When benefits are gone, we'll still be paying the costs.
Indiana has gotten a lot of infrastructure work done with the $3.8 billion it got for leasing the Indiana Toll Road to a private concessionaire, so it has to be conceded there were big benefits to the deal. But did those benefits outweigh the costs in lost revenues to Hoosiers?
No, they did not, argues a new analysis by John Gilmour, a government professor at the College of William and Mary, in Williamsburg, Va. He likens the lease to a home-equity loan and points out that most of the benefits from it are short- and medium-term, while most of the costs are long-term. That zeroes in on the greatest weakness of the lease, which we pointed out several times here during the original debate: 75 years is just too long to obligate future generations.
There is nothing inherently wrong with such privatization. Government isn’t always the best-equipped to provide a service just because it historically has.
Private enterprise can often provide the service better or cheaper or both. But what such a long-term lease does is to transfer future state revenues – what the state would have collected in toll fees 50, 60 and 70 years from now – to current budgets. That’s a good deal for us, perhaps not so for our children and grandchildren.
The deal could have been structured better, Gilmour suggests, to provide better safeguards. Payments could have been scheduled over the entire term of the lease, for example, instead of just being applied up front. He also likes the idea of a constitutional amendment limiting such deals to, say 30 years.
State officials make a good point when they note that the study omits one important factor – the money the state now won’t have to pay in road maintenance and improvements. If you add that estimated $4.5 million cost over the next 75 years to the $3.8 billion we got in the lease deal, that’s a little heftier sum.
But another negative factor, and one Gilmour’s study didn’t mention, is how bad this deal might be for Indiana drivers, who, after all, get the brunt of this activity. Why should they always pay a toll to travel this road when future transportation needs and the steps taken to address them might move traffic in some other direction? They’ll have to pay that toll for the next 75 years, no matter what.
It’s too late for any of this to matter for the current deal, of course. We’ve spent the money from it, so we certainly can’t undo the lease. But we can always take better care in preparing for the next deal and the one after that, so debate over this one will never stop being useful.