A governor, searching for the means to pay for much-needed improvements in public infrastructure, strikes a deal to lease to private investors one of his state's key holdings: a toll road.
The prospective payoff is in the billions, enabling the state to finally repair crumbling roads and bridges. But the deal isn't without controversy, especially in the state legislature, which must sign off on any agreements. Critics argue that the state, in order to reap short-term gains, is cashing in one of its key assets. Some also worry that, ahem, foreigners are involved in the deal.
Sound familiar? Well, it's not Indiana this time around. It's also not a hard-charging Republican governor who seeks to pour billions of dollars raised by a toll road lease into a massive building program.
The state in this story is Pennsylvania. And the governor is Democratic stalwart Ed Rendell, who reached a $12.8 billion agreement with a group of investors to take over operation of the Pennsylvania Turnpike.
As The Wall Street Journal detailed this week, Rendell was inspired by the work of Indiana Gov. Mitch Daniels, who raised $3.8 billion for much-needed infrastructure work by leasing the Indiana Toll Road in 2006. Other states, including Florida and New York, also are poised to forge lease agreements involving transportation assets.
Indiana's lease has enabled the state to jump start long-delayed road and bridge projects. It also had an unexpected benefit this year: Standard & Poor's, citing the state's improved financial outlook, upgraded Indiana's credit rating to triple-A, a development that will carry substantial savings for taxpayers.
As noted, the Pennsylvania deal has run into strong opposition. Rendell calls the proposal a "decided underdog'' in the legislature. Similarly, critics in Indiana, especially Democratic partisans, continue to attack the Toll Road lease.
But opponents neither there nor here have been able to credibly explain how to pay for road improvements without benefit of the lease revenue. Leaders in both states long lacked the political will to raise either taxes or tolls to the level necessary to adequately maintain the highways, let alone fund other projects.
Indiana's lease also carried the benefit of an upfront payment. The state not only pocketed $3.8 billion immediately, right away earning substantial interest, but it also was able to start work on road projects earlier than otherwise would have been possible. The accelerated roadwork pays off in reduced construction costs.
Two years later, the Toll Road lease continues to look like one of the smarter moves Indiana has made in a long time. So smart, in fact, leaders from other states want to travel the same path.
Well put. And I'm glad they mentioned that antis aren't offering alternative solutions--this is one my biggest pet peeves. From Texas to Pennsylvania to Indiana and corners in between, I find that the case over and over again (where's your solution, Lou Dobbs?). Antis are full of bogus or uninformed arguments against privatization, but don't stop and wait to hear them articulate alternative solutions--you'll be met with the sound of crickets. Unless you get this gem: "just raise the gas tax." Right--brilliant idea.