(HT: Plunderbund Facebook reader Rhonda Stoner)
Any time Governor Kasich talks about privatizing the Turnpike, he talks about how easy it’ll be for the State of Ohio to get a couple of billion dollars for it:
"Wouldn’t it be fantastic if I could take another country in Ohio called the turnpike, if I could privatize it and generate as much as $2.5 billion, potentially?—Gov. John Kasich [Source: Cleveland Plain Dealer, (02/10/11)]
After all, Kasich and his pro-privatization allies argue, Indiana was able to get $3.8 billion for leasing its Turnpike. Even with the credit markets as they are, we can surely get nearly $3 billion for a smaller stretch of road, amIright?
So, how’s the Indiana Turnpike idea working out?
It turns out that the company that is leasing the Turnpike for 75-years in 2006, is already in danger of defaulting on some of its financial for the deal five-years into it. (That’s 7% of the lease term, they’re soooo close.)
And why are they in danger of default?
[Indiana Finance Authority Chairman Christopher] Ruhl stated the Indiana Finance Authority has been aware that interest expense has exceeded gross Toll Road revenue for years. He said that was "not a surprise" given the amount the private consortium borrowed to pay for the lease.
In layman terms, their monthly income consistently is less than their mortgage payments. But don’t worry they’ve got a great plan to get out of this:
Tolls for cars driving the length of the road are now $8.80 as compared to $4.65 when the lease was signed. Tolls for large semitrailer trucks are now $35.20, as compared to $18 when the lease was signed. Tolls are scheduled for another increase July 1.
So, after nearly doubling the tolls, the company still can’t break make a profit and is in reported danger of default by 2015, so their solution is raising the tolls more.
How’s this a good idea for Ohioans again, Governor?