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08/02/2011

Local governments will benefit from turnpike lease, ODOT director says

Leasing the Ohio Turnpike could be a boon for cities and counties strapped for funds to build local infrastructure projects, Department of Transportation Director Jerry Wray said last week.

During a speech to the Columbus Metropolitan Club, Wray tried to dispel “misinformation” about Governor John Kasich's plan to lease the 241-mile toll road in northern Ohio and laid out a set of conditions that potential bidders would have to accept to operate.

Unlike Indiana, which several years ago got a $3.85 billion upfront payment to lease its turnpike over 75-years, the Kasich Administration will insist on getting an ongoing percentage of the toll revenue, he said.

“Whatever we do in terms of leasing the Ohio turnpike is going to be an upfront payment of some size with a percentage of the tolls for the life of the lease,” he said.

“We believe that the economy’s going to come back and jobs and commerce are going to grow and the turnpike’s going to become a vital link, and we want to benefit from that and we want Ohio to maintain a role with the turnpike.”

The administration will also maintain “strict control over how much the tolls can be increased,” he said. Earlier this week, Democrats and local officials warned of toll increases as they panned Kasich’s plan to privatize the road.

Wray later told reporters that the $3 billion figure the governor mentioned months ago was based on a significantly different lease plan that was predicated on a one-time, lump sum payment. “We’re not going to do that.”

He said he hopes to release a request for proposals for review by the General Assembly by early next year.

The administration will not sign a contract that includes a non-compete clause like one in Indiana, where the state agreed to not improve parallel roads, he told CMC members.

However, ODOT is aware that local residents are concerned that changes to the turnpike could encourage trucks to seek alternative routes, he said. “We will deal with that in the terms and conditions of our lease. And again, market forces are at play. If you are going to pay billions of dollars for the lease of the turnpike and then chase the trucks off, you’re not going to be very smart.”

Wray said the administration would not use the revenue to balance other parts of the state’s budget, but noted the governor has said he wants to reserve that option in case of an “extreme crisis.”

The director also contested criticism that privatizing the turnpike would allow it to fall into disrepair.

The lease will include detailed performance standards that will ensure the private operator maintains the road at a very high level, he said, adding market forces would also play a role. “It’s going to be in the best interests of the concessionaire to keep it in good shape.”

Restrictions on the lease deal will reduce the amount of money that Ohio can expect from the deal, he allowed.

“However, we don’t want to just get the most money we can get, we want to make sure we can get the best deal,” he said. “If it’s not a good deal for the state of Ohio, we won’t sign the lease. We can walk away.”

Nonetheless, Wray said the turnpike lease and other potential public-private partnerships would provide money for transportation infrastructure in the face of steeply declining federal funding and gas tax revenue. Funds obtained from a turnpike deal would not carry the same constraints as gas tax revenue and federal funding, he added.

“There will be a very, very robust debate about what’s going to happen to that money and how it should be spent. I don’t know how it will come out,” he said. “But I can tell you that I’m going to be on the side of a local government program to replace the federal dollars.”

Wray also said he hoped to create a program that would effectively replace federal funds with state money for local infrastructure projects.

One barrier to such a plan is the current restrictions on how gas tax revenue can be used, he said. “I know there’s some anxiety about that with the contractors and others, but I’m willing to pursue change to the law.”

He said ODOT could create the fund with different criteria for local entities’ funding needs. “We could set up different kinds of design standards, a different set of regulations, and make it easier for the locals to use it.”

The state constitution requires gas tax revenue to be spent on the road system and state law spells out how and where it can be spent, he said.

“It would not be impossible for us to change the law a little bit to allow a percentage to go to local governments. Now that’s going to be a bit controversial with contractors – there’s always somebody against everything,” he said. "But I think it’s something we could work out that would be to the advantage of the locals, but not hurt us.”

However, another significant hurdle to such a program is the current lack of federal funding, he said. “At this point, while it’s a good discussion, its just that – a discussion because we don’t have the money to do it.”

Gongwer News Service


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