Leadership Views

As published in the February 1, 2007 Toledo Business Journal

 James Seney, Road to Work Ohio

James Seney
Road to Work Ohio, chairman

Turnpike lease would spur
Ohio development

Toledo Business Journal recently interviewed James Seney, chairman of Road to Work Ohio; former executive director of the Ohio Rail Development Commission; and former mayor of Sylvania, Ohio. He shared the following thoughts.

Toledo Business Journal: Can you explain the mission of Road to Work Ohio, the organization that you lead?

James Seney: The basic mission is to get the State officials to look at the concept of leasing the Ohio Turnpike, getting equity out of it, and using that equity for what I call transportation-based economic development infrastructure.

TBJ: Can you share the short-term and long-term benefits that would result from the leasing of the Ohio Turnpike?

JS: The immediate benefit would be the obvious assembling of a large amount of capital that could be used to develop the infrastructure on which the private sector builds jobs. The Ohio Turnpike has been informally valued at $6 to $8 billion. I’ve been using the $5 billion value for discussion purposes. That’s an enormous amount of money. If you consider all the Ohio Department of Transportation (ODOD)- funded projects north or Route 30, you get about $3.2 billion. That includes the Cleveland opportunity corridor, finishing Fort-to-Port, and building two intermodal yards in northwest Ohio. It’s an enormous amount of money.

You also could set aside a chunk of money, approximately half a billion dollars, for purchasing large economic development projects like Toyota plants to use as an incentive. You could set up trust funds to create specific kinds of economic development. Obviously, the legislature would have the final say as to how the money would be allocated.

Ohio’s high-speed passenger rail project, the Ohio hub, is projected to employ 16,000 people during construction and had about a $20 billion impact on Ohio’s economy. For less than a half billion dollars, that could get underway.

There’s an enormous amount of things you can do with that kind of money. Even though it’s an upfront payment, it would take 20 to 25 years to spend that money on the infrastructure and development. It’s not something you could spend in one to two years. So it’s a tremendous opportunity for the state of Ohio.

For a community like Toledo – which has this tremendous geographic location but doesn’t have the capital to exploit it – to approach economic development successfully, it needs money. It needs to be able to invest money. The more money borrowed, the more debt – it drags you down. By leasing the turnpike, there is no debt. Under our proposal, Toledo would get about $78 million. The turnpike counties and cities north of Route 30 would get money, and the $3.75 billion balance would be spread over projects statewide.

The intermodal yard in Michigan – that should be in Ohio. With the $78 million, Toledo could take a few million dollars, compete for that intermodal yard, and put it where it belongs.

You have to be able to create the ability to develop those assets. And we’re going to have to convince the Canadian National (CN) Railroad to utilize the lange yard as the intermodal site. Obviously to do that, you need money.

TBJ: Please explain what Indiana has done with its turnpike and what impact this will have on Ohio and Michigan.

JS: Indiana has raised the ante on economic development with its turnpike. It got $3.8 billion and took 25% of that and spread it among the turnpike counties at an average payment of about $40 million per county. That means that every Indiana county with which Ohio is competing has a $40 million bankroll to invest in economic development projects. Right now Defiance County is competing for a distribution center with an Indiana county that is offering 300 acres of free land. Defiance can’t compete with that.

So, the question is, what is Ohio’s response going to be? How are we going to stay in the game? You either ante up or you fold. We need to counter what Indiana is doing.

Pennsylvania and New Jersey are looking at leasing their turnpikes. So Ohio isn’t the only one doing this. But, imagine if Pennsylvania and Indiana have this war chest for economic development and we’re in between those two. How will our border counties and river ports compete with those states?

Indiana and Pennsylvania are the most dangerous states to Ohio in this regard. Pennsylvania has 48 parties interested in entering into a lease. Wall Street has put up to a $30 billion value on the Pennsylvania turnpike, which is higher than Ohio. More traffic develops more revenue.

The Chicago Skyway got over a billion dollars for a short road that is similar to I-475.

TBJ: What are some of the key issues raised by opponents of this approach?

JS: As a result of my travels across the state, I have learned there are a number of key issues. First is the issue of foreign investment or having a foreign lessee. There is no speculation that [the turnpike would be leased to a foreign lessee], as there are certainly American investors that are interested.

The quality of maintenance, safety improvements, and deployment of technology are also issues. [Some people] ask why we don’t have EZ Pass [on the turnpike]. And people are concerned that there may be a deterioration of the maintenance on the highway. That can be handled contractually to maintain the quality level of the road.

Additionally, a certain amount of the proceeds should be used for the transition of affected employees. They shouldn’t be caught in the middle.

The biggest concern is how the money would be spent. I found the general distrust for Columbus to be much broader than I anticipated. The absolute lack of faith in the ability of Columbus to do this right is the number one issue.

Most people remembered the tobacco settlement where the money sort of vaporized and went to the general fund instead of going to people with lung disease or to supplementing Medicaid. That was very pervasive in the discussion.

Truck diversion is also a big issue. If toll rates are arbitrarily raised, how many counties will be affected by trucks going off the turnpike to Routes 20, 6, and 2? That can be controlled contractually too.

Most people [who are concerned about rising toll costs] don’t understand that tolls could be raised now too. The turnpike is a private, commercial road, and most people don’t relate to that. That takes us back to the emotional argument about foreign money. People think it’s our road, but it isn’t. It’s a private road, and we are charged tolls to drive on it. A state commission that can do what it wants without interference owns it.

One attempt to make it a free road was unsuccessful. So that leaves us with the option of doing nothing or getting the equity out of the road and essentially letting it continue as is. We’re advocating the latter to economically jumpstart the state of Ohio.

This is a tremendous opportunity. You can squander the opportunity by doing it wrong, or you can really take advantage of the opportunity by doing it right. So how do you negotiate this lease to create an owner / landlord relationship? The stipulations that you put into it will determine the ultimate value.

You could even spell out incentives to attract trucks. That would eliminate the truck diversion issue. Tolls could also be tied to major maintenance and construction, similarly to how the tolls are used today.

It could still be a public process even though it’s a private company. Which would not be much different than it is now.

TBJ: Are there any other issues that you would like to discuss?

JS: I’m a very aggressive proponent of economic development infrastructure.

Indiana is earning about $500,000 a day of interest. Ohio would be earning about $1 million a day on interest. For a lot of these projects, you can set up trust funds so that interest money can take care of the projects without dissipating the principal. It’s an enormous opportunity, and we should at least take a look at it.

When you say five, six, or seven billion dollars, I don’t think it’s [really registering] in people’s heads. Consider ethanol and the ability to finance and incentivize construction of alternate fuel plants in the state of Ohio. You can take a half billion dollars to do that. In $5 billion there are 10 half billions. It’s an awful lot of money. You can have an educational fund with $500 million and you can have an ethanol or alternate fuels financing program with another $500 million.

The value alone of increasing the freight system capacity is enormous. The economic impact is in the multiple millions, if not billions, over time. We have $5 or 6 billion to do additional projects too.

You could take a billion dollars and set it aside for 20 to 25 years so future legislatures can have a crack at the money. That’s millions of dollars in interest each year. Compound that over 25 years.

If this is done right, it is a tremendous opportunity. If it goes wrong, all you have is a leased road and squandered money. So it is something that should be done with a bright light on it and in the open. It takes the cooperation of the legislature and administration. And everybody should know what’s going on, unlike the tobacco settlement.

Any legislation that approves a turnpike lease should contain exactly how the money is going to be spent and the disposition of those five concerns: maintaining the quality of the road; transition of employees; how the money is spent; truck diversion; and toll rate increases. It should not be negotiated later, it should all be in the deal.