Compensation Clauses

In place of non-compete clauses, many agreements now include compensation provisions requiring the state to compensate the private operator if its actions negatively affect toll revenues. The Indiana deal, for example, requires the state to pay investors compensation for reduced toll revenue when the state performs construction, such as adding an exit or building a mass transit line down the median. This compensation would add significantly to the cost of construction, and the state could potentially not afford to do the work it would otherwise perform. As an added complication, the exact level of these future payments might be subject to dispute and lawsuits. Already, the state of Indiana has had to reimburse the private operator $447,000 for waiving toll collections to assist in evacuations from flooding in September 2008. Appendix A provides additional examples of these agreements.

These compensation clauses are inimical to comprehensive transportation planning. Transportation policy should be made according to what is best for the public, not conditioned by avoiding extra payments to a private operator.