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5/25/2006
SPECIAL REPORT: Indiana governor faces tough questions in DC

U.S. Rep. Peter DeFazio, D-Oregon, held Indiana Gov. Mitch Daniels' feet to the fire during Daniels' testimony Wednesday before a House subcommittee studying infrastructure funding.

The main topic was the Indiana Toll Road, which Daniels and the Indiana Legislature are hoping to lease to the private foreign consortium Cintra-Macquarie for 75 years for $3.85 billion in cash.

The lease is scheduled to be signed June 30, but not before some tough questions are answered, including the ones raised in a lawsuit challenging the constitutionality of the plan.

DeFazio launched into a direct inquiry during the hearing on Capitol Hill.

"Why wouldn't the state use the asset to go out and borrow the money and set up a fee schedule that would show the investors that there would be no risk for a toll increase, (which) you've granted to Macquarie?" DeFazio asked Daniels.

Daniels' response echoed his "Major Moves" transportation plan. He said the state could not pay for other road projects without the up-front cash from the lease.

"I like collecting interest better than paying interest," Daniels said.

"The entire history of the Indiana Toll Road documents that we would never achieve this level of benefit."

DeFazio asked Daniels about initiating a binding contract with a private entity to raise tolls instead of going through the state to raise tolls and keep the toll road.

"Are we outsourcing political will to a private entity here?" DeFazio asked.

Daniels said the state would have been forced to raise tolls eventually.

"Governors from both parties have declined to raise tolls by one cent since 1985," Daniels said. "We were going to raise the tolls whether there was a suitable offer or not."

The governor later testified more about why he believes the lease is a good deal.

"We could no longer go on with a road that was deteriorating, that was becoming congested, that had no new technology, the kind that is now the rule for American toll roads. So, we put into motion a modernization of the antique tolls before we had any idea whether we would receive the kind of offer that we did," Daniels said.

"By any calculation, the most generous calculation anybody made, assuming changes in future political behavior, (the road) does not have as much money as we were offered."

DeFazio pointed out that Cintra-Macquarie stands to make a 12.5 percent rate of return for its investors.

Daniels responded by saying he didn't know or care whether the private investors would make a profit.

"The point is, we have locked in and limited their ability to raise prices." Daniels said. "The only way they will make money on that road is by building a road that pleases its customers and that increases volume there, and the risk is entirely transferred to them."

Daniels also told the House subcommittee that the $3.85 billion from the lease would pay for 200 "Major Moves" projects, and that some of those projects would never get done without the cash infusion.

Indiana has a road-budget shortfall of more than $3 billion, so for Daniels, the Indiana Toll Road lease was the short-term solution.

"We looked at every option to address this funding shortfall, from raising the state gas tax (currently 18 cents), indexing the gas tax, transferring state sales taxes on gasoline to transportation, issuing more debt, increasing heavy truck fees and increasing vehicle registration fees, to name a few," Daniels testified.

He alluded to the $700 million to $900 million in interest the Cintra-Macquarie payment would generate, and noted the company's commitment to spending an additional $400 million on improvements to the toll road.

He said "Major Moves" would jumpstart $5 billion in additional investment in highways, including a major Interstate 69 upgrade.

Nothing can move forward on the lease, which Daniels and Cintra-Macquarie are scheduled to sign on June 30, until pending litigation is resolved.

A group of Indiana residents, on funding generated mostly from the trucking industry, continues to pursue a lawsuit against Daniels and the "Major Moves" plan on a basis of constitutionality.

The plaintiffs, who include OOIDA member Randy Nace, believe that any revenue from such a transaction should be used to pay down public debt, as outlined in the Indiana Constitution.

A superior court judge in St. Joseph County, IN, has an initial motion in that case under advisement, and a ruling could be issued any day now.

Another of the Indiana residents who is a plaintiff, Dave Menzer, is also a campaign organizer for the Citizens Action Coalition. He wrote in a letter to Land Line that Daniels has gone about the toll road lease in the wrong manner.

"The average citizen wonders why the state of Indiana should not continue to run the toll road for a profit, and pay as we go on needed infrastructure," Menzer wrote.

More information on the Citizens Action Coalition and the lawsuit can be found at www.majormoves.org.

By David Tanner, staff writer
david_tanner@landlinemag.com

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