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The Road to Indianapolis

The Indiana governor's controversial move to privatize a toll road is a success, but will it help him win reelection?

12:00 AM, Oct 9, 2008 • By RYAN L. COLE
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When Mitch Daniels took office as Indiana's governor in 2005, he inherited a transportation system in crisis. The state was a whopping $2.8 billion short of resources for its roads.

Daniels's options included a significant hike in the state's gas tax, a big increase in the state's debt, or, doing as his predecessors had done, ignoring the problem and making piecemeal improvements to the state's roads as money became available. Instead, he proposed leasing the Indiana Toll Road (ITR), a 157-mile stretch of highway running between Indiana's northern-most borders of Illinois and Ohio, to a private company. Operated by Indiana's Department of Transportation it had lost more than $16 million in 2005.

After considering a pool of bidders, Daniels accepted a $3.85 billion offer to maintain and operate the ITR for 75 years from the Indiana Toll Road Concession Company (ITRCC), a consortium of Cintra, a Spanish toll road operator, and Macquarie, an Australian infrastructure group. In a strictly party-line vote, the Indiana House passed legislation approving the deal, which was shortly green-lighted by the state Senate. In March 2006, Daniels signed the legislation, now known as Major Moves, into law.
The agreement was met with howls of derision and resistance. Two separate lawsuits charged that the plan violated the Indiana Constitution, and many Hoosiers openly expressed reservations about leasing a state asset to "foreigners." The outrage helped the Republicans lose control of the Indiana house of representatives in 2006, and polls showed decided disapproval of the governor and his programs. Two years later, with a gubernatorial campaign underway, the controversy surrounding Major Moves has abated.
The ITRCC did not mercilessly ratchet up toll prices (tolls are unchanged for drivers who use an I-Zoom access pass), no Hoosiers lost their jobs to overseas competition, and the state was been attacked by neither Spaniards nor Australians. The contract with the ITRCC strongly favored the state. Besides clauses that guaranteed the safety of Indiana's roads and its drivers (and their pocketbooks), it included lucrative incentives for the ITRCC to purchase supplies and equipment from Indiana entities.

And the funds generated by the lease of the toll road jumpstarted a decade's worth of stalled highway projects. Indiana's highway construction budget will quadruple from $213 million in 2006 to $874 million in 2015, which will fund over 200 new highway construction and preservation projects. These projects will in turn create thousands of jobs. (Due in large part to the state's commitment to improving its infrastructure, in July 2006, Honda Motor Company agreed to build a plant in Greensburg, which will employ nearly 4,000 people.)

"Some critics of Major Moves raised the prospect of Hoosiers losing their jobs and foreigners taking our money," said the director of Indiana's Office of Management and Budget, Ryan Kitchell. "But what we have done is just the opposite: we are bringing their money here and putting Hoosiers to work."

Politicians around the country are looking to copy Major Moves' success. In April, Democratic Pennsylvania governor Ed Rendell announced the privatization of the Pennsylvania Turnpike, which is expected to net the state close to $18 billion.
Despite the success, the fate of Major Moves is far from certain. Daniels faces a tough reelection campaign this fall, against Democrat Jill Long Thompson. While Thompson has stopped short of pledging to revoke the state's contract with the ITRCC, she has promised to "stop the Daniels' obsession with privatization." At the first of three scheduled gubernatorial debates, she accused the governor of leasing the state's property to foreigners and promised, if elected, to "fix the privatization problems created by Governor Daniels."

Such a turn of events would be a significant shift in the state's direction. Throughout his term, Daniels has emphasized reducing the size of government and dramatic cuts in state spending to remedy Indiana's economic woes. In addition to Major Moves, he privatized the state's welfare delivery system. Thanks to his Daniels' and Kitchell's focus, Indiana produced a balanced budget for the first time on eight years and is now sitting on a $1.4 billion surplus.

Polls show Daniels ahead of Thompson, and he certainly isn't backing down from his economic agenda. In July, he presided over the beginning of construction of the long delayed and hotly contested extension of Interstate 69. Daniels has spent his
time in office getting things done. It remains to be seen if Indiana's voters will reward him for this.

Ryan L. Cole is a writer based in Washington, D.C.