The Selling Of A Failing State Toll Road

"As a private citizen, I had always been intrigued to stop at a concrete booth and fish out a dime and a nickel to pay the 15-cent toll at Gary. As governor, I asked, 'What does it cost us to collect a toll?' This being government, no one knew, but after a few days of calculation, the answer came: 'About 34 cents, we think.' I said, only half in jest, that we should just go to the honor system and we'd come out way ahead.

Why would a losing enterprise with an underpriced product drift on in that way? Because it was run by politicians, who are rarely businesslike and deathly afraid to annoy anyone. So the state lost money on the road, postponed repairs and expansions and failed to install the electronic technology that makes toll ways elsewhere faster, more convenient and more efficient.

Just as many business units are more valuable if separated from their conglomerate parent, an asset like a highway can be worth vastly more under different management. When we offered our road for long-term lease, we received a high bid of $3.8 billion, cash, from Macquarie-Cintra, an Australian-Spanish consortium. The highest estimate of the road's net present value in state hands was less than half that amount, and even that estimate assumed regular toll increases of the kind past governors steadfastly refused to impose."