Indianapolis’ jail project moving closer to reality second time around

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DALLAS -- Marion County and Indianapolis took a first step toward getting a long-anticipated criminal justice facility off the ground with the approval of an initial $20 million in financing.

The City-County Council of Marion County and Indianapolis approved the bond anticipation note issue in a 17 to 7 vote on July 24, providing a strong indicator on how it might vote next year on the 35-year, lease appropriation bonds that will take out the note and cover the entire $571 million of project costs. The Indianapolis Bond Bank will serve as conduit issuer for the debt on behalf of the consolidated council.

“We’ve decided to do the financing in steps and get the reimbursement resolution passed so that any preliminary costs could ultimately be reimbursed through a bond resolution, and then we needed the short term financing to pay consultants on design,” the bond bank’s executive director Sarah Riordan said in an interview. “Next year we anticipate we will be ready to start construction, probably in the third quarter. We would look to do a larger bond issue in that time frame.”

The state of the art facility will include an assessment and intervention center and county jail, a court facility and a professional office building. Construction of the center would start early next fall at the site of the former Citizens Energy coke plant.

Riordan said that the assessment intervention facility makes the project unique. “It will seek to assess people with untreated mental health or addiction issues and intervene to get them treatment they need rather than cycling them through the criminal justice system."

Officials expect to pay off the lease appropriation bonds from savings created by new facilities. Debt service payments, which won’t begin until 2022 when the county moves into the new facilities, are anticipated to cost the county and city about $37 million a year.

No tax increases are needed, officials said. The project will consolidate city and county offices currently housed in private leased locations throughout the city.

About $35 million in annual savings are expected from the expiring leases for those offices currently located in privately owned buildings.

“This is money that they are actually spending today that they won’t need to spend with new facility,” city corporation counsel Andy Mallon said in a city-county council presentation. “Essentially we’re taking money that we’re using now in the criminal justice system and using it better by replacing old, outdated facilities. And there’s money that we hope to be able to capture with new facilities. For example, we will have a much better healthcare facility that we will look to get Medicaid reimbursements for.”

Riordan said that the council is aware of the risk that the full bonding proposal could get voted down next year but said that the approval of the $20 million is a pretty good indicator that the council will approve the proposal.

“We recognize that the approval of $20 million is definitely a big step toward approving the project as a whole but the finality of long term debt won’t take place until next year,” Riordan said. “But certainly issuing $20 million debt now is a pretty significant commitment. It is not totally dispositive but we worked really hard to show council this is what the costs of the overall project will be, this is why we believe it will be successful.”

This is the second attempt by city and county backers to get the project off the ground. In 2015, Indianapolis Mayor Greg Ballard proposed a privately financed, constructed and managed criminal justice center at a cost of approximately $408 million. That project didn't go forward because the city-county council failed to approve it due to uncertainties over the financing model and the extent of the project.

Under Ballard, the county had to pay $17 million upfront on studies and planning in an effort to move the county jail out of the downtown. Riordan said in that case, the county issued bonds to cover the costs after the project failed in late 2015. “They had consultants who had not yet been paid and so they issued short term debt of $12 million in December 2015 and that is still outstanding,” she said.

Despite the support by the city-county council for the latest round of funding, concerns remain over who would be on the hook for potential costs overrun.

Mallon said that the $571 million price tag estimate is the most the county can expect to spend, and the cost could come in below that amount.

The county retained the services of HOK, the same international design firm hired by Ballard. The firm has put together a rough outline of square footage and the county has based its cost estimating on that. The county also hired Sycamore Advisors to work on the project costs.

Councilman Jeff Miller has expressed concern that the current proposal requires more than $8 million a year out of the Indianapolis and Marion county budget for debt payments. Ballard’s proposal accounted for more savings from the agencies moving to the new center that would then be used to service the debt.

Diana Hamilton, president of Sycamore Advisors, said the difference in savings between both plans is that this second time around the plan accounts for food, clothing and medical costs for the inmates. “The biggest change in the value of the contract is that we deducted costs that will be carried into the new facilities,” said Hamilton.

Hamilton said that it’s unlikely that the debt issuance next year will hurt the county’s AAA rating since the bond will be paid from a rededication of funds. “Our expectation is that we should receive a strong AA ratings,” she said. “Not as strong as the city’s general obligation rating because we are not pledging property taxes.”

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