While Bloomberg Businessweek focuses on the bad news associated with the lower-than-expected use of Indiana’s privately managed toll road, this observer is struck with one very clear piece of good news: Corporate investors, not Indiana taxpayers, are stuck with the bill.
Now five years old, the Indiana deal has yet to turn a profit, or break even. Two overseas companies—Cintra Concesiones de Infraestructuras de Transporte, a unit of Madrid-based Ferrovial, and Macquarie Infrastructure Partners, an investment fund managed by Macquarie Group of Sydney, won the right to run the road with a daring $3.8 billion bid—$1 billion more than the next-highest offer. The companies each owned a 50 percent stake of the project, which was backed by several overseas banks. The group then attracted other investors who bought pieces of the deal.
It turned out to be a bargain for the taxpayers of Indiana. The state received the upfront payment and has avoided more than $100 million a year in operating costs. “The state got a great deal,” says Jane Jankowski, a spokeswoman for Indiana Republican Governor Mitch Daniels. “The lease agreement contains numerous protections for the taxpayer and travelers and ensures the continued successful operation of the road.”
The private investors haven’t made out so well. Had the road been profitable, they stood to make millions per year over the life of the 75-year project. As it is, they have not been able to get past the debt they incurred winning the bid.
This story offers another reason for Indiana voters to appreciate Mitch Daniels.
