CHICAGO – Weeks before Ohio releases a highly anticipated report on privatizing the Ohio Turnpike, the director of the Indiana Department of Transportation headlined an Ohio transportation conference to tout the Hoosier State’s $3.8 billion lease of its toll road.
Both states are leaders in the Midwest in pursuing public-private partnerships, particularly to fund transportation projects, and are in the midst of several P3 projects. Ohio Gov. John Kasich is pushing for a privatization of the turnpike, speculating it could raise $2.4 billion in cash for the state.
KPMG LLP, the state’s advisor, is expected to release a report within the next several weeks examining the best ways to wring cash out of the 241-mile turnpike. Options include a long-term lease or securitizing - and bonding against - future toll revenue. The state hopes to present a plan to the General Assembly soon after Jan. 1. It will either be a stand-alone proposal or part of the ODOT budget.
“We’ve had a lot of discussion and debate in Ohio about how we might leverage the Turnpike, and during those discussions oftentimes people bring up Indiana,” ODOT Director Jerry Wray said at an ODOT conference in downtown Columbus. “We hear all kinds of stories, good and bad, about what happened in Indiana.”
Indiana leased its toll road to a private consortium in 2006 for $3.8 billion in cash. It used $2.6 billion of the proceeds to finance infrastructure projects across the state.
“Perhaps there’s been some disagreement about what’s a good idea for the future of the turnpike, and we had the same kinds of discussions in 2006,” INDOT Director Mike Cline said at the conference Tuesday. “But the General Assembly approved it and the deal resulted in a $3.8 billion cash payment to the state.”
“Our timing was good and the value we were able to get was good,” Cline added. “Many people who were originally skeptical have come around to acknowledge that this was a good idea for Indiana.”
Wray acknowledged that the difference between the current market and the 2006 market would impact a final deal.
“The analysis we’re receiving from our consultant is heavy on the financial aspect, but will also include other pros and cons,” Wray said. “It’s their job to analyze this based on the current economic climate. There is a difference between the times Indiana was involved in and what the situation is now, and we’ll find out what the difference is.”
Cline dispelled what he dubbed myths of the toll road lease, including toll rates that have doubled, risks to the state of a concessionaire default, and deteriorating roads.
Cline said the state is still tapping proceeds from the 2006, 75-year lease of the toll road. He said the lease’s success sparked a larger emphasis on public-private partnerships as a way to finance infrastructure without raising taxes.
Ohio’s proposal has meet with resistance from many of the local counties surrounding the toll road, a problem that Indiana encountered as well, Cline said. Part of the solution was to give those counties a greater share of the proceeds from the proceeds.
“The idea of public-private partnerships, innovation, and nonconventional ways of getting things done is the template we have to work with as we move forward,” Cline said. “We have a lot of good experience from our lease of the toll road, and it’s positioned us from a staff standpoint, an industry standpoint, and just an economic development standpoint, for a very bright future.”