INDIANAPOLIS One of the most significant, as well as intriguing, sagas in the growing national debate over finding ways to finance future highway construction is being played out here in Indiana.

Led by the governor, the state is trying to lease its most important highway the Indiana Toll Road to a consortium of foreign investors.

The Spanish-Australian group plans to pay the state $3.85 billion for the right to operate the road for the next 75 years.

The state intends to use the money to help finance a $10.6 billion highway improvement program called Major Moves -- being pushed by Gov. Mitch Daniels.

The program proposes a slew of highway projects across the state, including building Interstate 69 between Evansville and Indianapolis. It also will provide $150 million over two years to all 92 counties for roads and bridges.

Since the first of the year, the toll-road lease proposal has been political issue No. 1 in Indiana.

Despite the controversy, it won approval in the Indiana legislature and, in March, Gov. Daniels signed legislation into law allowing the deal.

Predictably, lawsuits were filed last month to block the plan. A citizens coalition and a group of private citizens filed separate suits seeking to have the highway lease law declared unconstitutional.

The Citizens Action Coalition of Indiana and the seven individuals who sued also want a permanent injunction to block the deal.

The plaintiffs argue that the funding arrangement violates Indiana law, which stipulates that proceeds from the sale of public utilities must be used to repay public debt. The Daniels administration contends the deal is not a sale but a lease.

"Its sad for all of us that one group of Hoosiers would file a lawsuit that would try to deprive their neighbors of job opportunities and the economic development opportunities that Major Moves will provide," said Jane Jankowski, spokeswoman for the governor.

In a dig at the governor, the plaintiffs put up a Web site, called www.majormoves.org. Its homepage headline reads: "Moving Indiana Jobs and Money to a Foreign Land."

If the deal withstands the court challenge, it will be the largest privatization of a highway project in U.S. history.

At times while the proposal was being debated by the legislature, Gov. Daniels seemed positively giddy over the idea, saying the bid by the consortium represented an unprecedented windfall for the state that would pay for virtually all of Indianas road construction for the coming decade.

The proposal -- from Cintra of Madrid and Macquarie Infrastructure Group of Sydney -- was the best and highest of four bids the state received in response to a request for proposals to lease the 157-mile roadway.

What turned Daniels dizzy was the size of the consortiums proposal.

The state said it expected a bid of close to $2 billion. The governor characterized the nearly $4 billion bid as an "unprecedented and probably unrepeatable opportunity.

"Today marks an extraordinary moment in state history," Daniels gushed at a news conference. "A breakthrough like this may come but once in a public-service lifetime."

The lease would, for the first time, put the operation and maintenance of a major public Indiana road in the hands of private investors. The state would retain a measure of control: The agreement caps toll increases from year to year and sets guidelines to assure the road is properly maintained.

Still, the deal would give the Cintra-Macquarie consortium jurisdiction over both the toll road across northern Indiana, as well as the 7.8-mile Chicago Skyway.

The consortium, which calls itself Statewide Mobility Partners, forged a $1.8 billion lease with Chicago officials for the Skyway in 2004. (See Nov. 1, 2004 Bus & Motorcoach News.) The Skyway and Indiana Toll Road hook up in the northwest corner of Indiana.

Statewide Mobilitys bid represents the largest infusion ever of private capital to Indiana's budget. The proposal is nearly double what Daniels set as a minimum benchmark for moving forward with a deal.

The state, which would get the payment upfront, would use the money for toll-road improvements, grants to communities near the route, and other road projects statewide.

Because such leasing deals are relatively new in the U.S., experts say its too soon to gauge the full impact of the arrangement on the toll road and the state.

As originally written, the proposal lays out specific toll increases through 2010. Rates for:

* Three-axle motorcoaches will climb this year to $9.25, from the current $7.80. Next year, they will increase to $10, $10.75 in 2008 and $11.75 in 2009.

* Five axle-trucks go to $18 this year and top out at $32 in 2009.

* Two-axle cars and trucks that go the toll road's entire 157-mile stretch are scheduled to rise to $8 this year from $4.65. Tolls would stay at $8 until 2010.

However, a late addition to the plan could freeze some toll rates until electronic tolling is put in place.

In the lease law, long-term toll rates are pegged to vague inflationary indexes, such as the "per-capita nominal gross domestic product," making it difficult to determine toll rates in later years.

Critics of the proposal say the deal could "tie the hands of the state."

For instance, the proposal includes a "noncompete" provision that prohibits the state, along at least one stretch, from upgrading roads that parallel the toll road. The provision is meant to make the toll road a more attractive option for motorists.

Others have questioned whether the state got the best deal possible. Some have wondered why the Chicago Skyway was able to get almost $2 billion for its seven miles, while Indiana is only getting double that for a highway that's more than 20 times longer.

The Indiana Toll Road collects about $95 million annually from tolls and concessions. But because of rising operating and maintenance costs, the road has lost more than $8 million each year since 2003, state figures show.

How much the Cintra-Macquarie consortium might make in the deal is not clear. It would collect toll and concession money over the 75-year lease, and the consortium would have certain tax advantages.

Executives from Cintra and Macquarie say they intend to encourage drivers to use the road -- by making upgrades and keeping tolls reasonable.

For example, the consortium is expected to spend more than $200 million in upgrades in the next three years. That includes installing electronic pay-at-full-speed tolling.

Jose Maria Lopez de Fuentes, director of Cintra's U.S. operations, told the Indianapolis Star that toll roads are "very patient investments.

"Sometimes, you go years and decades without reaping a profit or a return," he told the newspaper. "But this is the business we are dedicated to. We're betting on the economics."

Cintra and Macquarie operate and maintain numerous roads around the world.

And while their road-investment strategy is relatively new in the United States, it has gained traction here as cash-strapped states have sought money for road construction.

In addition to the Skyway, Cintra and/or Macquarie have a hand in operating the Detroit-Windsor Tunnel, the Dulles Greenway near Washington, D.C., and the yet-to-be-built Trans-Texas Corridor.

Indiana officials note that the toll-road agreement, which runs about 200 pages, lays out binding guidelines on how the private consortium should operate and maintain the route: from pavement quality and police patrols, to landscaping standards.

Daniels said the toll road will be "better maintained, better patrolled, with better technology, than the state could ever provide."