Niki Kelly, writing for the Fort Wayne Journal Gazette, reported last week that the toll road money is almost gone. You might recall that, back in 2006, instead of proposing to raise the tolls ourselves, pay off the bonds, and owning the Indiana Toll Road outright, Gov. Daniels proposed a long term lease to a private consortium. (Mixing incompetence with pandering, the Democrats attacked the fact that the consortium was a foreign operation, sort of missing the point about what made this a questionable idea.)
I had a brother at Khe Sahn
Fighting off the Viet Cong
They’re still there, he’s all gone
The $3.8 billion payout for the lease was, according to Aaron Renn, a good trade; he knows more than I do about such things, so I’ll trust him on the price. But, the fact remains that the tolls remain much higher than they were, and we’ve lost control of the asset for another seven decades. And, according to Nikki Kelly, the money is mostly gone.
As of Jan. 1, the state had $1.7 billion still in the Major Moves Construction Fund.
But Will Wingfield, spokesman for INDOT, said several major projects are being awarded this year and next – obligating most of the money to be paid when construction is done in the next two years.
That means all the money should be spoken for at the end of June 2013.
That leaves two main questions: 1) Will the return on those projects be great enough to justify the higher tolls on the motorists of Northern Indiana for the next seventy years; and 2) What adjustments (higher taxes or more road deterioration) will be made now that the asset has been sold and the money’s all gone?
John Gregg is apparently favoring the deterioration option; advocating for elimination of the gas tax. Gregg says he’d pay for the shortfall by reducing government inefficiency elsewhere. But, I think by this time most people recognize “reduce government waste” as a candidate’s dodge; meaning they don’t want to alienate potential voters by saying they’d have to raise taxes elsewhere or by specifying cuts to a particular program which someone inevitably regards as valuable.
You can see a an overview of the distribution from gas tax revenues here (pdf – p.26), but a lot of it goes to maintain roads and highways. It’s easy for me to criticize John Gregg, because I expect him to be at least somewhat responsible about governing. I find myself being less disappointed in Mike Pence because I don’t even expect real solutions for governing from him – just vague conservative slogans and an indifference to whether application of those slogans actually improves the lives of Hoosiers.
At any rate, it looks like the roads are likely to get bumpier in Indiana in the near future.
As I understand the Gregg plan, he is proposing not to eliminate the excise tax on gas ($0.18 per gallon), but rather the sales tax on gasoline (7%). From the article:
“If gas is $3.40 a gallon (that’s before 36.5 cents in state and federal excise taxes are added), Gregg’s plan would save a driver roughly 24 cents per gallon, or roughly $2.85 for a 12-gallon fill up.”
That’s not to defend his plan, it would still be a significant cut in revenue that he has no real plan for dealing with. But it wouldn’t necessarily affect road construction and maintenance which are funded by the excise tax.
Oh, gotcha. I just heard “gas tax” which I usually associate with the excise tax.
I remember on car trip to St Louis listening to Adam Bold (founder of the Mutual Fund Store) talk about the main problem with the way governments are run. He stated that he was on the board of a small municipal government town. The board had an excess amount of money after they had completed the budget. He spoke up and said he had a wonderful idea, that they could put the money back in some safe investment for a rainy day. The rest of the board decided it would be better spent on some projects that were not exactly of great worth to the community. He then went on to say that to many government entities are made up of people that spend tax money like it’s play money.
The State of Indiana should have taken a least a billion and put it in some safe investments and used the money from the interest to fund projects for the next 20 to 30 years. That’s what smart people who win the lottery or have their ship come in do! Opppsss I am talking about smart people not governments! Then there is the quote from Heinlein’s ‘Time Enough for Love, ” When ever there is money laying around some well meaning fool will either try to spend it of steal it. Not the exact quote but it’s point is well made.
On the literary side of things Time Enough for Love is a good read, a bit wordy at times and if you don’t have the time Notebooks of Lazarus Long is worth a read.
http://www.angelfire.com/or/sociologyshop/lazlong.html
In terms of local units of government, funds are raised in ways that mark them for specific uses. Many times, extra funds have to be spent on the original project or a substantially similar project. It also has time limits on when it has to be spent before you start incurring penalties.
It can be annoying to deal with, but so is trying to explain the rules to “business” people who don’t want to follow them because that isn’t how it is done in their world.
“Safe investments”? It is not very likely that a politician can successfully accomplish that, seeing how the trend in Indiana has been for last few years.
I might sound naive, but there should be a statute enacted or an amendment to the Indiana Constitution promulgated that prohibits public contracts of any length greater than four or ten years. The point is not that the corporation is alien, although that is salt in the wound. When a contract like that is signed, there is no way to forecast what economic conditions will be—in this case six (6) years. This is what the United States did to third world countries—99-year lease on the Panama Canal comes to mind. My idea probably hasn’t much chance of passage in light of V’s valid criticism as to “safe investments.”
I agree with Mark, albeit not necessarily for the same reasons. The ability of municipalities to enter into long-term contracts allows those in office presently to mortgage the future to have more money today. That’s not fair to the future generations who have to live with diminished resources. Plus if it is a privatization contract, you’re not going to have competition, the hallmark of privatization, if it is a long-term contract. You’re just handing out a monopoly and that isn’t good for consumers.
Infrastructure maintenance negligence seems to have become more of an issue in the last 10-20 years. I figured the Toll Road lease enabled the State to put off the pain for a few years.
What would truly help would be in INDOT could come up with a long-term plan so we could, I dunno, budget for the future?
Doug, as far as raising the rates ourselves, I seem to recall the Democrats coming up with that alternative very late in the game, well after they’d made fools of themselves thinking anyone cared about the nationality of who owned the Toll Road. Behold the genius that is the Indiana Democratic Party. Not having raised rates for over 20+ years and keeping the rates so low we were losing money on the road (wonder if a certain representative from South Bend had anything to do with that) was a public policy decision in of itself.