Macquarie Infrastructure Group, partner in the long-term Indiana Toll Road “public-private partnership,” released some financial results yesterday. The document illustrates how much riskier the market perceives such deals to be. The details once again point up the fact, then, that such long-term infrastructure leases aren’t a good way for states and cities to get out of their current budget woes.

Eight months ago, Macquarie figured that its “discount rate” on the Indiana road was 10.01 percent.

That is, that’s how much in annual return Macquarie wanted for its shareholders as compensation for taking on the risk of holding the road asset, plus the normal return that shareholders would expect on any investment.

That estimate gave shareholders a value for the road — after debt and all the rest — of 344 million Australian dollars (AUD).

Today, though, Macquarie figures that the “discount rate” us up nearly two and a half full percentage points, to 12.50 percent. That is, Macquarie figures that the road is a more risky asset — meaning, roughly, that profits and the value of the road are less certain.

That helped bring the value of the asset to shareholders down to AUD$189 million, a full 45 percent.*

This valuation could still be too optimistic.

But let’s say that the figure is accurate — although frankly, it’s hard to say that any asset value is accurate when it can swing so much based on randomly plugged-in numbers (which is the reason that we’re in this asset-based global credit crisis in the first place).

These figures show two things.

One, the market thinks that it’s far, far riskier today to do a deal like the Indiana Toll Road than it was two years ago.

In fact, it would be impossible to get the real interest rate that creditors would demand today, because there aren’t any such creditors. That’s why Britain has had to bail out its Olympics private-public partnerships and, now, some toll roads of its own.

Two, such wildly fluctuating valuations show that even in the good times — whatever those may be — state officials can’t really be sure that they’re getting a good deal on long-term asset sales.

Obviously, Macquarie wasn’t good at this, either — and vastly overpaid for Indiana, which means that Indiana got a good deal here.

But the opposite could happen in the future, meaning not only that states would have handed over generations’ worth of toll revenues for a one-shot cash infusion, but that they would be shafted in the process, as well.

Moreover, it probably will happen, as desperate states look for something to sell, and as desperate banks look for a profit on something.

*Currency fluctations are in play here, too, but obviously, the discount rates matter a lot.

You may also like

Essential Plan surplus hits $3B

As Governor Cuomo pleads for financial help from Washington, one of his state's programs is sitting on $3 billion in unspent federal aid: the Essential Plan. Read More

More fiscal turmoil for Medicaid

In a sign of pandemic-related strain on state finances, the Cuomo administration is postponing a series of multi-billion-dollar Medicaid payments over the next three months. Read More

Another Medicaid payment delay

State Medicaid spending dropped to nearly zero in March as the Cuomo administration again delayed payments to balance the state's books. Comptroller Tom DiNapoli's cash report for March, posted on Wednesday, showed just $9.2 million in Medicaid disbursements. The state's share of Medicaid spending averages almost $2 billion per month. The comptroller's numbers reflect so-called Department of Health Medicaid, which covers the bulk of the program but excludes most spending on recipients with mental disabilities. Read More

Winning last year’s battle

The new state budget finally takes credible steps to address the Medicaid crisis of recent history. What's missing is a clear plan for weathering the far larger crisis of the present and future. Read More

Getting real on Medicaid

#NYCoronaVirus: As New York State lawmakers debate the Medicaid budget during a public health crisis, here are seven things they should keep in mind. Read More

Medicaid still needs fixing

The world has changed since Governor Cuomo tasked his Medicaid Redesign Team with finding $2.5 billion in savings to help balance the state budget. Yet even in light of the coronavirus pandemic, many of the panel's recommendations still make sense – and are arguably more necessary than ever. Read More

NY is shorted on virus relief

Although New York is taking the brunt of the coronavirus pandemic – with 43 percent of the nation's known cases and 40 percent of the deaths – the state is due to receive only 5 percent of the $150 billion Coronavirus Relief Fund just established by Congress. Read More

Are Cuomo’s hands tied on Medicaid?

#NYCorona: If recent history is any guide, the strings attached to federal coronavirus funding should be less of a problem for New York than Cuomo seems to think. Almost identical restrictions were placed on extra Medicaid money sent to states during the Great Recession, and they did not prevent then-Governor Paterson from enacting cuts to Medicaid. Read More


Sign up to receive updates about Empire Center research, news and events in your email.


Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130


The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.