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Daniels touts toll road lease to congressional panel

Friday, May 26, 2006

By MIKE SMITH

AP Political Writer

Leasing the Indiana Toll Road to a private company would provide money for hundreds of state highway and other transportation projects that are critical to a growing Indiana economy, Gov. Mitch Daniels told a congressional panel Wednesday.

Daniels and Virginia Gov. Timothy Kaine told the House Subcommittee on Highways, Transit and Pipelines that public-private partnerships can be viable, alternative ways to fund some transportation projects. The panel is holding hearings to learn more about the pros and cons of such arrangements.

"We don't know what single step we could have taken to create more long-term jobs and hope in our state," Daniels told the subcommittee about the toll road lease.

The General Assembly in March authorized Daniels to lease the 157-mile northern Indiana highway to a private Spanish-Australian partnership for an upfront payment of $3.8 billion.

The state would use the money to help pay for highway and other transportation projects, and the companies would operate and maintain the road and collect its toll revenue for 75 years. The state hopes to close the deal and transfer the highway by June 30, although the plan is being challenged in court.

A St. Joseph County judge is still mulling whether to allow a lawsuit that challenges the constitutionality of the lease to move forward. A decision is expected as soon as this week.

If the lease goes through, it would be the biggest highway-privatization in the country.

Privately operated toll roads are slowly catching on in the U.S. after decades of popularity in Europe and, more recently, South America, Australia and other nations.

Last year, Chicago became the first U.S. government entity to lease an existing tollway to private investors.

The city turned over the 7.8-mile Chicago Skyway for 99 years for $1.83 billion to the same Spanish-Australian company that wants to lease the Indiana road. Virginia has used a public-private partnership to build an 8.8 mile tollway near Richmond, Va., but that was a new road.

Several questions Daniels fielded involved toll increases.

Daniels plans to soon implement higher tolls for the road, but they at first would not apply to passenger cars and pickups. The private company plans to install electronic tolling, and motorists who use it would get discounts through 2016.

The private companies could not begin raising tolls until 2010, and the increases would be limited by factors that could include growth of inflation or gross domestic product.

Rep. Peter DeFazio, D-Ore., said the private companies expect to get returns on their investment of 12 percent to 13 percent. He asked why the state would not use toll increases on its own to borrow money to fund other projects.

Daniels noted toll road rates had not be raised since 1985, and that under the planned lease, the state would be collecting interest on the $3.8 billion, not incurring interest on state debt.

State borrowing would generate far less than the $3.8 billion that is needed to help cover a highway funding shortfall, he said.

"We would have missed the opportunity to build roads we need today, roads that are decades overdue and bridges in our state that we've been waiting for far too long," Daniels said. "I'm just not willing to wait 10 years or 20 or 30 ..."

Some committee members questioned whether the state should be turning over such a major public asset to a foreign venture.

Daniels said he welcomed foreign investment and that state government would keep a close eye on the companies to ensure they were living up to terms of the deal.

"We still own this road and always will," he said. "This is a lease and not a sale."

Republican Rep. Mike Sodrel of Indiana, owner of a Jeffersonville, Ind.-based trucking company, said he was not a big fan of toll or fuel tax increases.

But he said the highway system was vital to the economy and national security, and that Daniels' program ensures that money from the lease would be used solely for infrastructure improvement.



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