Officials with the Indiana Finance Authority correctly say you can’t condemn all public-private partnerships entered into by the state based on the failed outcome on Section 5 of Interstate 69. Painting all such arrangements with a broad brush would negate the success experienced in the Ohio River Bridge project, which connects Indiana with Kentucky and came in ahead of schedule and under budget.
Still, it’s easy to condemn the Section 5 construction project, which the state said Friday it would take over from the private development partner. It’s already beyond its first projected completion date and is expected to open two years late.
And Bloomington is the biggest loser of all for the deal’s failings.
At the start, this was bound to be a project of complex construction requirements and complicated financing. We expect government to figure such things out for the benefit of taxpayers, as it did with Sections 1 through 4 of the interstate. Section 4 ended just south of Bloomington at Ind. 37, where the funding strategy changed for the 21 miles to Martinsville know as I-69 Section 5.
The new strategy has been marked by delays, inconveniences, uncertainties and, worst of all, safety concerns.
At the core of the problems is the company Isolux Corsan, which had more than a three-quarters stake in I-69 Development Partners, the company the state agreed would build and maintain the road for 35 years. The company has had serious financial difficulties since shortly after Section 5 construction began.
Problems cascaded, and the bond rating under which the project was being financed dropped five times, hitting “junk” status and continuing to drop even farther to a lower level of junk.
The Indianapolis Star suggested in a Sunday report that one factor should have been a clue that this wasn’t a good partner for Indiana: Its bid of $325 million was $22 million less than the state’s own cost estimate and $73 million less than the next lowest bid on the project.
The state stands by its original decision. Micah Vincent, Indiana’s director of management and budget and chairman of the Indiana Finance Authority, said in a conference call Friday that had he been advising Gov. Mike Pence at the time the deal was made, he would have given it a green light. Pence, of course, touted the partnership as a progressive, creative way to move the highway forward with little risk to the state.
“If I was advising the governor at that time period, in 2013, I would have advised the same thing,” he said. But he also noted he would have gone for a partner that was experienced in this kind of arrangement. Isolux Corsan, the main force within Indiana Development Partners, had been involved in power infrastructure projects in the U.S., but no significant highway projects.
State officials maintain the entire cost of the project, counting reduced financing fees and the 35 years of maintenance, will be lower after the takeover. The state does take over the risk for unanticipated costs going forward that it thought it was avoiding.
Should the state have acted earlier to take over this mess? Perhaps, but the levels of complexity make it a fool’s game to offer a simple answer. However, in hindsight it appears the state should have done a lot of things differently to protect Hoosiers now affected by the problems created in the construction of Section 5.
State leaders on Friday’s conference call were reluctant to play the blame game and itemize any mistakes the state may have made, but they did say they would learn from the Section 5 experience.
Lessons from this would benefit especially residents of Morgan, Johnson and Marion counties. The route of Section 6, from Martinsville to I-465, will go through those counties, and decisions have yet to be made about how to pay for that leg of the highway. The idea of a public-private partnership is still on the table.
If that’s the chosen method, it needs to be nailed down much more effectively than Section 5 was. We’re sure about that.