As Republican Gov. Mitch Daniels' tenure winds down, it's unclear what kind of financial situation his successor will find for highway projects.
The $3.8 billion that Indiana netted in 2006 from leasing the Indiana Toll Road to a foreign consortium will be mostly spent or allocated by the time the state's next governor takes office in January, the Fort Wayne Journal-Gazette reported Sunday.
In recent years, the Indiana Department of Transportation has been spending more than a billion dollars annually on highway needs—some from the lease proceeds, the rest from federal and state gas taxes. But that level of spending will drop dramatically when the Toll Road money is gone.
Jack Basso, director of Program Finance and Management at the American Association of State Highway and Transportation Officials, said Indiana will soon be as cash-strapped as other states and with few options on the table.
"The next governor is going to have to face the reality that the money isn't going to materialize out of the air," Basso said. "There really aren't other options. The two big revenue generators for transportation are the fuel tax and vehicle registration fees."
By the time Daniels' successor—Republican Mike Pence, Democrat John Gregg or Libertarian Rupert Boneham—takes office in January, some of the toll road money will still be earning interest. But it all will be virtually awarded, via contract, for ongoing major highway projects slated to finish in the next two years.
When Daniels entered office in 2005, his administration announced it had discovered that Indiana had $2.1 billion worth of road construction projects on tap that weren't covered by federal and state gas taxes. Daniels' answer then was to lease the Indiana Toll Road for 75 years to a private Spanish-Australian consortium in exchange for billions of dollars to fund a massive 10-year highway construction plan to run from 2006-2015.
There aren't any more toll roads to lease, so Indiana's funding options will be limited, said Dennis Faulkenberg, president of APPIAN, a transportation consulting firm based in Indianapolis.
"My big question is what needs to be done and that tells me how concerned I should be. There are needs out there," he said.
Rep. Win Moses, D-Fort Wayne, said road construction projects are cyclical and won't stop just because the money dries up. He said that funding will certainly be an issue in the upcoming election.
"We have built some important roads. But we did so by mortgaging heavily the future and allowing the tolls to go up quickly," he said. "This was not a clear win-win. And now we are back where we started."
As of Jan. 1, the state had $1.7 billion in toll road money still in its construction fund. But Will Wingfield, a spokesman for INDOT, said several projects will have to be paid off in the next two years, meaning all the toll road funds should be spoken for at the end of June 2013. There is a $527 million trust fund, but it needs legislative authority to tap it.
INDOT Commissioner Michael Cline said the state has been in an enviable position during recent years, spending billions of dollars to build, repair or improve hundreds of roads and bridges.
"Because of the lease of the Toll Road, we eliminated many congested areas and solved an awful lot, but we know it's a dynamic activity and we'll continue to have needs," he said.
He estimated INDOT receives about $500 million a year from Indiana's gas tax. Most of that is used for debt service on road construction bonds and the operating budget of the agency, including snow removal, engineering and other major items.