Home | CONTACT US

If nothing else, the debate surrounding Gov. Mitch Daniels' Major Moves transportation initiative has forced Hoosiers to consider the inevitable 21st-century question: What is it going to take to compete in a global economy?

Proxies of this fundamental question can be found among the pros and the cons. From the advocates, we hear about the necessity of completing road projects that have languished for decades and enthusiasm about the jobs that will be created to do the work.

This viewpoint holds that building new highways and expanding smaller ones, in addition to new bridges and dozens if not hundreds of other infrastructure improvements, will enable Indiana to leverage its Crossroads of America advantage. Logistics and supply chain delivery are leading drivers in our state's competitiveness. Major Moves' proponents say that failing to prepare our infrastructure to take advantage of this strength will be done at our peril.

Opponents of the governor's plan do not quibble with the premise that better transportation systems are essential to our state's future growth and prosperity. Rather, their arguments tend to fall in one of two categories. The first camp asks, "Why so fast?" The other asks, "Isn't there a better path?"

The governor's recent appearance on a C-SPAN call-in show highlighted the question about pace. A caller from South Bend asked Daniels why he was pushing this plan so fast and hard when most people don't understand it yet.

The answer? The governor is a card-carrying member of the innovator class. As described by the book "Diffusion of Innovation," people are generally risk adverse. We tend to pursue change after others have proven it is safe. In other words, there are many more adopters than innovators. Innovators acutely perceive needs and possess the vision and intellectual capacity to pursue creative solutions to meet those needs. They also possess the courage to make unpopular decisions.

The negative consequence of this innovation push is that would-be adopters may not understand the problem as clearly. Said another way, they don't feel the same urgency or optimism. Hence, natural conflict exists between change agents and the status quo.

The second category of dissent bears a different claim. Those who disagree with the governor's means and methods fully understand his need for speed, but they think he is in the wrong car. They favor a more cautious, incremental approach. Views typifying this position question the risk-reward of the toll lease, including whether foreign investors should be involved.

Unfortunately, many in this camp seem to oppose for the sake of opposition. This was especially the case for the first few months after the Major Moves unveiling. Critics lined up to poke holes in the plan without offering any solutions to the pressing problems.

Indiana has a projected $2.8 billion shortfall in its transportation budget over the next 10 years. Doing nothing about this problem is not an option. So is there a more attractive alternative to leasing the Toll Road?

One alternative is bonding. States and municipalities have long relied on bonds to finance major public works projects. However, in a side-by-side comparison, the numbers just don't make the case for bonds to be the solution in this case.

First, a bond is a loan, whereas the lease is a payment. Second, the amount we could loan via bonds is perhaps one-third to one-half the amount we would get in the lease payment. Given these factors, the lease deal looks quite favorable in light of the potential to earn $800 million in interest compared to the bond liability of paying a similar amount in debt service over the life of the transaction.

The only meaningful risk associated with the Toll Road lease is a potential loss of future profit. To assess that risk, it is worth noting that the Toll Road has experienced negative cash flow the past few years (delaying hundreds of millions of dollars in needed construction), and political pressures will likely stymie future toll increases necessary to realize a profit. This suggests that the greater risk is borne by the bidder, not Hoosiers. That risk is further minimized by the sheer magnitude of the lease -- $3.85 billion in upfront cash and an additional $4 billion in future road repairs -- and by the fact that many of the Toll Road's travelers aren't Hoosiers.

That the bidder is an international corporate partnership would seem attractive to state leaders. Isn't it beneficial for Indiana to attract capital from outside our borders?

The fact that some people raise yellow caution flags on the question of a foreign leaseholder brings us back to the earlier dilemma of status quo fear. Whether or not we are ready for the globalized economy, it is already there. Nearly a thousand foreign companies do business in Indiana, resulting in more than 100,000 Hoosier jobs.

Daniels has called the legislature's impending decision on Major Moves "the jobs vote of a generation." This is a clever political line, and it indeed bears some truth; however, the stakes might even be higher. It may very well be a referendum about whether Indiana is poised to compete in the next economy.