Comment from William Hart on January 24, 2006 3:19 PM

I smell a skunk. This Toll Road lease is being pushed as a necessary deal too hard and way too fast! This needs to be studied. Arraingments should have been made months ago so this deal could be studied and discussed ahead of time, not shoved down our throats with no time for the legislature to get public opinion or study the whole proposal. The Governor wants this passed quickly so there will not be any time to examine the pros and cons.

I live in New Haven and if this proposal is voted in favor by my reprentatives, I will vote against them in this year's election. If the state gets the lease and spends all the money, what are we going to do 10, 20 or up until the next 75 years. Robbing Peter to pay Paul now will cost us in the future unless the state invests at least $3 billion in interest bearing notes and lives off the interest for the next 75 years.

If this lease gets passed I still smell a skunk!

Comment from Bryan on January 24, 2006 4:18 PM

I also might smell a skunk, maybe not the same one. I hope the following are in this deal: That the lessee will be fully responsible for all aspects of maintainance and operation.

The standards to which the road will be maintained spelled out explicitly and in detail. After all, if it is reasonable for a landlord to impose maintainance standards on tenants of any income level, it is reasonable for the state to impose standards on this lease of a road. Specifications of penalties for non-compliance with specified maintainance and operation standards and conditions of reversion of control to the state -- reversion that would occur without payment to the lessee.

Specifications of additional compensation to the state of Indiana beyond reversion to the state in the event of violations of certain of the conditions of use. This is normal to any lease not given out to a megacorporation -- you break it or allow it to break through neglect, you have to pay the landlord, even if you've abandoned it.

An escrow account in addition to the rent. Balance to be refunded upon the satisfactory completion of the lease. All of this might be already in the legislation.

Now, what we do not need in this lease: Hamstringing the lessee with demands regarding wages or benefits paid to employees. Hamstringing the lessee with demands regarding who the lessee may hire or contract for matters of maintainance and repair.

Comment from Dan Foreman on January 24, 2006 6:16 PM

Not a good deal. I think it is an admission from the Daniels' administration that they cannot handle large infrastructure projects. Look how they have screwed up the new Colts Stadium already. Fighting with a bean company for crying out loud.

Comment from bob reid on January 25, 2006 8:13 AM

Eat your seed corn? Years ago farmers saved some of their crop and used it to plant next years crop. a few Americans and most of the Third World still do. You would only eat you seed if you were starving. Thank you.

Comment from John Stence on January 25, 2006 10:12 AM

RiShawn:

Although your post about Hoosiers needing to travel more was good, and I agree – the argument is starting to wear a bit thin and come off as being arrogant.

I think that Doug Masson, in his blog, got the questions right. The question being how is this consortium going to wring $3.8 billion out of this road. The follow-up question is why can’t the State do something similar and save a ton of money.

The other, possibly much larger, questions have to do with the bill that would authorize such a lease – it would seem to give the Governor broad powers to do the same thing with Indiana transportation assets. And lastly, is this wise to push such sweeping legislation through the General Assembly without a little more time to study it. This has all the feel of a “quick close” by a traveling vinyl siding salesman. Unfortunately, Pat Bauer’s dim-witted political posturing has made taking a more careful look at the deal, and the larger bill, look like partisan obstructionism.

RiShawn, you come at this from an almost radical Libertarian perspective. Many of us are just not there with you. What’s more, many of us recognize that roads are more than just a sewer for cars and therefore should be part of a messy political process – in the best meaning of that phrase.

On the other hand, a great many of us view the new terrain I69 project as an economic and environmental boondoggle, bought and paid for by the road-building lobby. We were actually quite relieved to hear that the State would not have the money to move forward with it. On a much larger scale, some of us see INDOT as over-reliant on road building and not giving other transportation alternatives, such as light and heavy rail, their due. And yes, it is because I have traveled, to other US cities and to Europe, that I know what a good rail system can look like and how well it can work. I also know how bad, ugly and detrimental a road can be when it is just designed to move cars. Unfortunately, I didn’t have to travel to discover that.

It could be argued that my bringing up the issues of a new terrain I69, light rail and such is off subject; however, the stated reason for mortgaging the toll road, and conceivably any other transportation asset that is not nailed down, is to fund additional road building including a new terrain I69. I wish that you would cast your critical “the government can’t do anything right” eye on that project. At least the Indianapolis Business Journal printed a column by an economist questioning the Governor’s stated economic benefit of that project. (Sorry, I don’t have a paid subscription or I would provide the link)

Questions about the worthiness of some of the projects on which they intend to spend the proceeds of this money aside, this proposal is a big deal – not just the toll road, but the underlying bill as well – and it deserves more consideration without you insinuating that we are a bunch of hayseeds

Comment from RiShawn Biddle on January 25, 2006 10:38 AM

My apologies John if I seem like I'm being arrogant and treating Hoosiers as hayseeds. I don't think I'm being all that arrogant about this, nor am I treating Hoosiers as hayseeds. If anything, I'm actually demanding that native Hoosiers who simply oppose any change in the status quo actually do some thinking things through instead of asking questions and making counter-arguments that aren't well thought out nor consider the possibility that the concept may actually be a good idea in this circumstance.

As I've mentioned throughout in this post, just because a lease for the Toll Road is a good idea doesn't mean it's a good idea for all road concepts. A long-term lease for all or part of I-69, for example, may not make sense because it's widely-used by almost all taxpayers. Real life doesn't always match up with the ideal, something the average libertarian, who would argue for privatizing all major roads projects, doesn't always understand.

Which is why the label of 'radical libertarian' that you've used, besides being inaccurate, doesn't fit the facts in this case. And by the way, one should always stay away from calling people 'radical,' because like other such terms (think 'liberal' or elitist), it's merely used by most opponents -- you perhaps being the exception John -- as a way to tar someone and avoid actually advance an argument about the point being made.

As far as I'm concerned, it's frustrating that in an age when information is at one's fingertips, in which one can actually educate oneself thoroughly, that there are folks who support maintaining the status quo without thinking things over or actually thinking beyond the current paradigm. Hoosiers are smarter than they are willing to give themselves credit for being and better-able to change with the times than they are willing to admit. When someone who arrives into this state confronts a culture in which the argument of the day isn't how to improve government, but over the time of day, it's bound to make one shake their head and wonder if they know what century this is.

This is a state which has produced great political minds such as Richard Lugar, great businessmen such as Eli Lilly and two of the finest universities America has ever produced. And it still does. All these were minds who embraced the best of ideas, even those that didn't originate from within the state and realized the need for change when confronted. If only those who defend the status quo would embrace those people as their models, the nature of debate in this state wouldn't necessarily change from status quo versus reform, but at least the former would actually come up with credible ideas that might actually preserve their position while acknowledging that things aren't working in their current form.

As an editorialist, my job is to make people think and react, to arouse people to actually do something and not simply nod. This requires taking issues head-on, even if it annoys readers or makes them feel as if they've gone through the wringer. Strong, healthy debate should be interesting, entertaining, wearing and exhausting. Anything else is a yawn and I'm not here to put you to sleep.

I admit I must also show more care for the tender mercies of others. That's why I don't resort to calling anyone stupid; there is ignorance and obstinancy and blinding self-interest, but never stupidity. That's why I also won't allow such comments to be made by other commenters on this site. And I will do better to not make people feel that I'm calling them hayseeds.

At the same time, don't come into the arena without a strong, thorough argument. Don't argue a point without honoring the first rule of debate: Define your terms; don't do so or else others will do it for you. I definitely will. And expect to do the homework: When you complained that I didn't exactly answer a question you asked about how will private operators recoup their money, I went back, re-read the question and gave the answer. Whether you liked the answer or not, I did the job you expected of me. I expect others to do the same.

I will address your other questions later on today.

Comment from Karen on January 25, 2006 10:45 AM

It's obvious that Doug has roots in farming and is probably a native "Hoosier."

I am not yet sure if this is the best deal for Indiana. There are too many unanswered questions and it seems to have been pushed much too quickly.

Indiana always seems to be "starving". What happened to the surplus we supposedly had? Why do we have excise taxes and many adjacent states don't? Which is why there's the question on our State Income Tax Form asking, "how many cars owned and titled in Indiana?" Many residents are willing to cross the state line to avoid the tax. We have a convention and tourism, cultural arts, a lottery and legal gambling, all of which should be pouring money into the state coffers.

Comment from Bryan on January 25, 2006 11:19 AM

Indiana is run on the spoils system. Indiana politics is a patronage scam. This explains why nothing is "pouring money into the state coffers."

Proceeds from the state lottery, for example, are required, by law, to go into a slush fund that is then used by General Assembly members for patronage purposes. Every attempt to reform this has failed, of course.

Comment from Vanessa Williams on January 25, 2006 2:12 PM

I smell plenty of Hoosier-bashing in this post. I definitely get the impression that Mr. Biddle feels like Hoosiers are backwards and need to get with the times.

Here's the deal: As a native Hoosier, I don't see anything wrong with asking questions like: "Why do we need to change our clocks?" "Why do we need more roads?" "Why does Indianapolis need a professional football team?" These are valid questions. In my opinion, "because everyone else is doing it" is not a better answer than "because we've always done it that way."

Comment from RiShawn Biddle on January 25, 2006 2:40 PM

Do you smell Hoosier-bashing because it exists? Or is it that you don't like the questions and arguments I'm making? I'm betting on the latter. There's nothing that makes people angrier than questioning their worldviews and since I'm doing it, it's not exactly going to be welcomed.

Oh well. As I've said already, this isn't about knocking all Hoosiers in general, nor am I arguing that people should just simply copy what is being done elsewhere: That's not using any reason either.

What I am questioning is the unreasoned defense of the status quo that native Hoosiers who have never been outside the state are prone to doing, the unwillingness to actually counter the position of those who argue for reform -- and I'm not talking about stadium deals since I don't support using taxpayer dollars on such risky deals -- with a credible alternative.

Often in this forum and elsewhere, the common response from supporters of the status quo isn't an acknowledgement of the facts -- such as the fact that township government wastes 60 cents of every dollar of poor relief on administrative costs -- but a defense that defies logic. Or worse, as one can see in this case, accusations of "Hoosier-bashing" or that those arguing for change are demanding people to just do what other states or cities do. Which is absolute nonsense in most cases.

Such rubbish will rally the choir of those who agree. But one cannot get away with dismissing the argument forever; a counter must be made that is credible or else the status quo is revealed to be what it is: Indefensible.

I didn't say that there aren't any valid questions to be asked about the Toll Road deal. Re-read the post if you didn't get the point. What I have said is that the questions many are asking are based on assumptions that may not match up with that thing called the real world, where fiscal priorities for such matters as welfare and education already consume much of the state budget, leaving little for every transportation project, be it roads or that boondoggle called high-speed rail (I'll explain that later). Good questions should always be asked and ought to be answered. Poor questions do little to assist anyone in making decisions thoroughly.

Comment from John Stence on January 25, 2006 3:46 PM

RiShawn:

Sorry to sound like a broken record, but we still don’t know how they are getting this money out of the road. It seems to me that it can happen one of three ways:

1. They are more efficient at running a toll road: This is possible, although unlike some people, I do not assume that everything that the government does can be done more efficiently by private enterprise. It also seems unlikely that they are $3.8 billion + profit + financing more efficient. Regardless, I think that we can compare the cost of maintaining this road per mile against other roads to see if we are in the ballpark or not. We need more than anecdotal stories about some states that have poorly run roadways.

If the savings are from efficiency, that raises some serious questions about the way that the state government is run.

2. The State is simply exchanging future income for a lump-sum payment today: This is almost always a sucker’s deal. If this is where the money is coming from, and we must have that money now, the question remains why the State cannot do this less expensively than a private company since they would not also have to pay a profit. I am not a financing expert, by any stretch of the imagination, but the State can issue tax-free municipal bonds while the private company can structure other, passive loss carry forward instruments apparently. (It’s interesting that, in both cases, by being exempt from federal taxes the federal government is subsidizing the project).

The other issue with taking money out in this way is that too often the private company is simply providing political cover (or legal cover) to do something that politicians could not do. In other words, they can crank up prices beyond what would be politically acceptable.

If the argument is that we should engage in a sucker’s deal because the lump-sum payment would more than pay for itself in future economic growth that is stimulated by the road projects, I would want to see better information than the Governor is handing out. There is reason to believe that he is using overly optimistic estimates. What’s more, a new terrain I69 is more expensive than upgrading an existing road. Perhaps the political solution is that the toll road can be mortgaged if I69 is not new terrain – at least that way we would not be making two bad deals.

3. That there is some other revenue stream that I am not thinking of that a private company might be able to take advantage of: Naming rights or billboards every 100 feet, for example.

RiShawn, this is what I mean by where is the money coming from –- and the questions have not been answered –- or even asked as far as I know. We deserve to know the answers to the questions and understand the tradeoffs. If mortgaging the toll road is a good deal then let’s do it. If it is a bad deal, we should know that as well and be willing to tear up a $3.8 billion check.

Comment from Vanessa Williams on January 25, 2006 5:11 PM

I think it's very interesting that you're making the assumption that I'm defending the status quo. I'm not. I haven't really offered my opinion on this topic, mostly because I, like many other posters on this blog, do not have enough information to speak intelligently on this subject. I think that's why so many folks are ruffled about this topic. It has been rushed through, and when things are rushed there isn't adequate time to research the facts. So I think the natural reaction to being rushed is to say, "slow down, what's the hurry". I don't think that's the same thing as defending the status quo.

About my Hoosier-bashing comment, I made that comment because I really do believe that you are bashing native Hoosiers. The tone in your original post and in most of your replies is very negative about native Hoosiers who don't support your arguments.

RiShawn, I think your assumptions about the people who are questioning this toll road deal are wrong, and that makes me question your credibility to speak on this subject.

Comment from Jeff on January 25, 2006 5:14 PM

RiShawn raises some good points in his posts. The Indiana Toll Road (ITR) has no good free alternatives, which almost makes it a necessity for traffic travelling from Chicago to Toledo or Cleveland and other points east. I would also wager that a majority of the traffic that uses the ITR are interstate trucks and other out-of-staters on their way through, since the exits are too spread out for most commuters and they probably know the free local roads anyway. These factors make the ITR an attractive source of income.

The fair question is why has the state never made a real profit on it? Since when has government ever been the best manager of money? Look at all the expensive repairs that are needed, which should have been paid for by toll revenues. If the road does not collect enough in tolls to pay for its own repairs, then the tolls must be too low. It cost $2.00 to use the Chicago Skyway even before it was bought by the firm offering to buy the ITR, and I don't believe it's even 10 miles long. Raising the tolls to $8.00 on the ITR is still a deal.

By outsourcing a road that few Hoosiers use regularly (a generalization, I know, but I believe it to be true), the state can see an immediate source of revenue to put where it is needed right now. Repair the roads that many Hoosiers use and build new ones that will strengthen the transportation system of the state. Considering that in the long run none of my tax dollars will be necessary for the improvements if the plan is passed (including the I-69 expansion that lots of people like to complain about), I see only good that can come out of this plan. If the ITR isn't making us money now, we may as well take our chances to get the immediate windfall.

Comment from RiShawn Biddle on January 25, 2006 5:17 PM

Well Vanessa, one can only make assumptions if others don't do their job of defining their positions. Remember the first rule of debate: Define your terms or else those who are discussing a matter with you will define them for you. This extends to any other matter in a debate, including the position one takes on a matter (and why.)

When you assumed that I was somehow bashing Hoosiers -- and by the way, my argument is with native Hoosiers who have never spent any time outside the state and defend the status quo without question (feel free to re-read the "See the world" post) -- you did so based on the fact that I may not have explained myself clearly. I think I have throughout all this and done so ad nauseum; thus one must now guess that you're issue isn't with my position, but with my willingness to question a perspective different than mine.

It may not mean that you're defending status quo thinking in reference to the Toll Road issue, but one can guess that it is a defense of the kind of status quo thinking that characterizes a number of native Hoosiers, the ones that I've defined earlier.

As someone who uses judgement, I must judge one on what they say. If you don't explain yourself clearly, be ready to expect the other person in an argument to make educated guesses as to a position. Period. This is a forum for strong debate and all must be prepared for it.

As far as my credibility on this subject: Please explain that.

Comment from RiShawn Biddle on January 25, 2006 5:24 PM

One of the ways a toll road operator will be able to make profit off the road is by doing something called variable toll setting. Essentially tolls would be set at different rates at different points of the day in order to do such things as attract additional traffic from those looking for additional time savings during rush hour.

In the case of an Indiana Toll Road, Macquarie-Cintra could easily segment part of the road, say what used to be the median, into a special rush hour lane that can double as an HOV lane during off-peak hours.

Such variable toll rates aren't often set by state governments because of the politics: Groups who argue that roads shouldn't be financed with tolls in the first place tend not to want congestion or valuable pricing. This is where what makes perfect economic and financial sense collides with the political realm, where self interest and emotion are as much driving factors of discussion and decision-making as are altruism, sensible positions and the public good.

The other part of making money comes in the natural increase in traffic, which many are betting will play an even larger role in revenue increases as any hikes in tolls, much of which was already scheduled in the case of the Toll Road before the deal was struck. As noted to me today by an analyst from Fitch, the declining quality of interstates in this country -- a result of delayed maintenance, government budget decisions such as funding education, along with the political unpopularity of raising gasoline taxes -- means that those who can chose an alternative route will do so and pay for the privilege.

Then there is the issue of cost cuts. Since most state toll roads employ unionized state government employees -- whose unions are huge contributors -- their roads operations are plagued with limits on such things as hiring part-time toll operators or installing electronic toll collecting machines, which can save money. A private operator, unfettered by union contracts and work rules, can make changes that improve ridership and cut costs. In the case of the Toll Road, the state's personnel code, which is actually as restrictive when it comes to managing civil servants as an ordinary union collective bargaining arrangement.

So the promise, in addition to taking off the risks of capital improvements off the hands of the taxpayers, is improved service.

Note the privately-run toll isn't a new thing in other parts of the world. Europe has had them for 20 years or so, largely because municipal bonds aren't an investment instrument as prevalent there as in the United States.

Comment from Tom H on January 25, 2006 9:37 PM

A fascinating to and fro in this forum.

While I see great merit in privatizing the Toll Road, I nonetheless share much of native-Hoosier Vanessa's view that this is being pushed through too hastily. Karen and John Stence likewise voice this concern. This is a matter of great policy import -- it shouldn't simply be "take the money and run". Why else would there be a 200+ page proposed lease agreement document? What all is in there?

As regards RiShawn's perceived Hoosier-bashing, I share his core perspective on this state's resistance to things non-Hoosier. (Personally, as another recent transplant, I suspect the phrase "Not Invented Here" was invented here.) But methinks his "get things done now!" instinct could be tempered a bit.

Maybe this view is a reaction to my being labeled a "propagandist" the other day by a local legislator when I presented carefully-researched information on what Eastern DST will mean to my community. He denounced my information without even reading it (so glad he had an open mind to the concerns of one of his constituents). Accordingly, I am as leery of he and his party's embrace of this toll road lease as I am suspicious of their relying on shallow arguments and faulty data to steamroller the clock issue last year. (Don't get me wrong, I'm for DST, just not Eastern DST.)

P.S. If I may, can I ask RiShawn why "municipal bonds aren't an investment instrument as prevalent [in Europe] as in the United States"? I'm quite curious. Might your source at Fitch know?

Comment from bill plummer on January 25, 2006 9:38 PM

RiShawn:

Several points tonight. By the way, I for one don’t think you’re bashing Hoosiers at all. You apparently came here voluntarily from somewhere else, that says something.

1. You wrote: "A 40 percent increase in the Consumer Price Index won't necessarily be met by an equal increase in tolls simply because such a hike creates incentives for users to come up with ways around it."

I wrote: “A corresponding 40-percent nominal hike in tolls to keep up with a 40-percent hike in the CPI keeps the real price the same, so all else equal, consumers would drive exactly the same amount as before. Just wondering if you took Macroeconomics, this stuff is covered there. (I used to teach it.)”

You responded with real-world reasons why the toll hadn’t risen commensurate with general inflation, writing: “What should be done isn't always done in the real world and by now, Bill, you should be sophisticated enough to understand that.” Of course I’m aware of that. I was pointing out that your use of economic theory was wrong. Again, meeting a general price level increase of 40 percent with a 40 percent toll road price increase would, everything else equal (ceteris paribus), not change any consumer behavior or create any incentives for people to get around it, because the real price would be the same. Did you or did you not take an economics class? Do you understand the difference between nominal and real terms?

2. Referring to our state budget merely puts the $3.8 Billion (for a 75 year buyoff) into perspective against a $20+ yearly budget. I don’t care if a great percentage of the budget is nondiscretionary. The point is that a (very) small tax increase could pay for increased road maintenance or building.

3. I think the point people are making calling for more (any) study of the plan is that this being foisted down on the legislature very quickly. It may be so that Gov. Daniels has talked of this idea since 2004, but if he expects a competent legislature to vote for it, then he should have taken the lead last year in leading legislative committee meetings on the subject, explaining his vision and plan, and preparing legislators for the bid that was to come. Instead, around January 10, 2006, he announces his “Major Moves” project, which had a $2+ billion funding shortfall, by the way—and then, two weeks late, magically, he opens up a bid that gives Indiana the money for the program. Genius!

It’s interesting that you pointed out the same “we need more study” argument hit Mayor Peterson’s unigov plan, but in that case it was the Republicans combating a Democrat. Politics has no bounds on hyprocrisy.

I will grant you that Indiana may have the nation’s worst legislature, so I personally don’t expect a lot out of them. But don’t put ‘doing research on the internet’ throughout 2004 and 2005 to get up to speed on the topic onto the citizens. There are a thousand possible topics I could be doing research on, but until it comes up at the statehouse, there is no reason to. In November and December, recall that some of our wonderful legislators were floating ideas of requiring a license to have kids, or to mandate the teaching of Intelligent Design.

Isn’t a contradiction for you to say on the one hand, Hoosiers need to travel out of the state to get other experiences and perspectives; and on the other hand tell us that all the information we need is available on the web? Dang, I would travel but I’m too busy on the internet.

I don’t think a Hoosier necessarily has to travel to make good decisions. Sometimes our (OK, the legislature’s) wariness to change something is actually a blessing. For example, consider the case of state electric deregulation in California (and even Illinois and Ohio) and the whole Enron disaster.

4. You never did answer my question of, if 75 years is great, why not a 150 year lease? You may think this is a ridiculous question, but what if the Daniels program had been for 40 years, and someone asked, “Well, what if we leased it for 75 years?” Would that be ridiculous?

5. You wrote: “Then there are others such as Doug Masson of his eponymous blog, who argues against it because "it’s just not a good idea to eat your seed corn," whatever that means.” Even though I’d never heard this axiom before, I instantly knew what it meant. Seventy-five years is mortgaging, binding, the next 9 to 18 governors, the next 36 legislatures, and not just everyone’s children’s futures, but their children—people who haven’t even been born yet—people who may not be born for another 50 years.

6. You wrote: “This is a state which has produced great political minds such as Richard Lugar, great businessmen such as Eli Lilly” Indiana has also produced Charles Manson, Reverend Jim Jones, and Steve Hilbert.

7. You wrote: “As far as the inflation hike argument is concerned, theoretically, a 40 percent spike in inflation would be met with a corresponding hike. But that's not always so. Throughout the 1990s, companies found themselves slashing costs instead of raising prices because consumers could hunt for bargains; those firms could not raise prices, despite cost increases, because the market would not bear it.” Once again, while you may have examples in your mind for some companies or industries, on the whole, the macroeconomic level this is simply not true. The CPI went from 130.7 to 172.2 from 1990 to 2000 (1982-84=100), which is a 31.7% increase in the price level.

8. Was the Fitch analyst the same guy who was touting the great, new, innovative business model of Enron in 2000? An interesting idea of letting the more well-off pay to use non congested toll roads while the rest of the fast-becoming lower class uses the congested public roads. I go along with this, if our nation continues on the path of a widening divide between the rich and (vanishing) middle class and poor, which was begun by one Ronald Reagan.

9. Finally, to maybe add something new here: I was told today that one thing driving the expected profits for Macquarie-Cintra is the future development of adjacent property along the toll road—property that was taken by the state by eminent domain when the toll road was constructed. Which brings up the whole question of eminent domain and what the proper use of it is. Anyone else want to put together an investment group to condemn the Governor’s Geist waterside home and turn it into a restaurant?

Comment from Barry Fox on January 26, 2006 6:16 AM

I recently asked my local Newspaper in Elkhart, IN(The Truth) a couple questions (4) concerning the proposed Toll Road Lease Agreement, to receive the following...(See Blog http://www.etruth.com/About/Bio/AleksTapinsh/)

Commissioners qualified support for the Toll Road Lease:

A reader (Barry Fox) asks some questions about the Toll Road lease proposal.
1. Did the Commissioners actually view a copy of the proposed lease agreement?

It is my understanding, the commissioners didn't view the copy of the agreement. They based their decision on the letter from the governor answering some of the local concerns.

2. Was there ever any legal notice for bids?

There was a legal notice on bids on the Indiana state web site. The bids are due Friday.

3. If there was a public notice, was a price tag to bid (cost of documentation) so expensive as to discourage newspapers such as The Truth from obtaining a copy of the lease to report on?

Actually, we've requested a copy of the agreement from the governor's office. According to the governor's press secretary, Jane Jankowski, "The lease agreement is not currently available because we have an active bid process underway. It will be available once the bidding process has concluded." This means Friday.

4. Finally, (not to start rumors) I heard there are hotel rights, property considerations, etc... tied to this proposed lease. Have you heard anything like that?

We have heard the same rumors, but we don't have any evidence of that yet. Once the lease agreement is released, we'll be looking for that information.

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As a former County Commissioner, any time we put out bids, we were required to put together a package that was available so that those wanting to bid were bidding on apples for apples. You could not formulate a bid simply to disqualify bidders, but to give each bidder equal opportunity. What I don't understand is why a media outlet could not reportedly obtain a copy of the bid requirements. That just doesn't make since. Further, I do not understand why so many legislators reportedly did not have access...

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http://transcripts.cnn.com/TRANSCRIPTS/0305/22/bn.01.html

CNN BREAKING NEWS

Josh Bolten Will Replace Mitch Daniels

Aired May 22, 2003 - 07:50 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

BILL HEMMER, CNN ANCHOR: Word from the White House and our senior White House correspondent, John King, confirming with us here at CNN that Josh Bolten, a former executive with Goldman Sachs, is the president's choice right now to replace Mitch Daniels, who is the head of the OMB, the Office of Management and Budget. Mitch Daniels is returning to his home state of Indiana for the possible run for governor in that state.
The word from the White House, though, Josh Bolten will be the one the president will choose to replace him.

More on this when we get it.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.

************************************************************************************************************

Joshua B. Bolten
Director
On June 26, 2003, the United States Senate confirmed Joshua B. Bolten as the Director of the Office of Management and Budget, and Mr. Bolten was sworn in on June 30, 2003. As Director of OMB, Mr. Bolten will help oversee the preparation of the Federal budget and supervise its administration in Executive Branch agencies. He will work closely with Congress and federal departments to successfully implement the President’s agenda, from growing the economy and creating jobs to ensuring a strong national defense and a secure homeland.

From January 2001 through June of 2003, Mr. Bolten was Assistant to the President and Deputy Chief of Staff for Policy at the White House. From March 1999 through November 2000, he was Policy Director of the Bush-Cheney presidential campaign. Mr. Bolten also served as Policy Director of the Bush-Cheney transition. From 1994 to 1999, he was Executive Director, Legal & Government Affairs, for Goldman Sachs International in London.

During the Administration of President George H.W. Bush, Mr. Bolten served for three years as General Counsel to the U.S. Trade Representative and one year in the White House as Deputy Assistant to the President for Legislative Affairs. Previously, from 1985 to 1989, he was International Trade Counsel to the US Senate Finance Committee. Earlier, Mr. Bolten was in a private law practice with O’Melveny & Myers, and worked in the legal office of the U.S. State Department. He also served as Executive Assistant to the Director of the Kissinger Commission on Central America.

Mr. Bolten received his B.A. with distinction from Princeton University’s Woodrow Wilson School of Public and International Affairs (1976) and his J.D. from Stanford Law School (1980), where he was an editor of the Stanford Law Review. Immediately after law school, he served as a law clerk at the U.S. District Court in San Francisco. During the fall semester of 1993, Mr. Bolten taught international trade at Yale Law.

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October 16, 2005

State hires firm to work with Toll Road suitors
Investment company would help secure deal to lease the roadway to a private business

By Theodore Kim
theodore.kim@indystar.com
State officials have hired investment firm Goldman Sachs & Co., which helped Chicago pull off a lucrative road leasing deal, to cinch a comparable agreement to privatize the Indiana Toll Road.

The firm's hiring comes as at least one international company involved in the Skyway lease -- Sydney-based Macquarie Infrastructure Group -- has shown interest in leasing the Toll Road from the state, a company official said.
"It does appear that some very serious people are going to give this a very serious look," Gov. Mitch Daniels said last week.
The governor declined to identify any of the potential suitors.
Privatizing the operations of the Toll Road and a proposed stretch of I-69 between Indianapolis and Evansville are the linchpins of a new road-building blueprint called "Major Moves" that Daniels unveiled last month.
The state hopes to lease out the two roads to private companies for large fees that could translate into billions of dollars for the state. Those companies would be responsible for all operations and maintenance of the roads they lease. In return, the firms would collect all toll and concessions revenue.
That approach, coupled with a proposal by Daniels to raise Toll Road fees, represents a budding trend in the United States. With gasoline tax revenues flat, states and cities have begun considering nontraditional measures, such as privatization, to pay for new roads.
Goldman Sachs' involvement and Macquarie's interest offer the strongest signs yet that the governor's privatization efforts are gaining momentum. Daniels hopes to generate at least $2 billion through a Toll Road lease agreement, as well as about $700 million more with I-69.
"If it doesn't look like a solid gold (dollar total)," Daniels said, "then we won't do it."
The hiring of investment banking powerhouse Goldman Sachs, in particular, indicates that Indiana officials are modeling their tack on a similar deal struck in Chicago.
In January, Goldman Sachs helped Windy City officials lease the eight-mile Chicago Skyway. The roadway was leased to a conglomerate headed by Macquarie and Cintra, an infrastructure management company based in Spain.
State budget director Charles E. Schalliol said the Daniels administration chose Goldman Sachs, in part, because of the firm's participation in the Skyway deal.
In that arrangement, Cintra-Macquarie paid Chicago a lump sum of $1.83 billion for a 99-year lease. Goldman Sachs received about $8 million for helping consummate the deal.
Schalliol said the firm probably will be awarded a similar, or larger, fee for working on the Toll Road deal. Goldman Sachs will receive "very little" if an agreement is not reached, he said.
A deal could take as long as 18 months to complete. State officials plan to hire another firm to handle the leasing of the new I-69.
Mark Florian, a managing partner at Goldman Sachs who is heading up the Toll Road deal, was traveling last week and unavailable for comment.
As the state prepares to bid out the projects, potential leasing candidates have started to assemble.
Alex Doughty, vice president of communications for Macquarie's North American operations, said the company was likely to be a suitor for the Toll Road and I-69. Macquarie operates and maintains roads in Australia, Europe and the United States.
Meanwhile, Daniels is moving to shore up support for his privatization push given that any deal will require legislative approval.
Administration officials have hired a powerful Los Angeles law firm, Nossaman Gunther Knox & Elliott, to draft legislation that would give the governor the authority to privatize operations on the Toll Road and I-69.
At the request of top Republican lawmakers, a small bipartisan group of legislators also will soon receive briefings from budget officials and other consultants about the privatization effort.
The goal of the briefings is to drum up backing among key legislators in advance of the General Assembly session that begins in January.
House Speaker Brian Bosma, R-Indianapolis, said there was "a strong desire in the legislature to resolve the road-funding issue." Yet, on privatization, he acknowledged that many questions remain.
"The people jumping out now who are critical of the idea are ahead of the political curve. And people saying 'yes' now may be ahead of the curve, as well," Bosma said. "We just don't know enough about it to make a decision."

Call Star reporter Theodore Kim at (317) 444-6247.

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Posted on Wed, Jan. 25, 2006

General Assembly
Toll Road legislation clears step
Republicans on panel send bill to House
By Niki Kelly
The Journal Gazette

Schalliol also revealed some of the administrative costs related to the Toll Road deal, including a potential $20 million fee to investment banking firm Goldman Sachs, as well as about $1.5 million in other consulting fees.

I want to make it clear, I have not made up my own mind if this is a good thing for our state, or not. My issue is the more I read and research I do, the more questions I have, and HB1008 seems to be running on the same run-a-way train some other legislative pieces ran on last session. Any insight would be most appreciated...

Comment from Charles on January 26, 2006 7:52 AM

One of the biggest reasons this will work for the private firm has to do with tax depreciation - something that state government cannot do because they do not pay taxes. Remember that the private company will be able to depreciate the toll road. This will provide them a windfall of tax credits, and they can sell these tax credits to US companies.

Additionally, there are maintenance requirements (estimated at $4.4 billion) and a number of provisions that allow the State of Indiana to re-assume control should the private entity not live up to the contract. I have actually seen the contract and read it.

It is a typical leaseback program that is used by many companies to take advantage of the depreciation tax incentive. Besides, the $3.9 billion will be able to be used for other projects. The Toll Road will be maintained without the newly generated money.

The contract was given to the state by the City of Chicago and revised with additional provisions to ensure the state maintains its authority.

I find it interesting that we have many people wanting to claim the Daniels administration cannot run a large infrastructure project, when in fact; private companies operate all major road projects. Private engineering firms design it, private companies construct it, private companies are contracted to maintain it, and private companies are contracted to help with repair. The State simply approves the projects and enforces the guidelines.

I applaud Governor Daniels for saying that the government should not be in the business of operating the roads. This is a private entity that has the Skybridge in Chicago, the toll road in Washington DC and a number of other projects. This is their core business.

I know in my business, I contract out to people who can do it better for me. It may cost me more sometimes, but I know that I will have someone liable that I can expect will fix it.

Comment from RiShawn Biddle on January 26, 2006 9:43 AM

"You responded with real-world reasons why the toll hadn’t risen commensurate with general inflation, writing: “What should be done isn't always done in the real world and by now, Bill, you should be sophisticated enough to understand that.” Of course I’m aware of that. I was pointing out that your use of economic theory was wrong. Again, meeting a general price level increase of 40 percent with a 40 percent toll road price increase would, everything else equal (ceteris paribus), not change any consumer behavior or create any incentives for people to get around it, because the real price would be the same. Did you or did you not take an economics class? Do you understand the difference between nominal and real terms?"

Considering the amount of time I've spent covering economics and finance, yes I understand the general economic principles you are noting (and by the way, considering that I am treating you with respect, it would be a good idea for you to do the same; condescension just isn't pretty). The point I am making Bill, one which you seem to be willfully ignoring, is that economic principle and real life don't always meet up.

There are certain economic principles that do hold up no matter the behavior of people; certainly the likely consequences for not following the general principles generally hold up no matter what. The problem of many traditional economists is the idea that all behavior is objectively rational. The Toll Road situation exemplifies what behavioral economists, those who have rewritten the economic theory book by studying actual human behavior, have noted for a while: Not all behavior correlates with theory or general principle.

Going back to the Toll Road situation, a 40 percent increase in the CPI should lead to a 40 percent increase in tolls. But this isn't always so. In government hands, the politics involved will always dictate that what should be logical economic response won't always happen. This is why government road-building projects can often be inefficient exercises.

You may not like the fact that I've used real-world examples to make my point. But real life proves a point better than theory or principle. Perhaps you should take heed of that.

"2. Referring to our state budget merely puts the $3.8 Billion (for a 75 year buyoff) into perspective against a $20 billion-plus yearly budget. I don’t care if a great percentage of the budget is nondiscretionary. The point is that a (very) small tax increase could pay for increased road maintenance or building."

The problem with such an argument, Bill, is that once again, you are ignoring both political reality -- such a tax increase isn't going to happen in an election year -- and the reality of government financing of road construction in the 21st century, something which I would advise you to learn more about before coming to any judgement about whether the Toll Road lease deal makes sense.

In the case of the latter, states are confronting the same issue: Adding capacity and maintaining existing roads, much of which is plagued with decades of delayed maintenance because of the fact that interstates aren't financed by fees from users, but by general tax revenues. Since the municipal bond market and government restrictions generally restrict how governments can finance their projects and since the amount of delayed maintenance is greater than the revenues that can ever be raised through taxes to do all this without either inciting tax revolt or tax avoidance behavior, governments must figure out alternatives.

Such alternatives depend on the situation involved. An interstate with wide usage, for example, may be best-financed with taxes and at the same time, a component of that road could be dedicated as a toll road for congestion pricing and run by a private firm. A more limited-access road whose capital costs and risks to taxpayers are greater than the benefits to the citizenry, which is what the Toll Road is, may require different options.

The point all in all is that this shouldn't be an either-or matter, but a matter of making the best decisions depending on the nature of the infrastructure involved. You on the other hand, seem to be arguing for just one option and thinking simplistically in the process. I'm looking at the overall universe, where governments have priorities other than roads, where taxpayers ought to be exposed to the fewest risks compared to the greatest gain for their interests.

"3. I think the point people are making calling for more (any) study of the plan is that this being foisted down on the legislature very quickly. It may be so that Gov. Daniels has talked of this idea since 2004, but if he expects a competent legislature to vote for it, then he should have taken the lead last year in leading legislative committee meetings on the subject, explaining his vision and plan, and preparing legislators for the bid that was to come. Instead, around January 10, 2006, he announces his “Major Moves” project, which had a $2+ billion funding shortfall, by the way—and then, two weeks late, magically, he opens up a bid that gives Indiana the money for the program. Genius!"

Actually, Major Moves was formally announced late last year and had been discussed informally for two years. The whole argument over funding roads projects, or even to fund them at all, has been on the minds of the citizenry since discussions began over building the I-69 extension. The funding shortfall has been known for years; it's a reason why so many are opposed to new-terrain I-69 in the first place. I've lived in Indiana for less than two years and even I knew this.

This is no new concept nor was the debate something sprung upon the public, Bill, so the argument doesn't wash. One can argue whether this should have been better-covered by the press -- which actually has done a decent job discussing the issue long before Daniels revealed his plans -- or that legislators should have done a better job of informing the citizenry. At the same time, considering that the citizenry's eternal vigilence is the thing that keeps democracy alive, it is the job of the citizen to inform oneself and to demand information from government.

If citizens don't keep themselves informed, they suffer the consequences, plain and simple. This is why voting matters, why attending public meetings is important and why engaging in the public debate is critical. While representatives are elected to represent the interest of their citizens, the fact that we're all collections of competing interests means that elected officials can't simply be trusted alone to look after the common good.

"5. You wrote: “Then there are others such as Doug Masson of his eponymous blog, who argues against it because "it’s just not a good idea to eat your seed corn," whatever that means.” Even though I’d never heard this axiom before, I instantly knew what it meant. Seventy-five years is mortgaging, binding, the next 9 to 18 governors, the next 36 legislatures, and not just everyone’s children’s futures, but their children—people who haven’t even been born yet—people who may not be born for another 50 years."

Apparently my sarcasm went over a lot of people's heads this time around. When I said "whatever that means," I meant that I understood what Masson was arguing, but that considering the meaning of the term -- to foolishly live off one's source of sustenance -- and the situation being discussed here -- a long-term lease of a toll road that contributes almost nothing to the government coffers when compared to the size of its capital risks, level of use by the citizenry and reality that government's "seed corn" is taxes from citizens and businesses -- Masson misused the term.

Essentially his remark made no sense whatsoever in this context. Masson may disagree and you may as well -- and it's your respective rights to do so -- but I stand by my point and won't move off of it.

"8. Was the Fitch analyst the same guy who was touting the great, new, innovative business model of Enron in 2000? An interesting idea of letting the more well-off pay to use non congested toll roads while the rest of the fast-becoming lower class uses the congested public roads. I go along with this, if our nation continues on the path of a widening divide between the rich and (vanishing) middle class and poor, which was begun by one Ronald Reagan."

No. The analyst was Cherian George, who has been covering transportation infrastructure finance for over a decade. Sorry.

Comment from Bryan on January 26, 2006 3:05 PM

While we are all (or most of us) "citizens" in name, most of us are not citizens in practice. It is not enough to have the legal status of "citizen" to actually be more than a mere subject. The legal status of "citizen" only gives us the tools to become citizens in fact as well as name.

A citizen in name who does not work at the task remains a mere subject. This is something that I am trying to teach my children, that government is not something "over there" or "up there." Government is not an entity, it is a task.

That being said, I am a Hoosier who has spent many years living elsewhere and I do not automatically reject any and all Hoosier ways of doing things. For example, I never found an argument in favor of adopting DST that was better than "all the cool kids are doing it", and I lived with DST for years. It was no good, and nobody liked it. You know what the funny thing was about DST? Out in New York, everybody I knew complained that they were doing it "because of the farmers."

Comment from RiShawn Biddle on January 26, 2006 3:33 PM

^Good points on both Bryan. A citizen must actually act like one; that's why voting matters. And it's also why one must weigh all ideas; not all ideas are bad ones, even those of the status quo.

As for DST? As far as I'm concerned, it doesn't bother me one way or another. If the state decided to move away from it, the realities of the world -- in which one can easily be working with or for firms in Singapore or London -- means that nothing changes. And having DST means little in the way of adjustment. Which is why from my end, I think the debate over it was one of those that took attention away from more important matters.

Comment from Doug on January 26, 2006 11:03 PM

"When I said "whatever that means," I meant that I understood what Masson was arguing, but that considering the meaning of the term -- to foolishly live off one's source of sustenance -- and the situation being discussed here -- a long-term lease of a toll road that contributes almost nothing to the government coffers when compared to the size of its capital risks, level of use by the citizenry and reality that government's "seed corn" is taxes from citizens and businesses -- Masson misused the term."

I beg to differ. The Toll Road contributes more to Indiana than merely revenues to the government. It provides any number of benefits to Hoosiers, economic and otherwise. By giving up control of our infrastructure for immediate gain, we put the existing benefits in the hands of a private corporation and limit our ability to enhance the infrastructure for greater future benefits. In exchange for immediate benefit, we sacrifice our ability to sustain ourselves in the future.

You might argue that the future benefits aren't significant or that the risks associated with giving control to a private corporation aren't great or that the immediate gain outweighs the future risk. Obviously I don't make those arguments.

In any event, the phrase was being used correctly. Hoosiers are more than just their government, and the Toll Road provides more benefits than mere government revenue.

-----------------

Another thought -- if it's true that the foreign consortium's profits are mainly to be achieved through tax breaks, aren't we in some sense robbing Peter to pay Paul? Indiana gets more money, but the federal government gets less. Then there will be less federal money put into Indiana. Round and round we go.

Comment from bill plummer on January 26, 2006 11:13 PM

I’m not being condescending at all, RiShawn. Your example that a toll road increase commensurate with inflation would result in drivers driving less on the toll road is simply not correct. It would be the same as saying, a gallon of milk today is $2.50, and a year from now the general price level doubles, and a gallon of milk costs $5, and you said that would result in people buying less milk. Not at all. The relative price of milk would be the same (real price), and so, everything else equal, the exact same quantity of milk would be purchased.

I share your skepticism of the “rational economic man” is some cases, but for the vast majority of examples in our market economy, rationality is the correct assumption. Many many people are driven by price and price alone. If they weren’t, WalMart would not be the business that it is, would it?

Of course I know the real world does intrude on economic theory. If your point is simply that Indiana politicians have never had the political will to increase the toll on the toll road to at least keep up with inflation, I agree with you. But for me, another solution is to fix that problem, not turning it over to a private entity. (I admit I’m ignorant on this, but is there a Toll Authority or what? Why hasn’t the toll increased along with inflation?) One option that could be explored is having the state operate the toll road; and if there are parcels of land to be developed (forgetting for a moment the ethics of using eminent domain for private development), then lease those to private entities.

I don’t get this statement of yours: “The Toll Road situation exemplifies what behavioral economists, those who have rewritten the economic theory book by studying actual human behavior, have noted for a while: Not all behavior correlates with theory or general principle.” If you are referring to the fact of the incompetent legislators not increasing the tolls like they should have, economic theory doesn’t speak to that (well, maybe you apply some game theory), that would be more political science. Economic theory here would predict that as the real price of the toll has decreased, more traffic would be the result on the toll road. Or alternatively, if the toll had increased with inflation all these years, the traffic would be less on the Toll Road than it is currently.

The interesting dichotomy to me is the two sides of Gov. Daniels: One is the old school, count things honestly, use the right numbers, make the legislature do things honestly, etc.; and the other is the “private firms are better at everything than state government, everything should be privatized”. He’s going with the latter here, but there is no doubt that what he wants to do is securitize (and cash in) an income stream for 75 years and take the proceeds to use for the next 5 to 10 years (granted, to build some long-lived capital assets). There are really two questions here: one, is the lease a good idea to do; and two, what to do with the money?

I think Doug Masson’s “seed money” concept is right on. It would be as if a farmer could securitize his grain output for 75 years (binding his children and grandchildren to farming) and get a pot of cash. The questions should be, is the pot of cash large enough to do the deal? And if I take it, what should I do with the proceeds? Seems to me one option would be put the money in the bank and let you and your offspring get a part of it each year for 75 years. That’s what boggles my mind a little bit here: old school Daniels wants to blow through the $3.8 billion right away. Whatever happened to “pay-as-you-go? Let’s be clear: there is nothing magical about the concept of securitization. David Bowie did it with his song catalogue many years ago. If the “astonishing sum” of $3.8 billion can be shown to be a good deal, I’m for it. Hopefully our legislature will investigate it well (but with some of the idiots involved, I'm not holding my breath. I heard an exchange of words between Bad Hair Bauer and Daniels' budget point man Chuck Schalliol and it wasn't pretty.)

You wrote about my idea of increasing taxes to fund our road maintenance/construction: “The problem with such an argument, Bill, is that once again, you are ignoring both political reality -- such a tax increase isn't going to happen in an election year” I was just pointing out an alternate solution. But I also hope that someday we’ll have meaningful, statesmen politicians that don’t worry about it being an “election year”. I know what you’re saying, but by ignoring other options, you may already be onto a second-best solution. And I thought the Governor was all about statesmanship, honesty, and making the tough choices. Why can’t he sell that concept to his fellow Republicans in the state house, instead of dangling a shiny new bike in front of them?

Regarding looking at the universe of solutions, I’m all for that. If it appeared like I’m not for doing that, it’s only because I was playing devil’s advocate for one solution. Other posters have covered some of the universe of options, issues like, should we be building more roads at all, should we be looking at mass transit, etc. Here’s a concept to think about, how do we know how much traffic will be on the toll road, or other roads, in 50 or 70 years? If telecommuting and videoconferencing ever does take off, there may be no need for that 12 or 14 lane I-69 through Fishers in 10 years. And yes, I know forecasting a lesser amount of traffic on the Toll Road in the distant future indicates that we should take the money today.

Just wondering, RiShawn, in the time you’ve been doing these blog entries, have you ever written the words “I was wrong”?

And for Bryan, I for one am all for DST. I’ve been in Michigan around the summer solstice (where it was light at 9:30), and I didn’t hear anyone complaining about it. I don’t understand why New Yorkers wouldn’t like it, being so far east. For me, the question is simply, when do you want the daylight hour, 5 to 6 a.m. or 8 to 9 p.m.? I don’t really buy the economic benefit argument made for DST, but I do buy a health argument, which I never heard made last year. Indiana is one of the fattest states, it wouldn’t hurt us to get out more at night and move around. This issue ties in with health costs. In fact, a massive health/get in shape program spurred by the government could do wonders to reduce our health costs (that huge part of our budget).

Comment from RiShawn Biddle on January 27, 2006 1:39 AM

The problem with your argument Doug is you see this as some immediate gain. You don't consider what one could do with the proceeds from the Toll Road in terms of road infrastructure.

For example, if you put the Toll Road proceeds into a trust as instructed by Daniels in the Major Moves legislation, the funds could simply be invested in bonds yielding 5 percent interest. Based on $2.5 billion -- the proceeds not devoted to Northern Indiana county roads programs and the like -- the interest alone is $125 million, more than enough to fund a number of road projects that can add economic development benefits, including the ability to actually attract businesses without such useless giveaways as tax increment financing packages. Imagine if the interest wasn't even spent and just allowed to compound: Taxpayers would benefit far more greatly from this than from a toll road that only throws off $13 million a year -- and all of it devoted to debt repayments and capital costs.

Better roads serve Hoosiers as well with infrastructure that isn't potholed or riddled with the consequences of years of delayed maintenance. It deals with the reality that capacity, no matter whether mass transit is offered, will never meet handle more than 5 percent of actual traffic.

This isn't simply taking money off the table today for simple gain. It's an even more senseless argument, Doug, especially considering the billions poured into the road by Hoosiers through bond payments and tolls, for the Toll Road. One can actually argue that as in business, this is asset diversification, handing off an asset that no longer fits the state's infrastructure portfolio in exchange for new assets that can contribute additional gains in the long run. Such a way of thinking, novel as it is to you Doug, is actually the way state governments should think of these matters. Just keeping an asset just to keep it, on the other hand, isn't smart or innovative thinking. You may disagree and it's your right to do so, but what I am arguing is that people need to think differently, change their paradigm, consider that perhaps a idea is a good one, even if it doesn't initially fit your thinking.

Part of the problem in your thinking Doug is that you think like a lawyer: Process over results, laws over possibilities. Combined with a focus on a specialty and not a wide range of knowledge of finance, economics, sociology and the like, it leads to a tunnel vision that doesn't embrace possibilities. You also seem to argue as a Hoosier who thinks the status quo in road infrastructure funding should remain; that ignores the real-world collision of dwindling federal and state dollars that are driving the activities that are happening in nine states and being considered in several more.

Again, it's your right to think that way as it is mine. And I might be proven wrong. But there is merit to my position, period; this isn't some farmer eating seed corn, but asset diversification and managing the risks of capital costs -- a debt sort of speak since those costs must be absorbed less lives and assets are unduly harmed -- to achieve other rewards: To invest in other assets that can achieve long-term rewards for all Hoosiers, not just those in the northern seven counties whom have benefitted far more greatly from the Toll Road than those in the rest of the state who have to share disproportionately in the risks of capital costs and possible overruns. The moral hazard, if you will.

As for Bill: Time hasn't yet proven me wrong. When it happens, I'll gladly admit to it; my ego isn't dependent on me being right all the time. But when the great Ralph McGill railed against Jim Crow laws, he didn't know he would either be proven right or wrong about his position. He simply took a position based on his knowledge and defended it vigorously against all comers. Real life is about just taking a position and defending it. That's why you continue to read: I'm no shrinking violet and you wouldn't want that. Wouldn't be too much fun and you can also feel that you're right and "that guy Biddle
is out of his mind and wrong too."

Meanwhile the fact that you keep arguing the economic principle over the reality that principles don't necessarily work out in the real world -- which is the point I'm arguing -- seems to be a concession to my side. Or you're just stubborn. That's fine. It's your right to be so.

I've already noted that the economic principle is in theory, should be the case, but that real life often intrudes on the principle. In essence, you seem to be stuck on arguing principles instead of the case at hand, which is also your right. But at this point, you're talking past me and you're not actually paying attention to the point that I'm making. Nor have you proven me wrong.

What I am arguing when I note the Toll Road case exemplifying what behavioral economists have shown is this: Traditional economic theory argues that decisionmakers, consumers in most cases, but politicians as well because they act as consumers and business operators thanks to their control over toll roads and budgets, should behave in their rational self interest. In the case of a toll road, that means increasing tolls over time to meet inflation costs and capital costs. But behavioral economists note that this isn't necessarily so. IN the case of politicians, it may not make sense because they also consider that thing called short-term gain; they ignore their jobs as decisionmakers in the best interests of citizens for their other jobs as folks who need to get re-elected. So do the citizens that elect them, then vote them out if, say, a toll increase is suggested. They're not looking at their long-term best interest, which is to make sure the toll road can sustain itself, but their own short-term goals.

This should be expected because of the reality that there are competing interests involved in political decisionmaking. It's also why that it's impossible to make government operations in this area so much more efficient than what the private sector can actually do. Again -- and you seem to be willfully ignoring my ultimate point, Bill -- it doesn't mean a toll road privatization makes sense in every case; an interstate will always be subject to political machinations because of its wide use among the citizenry. What it means, however, is that such decisions should be based not on some knee-jerk defense of status quo, which is what you seem to be doing, but on the evidence and the nature of the infrastructure being considered, the risks and benefits of an approach.

Once again -- and pay attention Bill and Doug -- it's not an either or or neither nor. It's a depends on the matter at hand. And since this is no moral issue, ruling toll road leases out of hand is silly, impractical and in the long run, a sign of deficient thinking.

Comment from Tom H on January 27, 2006 9:17 AM

Bill Plummer: What makes you believe that "Indiana is one of the fattest states and it wouldn’t hurt us to get out more at night and move around?" Sounds "plausible", as they say, but what evidence is there for that view?

Personally, I would hypothesize it's the lack of morning daylight --especially in Winter -- that contributes more to obesity by triggering our bodies' craving for carbohydrates (to give us short-term energy to get rolling in the morning) than most anything we do (or would do) in the evening. Putting on pounds is more a winter problem than a summer problem.

Adopting DST will solve this, because most Hoosiers will be on Eastern DST, which actually adds at least 60 more days of late sunrises here in Indiana to the alarming 95 to 105 such late sunrise days we already suffer. With Eastern DST, almost the entire school year will be characterized by sunrises of 7:30 a.m. or later (some mornings as late as 8:21 a.m.)

You may not realize it, but people elsewhere in the U.S. don't encounter such extreme periods of dark mornings as we do (and have for the past fory some years). Of NYC, Chicago, LA and far-northern Seattle, only one of those cities has any sunrises at 7:30 or later through the year -- it's NYC and it has only one sunrise that late, at precisely 7:30 a.m.

Following from my hypothesis, adopting Central DST would better combat present factors contributing to obesity among Indiana's population. We would be waking to real morning sunshine, not darkness in the winter months, so our bodies would be less inclined to load up on carbohydrates. But, just as you noted, the health aspect was one that was not raised in the discussion last year. All the pity.

Maybe RiShawn will reconsider his knee-jerk dismissal of the clock issue as wasteful and archaic. One can always hope.

Comment from bill plummer on January 27, 2006 10:58 AM

Well, if you had written your original thought that a 40% increase in the nominal price of the toll along with a comcomitant 40% general price level increase would result in people finding ways around the toll road (due to the increased price), it would be flat wrong on a test. You've never addressed this point. I've written fairly extensively on this point, explaining it, and you've ignored everything I've written. It was simply a wrong statement on your part.

And, I've also extensively written about behavioral and real-world considerations, which I do not ignore at all.

By the way, a few days ago I did the exact same calculation of interest on the proceeds that you have done (and used 5% interest as well), and that was part of my last post. The questions are, do you take the money, and then, if you take it, how do you employ the proceeds. Your "use the $125 million interest" each year for 75 years is exactly NOT using your seed corn, but the opposite, it would be living within your means. This is what me and Doug have been pointing out, and now you're co-opting the argument like you thought of it?

So I guess you can never admit to being wrong, RiShawn, that's just not what the Star wants you to do. You should take a look back at the Star's editorials over time and ask yourself, were they right or wrong? Go back to the 1910s and 1920s, when they backed a KKK government, all the way up through the runup to our current war.

By the way, is it all about choices. It's all about opportunity cost, making choices. As someone in my office said the other day, you learn this the first day in economics (guns vs. butter)--although certainly this isn't the only class or place one should learn this. You and me both get this. Just as an example, have you ever looked at the National Priorities website that counts the cost of the war? You can break it down by state, and coincidentally, the current total for Indiana right now is $3.6 BILLION dollars. Ironic, eh?

Comment from RiShawn Biddle on January 27, 2006 10:59 AM

Nah Tom, it won't happen anytime soon. While I understand your health-related argument, you make the mistake that somehow the poor health of Hoosiers is somehow connected to late sunrises that prompt people to not work out. That's not necessarily the case.

Plenty of people jog late at night in Indianapolis, meaning the sunrise isn't a factor. Stop at your local gym at 7 p.m. and you will notice the gym rats and even average folks sweating on the treadmills and Nautilus machines. One can even find people working out on a Friday evening, just before they hit the town for drinks and lover-hunting.

Basically the problem of working out in Indiana goes far beyond late or early sunrises. It's about habits and lack of activity, about eating too much, often more of the simple carbs that break down too easily into sugar and cannot be burned easily through normal activity. It's about not taking an hour during lunchtime and taking a walk around Downtown, be it chilly days (a condition which allows for optimal fat-burning) or during humid afternoons.

Nor are Hoosiers despite the claims that Indiana is among the least-healthiest states, is unique in this regard. Los Angeles, for example, has the highest concentration of doughnut shops -- many ran by quite trim Thai emigres -- than any other city in the nation. New York is renown for its fat-filled delicatessens. And before Katrina, New Orleans was often top-3 on the list of least-healthy cities. These days, it's not even a simple American issue: Rates of heart attacks are increasing in France despite the reputation of the French for eating small portions.

It's a habit and diet problem.

Comment from RiShawn Biddle on January 27, 2006 11:32 AM

Once more time on the inflation discussion: At this point, you're arguing that I didn't address it. I have already addressed it. At this point, it's really an issue of agreeing to disagree; you are arguing what should happen, which you should know isn't necessarily connected to what really happens in the real world. I'm noting that while something should happen, it doesn't really happen all the time and in the case of the Toll Road, it hasn't: Tolls haven't risen to counter the loss of buying power that comes with inflation.

"By the way, a few days ago I did the exact same calculation of interest on the proceeds that you have done (and used 5% interest as well), and that was part of my last post. The questions are, do you take the money, and then, if you take it, how do you employ the proceeds. Your "use the $125 million interest" each year for 75 years is exactly NOT using your seed corn, but the opposite, it would be living within your means. This is what me and Doug have been pointing out, and now you're co-opting the argument like you thought of it?"

Actually Bill, I don't even remember you making such an argument. In fact, looking throughout your comments, I haven't seen a specific mention of this. Nor did Masson make such a specific comment, at least as far as I can recollect.

Nor is an idea so unique that other people can't consider it. The editorial page editor of this fine paper, for example, speculated about this last night. So did state Budget Director Chuck Schalliol during the House Ways and Means Committee hearing on H.B. 1008 on Tuesday -- long before you had possibly mentioned it. I didn't take credit for anything other than actually writing what I've written; don't you start taking credit for ideas that others have been floating around either.

The very concept of the trust fund, which was announced on Monday by Gov. Daniels as part of the Toll Road announcement, implicitly considers this. Spending could be leveraged with other concepts such as public-private partnership deals or adding some level of tolling on part of I-69, which could make sense if limited to a section of the road that is run based on a congestion pricing model (higher tolls during rush hour and lower tolls off-peak).

Essentially the $2.5 billion in proceeds not devoted to northern Indiana projects -- and note, the northern Indiana proceeds only makes up for payments from the Toll Road to those counties deferred since 1997 -- would be leveraged and not simply spent, at least in theory. Politicians being politicians, the theory may not work out. But then, that's why voters are supposed to hold their elected officials accountable.

Sorry sir, but neither one of us are so brilliant -- if we're brilliant at all -- to start claiming credit for ideas that others were speculating about.

And as far as the interest is concerned: You're not factoring that thing of beauty called compounding interest. Suppose the state simply invested the funds and not spent the interest. By 2013, when construction would begin on most of the unfunded roads projects, the proceeds will have grown from $2.5 billion to $3.4 billion. The interest in the first year alone -- $125 million -- is far more than the Toll Road's 2005 revenues of $96 million. More importantly, since there will be no capital costs eating up the interest and the money could be devoted to projects statewide -- instead of to a toll road benefitting just the northern end of the state -- it's actually a boon to all.

By the sixth year, annual interest would reach $163 million, almost double the Toll Road's 2005 revenues. Again, the fact that the interest income isn't consumed by capital expenditures nor is limited to northern Indiana, is a boon to the entire state.

So why do you oppose the Toll Road deal? Huh?

Comment from Bryan on January 27, 2006 3:44 PM

The health argument for DST is a load of rubbish. If it were true, then New York's health would already be worse than Indiana's, given how far east New York is.

Without DST in Indiana, New York and Indiana shared the same "by the clock" sunset times. New Hampshire should be filled with nobody but the Guinness World record obese if the "time zones make yuz fat" argument has any value at all.

Likewise, many are those of us who get our exercise in venues that don't rely on sunlight. Martial arts, fencing, racquetball, weightlifting, and many other very useful fitness regimens are easily done within these things called "buildings," which usually make use of Mr. Edison's wonderful new invention.

Comment from Bryan on January 27, 2006 3:50 PM

Regarding diet and health: A study was published not too long ago that looked at a large number of societal factors regarding childhood obesity. It was the first one of its breadth and depth done, at least in the USA.

After accounting for primarily hereditary factors (race and gender), the study determined that the most important factor in determining increase in BMI over the time of the study was not the presence or convenience of fast food outlets. It was not income. It was not a whole host of other things that get blamed by people who have an agenda and no science. The most important factor (after heredity) was the price of fresh vegetables! That's right, the more expensive fresh vegetables were in an area, the faster and more kids' BMI got out of whack.

This was independent of family income and educational level. Likewise, observance or non-observance of DST didn't even make it onto the RADAR.

I can provide a citation if desired.

Comment from bill plummer on January 27, 2006 4:32 PM

I never said that I posted about using the interest proceeds of the “astonishing sum” a few days ago, merely that I did that calculation. I did it the morning that I read the story on the Star website. I guess what I was commenting on was your noting the exact same concept today, when the idea certainly has not gotten any play at all, at least in this forum (I haven’t read the general message threads on the Star website, though I’m sure there are plenty of comments there). It’s true, neither one of us are brilliant for performing that calculation. But if the trust idea is part of the package, why wasn’t it given more play in the announcement and/or resulting hoopla? (and I apologize in advance if it was and I missed it.) But the fact that one of your colleagues brought up the concept last night tells me that it took from Monday to Thursday night for people there at the Star to consider that as an option. The simple notion of not eating your seed corn, which Doug first posted a few days ago, and my arguments along the same line, is nearly the same thing.

I love this, though: "And as far as the interest is concerned: You're not factoring that thing of beauty called compounding interest." Uhhh, I learned about that 30 years ago. I never claimed, nor thought I was supposed to analyze every possible plan for using the proceeds of the "astonishing sum of $3.8 billion". Of course there are a thousand possible ways of using the money, including some serious thought given to other transportation alternatives. I for one would love to commute via train from Fishers to downtown--I keep waiting for it to be built.

It gets back to our back and forth on the incompetence of our state leaders. If you’re going to do the deal and just use the interest for 75 years, then why bother doing the deal at all—just fix the damn problems with the government management-which as I’ve said is one side the Daniels-style government. One factor leaning toward the private deal would be if you are going to let the private firm develop land along the tollway, and maybe you thought there could be some lawsuits/eminent domain arguments if the state did the same type of developments.

I don’t think I’ve ever said that I oppose the Toll Road deal, only that it deserves deep and extensive study by the legislature (which is something I’m not holding my breath on). If the deal is done, I believe I would oppose blowing the proceeds right away, or even over the next 10 to 15 years, even if spent on capital projects. It relates to the concept of “intergenerational inequity”—but it doesn’t take a fancy social scientist to define it, the Hoosier farmer did with his “don’t eat your seed corn” maxim.

What’s that old consumer maxim, though: If it sounds to good to be true...

Comment from RiShawn Biddle on January 27, 2006 5:41 PM

"It’s true, neither one of us are brilliant for performing that calculation. But if the trust idea is part of the package, why wasn’t it given more play in the announcement and/or resulting hoopla? (and I apologize in advance if it was and I missed it.) But the fact that one of your colleagues brought up the concept last night tells me that it took from Monday to Thursday night for people there at the Star to consider that as an option."

No Bill. It means that unlike you, those of us who have the jobs of covering what happens at the statehouse are doing our jobs. Just because it came up in conversation doesn't mean people weren't thinking about it. But as someone charged with explaining to readers the complexities of an issue such as this, the first job is to explain the concept, break it down to it's simplest terms, then work from there. This may not be something you understand, but it's not your role to do so,thus it's expected.

"The simple notion of not eating your seed corn, which Doug first posted a few days ago, and my arguments along the same line, is nearly the same thing."

Actually I'm not saying the same thing as you are -- and if you need to reread it again, feel free to do so. What I am saying is that there are numerous benefits to doing this deal, especially when one stops looking at government as just a charity and law enforcement administrator that is absolutely good at its job and behaves rationally -- which you have admitted it doesn't -- and look at it for what it is: An organization with both public benefit (state police, welfare and health care) and business components (land management, roads operator, healthcare financing) whose activities often intersect and has assets that should be managed by their ability to serve both segements on behalf of the widest number of the taxpayers who pay into it.

This means that the benefits of the assets should outweigh the risks, especially the risks that come with delayed maintenance and long-term capital investment. Those risks should be weighed against whether the asset serves the widest number of taxpayers. If the vast majority of taxpayers are taking on a huge financial risk in keeping an asset that benefits few of them and contributes nothing to the general fund to finance other programs, then some asset reallocation and risk restructuring should take place. Or in other words, lease the Toll Road to a private firm that can manage it more efficiently and whose investors can better-absorb risk.

Looking at the possible benefits of using concepts such as leasing the Toll Road, on the other hand, is actually bringing positive business practices -- risk management and asset diversification -- to the public sector, which considering its problems managing infrastructure(the "earthquake toll increases" that often happen when prices aren't increased to meet inflation as in the case of the Toll Road), is much needed.

Considering the risks of toll roads in general -- including the fact that revenues that are often lower than estimated in its early years followed by stability 15 years down the line -- it may be best that toll roads aren't run by governments. Which is another reason why the Toll Road lease deal makes sense.

This isn't about seed corn; state government itself already has sources of revenue, namely the taxpayers, so there is no "seed corn" loss. Just understanding how governments work alone is enough to realize that this isn't so; the Toll Road as is, devotes none of its surplus to the general fund, but back to the Indiana Finance Authority, which uses the money to fund capital improvements on the toll road. Which is why the analogy you and Masson insist on using is intellectually ridiculous.

As far as the incompetence of politicians: There is some truth on that, but you act as if competent politicians would behave any differently. The reality is that politicians, because they are dealing with so many competing interests -- both their own and those of their constituencies and donors -- are going to be prone to make decisions that split the baby or delay the inevitable. The decision may not make good sense on any objective level, but this is what happens at times with the conflict between what is best for taxypayers overall, what benefits or hurts particular segments of that base and the personal ambitions of politicians, who as selfless as they may want to be, must also balance those interests and their own self-interest in getting re-election.

It's easy for those of us not sitting in legislative seats to opine about the public good, but for those in those seats, the problem becomes a matter of survival. Doing the 'right thing' can often cost one supporters among their base and ultimately, their seats.

Think of a recent case here in Indianapolis with Steve Talley, who actually manage to actually get government reform accomplished last year, yet paid the price for doing so this month when he lost the City-County Council presidency.

As much as we may rail about incompetent politicians, we should all remember that we the people create as much difficulty for them to achieve good public policy, both by choosing the wrong candidates for an office to making conflicting demands for fiscal thrift, innovative thinking and increasing spending on behalf of the public good. That reality -- and the consequences of that in the case of the Toll Road's management -- alone is enough of an argument on behalf of the lease deal.

Comment from T Heller on January 27, 2006 8:52 PM

Bryan:

Since you've gone a bit 'off the handle' on my hypothesis that late winter sunrise times can lead one's body to seek carbohydrates, let me make a couple of comments.

First, as to the study of childhood obesity you mention, I'm sure you're correctly relating that observance or non-observance of DST "didn't even make it onto the [study's] radar." I doubt the researchers would have even considered it, since the incidence of late sunrises in winter doesn't typically affect many places in the U.S. But it does affect Indiana, which is located to the far western edge (indeed, beyond the natural western longitudinal boundary) of the Eastern time zone. (I seriously doubt those researchers were from Indiana; otherwise they might have considered the effect of late sunrises.)

Furthermore, late sunrises are NOT due to DST -- they're the consequnce of Eastern Standard time here in Indiana. The introduction of Eastern DST this Spring, however, will add upwards of two months more of mornings with late sunrises (some in Spring, the others in Fall). And, as I hypothesized, I think this will contribute to additional carbohydrate loading by early-morning sunlight-starved schoolkids and others. It may not be a more potent factor than the price of fresh vegetables or dietary and exercise habits, but I think it can contribute to weight gain. Sugars give them a kick of energy to get going before the sunrise.

Please trust me when I say what I wrote was not an argument against DST. So many people lately have misinterpreted me on this point. I think changing our clocks with the rest of the nation is an important step in dragging Indiana and its economy kicking and screaming into the modern age. I've changed clocks my entire life; this last fall was the first time I haven't. It's the late sunrises that being assigned to the Eastern time zone that I find disturbing.

And finally, a couple of related corrections. You wrote that "New York and Indiana shared the same 'by the clock' sunset times" without DST. You might think so, but that's not true -- because Indiana's clock is the same as New York's but the sun still takes awhile longer to get around to us. That's why I talk about unnaturally late sunrises here (because we've been wrongly placed into the Eastern time zone) and why I hypothesize about the health effect of late sunrises.

We don't have the same 'by the clock' sunrises as New York. For example, on Jan 23rd (this last Monday), the sun rose in New York City at 7:14 AM, but it rose in Indianapolis at 8:00 AM. That's a big difference -- almost one time zone's worth, in fact.

I think people here don't grasp this. I'm not surprised, because they've lived in this time warp for forty years now, ever since bureaucrats in D.C. pushed Indiana into Eastern. People elsewhere in the U.S. don't experience days (and the preponderance of late sunrises) like we do here. That's because they live in time zones appropriate to their location on the globe. We don't.

I was hypothesizing that if we had more normal sunrise times like the rest of the U.S., we would remove one factor that leads many Hoosiers to seek a carbohydrate fix in the morning. We would get those more normal sunrise times if we were put in the Central time zone, which is the appropriate time zone for where we're located on the globe.

Finally, you comment that if "time zones make yuz fat", folks in New Hampshire should be obese. That's 180 degrees opposite of the effect I was hypothesizing. New Hampshire folks don't experience the late sunrises we do (because they're in the right time zone for their location on the globe), so they wouldn't suffer the morning carbohydrate-craving effect to the same extent I hypothesized Hoosiers do as a result of having been forced into waking up and getting to school or work way before sunrise (especially during the winter) for decades.

Give this some thought and you'll understand what I was suggesting.

Comment from bill plummer on January 28, 2006 12:26 AM

Check out this website, operated by three northern Indiana newspapers, for thoughts from some citizens in that part of the state: http://www.tollroadforsale.com/feedbackall.php

I especially like this idea:

Joey Koleff from Crown Point wrote:
The state complains about Brain Drain, where college grads take out of state jobs.

Consider this:
Purdue and Indiana University have two excellent business schools. If the state were to allow both universities to run a portion of the Toll Road as a learning experience in the graduate curriculum, you get fresh new ideas, young enthusiastic ownership, the money stays in the state and the students get the benefit of running a real company not a simulated one. The downside, you do not get the big dollars up front and make the Gov. look like a knight in shining armor.

Comment from edna on January 28, 2006 10:32 AM

What a lot of rhetoric about toll roads present and future! The simple fact is that our state government intends to accept an uncertain future for getting cash now. Sounds like one of those "Cash and Go" businesses that are springing up everywhere because workers cannot survive on their income from one payday to the next. Does anybody admire those businesses?

Comment from bill plummer on January 30, 2006 2:23 PM

Well, it's true that one can debate what functions are legitimate for state government--in fact, that's part of what drove Mayor Daley to do his lease deal--the Skyway was the only city operated toll road, and he didn't think it made sense for the city to be in that business.

But there are certainly public goods, such as roads, that may be better built and run by a state or national government--even toll roads.

Anyway, RiShawn, I've taken your advice, I'm travelling. RIght now I'm in Massachusetts, and earlier today I travelled on a toll road in New Hampshire, paying a 50 cent toll twice. I didn't mind, it was a great road.

Regarding the legislators, they are a sorry lot, only worried about keeping their positions--look at the incumbancy rate (yes, the voters are to blame as well--the only time there is a change is when someone dies...