Is it possible for Lake and LaPorte Counties to form a new entity, borrow billions to buy a portion of the bankrupt Indiana Toll Road and be on the hook for nothing in the event its toll road operations fail just like ITR Concession Co. failed after making the same bad investment in 2006? The answer seems to be yes as long as there are people dumb enough to sink billions into the bonds that are issued to finance the purchase, and that's what consultants advising the two counties are telling local officials according to the Northwest Indiana Times' Bill Dolan.
According to LaPorte County's attorney, Shaw Friedman, the only thing the county has to lose is a $5 million annual revenue stream if it doesn't join with Lake County in acquiring the portion of the toll road that runs through the two counties in Northern Indiana. Porter Co. pulled out of the deal because the deadline for submitting a bid didn't allow officials enough time to consider the undertaking. Friedman says the county will be out nothing if the bid is turned down because the money to pay the fees of the consultants for the bidding groups is being paid out of the bond proceeds of the winning bid group.
Friedman told the NWI Times he didn't know why the state of Indiana chose not to bid on the toll road, presuming the short deadline may have been the reason. When Gov. Daniels sold the legislature and public on the deal back in 2006, he claimed ownership of the toll road would automatically revert back to the state if the toll road concessionaire went bankrupt, which proved untrue. "The consultants said the plan is for Lake and LaPorte counties to form the Northern Indiana Toll Road Authority, a nonprofit public-benefit corporation that would issue billions of dollars in nonrecourse bonds to be paid back solely out of Toll Road revenues, not taxes, the NWI Times reported. "Bondholders have no right of recovery from either county," Shaw said. An interlocal government agreement between the two counties will provide that the two counties each receive $5 million after expenses are paid before the bond holders are repaid.
The consultants advising the two counties assure county officials there will be at least $230 million in revenues generated annually from the toll road and only about $40 million in operating and payroll expenses. Repairs to the road will cost between $20 million and $100 million. It's unclear how this portion of the toll road will generate higher revenues than the entire 157-mile toll road generates for ITR unless toll rates are being raised considerably.
Ferrovial and Macquarie Group teamed up to pay the state of Indiana $3.8 billion in 2006 for a 75-year lease agreement to operate the 157-mile toll road. The two foreign companies invested very little of their own capital initially, relying on money it borrowed from European banks who believed the unrealistic projections of future income growth from higher traffic. ITR Concession was only generating about $206 million in revenue annually at the end of 2013 before it filed for bankruptcy. Its debt, however, had grown to about $6 billion.
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