I was wondering what our Fair Governor’s idea was when it came to paying to fix our Scotthole-laden roads with money that currently doesn’t exist. Well, we found out via
Patrick Marley on Friday in the Milwaukee Journal-Sentinel.
Gov. Scott Walker's transportation secretary told business officials and others last week he had talked to a London financier about selling off Wisconsin's highways but had rejected the idea.
Transportation Secretary Dave Ross told a group last week that Walker's administration was adopting new ways of getting its work done and mentioned in passing his discussion about selling off roads, according to people familiar with the meeting.
He then said he was not pursuing the proposal because Wisconsin has good contractors to maintain the state's roads...
[DOT Deputy Secretary Bob] Seitz was present when Ross made his comments last week at a meeting at Wisconsin Manufacturers & Commerce headquarters in Madison. He said he hadn't heard about Ross' meeting with the businessperson until then and didn't know the person's name.
Nice to see Walker Cabinet officials floating this our to their puppetmasters at WMC in private, isn’t it? Banana Republicanism at its “finest.”
While it's not openly stated, it seems like this would be in the form of a new toll road in Wisconsin, as that would be the easiest way for the highway's operators and maintainers to get their money back. Basically someone would give the state of Wisconsin a bunch of money up-front, and then the operators would get the revenues that come in from operating the toll road and/or other businesses on or near the road.
I have a bit of familiarity on how some of this works, as I was just leaving Indiana in the mid-2000s when
then-Governor Mitch Daniels sold off the state’s Toll Road to a foreign company for $3.8 billion, and I still have friends in the state. Technically, it was a 75-year lease to the consortium, but I would think this is a model that any Wisconsin selloff would follow.
The experience in Indiana worked out reasonably well in the short-run for the state’s motorists, as the money was invested and used for
a highway program called Major Moves which meant that new tax money wasn’t needed for expansions and repairs.
But for the financiers, it wasn’t going so well,
as Forbes noted in 2014. What happens when the wave of the future files for bankruptcy?
That’s what they’re asking in Indiana now that its privatized toll road, lauded as a new era in public/private infrastructure partnerships, has filed for a “pre-packaged” Chapter 11 bankruptcy…
For one, the Indiana Toll Road, as well as many others, experienced dramatic drops in traffic due partly to the Great Recession. In 2010 it was estimated that the road needed nearly 11 million toll-paying trucks each year just to break even, but only half as many traveled the highway.
While the revenue situation improved in 2012, the road’s financing structure may have had an even bigger impact. Using a common project finance tool called anaccreting swap, the consortium hoped to exchange low debt service costs early on with higher costs later, and then eventually refinance. But the consortium’s inability to meet these increasing debt costs that ultimately prompted the filing. The road’s total debt obligations now stand at nearly $6 billion, up from $3.4 billion at the time of acquisition.
This wasn't such a great investment
Another part of the deal said that the tolls in Indiana would be frozen for 10 years. However, those 10 years ended in 2016, and in June 2017,
we got this story. Robin and other commuters we talked to didn’t know about the rate freeze that kept the cost of a trip down the entire length of the toll road to just $4.65. Robin was surprised to hear that the same trip would cost $10.52 on Thursday.
“Why is this happening? Why am I being charged this much? “What is the reason for it,” asked Robin.
There has been some debate over just whose best interests were being served by the freeze. “It did some favors for the people who enacted it,” said Ind. Rep. Scott Pelath, (D) Michigan City. “It kicked the can down the road past a few elections.”
“Now the money for paying the subsidy has worn off,” added Ind. Rep. Ryan Dvorak, (D) South Bend. “The true cost of the toll increases are going to be borne by everybody.”
And just this week, Indiana and the new operators of the Toll Road worked out a deal
where the operators will send the state $1 billion over the next 3 years, while the tolls for trucks and other heavy vehicles will go up 35% next month.
In addition, those billions that Indiana received from the original sale eventually ran out, and Daniels and successor Mike Pence (yeah, THAT GUY), didn’t reinvest. This led to Interstate 65 being shut down for months in 2015 due to deficient bridges, and
causing a Northwest Indiana Post-Tribune reporter to rip Indiana as the “Land of Cheap.”
By 2017, with money getting scarce again, Pence’s had a privatization plan for getting a new interstate built in southwest Indiana,
But Pence’s scheme turned into a disaster with the project being delayed and eventually stopped, and the company in charge of building it going broke.
The plan was that an organization called I-69 Partners would borrow money, and the state of Indiana would then pay the organization as it completed work and maintenance on the road. Most of the money for I-69 Partners came from a European company named Isolux, and they were not a good source.
Within the past two years, Isolux has been replaced on jobs in Brazil, Bolivia and Chile. The company is near insolvency. The bonds it used to finance I-69 construction, to use the industry's term, are "junk."
Even a supporter of public-private partnerships, Robert Poole of the libertarian Reason Foundation, had a harsh assessment: "This is one of the worst failures that I've seen in the state-level [public-private partnerships]"…
Just four months after construction finally started, one of the subcontractors, Aztec Engineering Group, issued a Notice of Default to Isolux for not paying for work on time, according to a court record.
Isolux made the payment but was the target of two more notices in March and June 2016, due to an outstanding balance of more than $4 million.
At various times that summer and into fall, as Pence campaigned for vice president, unpaid subcontractors walked off the job site. In June, Aztec suspended its work altogether and was replaced. In September, Crider & Crider of Bloomington stopped work.
The State of Indiana gave I-69 Partners the boot on the project after Pence left office, and now the project will have to be re-bid to a new vendor at a much higher cost and be completed well behind schedule. But hey, Pence doesn’t have to deal with that fallout, now does he?
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So with that background in place, let’s go back to the report about Scott Walker thinking about selling our interstate projects off to private interests as a way of alleviating our increasing backlog of road work.
Some who were familiar with the meeting said Ross referred to the businessperson as a billionaire, while one said he referred to the person as a financier.
The idea comes as road funding emerges as a central issue in the GOP governor's re-election bid. Walker has fought raising the gas tax, but has faced pressure from some of his fellow Republicans who want to do that to get more projects done.
In other words, selling Wisconsin highways was Walker’s bright idea as to how to get road projects done, while not getting on the bad side of Grover Norquist, the Kochs and other out-of-state oligarchs by (gasp!) raising taxes to pay for this work.
And how much would you want to bet some Walker donor would get a nice deal to operate any Wisconsin toll road, likely as a kickback for an even bigger donation? Always projection with these guys.
I wouldn't count on this working out either.
Amazingly, I saw a Koch ad this week claiming it was
Tony Evers that was thinking about toll roads, not Walker. Now I’ve seen Evers talk about increasing the gas tax to stop borrowing for these needed repairs (an increase which is not going to be by $1, righties.
Evers reiterated that yesterday), but he’s never mentioned tolls as an option as far as I know.
Based on the track record in Indiana (and they’re far from the only place these schemes have failed), it’s a horrible idea to try to use WisDOT’s budget problems as an excuse for Scott Walker and WisGOP to strike another deal that throws out taxpayer dollars to cronies. Any potential operator won't give Wisconsin the windfall that Indiana received for the Toll Road, now that there is more familiarity with costs and benefits of such a deal. Walker and anyone else who thought about this scam should be ripped mercilessly for even thinking of something so stupid and crooked.
See, this is the problem when you try to “legislate” by sloganeering, poses and empty promises, Reality catches up to you at some point, and the lies and schemes you try to pull to get yourself out of it just compounds the problems you caused.