We found out this weekend that Kasich’s people chose to award a lucrative, $1.5 million consulting contract to KPMG (voted one of 2011’s “World’s Best Outsourcing Advisors”) in order “to study whether leasing the Ohio Turnpike to a private operator might be a good idea.” They have until July to come up with their recommendations.

I wish they’d asked me instead. I would have been happy to provide them some very good recommendations for half the cost. And I can provide my answer right now: Nope. Leasing the turnpike is not good idea.

That’ll be $750K please. Thank you very much.

Here’s why (feel free to take notes, KPMG)…

Kasich claims he wants to lease the turnpike to obtain some one-time money that he can spend on other transportation projects. He thinks he can get 3 Billion bucks, but that figure seems very unrealistic. Indiana got $3.8 billion for its turnpike back in 2006, a year before the recession started. The lease was for 75 years. And even after doubling tolls, the company running the Indiana turnpike still can’t make enough money to pay off the loans it took out to buy the road. The company is likely to default in the next five years, and it’s continuing to raise tolls hoping it can catch up.

Given the current state of the economy, and the recent troubles with the Indiana turnpike, it seems unlikely that anyone in their right mind is going to offer us the $3 billion Kasich expects to get for the Turnpike lease. And if he does find someone to lease it, the only way for it to be profitable is to a. double or triple the tolls on the turnpike b. fire all of the unionized Turnpike Commission employees and replace them with lower paid employees and c. lower the standard of maintenance on the road.

Here’s a thought: If all Kasich wants is cash – and a steady stream of money, not just a one-time sum – why not just keep operating the turnpike as-is, and double the tolls ourselves? The Ohio Turnpike takes in $232 million a year in tolls. Doubling the tolls would bring in an extra $3 Billion in 13 years. Triple the tolls and you could cut the time in half. And unlike the lease idea, this plan would continue funding transportation projects for the state for decades to come. We’d be bringing in $3 Billion every 13 years – not just once in 75 years. By simply raising the tolls ourselves, just like a private operator would, we could provide a steady stream of revenue for new transportation projects, maintain the current high standards for maintenance and avoid massive layoffs of Turnpike employees.

I’m not saying I support this idea, but if Kasich’s only goal is to find a source of funding for transportation projects, then this long-term solution seems like a hell of a lot better than his lousy lease idea.

If Kasich’s only goal was funding transportation projects in the state, then he wouldn’t even be talking about leasing the turnpike. There really is no upside for the state in his lease plan, but the downsides are plenty:

  • The highway’s condition will not improve if we lease it – and it may get worse
  • There will be no major cost savings to the state by turning the Turnpike over to a private company
  • The only way to make the lease profitable for a private company is to greatly increase the tolls
  • Increased tolls means drivers – especially commercial truckers – will move to other roads, increasing wear-and-tear on the highways the state still maintains, increasing traffic congestion and increasing the number of accidents that need to be handled by emergency crews
  • There is no way we will get anywhere near the $2.5 to $3 billion in one-time-money Kasich claims he expects
  • In order to save money the new owners will fire all of the current turnpike workers and hire back workers at a much lower salary with little or no benefits
  • Other long-term lease projects, like the Chicago Skyway, end up being run by a group of foreign investors who are only interested in profits and have no interest in Ohio or its citizens.

The truth is: transportation funds are not the real purpose behind the turnpike lease idea.

Ultimately, Kasich has two goals here, and both of them are purely ideological and unrelated to budgets or funding or even transportation. The first is the privatization of public assets. The second is union busting.

Leasing the turnpike would accomplish both goals – allowing a private company to potentially profit from state-owned assets while allowing the same company to fire all of the currently-unionized employees of the Turnpike Commission, replacing them with lower-paid positions with ‘shabby’ benefits.

As a couple of pretty bright PhD’s (David Ellis and Ned Hill) said back in 2006 after analyzing Ken Blackwell and Jerome Corsi’s original turnpike lease proposal: “The only reason to lease the asset, given our analysis, is an ideological drive to shrink the size of government.”

And the same thing is true today with Kasich’s proposal. Leasing the turnpike is a bad move for the state, and Ohioans know it. The lease idea is just about as unpopular as Kasich is.

It remains to be seen what the highly-paid KPMG consultants will suggest and how the Kasich administration will respond to their recommendations. But it’s amazingly clear that Kasich’s goals are not in line with those of most Ohioans. And his true goals have nothing to do with funding transportation projects. Kasich’s policy decision are being driven by his extreme, anti-worker ideology. And his complete lack of common sense and his inability to compromise have only made things worse.

Leasing the Ohio Turnpike to a private, likely foreign operator is really bad news for Ohio’s workers and a horrible financial decision for Ohio and Ohioans. The decision to lease the turnpike might actually result in big bonuses for some foreign executives, it will also cause higher tolls for Ohioans, fewer and lower paying jobs for Ohioans and crappier roads for Ohioans.

Unfortunately, for Kasich, executive bonuses are always going to win out over good roads and jobs for Ohioans.

  • Anonymous

    I drove back from Chicago yesterday. As I made the haul between Toledo and Cleveland on route 2, the highway was a sea of semis, undoubtedly doing exactly what I was doing – avoiding the turnpike because of the high tolls.

  • Anonymous

    Same thing happened to me a couple of years ago driving from Toledo to Akron on Route 2.

  • Anonymous

    Speaking of King Kasich and his wacky-wingnut ideology.
    Wonder if he, Shannon Jones and Batchelderwill hold a presser expressing their outrage at OSU picking up Urban Meyer’s PERS contribution, or the longevity pay OSU agreed to in his contract…

  • Anonymous

    For those of you who live in Northeast Ohio, especially Cleveland, I would be very opposed to a turnpike sale/lease.  Many of you use the highway to commute to/from work and your lives would become a nightmare if this goes through. 

  • Hungry Coyote

    If the governor wants to raise money to repair Ohio’s roads all he needs to do is increase the gas tax by a penny a gallon. The trouble with that plan is he would not be able to squeeze the consulting company or the companies that bid on the lease for a campaign contributions.

    Also, just to clarify your position, as the Turnpike is set up now, profits from the tolls collected cannot be disbursed to other highway projects. So it doesn’t matter if you double tolls or not, that money must remain with the turnpike commission. At least that’s how I understand it. Of course, if the Governor can get those ugly pink driver’s licensed changed to a more manly color I sure he could get the by laws of the Turnpke Commission changed.

  • That’s true – and the gas tax is a good idea – but it’s going to take an act of the legislature to change the law to allow the money to be spent more than a mile from the turnpike anyway. If they are going to change it for privatization, why not change it to allow other roads to be fixed with the extra tolls?

    I’m not saying I support this idea – just saying there are a lot of other options out there that are vastly superior to effectively giving away 55 years of toll revenue and firing all of the OTC employees.

  • Fotogirlcb2002

    So… has anything these people have done saved one red cent? Not when you pay companies
    $1.5 million to study IF you can or need to privatize…
    lets see in just a matter of a few days hes spent $1.5 million on this contract, spend how much on a new license plate fiasco,  a company with 6 figure salaries left Cincinnati , I would say he has cost Ohio quite enough money …… bring on the impeachment legislation ! 

  • Dmoore2222

    All very good thinking and comments. But let’s face it. John Kasich is toast. He has NO political capital or credibility, and has demonstrated that he lacks the intellectual and political capacity to solve problems, not to mention those of his own making. His party is in hiding after the Issue 2 beat down and wouldn’t dare support anything this senseless and controversial.  They’re all huddled in a corner hoping a lot will be forgotten by next November. But I wouldn’t count on it.

  • Annekarima

    Didn’t I read somewhere that he has been in TX for a day or two?  If he gets a view of those toll roads and gets an idea Ohio may see a toll on every road and drivers will have problems finding where to drive to not have to pay one.

  • Anonymous

    If the state increases the toll it’s a tax increase.

    Grover Norquist would bust a vain.

  • Anonymous

    That is the way it appears, but I’ve been guilty of gloating before only to have them rise up again.

    Not only evangelize, but vigilance.

  • Anonymous

    That is the way it appears, but I’ve been guilty of gloating before only to have them rise up again.

    Not only evangelize, but vigilance.

  • Bbhwana

    In hiding because of the issue 2 beat down? I thought that was the Cleveland firefighters – you know the ones that save lives in Cleveland while living in California at the same time!!!! The only thing funnier or more worthless than Evangelest Ted are you retards on this site!

  • Ugh.  Even Plunderbund has the facts wrong.  KPMG was not awarded a $1.5 million contract to study the benefits of leasing the Ohio Turnpike.  The terms of the contract are being negotiated at this time.  $1.5 million of federal tax money is going to be paid to KPMG.  The state of Ohio will be paying additional money on top of that figure.

    Remember, we agreed to pay Moelis and Co. a revenue cut that works out to be around $15 million for their assistance in negotiating a crappy deal with the casinos. 

    No way KPMG works for only the federal cash.  Expect that figure to shoot up a bit.  We will pay $7.5 – $8.5 million for them to tell us, “Don’t lease it, take a cut of the tolls for the state each year (which the Republicans blocked Strickland from doing) or have ODOT take over the pike.”  Those are the actual answers as to what will be happening.  The alleged billions from a lease will never materialize.

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