INDIANAPOLIS | Less than 10 minutes into last month's gubernatorial debate in Merrillville, Gov. Mitch Daniels found himself in a familiar place: defending his 75-year, $3.8 billion private lease of the Indiana Toll Road.
The 2006 deal, which the Republican governor has called a "slam dunk" and the "best thing we could've done for the state's future," paved the way for Major Moves, a 10-year, $11.8 billion statewide highway construction program.
But the lease also opened a major avenue of attack for Democrats, including Jill Long Thompson, the former northeast Indiana congresswoman seeking to unseat the incumbent governor Nov. 4. Long Thompson repeatedly has vowed to end Daniels' "privatization madness," and she put the Toll Road back in the news last week with an assault on the state's stewardship of the lease proceeds.
"The polling shows that the economy is the No. 1 issue, and privatization is second," Long Thompson said last week, citing internal polling by her campaign. "It's important for the public to know that my approach to leading is very different. If something is broken, you should fix it instead of selling it, especially when it belongs to the public."
The 157-mile Indiana Toll Road wasn't broken -- or broke -- when Daniels put it on the auction block in late 2005. The tolls, which hadn't been increased since 1985, generated about $90 million a year, but repair costs had begun to outpace revenues.
The Daniels administration sought a big cash infusion to help bankroll a public works plan that would put Hoosiers to work building dozens of long-promised road projects across the state. The governor says he didn't bank on the ensuing rancor that permeated legislative races two years ago and now hangs over his own re-election bid.
"It's such an obviously great thing for the whole state that I don't think anyone at the outset imagined the noise we would eventually hear," Daniels said. "It was such an astonishing amount of money, far beyond what anybody had predicted or projected, that at the moment and for a while after I think everyone thought this was going to be a consensus measure."
Cintra-Macquarie, a Spanish-Australian consortium that paid $1.8 billion for a 99-year lease of the Chicago Skyway a year earlier, put forth the $3.8 billion bid, which exceeded three competing offers by more than $1 billion. Cintra-Macquarie also committed to making more than $4 billion in road repairs and improvements over the life of the 75-year deal.
But Democrats, who were in the minority in both chambers of the General Assembly, argued the bid was too low and suggested bonding against the toll hikes included in the lease deal, a plan Daniels' budget director dismissed as "a joke." The administration later commissioned an analysis by accounting firm Crowe Chizek that put the value of the Toll Road at $1.9 billion.
Legislators set aside $278 million in lease proceeds to freeze passenger car tolls at the 1985 rates until 2016 for motorists using electronic toll transponders. Cash fares went up about 80 percent this April, and the private operator can begin annual toll hikes of at least 2 percent in 2010.
Long Thompson has said that as governor, she would create a committee to review every privatization deal undertaken by the Daniels administration, including a 10-year, $1.1 billion contract that shifted the processing of applications for food stamps and other welfare programs to a consortium led by IBM. But she has all but ruled out canceling the 73 years remaining on the Toll Road lease.
The Democrat's latest volley was to chastise Daniels for state Treasurer Richard Mourdock's decision to invest $277 million in lease proceeds in high-yield bonds and $616 million in mortgage-backed securities offered by lending giants Fannie Mae and Freddie Mac. Mourdock staunchly defended the safety of the $2.6 billion overall investment portfolio, which has earned more than $300 million in interest since late 2006.
"The irony of this must not be lost on you," Daniels said last week. "If people like my opponent had their way, there wouldn't be any (lease) money to invest."