Governors Talk Toll Road Privatization in Indiana and New Jersey

Published March 1, 2005

The governors of Indiana and New Jersey have raised the possibility of leasing roads in their states to private entities.

In Indiana, talk is in the air concerning the 157-mile Indiana Toll Road, which links Illinois and Ohio. In New Jersey, the 148-mile New Jersey Turnpike, linking the George Washington Bridge in New York with the Delaware Memorial Bridge, may be leased to private concerns.

Indiana Toll Road Attractive

In a January 4 conference call with reporters, Indiana Gov. Mitch Daniels (R) (who at the time was governor-elect) stated the Indiana Toll Road may indeed “one day land on the auction block as part of a mass liquidation of state assets.”

When asked if Chicago’s recent agreement to a 99-year, $1.8 billion lease of the Chicago Skyway–a nearly eight-mile stretch of toll road built more than 40 years ago–made the idea more attractive for Indiana, Daniels said the Skyway lease brought home “a very handy current illustration of what creative solutions are possible,” according to the Chicago Sun-Times.

A consortium of overseas investors paid a $1.8 billion lump sum to Chicago in January for the Skyway lease.

The Sun-Times quoted Daniels as saying he will “command top department heads to inventory state assets for possible sale.”

“The Indiana Toll Road is a prime candidate for privatization due to its linkages with other tollways and the density of truck traffic,” noted Joe Schwieterman, a transportation professor at DePaul University. “Several firms are interested in this aging state asset. If the state plays its cards right, motorists and taxpayers could benefit from an infusion of private capital.”

NJ Turnpike Deal Possible

On January 23, New Jersey Star Ledger reporters Josh Margolin and Jeff Whelan wrote, “acting Gov. Richard Codey is studying the possibility of leasing one or more toll roads, including the New Jersey Turnpike.”

Codey is currently leading the state after scandal chased former governor James E. McGreevey from office in November 2004. Codey, a Democrat, also holds the post of State Senate president. He is looking for funds to fill a $4 billion gap in the state’s budget.

Codey told the Star Ledger, “It makes sense that when you take over a business that’s struggling you look at ways to leverage your assets. There’s a lot of assets the state has. I’ll look at anything.”

Private Analysts Predict Windfalls

“Just when you think there’s no other way to address a $5 billion to $10 billion gap–boom, they come up with something else,” said Arturo Perez, a budget analyst with the National Conference of State Legislatures, to the Star Ledger.

Neil Gray, a government affairs official with the International Bridge, Tunnel, and Turnpike Association, told the Star Ledger, “conversion of toll roads into private operations is getting more popular as budget woes linger.”

New Jersey Pol Interested

New Jersey Assembly Transportation Committee Chairman John Wisniewski (D-Parlin) told the Star Ledger, “as the trust fund that finances new transportation projects in New Jersey nears bankruptcy next year, the privatization of toll roads may be worth study.

“It is something we should examine to understand whether it is something that can work for New Jersey,” he said. “If we’re talking about making transportation better and providing more resources for transportation, and at the same time making government smaller, then let’s talk about it.”

Analysts Like Possibilities

Robert Poole, founder of the Reason Foundation and a nationally known expert on privatization and transportation policy, said, “I’ve been very excited to see the recent expansions in the scope of U.S. highway privatization. I’ve done several interviews with reporters on this subject, including one on the potential for privatizing the New Jersey Turnpike.”

Geoffrey Segal, director of government reform studies at Reason, said toll road privatization plans are worthy of study and implementation.

“This represents a win-win for taxpayers. States and cities can get money-losing initiatives off their books, while improving the quality of the infrastructure and the services provided to users,” Segal said.

“In addition,” Segal continued, “the divestiture infuses much needed one-time cash resources to cover budget shortfalls or enable other capital investments to move forward.”

John W. Skorburg ([email protected]) is a visiting lecturer in economics at the University of Illinois-Chicago and associate editor of Budget & Tax News.