Topeka ? Two of the nation’s mightiest investment banking firms are proposing that a for-sale sign be put on the Kansas Turnpike.

The banks have produced reports that focus on offering the 236-mile highway to investors in a long-term lease.

And they have dangled the possibility of upfront cash to revenue-hungry Kansas lawmakers ranging from $300 million to $3.15 billion, depending on how high tolls could be increased.

But the idea didn’t go down well with Sen. Les Donovan, a Wichita Republican who is chairman of the Senate Transportation Committee and a member of the turnpike authority.

“I hope we don’t spend a lot of time on this rabbit trail,” Donovan said Wednesday after legislators were informed of the banks’ reports.

And Kansas Turnpike Authority President Mike Johnston warned the plan could mean much steeper tolls for KTA users.

Privatization

The turnpike turned up on the radar screen of Citigroup and Goldman Sachs Group Inc., both of which recently advised the city of Chicago in the $1.83 billion, 99-year lease of the 7.8-mile Chicago Skyway toll road to a Spanish-Australian partnership.

Joyce Green, a toll worker for the Kansas Turnpike, works her daily shift Wednesday afternoon. Two banking firms have suggested that the turnpike be sold to investors.

Goldman Sachs didn’t return a telephone call for comment. A Citigroup official would only say the Kansas report represented a “preliminary analysis.”

The two firms’ reports extolled the virtues of privatization of toll roads as a way to help generate quick infusions of revenue for states.

The Kansas Turnpike, which directly serves more than half the state’s population, “presents a compelling opportunity” because of its well-established track record of profits and strategic Midwest transportation location, the Goldman Sachs report said.

Stretching from the Kansas-Oklahoma border through Wichita and then eastward through Lawrence and to the Kansas City, Kan.-area, the turnpike has an annual traffic volume of nearly 34 million vehicle trips.

“We believe another toll road private concession in the United States would be well received by the financial markets, and that several buyers would be keenly interested in pursuing the opportunity,” the Goldman Sachs report said.

One-time money

Donovan said he likes the Kansas Turnpike too, and that’s why it should stay in the hands of the Kansas Turnpike Authority.

“We have a very good system that works,” said Donovan, who also serves on the turnpike authority.

Even though the state faces significant budget challenges to take care of public schools and health care, Donovan said lawmakers shouldn’t be mesmerized by promises of big bucks from the proposals.

• Kansas Turnpike Authority
• Turnpike map

“One-time money is not the way to go,” he said.

The two firms shared their findings with the turnpike authority, which then passed it along to lawmakers with a cover letter from Johnston, the president and chief executive officer of the authority.

Higher tolls

Johnston cautioned lawmakers, who would have to approve any deal involving the lease of the turnpike.

“When reviewing this material, it is important to keep in mind that virtually all of the ‘substantial value’ associated with these proposals is derived from sharply higher toll rates for turnpike customers.

“For example, in the Chicago Skyway’s case, toll rates beginning in January of 2005 will be increased to approximately a 7.93 percent annual increase each year until 2017,” Johnston said.

Indeed, the reports note the need for dramatic toll increases in Kansas under some scenarios. One of the successes of the sale of the Chicago Skyway was an “aggressive tolling regime,” the Citigroup study said.

Skepticism urged

Steve Swartz, a spokesman for the Kansas Department of Transportation, said talk of leasing the turnpike to private investors “needs to be approached with caution and a huge amount of skepticism.

“The state would lose oversight of the turnpike for a long time for some one-time money, and tolls would have to go up dramatically to make this deal attractive to a buyer,” Swartz said.

But Swartz noted there was a lot of interest among investor groups in purchasing toll roads since the transaction involving the Chicago Skyway.

“The Chicago bridge sale is going to make all toll roads subject to similar studies and possible offers for purchase,” he said.

Public-private road partnerships are common in Europe and Asia, the Goldman Sachs study says, and are being considered in at least 11 states.

Selling the road

This is not the first time selling the Kansas Turnpike has been discussed.

In 2003, some legislators suggested selling the highway as a way to provide money for the state without increasing taxes. But the idea went nowhere.

In 1993-94, the turnpike authority was under fire amid allegations it was spending a lot on board travel and perks, and inefficiently handling bond issues. A 1994 legislative audit’s findings were “inconclusive” on the issue of whether the authority paid too much to underwrite bonds. The audit recommended the authority use an independent financial adviser on complex transactions and solicit more underwriters.

A 1992 report by the Reason Public Policy Institute in California, an advocate of privatization, estimated the turnpike’s value at $900 million.