Tollway bankruptcy: Bad sign for Brent Spence?

Jason Williams | Cincinnati.com
September 22, 2014

The private company running a major tollway in Indiana has filed for bankruptcy – a potential blow to efforts by Greater Cincinnati and Northern Kentucky leaders to win public support to use tolls to pay for a new Brent Spence Bridge.

Declining traffic volume contributed to Chicago-based ITR Concession Co. failing to make a $102 million interest payment this summer on the 157-mile Indiana Toll Road, according to multiple reports.

The debt stems from a 2006 deal backed by two international companies in which Indiana received $3.8 billion up front in exchange for a 75-year lease of a highway spanning the northern part of the state. Those companies – Spain’s Cintra and Australia’s Macquarie – also have shown interest in being part of a public-private deal to use tolls to pay off the $2.6 billion Brent Spence Bridge replacement and corridor overhaul.

But those pushing for Brent Spence Bridge construction to be fast-tracked say business and political leaders and transportation planners say they don’t face the same issues as Indiana leaders did.

“The world is much more sophisticated about 3P deals now, particularly in this country,” said Mark Policinski, executive director of the Ohio-Kentucky-Indiana Regional Council of Governments transportation planning agency. “That was eight years ago, and the economy is different now.”

Policinski added: “Equity for these projects is at an all-time high. The marketplace will value the project, and its return on investment. Then it will price it, and we will see if a deal can be done.”

The Financial Times said the Indiana Toll Road, one of the highest-profile private tollways in the U.S., is “the latest sign of how a decline in traffic is threatening private investment in the crumbling U.S. road network.”

The Indiana road company isn’t the first to seek creditor protection since the financial crisis, Bloomberg reports. Operators of the South Bay Expressway, a 10-mile toll road near San Diego, and the 16-mile Southern Connector in Greenville County, South Carolina, each filed for bankruptcy in 2010 after experiencing low traffic.

The news comes as business leaders in Greater Cincinnati and Northern Kentucky prepare to lobby Kentucky lawmakers this fall to pass legislation that would allow for a new bridge to be built using a public-private partnership. The General Assembly session begins in January.

Kentucky owns the Brent Spence Bridge and has the final say on how to pay for it. Northern Kentucky lawmakers have remained united in their anti-toll stance, but Kentucky Gov. Steve Beshear, Ohio Gov. John Kasich and several top business leaders on both sides of the Ohio River continue to say tolls are the only way to pay for a new bridge.

Greater Cincinnati and Northern Kentucky are among several regions across the U.S. considering tolls to pay for major infrastructure projects. Money has not been available to cover project costs, in part, because of the ban on federal earmarks, stagnant motor-fuels tax receipts and an uptick in the manufacturing of more fuel-efficient vehicles. Tolls typically are a guaranteed revenue stream to repay the private operator.

Some toll opponents here at home fear that traffic would decline on a new Brent Spence Bridge to a point where the private company would default on its payments – potentially costing taxpayers more long-term. Bloomberg reported that traffic volume has fallen by 42 percent on the Indiana Toll Road in the past eight years, according to Macquarie Atlas, the unit that owns the concessionaire.

The lease gives ITR all the highway’s toll revenues, and it is responsible for maintenance and improvement costs.

The toll charge for cars not using transponders to pay has risen each July since 2008 under a formula included in ITR’s lease agreement. That rate now stands at $9.70 for driving the highway’s full length — up from $4.65, which the state hadn’t increased since 1985. The charge for cars using transponders remains locked at $4.65 until 2016.

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