Bond Buyer Calls Indianapolis' P3 Criminal Justice Center "Precedent-Setting"

The Bond Buyer is calling Indianapolis' secretive P3 criminal justice center project the "largest P3 deal in the U.S." with a price tag of at least $500 million. The Pillsbury Doughboy, also known as Mayor Greg Ballard's Deputy Mayor for Economic Development Adam Collins, tells the Bond Buyer that Indianapolis won't have to dip into general funds or raise taxes to make ginormous annual availability payments to the P3 operator over the next 35 years. "This is a project we expect to be revenue neutral and won't require any additional funding source or tax for the city at all," Collins said. "That was the promise and the allure for the city." And pigs can fly.

The size of the payments is yet to be determined, but will come largely from savings the city expects to achieve by terminating existing contracts, and saving on rent and management of the facilities, he said. The payments will include operations and maintenance and debt service, among other things . . .

We think obviously we're on the leading edge of this particular type of delivery model, but being there provides us with opportunities that we wouldn't have had otherwise," Collins said. "We have a market hungry for participation and three bidding teams that we believe are interested in seeing this done, and sharpening their pencils to give the city the best deal."

John Gilmour, a professor of government and public policy at William and Mary College is skeptical of some of Collins' claims. He quickly disabuses us of the notion that availability payments made to the P3 operator are any different than debt. "What's good about it is a new asset is being built," Gilmour said about the new complex. "But the question is, how does it compare to a conventional financing deal?" Gilmour doesn't believe the P3 operator will be eligible for tax-exempt debt, which means the interest costs and profit margin demanded by the P3 operator will push the costs higher than if the city relies on traditional 30-year bonds to finance the project on its own.

Barney Allison, a partner at Nossaman LLP, the Los Angeles law firm with whom the City illegally entered into a contract costing city taxpayers several million dollars to provide legal advice on the project, tells the Bond Buyer that lobbying of Congress is underway to make these P3 deals tax-exempt as if it was the governmental entity borrowing the money to construct the building rather than the P3 operator. "It would be wonderful to have that," said Allison. "All the big P3s are being done in transport, because you've got [departments of transportation] with huge budgets and huge funding sources," said Allison. "Here we've got a city and a county that's looking to operate an essential government function for the next 35 years and they're very concerned about what it's going to cost them," said Allison. "The city is looking at this particular project from a policy standpoint, a way of getting new infrastructure and new jails and a new courthouse, and hopefully through the efficiencies of the P3, they'll come up with a way to achieve at least neutrality of running that jail and courthouse."

Allison noticeably omitted concerns that the P3 courthouse project he also worked on in Long Beach, California has been heavily criticized by state officials as costing much more than if traditional public financing had been utilized for the project. Allison told the Bond Buyer that the developer relied on traditional bank borrowing originally, which was later refinanced with taxable bonds. The Bond Buyer briefly touched on the controversy surrounding the project. "The city has refused to release financing details of the project, citing the ongoing bidding process," the report said. "The secrecy has sparked criticism in local media, as well as from the state's Public Access Counselor under Gov. Mike Pence."