Commentary

Indiana Toll Road Concessionaire on Investing Local, Hiring Local

The state of Indiana rocked the transportation world in 2006 when it received $3.8 billion from an international consortium for a 75-year lease of the Indiana Toll Road, a move designed to both improve the quality of the facility’s services for the long-term and allow the state to fund a 10-year highway program that will improve mobility statewide. As would be predicted with any initiative involving a significant paradigm shiftâ??in the ITR’s case, the transition from public-to-private operationâ??the move was met with a barrage of misunderstandings and concerns over such things as foreign concessionaires operating domestic infrastructure, future toll rates, operations/maintenance of the asset and more.

As the concessionaire nears the end of its fourth year of operation, Keith Benman at The Times of Northwest Indiana checks in with ITR Concession Co. CEO Fernando Redondo on the issues above and more. An excerpt:

Q: How much has ITR Concession Co. invested in the Toll Road in terms of electronic tolling, roadway construction and other capital improvements?

A: We have invested around $300 million in the road — $175 million has been for the mandatory expansion work; $25 million on maintenance projects we do every year; about $45 million on IT; that would cover the implementation of the electronic tolling, the replacement of the manual system, the new equipment. Around $35 million would be the rehabilitation of the structures, the bridges and such, and the other $20 million would be the work on the (toll) plazas, which we’ve expanded over the last three years.

Q: You’ve put a lot of investment into the Toll Road with electronic tolling and the expansions — so what effect has that all had on traffic and operating the Toll Road up to this point?

A: It is really a couple of things. As we improve the road and resurface it and take care of the structures, obviously we are making the road better. It was needed, and it’s something we have to do, but it doesn’t necessarily have an effect on traffic (counts). Normally, you expand to what’s necessary for the level of traffic. But the investments that we think have been more fruitful have been the expansions of the toll plazas, the implementation of electronic tolling, all those things that have helped us alleviate some of the traffic congestion we found at the plazas when we arrived. […]

Q: The Toll Road lease was very controversial in this part of the state when it was enacted. Critics said everything from, tolls will go up, to, foreigners will be in control of a vital U.S. trade route. What answers to those critics have you provided through your operation of the Toll Road? How do you think the public is perceiving it now?

A: We get input from surveys and basically our customers, the users, are quite happy with the way we are operating the road. And I believe that with the $300 million we invested at the beginning, some of that has had a very big impact on improving the way the road is. The introduction of electronic tolling, the expansion of the plazas, all those things. We purchased a new fleet of trucks to maintain our roadway. And every year we are buying more equipment. All those things are making the operation smoother, and we see very little criticism today with things we are doing. We are running the road efficiently. Remember, many of the people that are working for us were working for the state. So when they say, oh those foreigners are going to come here — in this company today, we have 350 employees or 375, and it’s only two guys are coming from another country. … And the rest are all from around here. So these are the people who are running your road and have been running it for a long time.

Read the whole thing, and also be sure to check out Indiana Gov. Mitch Daniels’ comments on the ITR lease from last May.

The evidence continues to mount on the wisdom of the ITR concession, as it’s been a win-win on so many fronts (e.g., performance, investment in the asset, state transportation funding, economic development, etc.). Success stories like this have helped dispel fears and misunderstandings over these types of infrastructure public-private partnerships (PPPs), which is one reason we’re seeing growing interest across the states in similar to deliver new or modernize existing infrastructure. Indiana offers a strong example of how states can partner with the private sector to deliver new sources of transportation funding, improve mobility and system performance, and deliver better value for taxpayers in tough fiscal times.

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Leonard Gilroy is Senior Managing Director of the Pension Integrity Project at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The Pension Integrity Project assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.

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