California pension investment ticks off state engineers’ union

The Sacramento Bee ^ | May 10, 2016 | Jon Ortiz

[Tolerance Sucks Rocks]

Add one more investment to the list of CalPERS’ controversial investments: a privately run state highway.

The retirement fund recently purchased 10 percent of Indiana Toll Road Concession Co. The firm runs a 157-mile stretch of highway that runs across northern Indiana from Illinois to Ohio. California’s state engineers’ union says it’s a horrible investment that sinks government employees’ money into a project that, ironically, is hostile to government employees.

The toll-road company is the first of what fund managers anticipate will be more investments in infrastructure and transportation projects as the $291 billion system broadens its reach into those sectors.

Indiana Gov. Mitch Daniels thought a public-private highway partnership would be a win-win for the state and the private sector when he proposed it in 2005. A year later, Indiana Toll Road Concession Co. won the contract with a bid that included $3.8 billion up front. The money was earmarked for highway construction and maintenance projects statewide. Meanwhile, the 75-year deal gave the firm responsibility to manage the state-owned road in exchange for keeping collected tolls.

Then the recession hit. Traffic volumes fell. The company’s debt reportedly grew from $3.4 billion to $6 billion eight years later. It went bankrupt in 2014. (Indiana got to keep the up-front money.)

IFM Investors bought the company for an undisclosed sum last year. Then last week CalPERS announced its stake, the fund’s first U.S. transportation purchase in a new program emphasizing infrastructure investments. CalPERS didn’t say how much it paid.

[minnesota_bound]

Better solution is no toll roads.