Toll Talk
For whom the road toll$
Bush administration, states roll out the red carpet for private bidders
By David Tanner staff writer Fuel taxes and tolls are two factors affecting your bottom line. So when private investors take over control of the toll roads on your route, your cost of doing business is likely to go only one way, and that's up. Billions of dollars are changing hands across North America as private businesses promise big cash up front in exchange for control and the right to make profit from toll roads. The Illinois government, for example, leased the Chicago Skyway to a private company in late 2004 for $1.8 billion. The Skyway connected more than 17.4 million motorists in 2003 from the Dan Ryan Expressway to the Indiana Toll Road, and that was during a reconstruction phase. Neighboring Indiana followed suit in early 2006, offering a private company a lease for 157 miles of the Indiana Toll Road for $3.85 billion. Two thirds of the cash will arrive up front in the deal the Indiana House approved in early February. In Texas, a mega-infrastructure project known as the Trans-Texas Corridor will cost at least $186 billion over the next 50 years to create separate lanes for passenger vehicles and large trucks, launch new commuter and freight railway lines and form a conduit for multiple utilities. All of these projects and others like them share some common ground behind the billions. If you don't know the names Cintra or Macquarie yet, sit back and get acquainted with two companies that could already be profiting from your tolls. Billionaire bidders have clout Cintra is the short name for the Spanish-based infrastructure giant, Cintra Concesiones de Infraestructures de Transport S.A. It is a privately held subsidiary of Grupo Ferrovial, which is traded on the Madrid Stock Exchange. Ferrovial had a market capitalization of more than $8 billion U.S. in 2005. Partnering with other giant financiers and builders like the Macquarie Infrastructure Group from Australia, the resulting combinations hold some mighty clout in the quest for profitable ventures like toll roads. When Cintra and/or Macquarie bid on a road project, the result is almost always in their favor. Consider the case of the Indiana Toll Road. Gov. Mitch Daniels had sought a $2 billion bid only to receive a $3.85 billion blowout offer from a Cintra-Macquarie partnership called Statewide Mobility Partners. No other bid for the 75-year deal was even close, but the other three bids were also from foreign companies. In the Chicago Skyway deal, the second-highest bid for the $1.85 billion Chicago Skyway lease was $1.2 billion. Not even the well-connected, multi-billion-dollar Carlyle Group could compete with Cintra-Macquarie's Skyway Concession Co. for the 99-year lease. "Everything that they buy, they buy with the intention of profitability," a Skyway Concession Co. spokeswoman told Land Line. "They are aggressive and forward thinking, and that's one of the reasons they got the rights to the Indiana Toll Road." The road to privatize toll ways is at least partially paved by SAFETEA-LU, the federal highway legislation President Bush signed into law in August 2005. It allows for privatization that could include airports and other entities going to the highest bidder. States benefit from up-front cash, as Indiana, Illinois and Texas have made clear. Not only do the cash infusions help with infrastructure needs, money goes to other areas where states lack funding, said the spokeswoman for the firm operating the Chicago Skyway. "Here in Chicago, a lot of money Cintra-Macquarie paid in order to get the lease for the Skyway went into human services," she said, including homeless shelters and utility assistance. "It gave them resources for things that people care about that they would otherwise be unable to do." In Indiana, more than $2 billion is scheduled to arrive up front to eliminate a projected 20-year infrastructure deficit, according to The Indianapolis Star. Gov. Daniels said the money would be invested as quickly as possible. The financiers want a seamless system of electronic tolling, based on a public demand for good roads and to keep traffic moving. "It's going to be great for the traveling public, because it will be a seamless electronic toll collection from the East Coast all the way to the Iowa border," the company spokeswoman said. Even with planned toll increases drawing complaints. "Indiana has held steady on their tolls for 10 or 20 years. That's one of the reasons they don't have the resources to do things," the Skyway spokeswoman said. Control of the eight-mile long Chicago Skyway is 55 percent Cintra and 45 percent Macquarie. The Skyway Concession Company has increased tolls there from 50 cents to $2.50 since the lease began in January 2005. That netted a 15-percent increase in revenue since the state government last collected the tolls. The Indiana Toll Road deal is a 50-50-control split between Cintra and Macquarie. Tolls for cars on the Indiana road will see increases of 70 percent, and heavy-truck tolls are anticipated to more than double from $14.85 to $32 by 2009. Increases after 2009 would keep up with inflation, according to the lease. Elsewhere in North America, Cintra controls 53.2 percent of the 67-mile-long 407 Express Toll Route in Ontario, with Macquarie controlling 30 percent and other interests making up the rest. The owner group raised tolls 9 percent at the beginning of 2006, calculated by distance traveled and type of vehicle. Toronto benefits from its commuters getting high-occupancy vehicle lanes and seamless electronic tolling. The private company takes care of the maintenance and does repairs. But not everyone is accepting the privatization concept for toll roads, including owner-operators. "Truckers have more at stake than anyone else," OOIDA Executive Vice President Todd Spencer said in a Call to Action for Indiana truckers. "If the heavily traveled Indiana road can be auctioned off so can every other route in the nation." OOIDA is encouraging truckers to contact their legislators and reject the notion of private toll roads. In addition to highways, federal legislation could give states the authority to unload control of other transportation infrastructure, including river ports and airports, Spencer said. Who are these big companies? As long as there are contracts to win, there will be bidders like the publicly traded Macquarie and its subsidiaries. The parent company and financial titan Macquarie Bank has been on a tear in recent years, acquiring numerous entities. According to BusinessWeek in October 2005, Macquarie subsidiaries held $67 billion in assets and employ 6,800 people in 23 countries. Macquarie Infrastructure Group holds 100 percent of the interest in the $635-million South Bay Expressway, a toll road in San Diego. Macquarie also has a $533-million lease for the Dulles Greenway in Virginia near Washington, DC. Add to that power lines in Michigan, a major gas utility in Hawaii, wind farms in France and several airports, retirement homes and shopping centers. Macquarie's portfolio for its investors also includes a $290-million share of the BBC's broadcast division in England, and a $460 million media company in Taiwan. Thomson Financial stated that Macquarie ranks 28th worldwide in completing mergers. It's hard to comprehend that there are 27 companies doing better than Macquarie's $67 billion clout in the global marketplace. Think of the added clout when you add an experienced road baron like Cintra into the mix. Cintra private operatives lease 21 toll roads in Spain, Portugal, Ireland, Italy, Chile, Canada and the U.S., and control 200,000 parking spaces throughout Europe. Cintra moved into North American markets in 1999, pooling a $2.2 billion bid with Macquarie and other investors for the lion's share of the 407 ETR in Canada. More on the horizon It seems like everywhere drivers turn, there's another privatization of a toll road happening or some kind of colossal bidding going on. The Texas government has not yet broken ground on the Trans-Texas Corridor, but the infrastructure partnership of Cintra and a San Antonio contractor - Zachry Construction - has promised to drop $6 billion on a 600-mile phase connecting San Antonio and Dallas. Cintra-Zachry has inked a deal to pay the Texas Department of Transportation another $1.2 billion to jumpstart other infrastructure. Some eyes are now on Illinois, which is revamping its toll stations, bridges and lanes on several key toll roads. It might be too early to tell what type of interest the plan will draw from public and private interests. But as long as there are movers and shakers like Cintra and Macquarie around, there are buyers eager to front cash for the opportunity to collect your tolls for decades to come.