Thursday, April 5th, 2012

Hoosiers to Pay 80% of Local Tolls for Ohio River Bridges Project

Update 4/6: The organization behind the polls has put up a web site with raw data and more findings from their scientific survey.

Update 4/6: Later reports with more specific data from this poll show that the actual ratio is 74% of the local traffic is Hoosiers, not 80% – still a stunning ratio. The pollster estimates a slightly lower ratio of toll revenue to Indiana – 70%, though it’s not clear how they did this math. And finally it looks like Southern Indiana officials are waking up to the fact that they are going to get pimped on this deal. Remember folks, you heard it here first.

Indiana and Kentucky transportation officials have tried mightily to avoid talking about the breakdown of cross-river traffic in Louisville, a crucial piece of data to have in determining who will actually pay for $2.6 billion in two new bridges if it is done largely through tolling. But a new scientific, independent poll released today exposes that Hoosiers will pay four times as many tolls as Kentuckians because that’s how many more trips back and forth across the river they make compared to Kentuckians. In Clark and Floyd Counties, residents actually make five times as many trips as Kentuckians. This means that of all the local bridge tolls being collected, Hoosiers are going to pay 80% of them. This explodes the idea that Indiana and Kentucky are splitting the cost 50/50, which is already ridiculous as it stands.

Only about half of area residents supports tolling to pay for the bridges, which is surprising considering that most of the people are in Kentucky and they are paying next to nothing comparatively. Hoosiers seem wise to this game however, as only 36% of residents of Clark and Floyd Counties approve of tolls.

To recap: The two states were able to reduce the cost of the overall project by $1.5 billion, but Indiana gave away $1.7 billion to Kentucky, meaning its share of the costs actually went up by $200 million. Indiana also agreed to built a 1.4 mile approach road and tunnel in Kentucky for $795 million – a staggering $100,000 per foot – that is now the most expensive highway project on Indiana’s books.

I always knew tolling would be bad for Indiana, but now we know how bad. I wouldn’t mind if Hoosiers were paying for the East End bridge that makes sense (minus the gold plated, fraudulent tunnel on the Kentucky side of the river), but to pay for nearly the entire project is ludicrous.

I’m on record as being a Mitch Daniels fan, but he’s clearly screwed up badly on this one. He seems desperate to put another feather in the cap of his legacy by getting yet another highway project that had been stalled for years actually built on his watch. But the cost to Hoosiers here is just too high. He’s throwing his own southern Indiana constituents under the bus with this one by cramming a horrible business deal and tolls they don’t want down their throats. It’s time to change course big time before a terrible mistake gets made.

Indiana’s Bridge Deal Boondoggle
Part 1: A Financial Fiasco
Part 2: Hoosiers to Pay Even More With Tolling
Part 3: Indiana’s Mini-Big Dig
Part 4: A Better Way

Topics: Public Policy, Transportation
Cities: Louisville

25 Responses to “Hoosiers to Pay 80% of Local Tolls for Ohio River Bridges Project”

  1. Matthew Hall says:

    You should look at this a different way. This is a recognition of the value of the Louisville MSA for the economy of southern indiana. Southern Indianans are paying for something that supports their economy; access to Louisville. This is an interesting example of the real value of cities and metros that gets obscured through the complex federal transfers of wealth from cities to suburbs and exurbs through mortgage interest deductions and road spending. Detroit and other cities have failed because the suburban parts of their metros found a way to get out from under paying for their share of the costs of sustaining their metro’s infrastructure and other public services and therby undermining their entire metros. This is a sign that this won’t happen in Louisville because the people there are willing to invest in their entire region’s future.

  2. Jeff Gillenwater says:

    While there’s truth in what Matthew says in general terms of true costs, much of it isn’t applicable in this particular case without viable transportation options in place prior to interstate bridge construction. As currently conceived, the Ohio River Bridges Project systemically devalues the urban core and shared riverfront in service to increased sprawl.

    With no other viable mobility options other than driving and only one local bridge, tolls will penalize those who choose to live in the denser urban core just as much (if not more so) than anyone else while the other suburban and exurban subsidies continue. People inside the beltway would be much better served with local bridges, increased transit, and an enhanced riverfront instead of the downtown portion of ORBP, all of which would collectively help encourage the type of density that saves us all money and other resources.

  3. EngineerScotty says:

    A similar debate comes up in Portland/Vancouver with the CRC; though Vancouverites seem to be smarter than southern Indiana residents are; the potential disparate impact that tolling will have on Vancouver commuters and shoppers(many of whom come to Oregon for jobs and to engage in sales-tax-free shopping), whereas Oregonians have far fewer reasons to visit the ‘Couv.

    OTOH, much more of the project benefit would be enjoyed by the Washington side. They’d get a light rail line to Portland as well (which many residents in Vancouver, a community which is far more conservative than Portland), and a whole bunch of upgrades to I-5 on their side of the river.

    Compared to this fustercluck, the Ohio River Bridges project seems to be smooth sailing.

  4. Nick says:

    The only way this makes sense is if Indiana lands the Audi/VW auto assembly plant or a similarly large project in the 6,000 acre River Ridge Commerce Center which will benefit from the new bridge.

    We may know April 18th if IN/KY/TN or Mexico gets a huge economic boost.

  5. Stunoland says:

    If local leadership were honest about the inevitable tolling of the Sherman-Minton bridge, the support for this project would be minimal.

    (ii)Additions to the LSIORB toll revenue system of facilities including potentially the Sherman Minton Bridge.

    The possibility of tolling the Sherman-Minton bridge was dismissed by both governors and Louisville’s mayor until it was slipped in the memorandum of understanding at the last minute. Our local and state leadership is either hopelessly incompetent or intentionally creating a crisis in approximately 2020. The toll revenues will not be adequate to cover the payment on the bonds. Local leadership will blame the shortfall on cost over-runs. Indianapolis and the historically anti-urban KY state lawmakers will not cover the shortfall. The strained finances of the ORBP will become unworkable well before the Sherman-Minton bridge is to be replaced in 2031.

    When voting to allocate $300 million in state road funds the KY state legislature was unaware that the ORBP financial plan relies on replacing the Sherman-Minton in 2031 with a toll bridge. The ORBP relies on the existing Kennedy bridge to handle all south bound I-65 traffic for decades, despite reaching its expected lifespan in 2011. Does that make any sense? The CDSmith consultants in charge of the financial plan and state transportation officials are fully aware that the 2/3rds tolling scenario is fatally flawed.

    Wilbur-Smith’s, now CDSmith’s, track record alone is enough to know that the ORBP tolling studies suffer from an extreme level of optimism bias. The last 12 Wilbur-Smith tolling projections have been off by a collective 127%. That’s right, the estimated revenue was more than double what the states collected in tolls. The preliminary ORBP toll studies displayed a complete lack of integrity with such absurd assumptions as the average local resident valuing his/her commute time at an absurd $21.60. In 2009 the same company used a Value Of Time assumption for the Washington D.C. metro area, median income $72,800, that was 66% lower. One study actually assumed the total number of bridge crossings would be the same under a $3 tolling scenario as in a toll-free scenario. This fails the common sense test.

    This is what Terry Maynard, an economist working for the Reston Citizens Association, had to say about the accuracy of CDSmith’s toll studies:
    “The forecasts of revenue seem tailored to what the operators want to be forecasted as a revenue stream rather than its real world potential – which is going to be the same regardless of who is looking for revenue and why.
    In other words they look more like a dressing up of the client’s wishful thinking in the garb of professional analysis than an objective assessment of revenue potential.
    Selling bonds on this basis looks problematic.”

    The tolling of the Sherman-Minton is crucial to this projects financial feasibility. The survey indicated that 26% of local residents would cross the river less often. 32% would avoid toll bridges in favor of non-tolled spans. A much higher percentage of through traffic will choose the non-tolled bridge. cross state travelers, especially tractor-trailers, generally prefer to bypass the city. Both I-65 and I-64 travellers will avoid tolled bridges and choose the western bypass.

    Think about it you can drive a few miles around the city, avoiding traffic and a $2 toll + the requisite $1-5 administrative fee. The Bridges “Authority” has failed to mention the 1-time administrative fee that is necessary with picture capture tolling. The collection rate on out of state plates is abysmal. Dallas has a 30% collection rate and Denver has a 60% rate. In those cities the vast majority of traffic on those tolled roads is in state. 34% of traffic on I-64 is non-local. I’m not sure about I-65 but it is probably in that ballpark.

    A muddy license plate, a bike rack, or a ladder off the hitch is all a local needs to avoid tolls. In Wilbur-Smith’s, now CDSmith’s Time-of-Day Travel Demand Model there was an 80% confirmation rate on license plate numbers. Most states do not have transfer agreements so there will be significant collection problems on those non-local plates that are read correctly. The more problems collecting tolls the higher the 1-time administrative fee and thus more diversion to the non-tolled interstate bridge.

    The supplemental environmental impact study for this project predicts traffic volume increases of 1.3% from 2007-2030. It’s 2012 and traffic volumes have decreased 10%.

    KY State legislators are fully aware that this plan is financially irresponsible. The sponsor of the bill appropriating $300 million stated the following: “we are not approving this financial plan…We are not required to approve the financial plan.”

    It is blatantly obvious to anyone paying attention that the existing Sherman-Minton bridge will be tolled. They could not sell the bonds without this stipulation, (ii)Additions to the LSIORB toll revenue system of facilities including potentially the Sherman-Minton Bridge. Those 14 words allow for over $700 million in bonds to be sold. Those words are the difference between a financially solvent project and bankruptcy.

  6. Stlplanr says:

    And how much traffic is neither Louisville nor Southern Indiana, but actually pass-through traffic?

    I’ve only crossed the Ohio River here for cross-country trips. And I usually take the primary interstates that go through downtowns, instead of the “by-pass” loops.

    I have found that the loops have less predictable congestion, due to their edge cities and sprawl. And even if traffic slows a bit going through a city, I’d rather see some of the city from the freeway than its anyplace ‘burbs.

    Despite my cross-country scenic drives, I still believe Louisville should absolutely 86 64. Besides, I’m more intriqued to get off the highways and explore a city, when less can be seen from its freeways.

  7. Bow says:

    I am not at all surprised Daniels would push through this deal which throws southern Indiana under the bus. I agree with Aaron this is Daniels attempt to add a legacy feather to his hat.

    Southern Indiana is the perfect place for Daniels can operate under the radar. Here’s why: Because he can operate under the radar. It’s a well know fact that the botton third of Indiana is in large part is a non-player in Indiana politics. Weak representation in the State house coupled with a deep cultral gap with the northern 2/3 of the state.

    I have often opined that the Southern Indiana would be better off if State Government would behave in a hostile manner. As, it is due to the strong culture gap, it is almost completely ignored.

    Northern Indiana (“the region”) has no problem pushing the right buttons in Indianapolis to push their agendas. Something the bottom 33 counties have never mastered.

    It would be rather rare to see much at all written or discussed in Indy or government to have any write up about soutern Indiana and Lousiville.

    Like it or not the top 2/3 of the state look down on the southern 1/3.

  8. @Bow, perhaps the northern 2/3 of the state does look down on Southern Indiana. I don’t know about that. But I can tell you that when it comes to key priorities like roads, Southern Indiana, far from being ignored by the state, has been the recipient of unparalleled largess. I-69 has been the state’s top priority – across both political parties – for a long time. Similarly the Ohio River Bridges project is massive. By itself it is bigger than the entire Major Moves program for metro Indianapolis. And this is on top of a very expensive widening of I-65 just a few years back. I’ve been analyzing INDOT expenditures and planned expenditures for 20 years now, and on a per capita basis there is no doubt Southern Indiana far and away is the winner in state highway spending.

  9. Bow says:

    Just to clear up: I am aware of all the attention paid to the I-69 project to Evansville. That project is viewed as an important economic stimulus for Evansville, Indianapolis and the favorite son Bloomington.

    But again, the bridge project (wrongly), is almost completely absent from any kind of public debate. Studies out of Butler, Ball State and IU have supported this view of the cultural gap that hurts that area of the state. I only illustrate that to highlight to example the lack of political risk of such a risk to Daniels.

  10. valkraider says:

    Isn’t this kind of the whole point?

    If Hoosiers don’t want to pay the tolls, don’t drive over the bridge. Get a job in Indiana, or move to Kentucky.

    Why should folks in Kentucky pay for people to live in suburban Indiana?

  11. John Morris says:

    Glad someone else said it.

  12. Hoosiers don’t even want most of this project. They were held hostage by Louisville’s mayor some years ago to include a new downtown bridge and a reconstruction of Spaghetti Junction in downtown Louisville. I think Hoosiers would be fine with the arrangement that let’s them pay more if they only had to pay for the parts of the project they actually want.

  13. Jeff Gillenwater says:

    Aaron nailed it. Louisville’s mayor is held hostage by a relatively small cadre of donors/players and the region, in turn, is held hostage by him. A change in mayor hasn’t changed that. A majority of regional citizens, and especially Hoosiers, have never supported the project as currently designed. I actually think Hoosiers might go for paying for all or at least most of the East End Bridge (sans tunnel) if that’s all project supporters wanted to do.

    And to reiterate, it’s not accurate to describe all of Southern Indiana as being a suburb of Louisville. Parts are closer to the core of the metro both geographically and as a functions of age and design than places in Louisville proper. They are arguably the areas that will see the most negative impact from the downtown portion of the project.

    The real kicker: Despite jobs and economic vitality being used as a primary justification for ORBP for years, a recently completed Supplemental Draft Environmental Impact Statement for the project actually predicts fewer, long-term planning area jobs as a result of building all of it than if we built no part of it.

  14. Jeff Gillenwater says:

    And BOW is right, too. Daniels told Hoosiers in this part of the state that Indiana’s money for the bridges project was “in the bank” as a result of Major Moves. It’s only much more recently that he’s done a 180 in support of toll-based financing, saying that Hoosiers elsewhere shouldn’t have to pay for infrastructure they’ll probably never use. When it comes to the I-69 project, though, he apparently thinks (wink, wink) that Hoosiers near Louisville drive to Indy via Evansville, as he has no problem with us helping to pay for that stretch. Obviously, his assessment of political risk in the ORBP area is very low.

  15. Bow says:

    Just a side note: it strikes me a bit (no a lot), I break out in uncontrolable laughing when KY claims owner ship of the river. After all they say KY “owns” and own the river..guess what build it and paid and let KY pay for it all.

  16. John Morris says:

    The bottom line seems to be that Indiana wanted this bridge to exist a lot more than Kentucky did.

    The other lesson here is that even so called responsible political leaders are usually politicians first. Google Public Choice Theory.

  17. John Morris says:

    “It’s only much more recently that he’s done a 180 in support of toll-based financing, saying that Hoosiers elsewhere shouldn’t have to pay for infrastructure they’ll probably never use.”

    Honestly, this smacks of fraud. I assume the bonds for this project could not be sold without a strong suggestion that any shortfalls in toll revenues will be made up by Indiana taxpayers.

    How about Mitch puts up or shuts up. If the tolls don’t cover the costs–he should have to pay a substantial penalty out of his own pocket.

  18. John Morris says:

    I think $200,000 would be a nice number. It won’t make things up to the taxpayer, but it might limit how eager the next guy will be to throw other people’s money around

  19. Jeff Gillenwater says:

    Actually, John, the problem is that a significant portion of Louisville’s political power (read as big money) is concentrated near the route of the proposed East End Bridge. A large majority on work-a-day citizens on both sides of the river have supported construction there. Welcome to plantation-style governance. This is the South. We’re still run the old way. The western swing of the loop was built through the poor black (and some white) neighborhoods in the 60s and they’ve seen almost no substantial transportation investment since.

    When Daniels did his funding switcheroo, our local Indiana GOP wonderboy, District 72 State Rep Ed Clere, quietly voted to give Daniels the authority to implement tolls with no further legislative approval needed, a fact that wasn’t reported in this part of the state until nearly a year later. When asked about his stance on tolls during the most recent election, he lied. It was only after re-election that the tolling truth came out. Our newly minted state Senator is such a dupe he voted to give the governor the same authority a short while later and then claimed he would never do such a thing a couple of days later. I actually think he thought he was telling the truth at the time, not fully realizing what he had voted for.

    For his part, Daniels and his PAC have still been crowing about a “fully funded” 10 year transportation plan as a major accomplishment. The reality is that most of the money was never actually there and a large number of projects have been downsized, delayed, or cancelled. Agreed upon payouts for local governments to take over stretches of state highways have been reduced and the reductions themselves have been denied in the press. We have a situation now in which the state is communicating that they just won’t do anymore maintenance on some stretches of state road if a municipality won’t accept a payout at lower terms than initially discussed. I cringe when I see Aaron praise him. The “creative financing” for road construction he highlighted recently wouldn’t have been necessary if Daniels had been telling the truth a short while ago. It’s just another project to which Major Moves funds were promised but never materialized.

    All that said and public choice theory to boot, I’m not sure I’ve ever seen the level of duplicity that’s been the hallmark of this bridges deal since day one, at least not on this scale locally. If we get lucky, there will be at least one or two more more federal lawsuits. They’re well deserved.

  20. John Morris says:

    Bottom line is that Kentucky either didn’t want to or couldn’t pay for the stuff on it’s side.

    Don’t get me wrong, Daniels is what passes for a responsible political leader. Most of the others are worse.

    Some kind of punishment and reward has to be built into the system. A lot of what is going on from an accounting standpoint seems like people should end up in jail.

  21. John Morris says:

    “A large majority on work-a-day citizens on both sides of the river have supported construction there.”

    Supporting something and actually paying for it are two different things.

    On a deep level, Kentucky as a state didn’t see the value in this. From a distance, my guess is they are right. The project seems to mostly benefit a fairly small group of people in Indiana. They should pay for it.

  22. John Morris says:

    I really should drop out of this discussion cause I just don’t know enough about it.

    My strong guess is that toll revenues could never cover the cost of the current scheme. Am I right that a few miles down the river, there are free alternatives? So many lies in one place. Obviously these bridges will have to be tolled but nobody will say it. So many lies.

  23. Jeff Gillenwater says:

    There’s Louisville, and then there’s Kentucky. Kentucky state legislators in Frankfort are already talking about what toll revenue could be used for in their districts once construction costs are covered decades from now. The Louisville rep was one of two votes in the house against the finance plan that included tolls. Revealed during that legislative process in just the past couple weeks, though, was that the long-term finance plan assumes that the preexisting western bridge will also be tolled in the future. The gist is that they’re telling the public it won’t be but dangling the potential additional revenue out there for financiers.

    Keep in mind, too, that the river is pretty much a straight line through the heart of the urban core over which there will only be one untolled, local bridge (the oldest and smallest, most in need of maintenance and/or replacement). Little to no viable cross-river transit, no other options, with about $3 billion in direct, upfront costs before interest. The tolled “system” will act as a veritable monopoly dissecting the metro area. It’s roughly thirty miles to the nearest bridge otherwise.

  24. John Morris says:

    “Veritable monopoly”? People could just choose to stay on their side of the river.

    I think the projections are for a pretty large amount of cross border commuting and a big amount of Indiana development.

    Add already high fuel prices to a public that has never paid anything to cross in an area that is not too wealthy and it’s likely to bite pretty hard. I am right in saying there has never been a toll on any of these bridges before?

    Other attractions that drive traffic like the Indiana casino are likely to lose pull if and when Kentucky allows gaming.

    I doubt investors would swallow this without thinking the state would back this up if tolls fell short.

  25. John Morris says:

    If half the stuff @Stunoland says about how inaccurate the toll projections are is true, there is material misrepresentation going on.

    Can one really issue bonds based on these kind of lies and get away with it?

    Only real, powerful legal consequences will deter politicians who benefit by lying.

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