The Interim Committee on Roads and Transportation heard from both the Indiana Finance Authority (IFA) and the Indiana Department of Transportation (INDOT) on the Indiana Toll Road and current and future road infrastructure needs on Sept. 23. IFA Public Finance Director Kendra York and INDOT Commissioner Karl Browning testified.
York reviewed the status of several public-private partnership (P3) projects around the state, but most of the interest and questions concerned the pre-packaged Chapter 11 bankruptcy of the private operator of the Indiana Toll Road, ITR Concession Company, LLC (ITRCC) and its affiliates. ITRCC filed for bankruptcy on September 11.
York testified that the bankruptcy proceeding is expected to result in either the sale of all assets of ITRCC (including lease rights to the toll road) to a new entity or a restructuring of the existing debt. Under either scenario, the toll road will continue to be owned by the IFA on behalf of the state of Indiana. IFA will continue to have the rights it negotiated in the original lease agreement including the right to approve any new operator and that operator will be strictly held to the same operational standards set forth in the original lease agreement. There will be no change to the current toll rate structure under the lease agreement. Road operations will continue as usual during the bankruptcy process without impact to drivers, employees, vendors and the communities served by the road.
York said IFA will continue to monitor the bankruptcy and work with related parties to protect the public interest. In other words, any concerns about adverse effects of the bankruptcy proceeding on the toll road or the state of Indiana are misguided at best, misleading at worst.
Browning provided a broad overview of the state of Indiana’s roads and bridges during his testimony. When adjusted for inflation, INDOT is operating much more efficiently than in years past: Operating expenses in 2014 are approximately $74 million less than in 2005, but while INDOT is operating more efficiently, the state needs more revenues to address a growing need for maintenance of existing infrastructure, let alone expansion of the state’s highway network.
Within the next five years, all fuel excise tax revenues from the state’s highway fund will be required for maintenance of existing infrastructure; no funding will be available for expansion projects. Additionally, more than half of the state’s bridges are in the last 25 years of their useful life (50+ years or older) and will need significant reconstruction or remediation.
Both federal and state highway revenues are expected to remain flat or slightly decline due to a number of factors, including increased fuel efficiency standards and alternative-fuel vehicles. This will cause the state to have to look for creative ways to finance projects (such as P3s) or find new sources of revenue. INDOT is in the middle of a legislatively-mandated two-year study of needs and funding sources.
In short, while the state did well in the Major Moves era with strategic investments, it is facing increasing challenges to pay for future upgrades to its surface transportation network. New sources of revenue need to be found and the Indiana Chamber looks forward to the final analysis by INDOT in the two-year study.