Myths & Truths
July 28, 2016 at 4:25 p.m.
By Gary [email protected]
Governor Mitch Daniels and Republican lawmakers really got skewered over this issue.
So now we can all sit back and watch – depending on who you talk to – either:
A. Lots of new jobs and prosperity in the state.
Or:
B. Lower wages, endangered workers and fewer union members.
My sense is we will see none of the above. I believe RTW’s effect on jobs, wages, unions and the economy will be minimal – in either direction.
I guess time will tell.
As most people around here know, Gov. Daniels was in Warsaw Jan. 26 for a Warsaw/Kosciusko Chamber banquet. I got to talk to him a little bit afterward. We talked about lots of things, but I mentioned the toll road issue and it seemed to spark his interest.
And I still hear people deride the governor for “selling our toll road.”
I decided to write about it this week because, coincidentally, the legislature of our neighbor to the north, Michigan, is considering some pretty significant “revenue enhancers” to fund a transportation program.
Governor Rick Snyder has proposed replacing the gas tax at the pump with a 28.3-cent tax on the wholesale price of fuel. That would translate to another 9 or 10 cents a gallon at the pump. Gov. Snyder also has proposed increasing car registration fees by a whopping 67 percent.
Now, wouldn’t it be nice if states wouldn’t have to hammer away at taxpayers during a recession in order to repair and replace crumbling roads and bridges?
Wouldn’t it be nice if all states had a fully funded transportation infrastructure program in place?
Yes, it would. Unfortunately, only one state in the nation does. And that would be Indiana.
Gov. Daniels bristles at criticism of his Major Moves transportation program. The linchpin of the program was the lease of the Indiana Toll Road. He likes to debunk myths about the program, low these nearly six years later.
Myth: We sold a state asset.
Truth: We didn’t sell anything to anyone. The state still owns the toll road and always will. It is being operated under contract, strictly regulated as to prices and service levels, just as many public utilities are across the state. The contract provides for more lanes, electronic tolling, more Indiana State Police coverage, better facilities and service than ever before. If the contract’s performance standards are not met, the state can cancel the lease and resume direct management.
Because of the lease, Indiana will buy $4 billion of additional public infrastructure to leave to future generations, all without a penny of new taxes or borrowing.
Myth: We got benefits in the short term but give up money in the long term.
Truth: The toll road was losing money. The U.S. Department of Transportation reported, “The Indiana toll road was an underperforming asset that consistently lost money – the ITR lost money in three of the last five years it was publicly operated and in 2005, the ITR lost $16 million.” Over the entire 50-year previous history of the road, a total of $130 million was generated for other purposes. The Major Moves trust fund now receives more than that in interest alone.
Myth: The deal wasn’t fair to the seven toll road counties.
Truth: Major Moves brought a bonanza to the toll road counties. In cash and new projects, the counties received an average of $11 for every dollar they got in the 50 years of political management. In addition, other proceeds are being used to subsidize passenger car tolls. Indiana toll road tolls are among the lowest of any toll road in America. Two-thirds of all tolls are paid by out-of–state vehicles.
Myth: Indiana didn’t receive a good price.
Truth: Indiana got a great price. The $3.8 billion payment has already made more than two times more for the state in interest than the toll road invested in communities during its 50-year history. Indiana’s largest public accounting firm, Crowe Chizek of South Bend, analyzed the toll road financial statements and found the $3.8 billion to be at least $2 billion more than what the state could possibly have generated on its own through higher tolls and borrowing.
Myth: If the contractor could make a profit, the state could have done just as well.
Truth: For 50 years of politicians running it, the toll road barely broke even, owing hundreds of millions in debt. Through Major Moves, the state has locked in and pocketed a huge, certain profit. Whether the contractor and its investors will ever get their money back or not will not be known for many years. So far they have reported a loss of more than $270 million. The risk of lost dollars has been shifted from Hoosier taxpayers to the investors. And if the investors ever do make a profit they will pay taxes to the state.
Myth: After 10 years, the money will all be gone.
Truth: The money will be invested in roads, rail and bridges, hard public assets that will improve life in Indiana and strengthen the Indiana economy for generations to come. Without Major Moves, Hoosiers in northern Indiana would have waited decades for overdue work on roads like I-80, I-94, U.S. 6, U.S. 41, U.S. 31, Ind. 23, Ind. 15 and Ind. 49. In addition, $500 million in proceeds are in permanent trust for future generations.[[In-content Ad]]Myth: Our tolls now go to foreigners.
Truth: The only people receiving funds from the toll road are the Hoosiers who work there, and those investors in the partnership who paid for the lease. The list of investors is led by American workers’ pension funds such as Mid-Atlantic Regional Council of Carpenters, Midwest Operating Engineers, Painters Union of St. Louis, and Baylor University, as well as U.S. financial institutions like Northwestern Mutual Life.
Myth: There must have been some other way to accomplish all this.
Truth: Yes, there was. We could have tripled the gas tax. Indiana hasn’t, and won’t have to.
When you talk to people about issues like this, Gov. Daniels characterizes them as “don’ts, won’ts and can’t’s.”
“Don’ts” don’t understand, but when you explain it to them they concede, “Yeah, that was a good idea.”
“Won’ts” understand, but refuse to acknowledge the benefits despite incontrovertible evidence, usually because of politics.
“Can’ts” simply can’t understand. There are very few of those.
Certainly there still are plenty of things in Indiana to improve, but facts are stubborn and one thing is certain: Indiana, with its budget surplus and fully funded transportation program, is the fiscal envy of just about every state in the nation.
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Governor Mitch Daniels and Republican lawmakers really got skewered over this issue.
So now we can all sit back and watch – depending on who you talk to – either:
A. Lots of new jobs and prosperity in the state.
Or:
B. Lower wages, endangered workers and fewer union members.
My sense is we will see none of the above. I believe RTW’s effect on jobs, wages, unions and the economy will be minimal – in either direction.
I guess time will tell.
As most people around here know, Gov. Daniels was in Warsaw Jan. 26 for a Warsaw/Kosciusko Chamber banquet. I got to talk to him a little bit afterward. We talked about lots of things, but I mentioned the toll road issue and it seemed to spark his interest.
And I still hear people deride the governor for “selling our toll road.”
I decided to write about it this week because, coincidentally, the legislature of our neighbor to the north, Michigan, is considering some pretty significant “revenue enhancers” to fund a transportation program.
Governor Rick Snyder has proposed replacing the gas tax at the pump with a 28.3-cent tax on the wholesale price of fuel. That would translate to another 9 or 10 cents a gallon at the pump. Gov. Snyder also has proposed increasing car registration fees by a whopping 67 percent.
Now, wouldn’t it be nice if states wouldn’t have to hammer away at taxpayers during a recession in order to repair and replace crumbling roads and bridges?
Wouldn’t it be nice if all states had a fully funded transportation infrastructure program in place?
Yes, it would. Unfortunately, only one state in the nation does. And that would be Indiana.
Gov. Daniels bristles at criticism of his Major Moves transportation program. The linchpin of the program was the lease of the Indiana Toll Road. He likes to debunk myths about the program, low these nearly six years later.
Myth: We sold a state asset.
Truth: We didn’t sell anything to anyone. The state still owns the toll road and always will. It is being operated under contract, strictly regulated as to prices and service levels, just as many public utilities are across the state. The contract provides for more lanes, electronic tolling, more Indiana State Police coverage, better facilities and service than ever before. If the contract’s performance standards are not met, the state can cancel the lease and resume direct management.
Because of the lease, Indiana will buy $4 billion of additional public infrastructure to leave to future generations, all without a penny of new taxes or borrowing.
Myth: We got benefits in the short term but give up money in the long term.
Truth: The toll road was losing money. The U.S. Department of Transportation reported, “The Indiana toll road was an underperforming asset that consistently lost money – the ITR lost money in three of the last five years it was publicly operated and in 2005, the ITR lost $16 million.” Over the entire 50-year previous history of the road, a total of $130 million was generated for other purposes. The Major Moves trust fund now receives more than that in interest alone.
Myth: The deal wasn’t fair to the seven toll road counties.
Truth: Major Moves brought a bonanza to the toll road counties. In cash and new projects, the counties received an average of $11 for every dollar they got in the 50 years of political management. In addition, other proceeds are being used to subsidize passenger car tolls. Indiana toll road tolls are among the lowest of any toll road in America. Two-thirds of all tolls are paid by out-of–state vehicles.
Myth: Indiana didn’t receive a good price.
Truth: Indiana got a great price. The $3.8 billion payment has already made more than two times more for the state in interest than the toll road invested in communities during its 50-year history. Indiana’s largest public accounting firm, Crowe Chizek of South Bend, analyzed the toll road financial statements and found the $3.8 billion to be at least $2 billion more than what the state could possibly have generated on its own through higher tolls and borrowing.
Myth: If the contractor could make a profit, the state could have done just as well.
Truth: For 50 years of politicians running it, the toll road barely broke even, owing hundreds of millions in debt. Through Major Moves, the state has locked in and pocketed a huge, certain profit. Whether the contractor and its investors will ever get their money back or not will not be known for many years. So far they have reported a loss of more than $270 million. The risk of lost dollars has been shifted from Hoosier taxpayers to the investors. And if the investors ever do make a profit they will pay taxes to the state.
Myth: After 10 years, the money will all be gone.
Truth: The money will be invested in roads, rail and bridges, hard public assets that will improve life in Indiana and strengthen the Indiana economy for generations to come. Without Major Moves, Hoosiers in northern Indiana would have waited decades for overdue work on roads like I-80, I-94, U.S. 6, U.S. 41, U.S. 31, Ind. 23, Ind. 15 and Ind. 49. In addition, $500 million in proceeds are in permanent trust for future generations.[[In-content Ad]]Myth: Our tolls now go to foreigners.
Truth: The only people receiving funds from the toll road are the Hoosiers who work there, and those investors in the partnership who paid for the lease. The list of investors is led by American workers’ pension funds such as Mid-Atlantic Regional Council of Carpenters, Midwest Operating Engineers, Painters Union of St. Louis, and Baylor University, as well as U.S. financial institutions like Northwestern Mutual Life.
Myth: There must have been some other way to accomplish all this.
Truth: Yes, there was. We could have tripled the gas tax. Indiana hasn’t, and won’t have to.
When you talk to people about issues like this, Gov. Daniels characterizes them as “don’ts, won’ts and can’t’s.”
“Don’ts” don’t understand, but when you explain it to them they concede, “Yeah, that was a good idea.”
“Won’ts” understand, but refuse to acknowledge the benefits despite incontrovertible evidence, usually because of politics.
“Can’ts” simply can’t understand. There are very few of those.
Certainly there still are plenty of things in Indiana to improve, but facts are stubborn and one thing is certain: Indiana, with its budget surplus and fully funded transportation program, is the fiscal envy of just about every state in the nation.
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