Indiana Finance Authority signs off on toll rate hike

The Indiana Finance Authority gave final approval to Gov. Eric Holcomb’s $1 billion deal with the Indiana Toll Road Company that imposes a 35% fee increase for large trucks.

Toll rates on commercial trucks will increase Oct. 5 after Thursday’s unanimous vote and the state will receive $400 million that same day from the Indiana Toll Road Concession Co., LLC, the private concessionaire that operates the toll road.

The Chicago Skyway bridges the southeast side of the city to northwest Indiana, and connects to the Indiana Toll Road.
The Chicago Skyway bridges the southeast side of the city to northwest Indiana, and connects to the Indiana Toll Road.Photographer: Frank Polich/Bloomberg News

The state will receive another $300 million in October 2019, and $300 million in October 2020.

The rate increase applies to vehicles with three or more axles.

The new deal comes with a letter of credit on behalf of the operator that allows the state to demand payment from the bank should the company fail to pay. “If the concessionaire does not pay us promptly, we can immediately make a demand upon that bank and be paid from that letter of credit,” said Dan Huge, Indiana's state public finance director.

The bulk of the resources the state gets in the deal will fund highways, including accelerating work on Interstate 69 and bridge improvements, and resurfacing and new interchanges on U.S. routes 20, 30 and 31. The remaining funds – approximately one-fifth of the total – will be spent on rural broadband, recreational trails and subsidies for international flights.

Holcomb announced the agreement Sept. 4. No legislative approval was needed.

ITR may opt to finance the equity payments with its own bond proceeds but a restriction on issuing additional debt means the concessionaire will first have to reduce its roughly $3 billion in debt outstanding and grow revenues, according to Fitch Ratings report.

The toll rate increase is expected to generate additional cash flows for the concessionare on an annual basis and contribute to additional revenue.

ITR anticipates that any borrowing for the purpose of partial reimbursement of the $1 billion payment will not be issued before fiscal 2020 or 2021. Fitch affirmed its BBB rating with stable outlook on ITR’s debt outstanding on May 21.

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Infrastructure Public-private partnership Transportation industry Indiana Finance Authority Indiana
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