Indiana governor's $1 billion toll hike deal
Indiana will raise $1 billion in funding for road and other infrastructure projects from a rate hike on the privately operated Indiana Toll Road.
The plan, unveiled on Tuesday as Gov. Eric Holcomb’s Next Level Connections initiative, calls for the Indiana Finance Authority to amend its agreement with the Indiana Toll Road Concession Company to increase the toll rates for heavy vehicles by 35% beginning in October.
The $1 billion payment from the concessionaire to the state would be received over the next three years. The first payment of $400 million is expected in early October; $300 million in October 2019, and $300 million in October 2020.
The agreement still has to be finalized by the Indiana Finance Authority at its Sept. 20 meeting. No legislative approval is needed.
The state has not disclosed the full amount of revenue the rate increase will produce or how much profit the Indiana Toll Road Concession Company estimates it will get under the amended contract. The concession company has 63 years remaining on its 75-year lease of the tollway. Australian fund manager fund IFM Investors bought the rights to the Indiana Toll Road lease in May 2015 for $5.7 billion.
The fund took over the remaining years of the 75-year lease after concessionaire ITR Concession Company LLC, a subsidiary of Macquarie Infrastructure Partners, Macquarie Atlas Roads and Cintra, declared bankruptcy. The original concessionaire took over the toll road in 2006 after paying the state of Indiana $3.8 billion, the largest such privatization at the time.
Fitch Ratings has a BBB rating and stable outlook on the ITR Concession Company LLC. The rating agency does not expect the toll deal to affect the rating, it said in a news release Wednesday.
Roughly $600 million will finance the completion of section 6 of Interstate 69, from Martinsville to Indianapolis, calling for work to be completed by 2024 instead of 2027. The leg is part of a larger project the state took over after a public private partnership failed.
The money the state gets from the toll road agreement will fund planned road projects in the seven Toll Road counties and the freed up resources will be directed to Next Level Connections program projects elsewhere, according to a fact sheet prepared by the Holcomb administration.
The other $400 million would go towards projects including new interchanges on the road between Indianapolis and South Bend, reducing the number of traffic lights in that stretch, boosting rural broadband internet access, luring new overseas flights to Indiana airports and improving hiking and biking trails across the state.
The state hired an outside consultant to assess the change, Holcomb said at a press conference on Tuesday. "I was assured this is a good deal for the state of Indiana," Holcomb said. The investments "are all about one Indiana, right down to our smallest town, and how we connect with one another and how we conduct our commerce via all modes of transportation."
“I look forward to working with the governor to help build connections for all Hoosiers through supporting strong policies that solidify Indiana's position as the economic powerhouse of the Midwest," said House Speaker Brian Bosma, R-Indianapolis.
Holcomb is a Republican and the GOP controls the Indiana legislature.
State Rep. Pat Bauer, D-South Bend, condemned the deal as "another tax increase," on top of GOP-supported fuel tax hikes, that he argued would result in higher prices for consumers as the cost of the new truck toll rates are passed along to consumers.
"Taxing one industry that uses the Toll Road in northern Indiana in order to support the various needs of other parts of the state is ridiculous," Bauer said.
Bauer also questioned the lack of transparency over how much the toll road operator stands to make out of the rate hike. “For a governor who prides himself on transparency, he is intentionally muddying the water by not coming clean on the details of this proposal,” he said.
Under the current lease, the Indiana Toll Road Concession Co. is allowed to raise toll rates the greater of 2% or inflation annually. The amendment the Holcomb administration negotiated will increase the toll rate for vehicles with three or more axles by 35% starting Oct. 5.
Small dump trucks will pay $22.04 – up from $16.33. A four-axle vehicle – such as a pickup truck with a trailer – will jump to $45.96 from $34.04. A five-axle vehicle such as a semi tractor-trailer will pay $60.02, up from $44.46.