INDOT chief urges new look at road project funding

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INDIANAPOLIS (AP) — Concerns about rising debt payments are prompting Indiana’s top transportation official to seek new ways to finance road projects.

Department of Transportation Commissioner Karl Browning told the Indianapolis Business Journal he doesn’t think the state should commit to any more “availability payments,” a type of public-private partnership used to finance section five of the Interstate 69 project and Indiana’s share of the Ohio River bridges project.

“It’s a lot like borrowing,” Browning told the Indiana Chamber of Commerce recently. “I would be more than cautious about the notion of doing public-private partnerships of the nature of some of them that we’ve done.”

Availability payments are annual payments that come from available budgeted revenue sources. A developer can use a government’s long-term commitment of annual payments to finance a project.

The funding mechanism is gaining popularity as governments look to finance projects that can’t be tied to a dedicated funding stream, such as tolls. Indianapolis, for example, plans to use availability payments to finance a criminal justice complex that could cost as much as $600 million.

While Indiana isn’t carrying the debt from the Ohio River Bridges project or I-69 on its books, the deals still mean INDOT has to set aside money for 35 years.

Browning said about 10 percent of the Department of Transportation’s revenue currently goes to debt service. That will rise to 17 percent in 2018, according to INDOT projections.

“In my view, that’s a manageable number,” Browning told the chamber. “If we let it get higher, we’re going to be mortgaging our grandchildren.”

Browning said he would support a public-private deal for new construction if it can be sustained by a known revenue source, such as tolls.

Tolls weren’t an option for section five of I-69, so state lawmakers in 2013 agreed to let the Indiana Finance Authority pursue an availability-payment scheme.

Once the road is operational, Indiana will pay $21.8 million a year for 35 years.

Another project using availability-payment funding is the East End Crossing, a toll bridge under construction over the Ohio River at Utica. Availability payments are $33 million a year from 2016 through 2050.

Toll revenue will offset the payments, but Indiana doesn’t expect it to cover the bridge’s $763 million cost.

Browning hopes to rally taxpayer support for a lasting solution to the transportation funding gap caused by declining gas-tax revenue, aging infrastructure and escalating construction costs. He noted that roads and bridges built 50 years ago are approaching the end of their useful lives.

Nearly 13 percent of bridges and almost 12 percent of highways will be in poor condition by 2024, he said.

“If we’re going to be the crossroads of America,” he said, “our existing highways have to be in pretty dang good shape. We have to persuade 6 million people that it’s worth it to them, and not rely on the federal government.”

Indiana Chamber transportation lobbyist Cam Carter said no P3 deal will make up for the fact that the federal gas tax hasn’t risen since 1993, cars are becoming more fuel-efficient and Americans are driving less.

“What you have to understand with public-private partnerships in the transportation realm — they’re a financing mechanism,” Carter said. “They’re not a funding mechanism.”

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Information from: Indianapolis Business Journal, http://www.ibj.com

 

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