Page 26 - Arkanas Trucking Report Volume 22 Issue 5

costs made it less so. The department considering private options. local governments from expanding near-
studied tolling on I-40 from North Indiana serves as a cautionary tale. by roads. As “The Highwaymen” pointed
Little Rock to West Memphis to add a On June 29, 2006, the state received out, P3s have benefitted big businesses
lane in each direction. If only the new $3.8 billion from a foreign consortium like Goldman Sachs, which was advising
lane is tolled, it’s not feasible. If the that included Cintra, a construction governments on privatizing highways
entire interstate is tolled, it would be, firm based in Spain, and the Macquarie while it also was investing in those high-
but tolling existing interstates is illegal Infrastructure Group. In return, the ways. The firm earned a $20 million
under federal law. private contractors would operate the advisory fee from Indiana. Meanwhile,
“It’s not the silver bullet,” Bennett Indiana Toll Road for 75 years, sup- P3s allow elected officials to pass off dif-
said earlier this year. “It can help bridge posedly earning more than $11 billion ficult political decisions such as raising
gaps at some point, but for the most over that time period, according to tolls to unelected private companies.
part, they’re going to have to be able to “The Highwaymen.” Instead, the opera- According to Lynch, financial enti-
have a return on that investment. That tor filed for bankruptcy in 2014, and ties often don’t plan on owning the
usually means tolls, and to make tolls now it is operated by Australia-based roads throughout the length of the
viable, you really have to have traffic, IFM Investors. Reportedly, Trump cited contract. Instead, they intend to pay
and it’s usually traffic at higher levels Indiana’s experience when he ques- upfront through the capital markets or
than what we have in Arkansas. But tioned the value of P3s. by using their own money, then collect
we’re still going to keep exploring it to Other P3s have not fulfilled their tolls and fees until they break even, and
see if it’s a possibility.” promise or their purpose. When the then unload the asset for a profit. Over
recession hit, less capital was available the course of that lease, the road may be
INDIANA: A CAUTIONARY TALE for investing in roads, and traffic vol- owned by multiple operators.
Lynch said momentum has slowed, ume did not meet forecasts. In several instances, the conces-
though not stopped, since the publica- A big concern is the business model sionaire has gone bankrupt. When that
tion of “The Highwaymen.” At the time, involved with P3s. Many of the arrange- happens, its parent company can suck
the Indiana Toll Road had been leased ments involve foreign operators and all the money it can out of the deal, cut
the year before, and other states were include noncompete clauses preventing off the bankrupt entity, and walk away.

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26 Issue 5 2017 | ARKANSAS TRUCKING REPORT