Indiana missing out on millions of road dollars, businesses say

Highway sign program privately contracted

INDIANAPOLIS - Indiana could be missing out on millions of dollars to fix roads, businesses and state lawmakers say.

Indiana Logo Sign Group, a private company on East 96th Street, has operated the blue logo sign program in Indiana since 1988.

That's the same year the state last competitively bid the sign program, when Robert Orr was governor.

Hoosier businesses pay to be on the signs, but Call 6 Investigator Kara Kenney dug through the contract and found Indiana Logo Sign Group keeps 90 percent of the revenue.

The Indiana Department of Transportation receives the remaining 10 percent of sign revenue, money that goes to repair roads.

"It flies in the face of logic. Somebody didn't use good business sense when they negotiated that," said Jay Ricker, who owns 50 convenience stores throughout Indiana. "I think we're missing out on tens of millions of dollars."

Indiana receives $464,000 a year from the blue logo sign program, INDOT spokesman Will Wingfield said.

INDOT uses the money to fund operations or construction projects, including matching against federal highway funds, Wingfield said.

The Call 6 Investigators contacted all 50 states and found that in terms of profit sharing, it appears many states have better deals than Indiana.

Here are some examples:

  • Michigan contracts with Michigan Logos, Inc., and the state gets 15 percent of the revenue, a guaranteed minimum return of $850,000.
  • Kentucky contracts with Kentucky Logos, LLC, and the state receives 35 percent of the revenue for a total of about $677,000 a year.
  • Kansas contracts with Kansas Logos Inc., and the state takes in 60 percent of collected fees, with a guaranteed payment of $1.5 million.
  • Tennessee contracts with Law Signs LLC and receives about 74 percent of the gross revenue, about $778,000 per year.
  • Ohio partners with Ohio Logos Inc., and the company gets a flat annual fee of $1.29 million. The Ohio Department of Transportation gets everything else, which comes out to about $5 million each year, or about 80 percent of the profit.
  • The Illinois Department of Transportation runs its program on a break even basis.
  • Arizona began running its own blue sign program in 2012, which was previously administered by an outside vendor for 20 years. Arizona's program took in $1.4 million in fiscal year 2013 for its state highway fund.

Many Indiana drivers Kenney spoke with were under the impression INDOT runs Indiana's program.

"It's the city or the state or whoever owns the highways," said Maria Meyer, while at a rest stop on Interstate 70 in Indianapolis.

Scot Imus, director of the Indiana Petroleum Marketers and Convenience Store Association, has been looking into Indiana's contract with Indiana Logo Sign Group for several years.

"Totally outrageous -- it's the state's right-of-way," said Imus. "The state ought to be profiting the most out of this arrangement."

Imus and the Call 6 Investigators did some checking and found Indiana businesses pay among the highest in the country each year to be on the signs, $3,744 for four (two ramp, two mainline) signs at an interchange.

That's not counting the initial fee to create the placard.

"It’s a bad deal for Indiana, certainly Indiana businesses," said Imus.

Contract Details

Indiana Logo Sign Group won the contract in 1988, and for 19 years, Indiana got no profit from the program.

After a renewal in 2007, the state started receiving 10 percent of the revenue.

The current contract was amended in 2011 and does not expire until 2026.

The Call 6 Investigators dug through campaign finance data and found since 1997, Indiana Logo Sign group and its top officials have donated more than $90,000 to governors, lawmakers and campaign committees, both Republican and Democrat.

Kenney asked to speak with William Drew, Indiana Logo Sign Group’s president and managing partner, but he declined to be interviewed on camera.

When the Call 6 team stopped by the 96th Street office to get video, Kenney asked Drew if he would like to speak, but he told the camera to stay in the hall.

In an email, Drew said, "The revenue sharing amount is determined through negotiations after considering the various unique characteristics of the individual state."

Indiana Logo Sign Group does not contract with other states, Drew said.

It's unclear if Indiana Logo Sign Group's partners, Logo Signs of America Inc. and Interstate Logo Inc., contract with other states.

Kenney sent more than a dozen follow-up questions to Drew on June 12 about the company's deal with the state of Indiana, but Drew has not yet responded to those questions.

Kenney also submitted a public records request to the state of Indiana on May 30, requesting the 1988 contract signed with Indiana Logo Sign Group, the original bid proposal, annual financial reports the company is required to submit to the state, as well as other documents,

As of July 10, the state had still not provided the records to Kenney.

INDOT's Response

The Call 6 Investigators asked Wingfield if Indiana is missing

out on money for its roads.
           
"This program began as one that had no taxpayer investment whatsoever," said Wingfield. "Other states have made some investments using taxpayer dollars in the past. We're receiving more than we used to."

Wingfield explained that after Indiana Logo Sign Group won the contract in 1988, the company invested in the infrastructure for the program.

"They were the ones who invested their own money to build this program up from scratch," said Wingfield. "Since it started in 1988, it's always been a privately funded program."

Kenney asked about other states receiving higher percentages back for their roads.

"Those programs came to be from a different perspective than INDOT did," said Wingfield. "Their program may be run entirely differently. The history is different, and in many cases the way they operate is different."

Wingfield said he is unaware of INDOT factoring in campaign contributions when selecting a contractor.

"I can't, of course, speak to the prior administrations that made the decisions that they did," said Wingfield. "Of course, we're working today to manage the program the best we can."

Breaking its contract with Indiana Logo Sign Group could get expensive for the state or another company.

"We would actually have to purchase those signs," said Wingfield. "Or it would be another company buying them out and would be several millions of dollars to buy the signs and active lease agreements. It would take another company several years to get a return on their investment."

Wingfield said the rates Hoosier businesses pay to be on the signs are competitive.

"Of the signs that are out there, they're 81 percent full, so the price itself is not limiting demand," said Wingfield, adding that the costs are competitive with other forms of advertising, such as billboards. "It’s a fraction of that cost."

Ricker said the blue logo signs are a must for successful businesses by a highway, and that's why he pays $36,000 a year on them.

He just wants Indiana and its roads to get a bigger piece of the money pie.

"I'm irritated so many dollars that could go to roads are going into someone's pocket," said Ricker.

As a result of the amendment signed in 2011, Indiana will start receiving more money -- the greater of $600,000 or 15 percent of the revenue -- beginning in 2017.

Indiana Logo Sign Group will also take on the Tourist-Oriented Directional Signs, or TODS program, which was previously run by the state.

Wingfield said the sign contract will be bid out again around the time the current contract expires in 2026.

Lawmaker Response

State Rep. Terri Austin (D-Anderson) said the state needs to take a closer look at the contract.

"We're giving away a fortune," said Austin. "At a time when we desperately need money for our roads, this is not a good deal for taxpayers, it simply is not."

Austin wants the state to consider running its own program like Illinois, Iowa, North Carolina and other states.

"Why in the world are we sending that money out the door to the private sector when I think it's the kind of thing we could run with a two- to three-person office," said Austin.

Wingfield said contracting out the work ensures it is run professionally, instead of politically.

Wingfield also said that if the state ran the program, it would have to use state employees with state benefits and pensions to do the work.

Follow Kara Kenney on Twitter: @karakenney6  | Facebook: KaraKenneyNews

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