The idea of using public-private partnerships to build or maintain toll highways and bridges may not be as popular as it was during the Bush administration, when Transportation Secretary Mary Peters championed private sector investment in public infrastructure at every turn and every intersection. But the public-private partnership is far from dead — though some in Washington would like it to be.
Indiana Gov. Mitch Daniels, the architect of one of the largest public-private infrastructure partnerships in U.S. history, came to Capitol Hill late last month to rally opposition to provisions in the Senate transportation bill he said would penalize states that take the public-private road to funding infrastructure.
House-Senate conferees “might put a transportation bill out that, as I see it, would have some real backward features,” the Republican governor told reporters at a roundtable sponsored by the libertarian Reason Foundation on May 31.
There’s a chance, he said, the House-Senate conferees may not put out a transportation bill at all before a June 30 deadline forces another extension of the current law. “I heard it was 50-50,” he said. He wants to be sure, however, the next transportation bill at least isn’t hostile to public-private initiatives — and Indiana.
Side Bar: Deal of (almost) a Century?
“There’s a proposal to penalize states like ours that have had the effrontery to harvest dollars from an underperforming asset, even though they were all reinvested in infrastructure, something we all agree is a good idea,” he said.
At issue are amendments from Sen. Jeff Bingaman, D-N.M., that would reduce federal highway funding for states that sell or lease toll roads to private companies by removing those highways from federal funding formulas and changing the tax code in a way that could make projects less attractive to potential investors.
The amendments are a shot straight at Indiana, a target identified by Bingaman in an editorial column in The Washington Post, and other states that have used public-private partnerships to raise funds and build or maintain infrastructure. In his May 4 column, Bingaman charged that public-private partnerships such as the Indiana Toll Road essentially charge taxpayers twice for the same highway.
“What this means is that the nation’s drivers paid for the road with 55 years’ worth of their tolls, and now they essentially have to buy it back,” the senator wrote. Indiana will receive $900 million in federal highway funds this year, Bingaman wrote, “the same amount it would have received had it never made the deal” to lease the Toll Road for 75 years in 2006. Daniels sees no problem with that. The 157-mile Indiana Toll Road, he said, although part of the interstate highway system, was neither built nor maintained with federal highway money or even state taxes.
The $3.8 billion, cash-up-front deal Indiana signed to lease — not sell — its toll road in 2006 funded “Major Moves,” a 10-year infrastructure spending program that is expected to complete 65 roadway projects by the end of 2012. More than 600 bridges throughout Indiana will have been repaired or replaced under the spending program by year’s end, according to the state Department of Transportation.
But Indiana isn’t slow to spend federal highway dollars, too. It was able to quickly spend stimulus funds, Daniels said, because it had an existing infrastructure program. “We simply plugged (the funding) into things we were already working on.” As for the federal highway formula, “this is a state that gets screwed every year anyway,” Daniels said. “Ninety-two cents is the most we’ve ever collected from every dollar raised in Indiana” for the federal Highway Trust Fund, he said.
Daniels isn’t just worried about being penalized for the toll road lease. Indiana has two new public-private partnerships in the wings, both bridge-building deals. Other states, including Virginia, are planning public-private partnerships. Virginia Gov. Bob McDonnell last week identified eight priority public-private ventures and 14 “conceptual” projects that include highway, communications and port infrastructure.
Daniels and his allies want to keep such projects on the table and defeat legislation they fear would discourage potential investors. “Some mix of private capital properly recruited and regulated” is part of the answer to the nation’s infrastructure crisis, he said. “We’re not going to get there the old-fashioned way alone.”