States reeling from declining revenues and aging infrastructure are looking at innovative alternatives to finance transportation projects.
One alternative is public-private partnerships, also known as PPPs. Several states have either leased or have proposed leasing public assets such as toll roads. State Rep. Randy Borror of Indiana, who helped shepherd through the legislature a $3.8 billion lease arrangement of the Indiana Toll Road in 2006, described the Indiana plan Thursday at a Financial Services workshop.
Borror said the state budget was in a deficit, there were 200 unfunded transportation projects on the books, some as old as 40 years, and other funding options were not feasible. He said the other options included increasing the gas tax, restructuring debt, issuing more bonds and increasing tolls.
Over the years, said Borror, state officials lacked the political courage to implement strategies such as increased gas taxes or higher tolls.
“Today’s budget problems demand bold action,” said Borror.
Before the lease was approved, however, the plan faced objections that had to be addressed. There were concerns about the value of the bid, the interest of a foreign consortium in the deal and questions about why bonds weren’t used to finance other road projects.
But the infusion of the upfront capital allowed the state to pay off $225 million in toll road debt, establish a $500 million trust fund designed to generate $100 million annually in interest revenue once the lease term expires and provide $40 million in economic development funding to each county the toll road crosses. In addition, the state will build I-69, a north-south route from Indianapolis to Evansville.
New Jersey also had a plan state officials had hoped would help the state deal with safety and congestion problems on the state’s roads by leasing its tollway system. Nancy Feldman, director of the Office of Public Finance for New Jersey, explained that the state wanted to use the money to improve 700 bridges that had been identified as deficient, resurface 10,000 miles of roads, and fund a second tunnel under the Hudson River between New Jersey and New York.
“The problem was short-sighted decisions over the years,” she said. “There was overspending, misspending and irresponsible borrowing.”
The plan, however, doesn’t have enough legislative support and Gov. Jon Corzine is now considering alternatives such as raising the gas tax, increasing tolls and tolling roads that are not currently toll roads.
At least the dialogue has begun, said Feldman, and state officials recognize something has to be done.
—Jack Penchoff
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