Monday, September 15, 2014

Indiana Toll Road Could Get New Owner

As the foreign operator of the Indiana Toll Road ponders bankruptcy less than eight years into its 75-year lease with the State, a report in the Wall Street Journal suggests Ferrovial and Macquarie Group might sell its lease to someone else. When state lawmakers approved the controversial lease in 2006, it was always suggested that the state would get the toll road back in the event its operator went bankrupt.

State Sen. Tom Wyss (R-Fort Wayne) tells the Fort Wayne Journal-Gazette "it doesn't mean anything." "The worst scenario is it would be turned over to us and we'd get it back." Is he joking? If it's turned back over to the state, all of the toll revenues would belong to the state, not the private operator, and the State wouldn't have to return any of the billions it got up front for the lease.

The Swiss bank, UBS, has reportedly been retained by the Toll Road's operator to market the lease. If UBS is unable to find a buyer, the Wall Street Journal report says the toll road will be turned over to the hedge funds that are owed about $6 billion in debt by the operator. The operator paid the State $3.8 billion for the 75-year lease, which has pretty much been spent. The lease's operator has 90 days to remedy any breach of its lease. If it fails, the two sides have 60 days to resolve differences before the state can resume its management of the toll road.

Former State Rep. Win Moses (D-Fort Wayne), who voted for against the lease, said there was "a certainty that something will go wrong." "It just happened sooner than we expected." Moses worries that some costs will be put off to future generations, particularly if it winds up in a court battle over control. "I'd be very worried that they will try to reduce the maintenance, Moses said. "We do have some minimum maintenance standards, but we could be fighting over those as the new group comes in."


Anonymous said...

Everyone in the Daniels' Administration who worked on the sale should be permanently humiliated and barred from future governmental work over this colossal screw up.

Hopefully, this disaster is so epic that other governments won't be able to sell off their roads and that Indiana won't be able to sell off any more roads.

Anonymous said...

As I sit and read this I am still trying to understand why this is such a bad deal for the State and taxpayers. The toll road was a net loss for the State for decades. We get billions to let someone else upgrade it and run it including maintenance. If they default, we get it back including all the tolls but don't have to pay back the billions. Explain how this is such a bad deal again!?

Anonymous said...

Is it true that Daniels is planning
on trying to outsource the Purdue School of Veterinary Medicine to Pet Supplies Plus to operate?

Anonymous said...

Win Moses will be surprised to read here that he voted for the Toll Road lease.

Anonymous said...

Failing to find a company that would remain solvent for the life of the sale and allowing the highway to devolve into the hands of a string of unmotivated owners is no way to conduct business, 10:58.

If and when we get that highway back, the first order of business should be to remove permanently all tolls from it.

tom greenacres said...

I too wonder why it is such a bad idea that Indiana received a great deal of money up front for this lease, gets to keep the money, and may even get unrestricted ownership of the Toll Road back. Please explain where the "badness" is in this.

Unigov said...

The "badness" stems from monetizing 75 years of revenue so all that money can be spent short-term in order to buy votes.

A smaller badness is that all the members of the General Assembly get to use the toll road for free - they were given free electronic passes. And that's JUST the bribes we know about.

A more global badness is that the deal was set up with one goal - to let rich people dodge taxes. Creating a lease creates the ability to depreciate the asset. The very essence of this deal is to shift a tax burden from 'everyone' to the rich lease investors.

Anonymous said...

I've heard for years the argument of monetizing the 75 years and spending it now. I would agree if the Toll Road ever turned a profit under government control prior to the lease. It didn't. Ever. It was a loss to the State every year. It collected less in tolls than it it cost to run it. That is a loss. Instead, we get someone to give us BILLIONS to let them run it and we get it back without having to pay back the money. Sounds like a great deal for the State and me as a taxpayer.