Major Moves jobs back loaded to the future
Major Moves, the landmark legislation Gov. Mitch Daniels described as “the jobs bill of a generation,” is a work in progress, with most of the jobs beyond the horizon. In an exclusive interview with Howey Politics Indiana, Daniels said the further Major Moves goes, the better it looks.
“Some things, you look back and say they didn’t work out as well as you hoped or they seemed at the beginning,” said Daniels. “Not this one. It looks better in part because you can see that we’re able to turn the money into real assets for when your kids are looking for a job.”
With Indiana’s jobless rate hovering around 10 percent for the past year, the program may become a political battleground. This past week, the 8th CD campaign of Republican Larry Bucshon assailed State Rep. Trent Van Haaften for voting against Major Moves as Gov. Daniels went to Evansville to say the I-69 link between Evansville and Bloomington will be completed years ahead of schedule.
While House Speaker B. Patrick Bauer has dropped rhetoric about “selling” the toll road to “foreigners,” he still believes it “violated a trust” made by Republican Gov. Harold Handley to eventually make the road toll-free and questions whether Major Moves projects is employing enough Hoosier engineers and construction workers.
Daniels sold Major Moves as a jobs bill in September 2005. A formula used by the United States Department of Transportation estimates $1 billion in infrastructure supports 47,000 jobs.
“The number thrown around the Statehouse was 2.5 times 47,000,” said Dennis Faulkenberg, president and CEO of Appian. That equation equals 117,500 projected jobs, of which one-third would be direct, on-site construction jobs. “The latest estimate is 28,500 jobs,” Faulkenberg said.
If these numbers are correct, Major Moves will create about one-fifth of the construction jobs its supporters projected it would create.
“That was never the central point,” Daniels said. “It was never about construction jobs. It’s about having a first class infrastructure over which the private sector over the long haul will invest and create the big number of jobs.”
“I am confident that there will be future job development,” said Cam Carter, the Indiana Chamber’s vice president for economic development and small business affairs. “It sets the table for the future. Every study shows these investments spur jobs and growth.”
Six months from introduction to passage
Daniels introduced Major Moves in September 2005. The key projects were the construction of U.S. 31 from Plymouth to South Bend and an extension of Interstate 69 through Southwest Indiana.
It also called for a 75-year, $3.85 billion lease of the Indiana Toll Road to Cintra Macquarie, at the time described by Bloomberg News as the largest amount ever paid to a U.S. state or municipality for an asset.
“We hit the absolute sweet spot in terms of the value we got,” Daniels said. “It was really important to move fast at the time.”
“It’s amazing to me when I go to the meeting of the National Association of State Treasurers how many of my counterparts will say to me, ‘How the heck did Indiana do that?’” State Treasurer Richard Mourdock said. “It was recognized as the deal of the year. It was just a great model.”
After passing the Indiana Senate by a 29-20 vote on March 2, 2006, Major Moves ran into strident opposition in the Indiana House. There was talk of a special session.
House Speaker B. Patrick Bauer, D-South Bend, who was the minority leader at the time, said the bill was “conceived in sin” and cast the legislation as selling Hoosier assets to “foreigners.” Legislative attempts were made to mandate that American flags would fly at Indiana Toll Road booths. That attempt failed.
“Don’t do it,” Bauer told the assembly as the bill came up for a vote. “We are about to make the toll road a cash cow.” Bauer cited constituent concerns over the lease of the toll road to a foreign company as a source of opposition. “They know it’s a bad deal,” said Bauer. “They know we’re outsourcing our money and that we’re tying up something for 75 years. That company’s going to make a lot of money.”
Bill Oesterle, Daniels’ 2004 campaign manager, told HPI at the time, “The polling they are looking at asks questions like, ‘Do you favor selling the toll road to foreigners?’ There’s been no messaging into their districts. The southern Indiana legislators will get hung out to dry when we come back and say, ‘The governor delivered I-69, or the Ohio River bridges, and your guy voted against it.’ They are grossly misreading the situation.”
Daniels positioned it as “asset management.” He was faced with a number of big projects like I-69, the Hoosier Heartland Corridor and the U.S. 31 freeway that the governor said would never be built without leveraging assets like the toll road. He also noted that there wasn’t the political will for legislators and governors to even raise tolls, which were the same in 2006 as they were in 1985.
House Minority Leader Brian Bosma, R-Indianapolis, who was speaker in 2006, said at the time of passage the bill is about jobs. In December 2005, Indiana lost 2,800 jobs, which led the nation.
“It’s not about roads,” Bosma said on the House floor. “It’s about families. It’s utilizing the asset. It’s about leadership.”
State Rep. Terri Austin, D-Anderson, told HPI that Major Moves was rushed through the assembly. “It was debated in 30 days,” said Austin, even though it was introduced six months earlier. “There was no real time to develop a robust examination on policy issues. We knew very little about it. Not all public private partnerships are a silver bullet.”
Democrats in the House complained that the Daniels’ administration was “moving too fast” as time ticked into the governor’s first mid-term. All was underscored by the Iraq War and as the unpopular Bush presidency forged what would ultimately be a Democratic year that resulted in a takeover of the House.
Despite challenger campaigns aimed at toll road county Republican incumbents such as Reps. Don Lehe, Tim Neese, Jackie Walorski and Marlin Stutzman, none were defeated that November.
Mourdock said the speed of the toll road bill’s movement was a lesson learned. “Timing and leadership to say that we’re going to pull the trigger and pull it now has been a real lesson from this,” he said.
Major Moves passed the Indiana House by a 51-48 vote in mid-March 2006.
“The governor and Republicans don’t listen,” Bauer said after the vote. “In every possible way, the people of Indiana spoke loudly and clearly on Major Moves: They didn’t like it and they didn’t want it.”
The assembly created a $500 million trust, known as the Next Generation fund. Mourdock said the interest and earnings are scraped off every five years and given to INDOT. The state starts off with a new $500 million at the start of a five-year period.
“Putting money aside was a good idea, but the assumption on the rate of return was unrealistic,” said Austin, who in 2009 sponsored a bill that would has siphoned Major Moves money into other job creating legislation as the Great Recession gripped Indiana. The state received more than $4 billion in federal stimulus funds that became the Obama administration’s first big policy push. “We have an obligation to continually monitor it and get a better return for taxpayers,” Austin said.
Daniels says most of the trust fund money is being invested and used if the gas tax keeps underperforming. Next Generation is not constitutionally protected, which means the General Assembly can tap into its funds at any time. That has not happened, but it doesn’t stop Mourdock and Carter from worrying.
“If we’re not good stewards of the funds, shame on us,” Carter said. “We will be defending Major Moves until there’s not a dime left.”
“To this point, to the credit of both Republican and Democrat leadership, neither party has said, ‘We want to get in there and rob that fund,’” Mourdock said. “I hope it stays that way.”
Rep. Neese, R-Elkhart, said constituents have come to understand Major Moves since its approval. “I’ve found it to be more advantageous now than ever before,” Neese said. “It is virtually non-political because it is a private entity. Once the legislation was approved, they largely think it’s in the right direction.”
After approval, $40 million was given to Elkhart, LaGrange, LaPorte, Porter, Steuben and St. Joseph counties and $15 million was given to Lake and Porter counties while the Northwest Regional Development Authority was created.
Current state and future growth
An INDOT update in November 2009 shows 34 roadways have been completed, with 16 more under construction and 650 bridges around the state are expected to be rehabilitated or replaced.
“Transportation infrastructure has a multiplier effect,” Carter said. “It’s very well established. I think future economic growth will be profound. Projects that were on a slow walk were accelerated.”
According to INDOT spokesman Will Wingfield, $1.2 billion has been spent on the major projects, such as Hoosier Heartland, Fort-to-Port (from Fort Wayne to Toledo, Ohio), U.S. 31 and I-69. According to the state government website, between 2001-2005, Indiana averaged nearly $750 million in highway investment, with $250 million spent on new construction and the remaining $500 million on preservation projects.
The state is now averaging $1.5 billion in construction dollars annually. There is speculation that construction of the major projects never would have happened without Major Moves. “On the track we were on, never would there have been a Hoosier Heartland, never would there have been a U.S. 31, never would there have been an I-69, never would there have been a U.S.24 - these are the big ones,” Daniels said. “And I mean never.”
Construction of the northern half of I-69 between Bloomington and Indianapolis has not begun, but Daniels is confident that the project underway will be finished on time and on budget.
“We’ve been working really hard for it,” said Daniels. “It is true that because so much of the Major Moves money is being spent elsewhere in the state, it’s not enough to pay for all of I-69. So what’s going to happen with I-69? We’re going to build a whole lot of it.”
Daniels said he expects to finish a substantial amount of I-69 under his watch, but also says a future governor will have to decide how fast to finish what is left.
“Everything is moving in the right direction,” said Daniels. “We’ve been working with highway people. They found some really good ways to move faster and save money, and moving faster saves money by itself. Things like speeding up the land acquisition, or going to some of these folks early and giving them some certainty, things we didn’t used to do.”
“Look, I-69, for a long time, will have a moderate traffic level,” Daniels added, noting that early pavement depths will not be as thick as they will when the entire project is closer to completion. “In 20-25 years, it’ll have a much higher traffic level.”
Daniels says the future economic impact of Major Moves is large because other states are crumbling and spending less. The state has made $639 million off the $3.8 billion lease, according to the state treasurer’s office.
“There are dimensions of competition between the states in which I’ve often pointed out that if we don’t move and move fast, we will be passed by or left behind,” said Daniels. “In infrastructure, there’s a little luck for us. Other states are falling behind. I do believe that we have a chance to open up a very large advantage over other states in part because of what we’re doing, in part because they’re struggling the way they are.”
Wingfield agrees, also citing the struggles of neighboring states.
“Major Moves is innovative in coming up with public-private partnerships to build infrastructure,” Wingfield told HPI. “Once these roads are built, they will reap rewards for years to come.”
Just this past year, both Indiana and Illinois legislatures passed the Illiana Expressway, another public-private partnership. “That’s the beauty of the private sector,” Faulkenberg said of public-private partnerships. “They come in and do things that government never gets done. They are able to do that kind of thing faster than government.”
According to Wingfield, the Indiana Toll Road generated approximately $254 million in profit during its initial 50 years before the lease. Since the lease in 2006, it has generated $650 million.
“A lot of the deferred maintenance of the road has been brought up to speed,” Elkhart County Council President John Letherman said of the toll road. “The electronic road is completed and has made it much more functional and much more efficient, leading to travel up here. People are impressed with the speed they can get on and off.”
“I’m thankful we have Major Moves,” added Letherman, a Republican who was a key member of the U.S. 31 Coalition advocacy group. “If we didn’t, most of us would be in dire straits to support our local projects, much less the major projects.”
Businesses, such as Honda in Greensburg, have come to Indiana as a result of Major Moves. Nestle at Anderson and Medco at Whitestown are other examples. The Indiana Economic Development Corp. (IEDC) told HPI that phase two of the Nestle expansion created 134 jobs and the Medco expansion will create 1,300 jobs.
“It’s been helpful to do projects to allow us to compete for distribution and manufacturing centers,” IEDC Director Mitch Roob said. “When companies decide to expand, we’ll have roads that other states don’t have.”
Mourdock and Daniels cite quick and low-cost transportation as key reasons for businesses coming to Indiana. “Time is money,” said Daniels. “It’s just that simple. Other states didn’t have enough money. We were able to say yes. It’s the commerce that can happen when you have great infrastructure like that, so the faster you get it there, the sooner businesses say, ‘Okay, I pick Indiana.’”
“As Realtors always say, ‘location, location, location,’” Mourdock said. “We have that advantage in this state. We’re called the Crossroads of America for that reason.”
Coupled with the major projects are more than 200 local projects, such as the re-routing of US 31 through Kokomo.
“A lot of people are pleased,” Kokomo City Engineer Carey Stranahan said. “We are still looking for ways we can maximize the benefits of this project. For Kokomo, it has been a benefit.”
Mourdock said local projects are helping local businesses get their products in and out of the door more efficiently.
“If a plant wants to come in and locate, they need to widen the road so that trucks can turn in and out,” said Mourdock. “It gets used for projects like that, as well as for the brief paving of existing state roads, like I-69.”
Mourdock also says Major Moves has emerged as a model future public-private partnerships can look toward.
“Indiana is at the cutting edge,” said Mourdock. “The economic results that we’ve achieved demonstrate why it’s such a good idea. It requires private management, which is done more efficiently than the government can do it.”
On Tuesday, Speaker Bauer was asked to give an assessment of Major Moves four years in. “We get hundreds of millions of dollars from the federal government every year and we got $800-$900 million in stimulus money. Major Moves would not have precluded I-69,” he said.
Bauer added, “Major Moves first broke a promise by a Republican governor (Handley) in 1958 that it would be a free road. Every governor since knew of that. The only toll on that road was supposed to be for maintenance, egress or ingress, upkeep and things like that. That violated a basic trust. Kentucky built a road similar – same thing, a toll road – and it became a free road. That, too, raises the ire on those who aren’t Irish. Because of that, he (Daniels) chose what he says was an ‘under-performing asset,’ was an asset that was not supposed to perform in a profitable manner. So I think there were other forms and other ways of doing that.
“On the whole road program, our concern is that it is Indiana workers who work on these roads,” Bauer continued. “For the last couple of years we’ve been trying to keep out an Ohio company. They seem to be one of the favorites for the governor. In many cases there are hundreds of Hoosiers – if not thousands – who don’t get jobs. I think we have to do some reconstruction of that whole highway operation to try to give preference to Indiana workers.”
Challenges
Letherman said a challenge Major Moves faces is a drop in the gas tax revenue. Due to the economic recession, fuel consumption has fallen, resulting in a lower gas tax income. Letherman said the state should find a different way over time to support highway systems.
“Whether that is additional polling or mileage taxes as opposed to gasoline taxes, I don’t really know what all of the opportunities are because it’s not my business,” Letherman said. “But the one we’ve got right now is probably seriously flawed.”
Mourdock said the state is operating with “extreme caution” as it continues to invest.
“Anybody who’s not fearful of a double-dip recession isn’t watching the signs,” said Mourdock. “All of the investing we’re doing is very much with the safety of those funds involved.”
According to Wingfield, the state received $658 million via the American Recovery and Reinvestment Act of 2009 for highways. Of that, $440 million was spent on highway investment.
Wingfield said stimulus money went to economically stressed counties. He also said half of the funds received had to be assigned to roads within 90 days. The other half had to be assigned within a year.
Indiana met both requirements. Wingfield said Indiana has more recovery projects than any state.
“A lot of the projects (that received stimulus money) were shovel-ready,” Wingfield said.
Still, there is concern that certain projects will be cut as a result of the severity of the recession.
“Certain projects lend themselves better than others,” Wingfield said. “It’s not specifically due to funding. As conditions on the ground evolve, we need to be able to respond. Our forecast is only as good as the facts we have today.”
Epilogue
Near Peru, the Hoosier Heartland Corridor (U.S. 24) intersects with U.S. 31. A few miles south lies the Grissom Aeroplex and the state’s longest runway that the Pentagon turned over to civilian control in 2009.
Beyond Honda at Greensburg, this could be the classic example of improved roads matching up with existing infrastructure to create the jobs for the next generation of Hoosiers. The area took big hits when the Norfolk & Western and the Chesapeake & Ohio railroads left, along with the U.S. Air Force while Chrysler and Delphi Corp. teetered in bankruptcy at Kokomo. “It takes a special kind of business that wants to use the incredible airfield that’s there,” Daniels said. “There’s no question, in my mind, that the two corridors all become more attractive now.”
The area could use the boost of Major Moves. Department of Workforce Development jobless statistics in April reveal the need. Cass County has 10.1 percent unemployment; Miami County stands at 11.6 percent and Howard County has an alarming 12.2 percent, the seventh-highest in the state.
Major Moves’ impact on the two corridors could change that.
“It’s not a complete answer in and of itself, but if you go talk to the people at Delphi in Logansport or some of these communities that have lost a lot of jobs, they know and they believe that being so much more convenient to the rest of the economy is going be a big plus for them,” Daniels said.
