiana and Illinois are now offering private investment teams annual availability payments throughout the 35-year lease.
If toll collections don't exceed the amount of those fixed payments, the states will have to dip into their highway funds to pay the bill.
Indiana and Illinois also estimate they may have to fork over up to a combined $270 million in cash to investors in the form of milestone payments in 2018 and 2019 once the road is built . . .
Benman's story overlooked an Illinois Department of Transportation study that suggested tolls on the Illiana Expressway would need to be two to three times as high as tolls on other area toll roads in order to cover payments on the road once it is constructed. One of the reasons the private consortium that operates the Indiana Toll Road has been struggling with the deal it inked with the State of Indiana in 2006 is the fact that traffic on the road has been lower than anticipated, resulting in fewer toll road revenues. I can't imagine drivers paying more to make their East-West commute using the Illiana Expressway. It is also unclear to me why Indiana wants to invest in a direct route to a third airport in Illinois rather than the Gary Airport, which officials there recently privatized for no upfront payment. Instead, Gary officials are hoping the deal generates a minimum $25 million investment during the first five years. Unfortunately, by the time Hoosiers figure out how badly they were screwed on the Illiana Expressway deal, Gov. Pence will likely be long gone from office.

1 comment:

Flogger said...

I have relatives who live up in the Peotone area. Decades ago when the Third Airport was first being floated there was opposition. There were signs all over with a slash mark through a drawing of an airplane.

According to an article I read in the South Town Star, a Sun times Paper. http://southtownstar.suntimes.com/news/kadner/25304216-452/kadner-do-airlines-want-in-on-south-suburban-airport.html

Gov. Pat Quinn ended more than 30 years of regional political warfare over control of the airport when he signed a bill giving IDOT the authority to build the South Suburban Airport. Quinn has said his goal is to create a public-private partnership to ultimately construct and operate the airport.

Further- Illinois has acquired more than 3,000 acres in the initial airport footprint, which eventually would cover 5,800 acres.

But the South Suburban Airport would be unique. No private company is running a major airport in this country, although it has become fairly common in Europe.

Ahh, another "Private-Public Partnership." The Public pays the bills and the Private Company skims the profits off the top.