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Saturday, June 24, 2006

Ind. Decisions - Followup on toll road rulimg

From the Fort Wayne Journal Gazette editorial today:

Indiana and Texas – traveling at dramatically different rates of speed on toll-road privatization – chose different routes this week. Which state made the better choice might not be known for many years, but it’s clear that Texas spent more time studying the road map.

In January, just a day after Gov. Mitch Daniels unveiled the “astounding sum” offered by the top bidder for the Indiana Toll Road, the Harris County (Texas) Board of Commissioners authorized a $1 million study of options for its own 83-mile toll road system. While that study was under way, Indiana lawmakers argued over how to spend $3.8 billion and approved the governor’s Major Moves plan. Objections from Democratic legislators and a lawsuit filed by lease opponents presented only minor roadblocks.

Tuesday, with results of the Texas study in hand, the Harris County commissioners voted unanimously to continue operating their toll road system instead of selling or leasing it to private investors. The investment consultant’s report advised that the county could increase profits by imitating a private firm’s practices.

“Now we can erect a sign on the toll roads: ‘Not for sale, not for lease,’ ” said Commissioner Steve Radack.

The study concluded that the Harris County Toll Road Authority would have to give up most of its control over rate increases to secure the best price for a sale or lease. JP Morgan and Popular Securities advised the county officials that they could have gotten as much as $20 billion for the Houston-area toll road system.

The same day Texas officials chose the exit ramp for privatization, the Indiana Supreme Court accelerated Daniels’ plan by rejecting legal arguments raised by opponents of the Indiana Toll Road lease. By upholding a ruling that says the plaintiffs must post a $1.9 billion bond to proceed, the court effectively killed the lawsuit. The state is now set to collect $3.8 billion from Cintra-Macquarie, the Spanish-Australian consortium that will run the Toll Road for the next 75 years.

The “astounding sum” will, indeed, present a major boost for the state’s long-delayed road-building and improvement efforts. Hoosiers can expect to see benefits soon – particularly given the interest Republican lawmakers have in proving to voters their Major Moves support was warranted.

But the deal’s success can’t be fairly judged before Nov. 7, or even in the 10 years it will take to spend the lease proceeds. The real test will come in the decades ahead. Will the private operator maintain the Toll Road without continual legal pressure by the state? Will the communities bordering the Toll Road face court battles each time they propose new roads or improvements to roads that might draw drivers away from the toll booths? Will northern Indiana residents ultimately bear the full cost of the deal in the form of toll increases?

The Harris County decision offers an interesting view of the road not taken. We’ll keep watching.

The Chicago Tribune reported yesterday:
Gov. Rod Blagojevich said Thursday that he has no intention of selling or leasing the 274-mile Illinois Tollway to private investors, contending the state is doing "great things" by expanding open-road tolling and electronic toll collection.

The decision by the Democratic governor takes away a potential re-election issue that threatened to mobilize voters in the Republican-rich suburbs who would face uncertainty over toll increases and have little say over where the proceeds from a sale or lease would be spent.

Blagojevich said in April that he was open to considering the concept of transferring the toll roads to private operators. At that time, state Sen. Jeff Schoenberg (D-Evanston) was making plans for hearings about the practicality of a lease or sale.

Schoenberg had suggested using the proceeds to reduce the state's huge public pension liabilities and generate federal matching funds for transportation projects.

But on Thursday, Blagojevich appeared to close the door on the idea.

"I like the fact that we're doing great things with the tollway. We've made it easier for motorists to go to and from places much sooner than later," Blagojevich told the Tribune. "And, we're in charge."

Blagojevich cited the expansion of the I-PASS electronic toll collection system and the effort to make the Illinois Tollway the first in the nation with open-road tolling systemwide. He said political concerns in a re-election year were not a motivation for his decision.

"I have no interest in giving up the tollway when we're doing so many good things," he said. "I have no interest in turning it over to private investors."

The possibility of a tollway lease or sale was fueled by Mayor Richard Daley's $1.8 billion lease of the Chicago Skyway and Indiana's pending lease of the Indiana Toll Road for $3.8 billion. Potential revenue from the sale or lease of the Illinois Tollway has been estimated to be at least $15 billion.

The Fort Wayne News- Sentinel editorialized yesterday, in a piece titled "Major Moves ahead: In many ways, the great lease debate is just starting, here and in the rest of the nation":
The Indiana Supreme Court, in throwing out objections to Gov. Mitch Daniels’ lease of the Indiana Toll Road, has confirmed our belief that the 75-year, $3.8 billion agreement is a good deal for the state and Hoosier taxpayers. But it also demonstrates why such deals should be considered one at a time, with healthy debate and legislative input. The governor should not have, as he originally sought, carte blanche to lease state assets whenever he feels like it.

Opponents to this one lease raised numerous constitutional questions, so who knows how many more there might be in the limitless permutations possible in future lease proposals?

The most serious question addressed by the court was whether a state law meant to keep harassing or frivolous lawsuits from stopping public projects applied to the lease deal. The court ruled that it did, meaning that those challenging the deal would have to put up a bond equal to half its worth – or $1.9 billion – to proceed. That requirement has essentially stopped the opposition, its leaders say. The court’s decision hinged a great deal on language interpretation and legislative intent. The lawsuit law refers to “municipal corporations,” opponents said, which the Indiana Finance Authority, through which the toll-road deal is being made, is not. But the legislature clearly intended such entities as the IFA to be covered in the definition of municipal corporations, the court said. That makes a great deal of sense. Why would the state want to protect city and county public projects from frivolous lawsuits but not its own projects?

The great lease debate does not end with this court decision. In many ways, it is just getting started, both in Indiana and nationwide. * * *

The political ramifications are obvious. On paper, leasing the toll road seems like a brilliant political move. Ordinarily, politicians have to propose projects that are immediately costly in the form of tax increases but the benefits of which are somewhere in the future. With this deal, Daniels gets to spread lots of money around immediately. The possible effects of an Australian-Spanish consortium controlling the road are far in the future.

Posted by Marcia Oddi on June 24, 2006 06:41 AM
Posted to Ind. Sup.Ct. Decisions