INDIANAPOLIS - A state representative from Bloomington is worried about the long-reaching impact of Indiana’s 35year deal with I-69 Development Partners LLC after missed payments from the contractor led some construction workers to leave the site.
Rep. Matt Pierce, D-Bloomington, said I-69 Development failed to pay one subcontractor $2.3 million for completed work. He said this kind of failure may continue once the company is in charge of maintenance and snow removal on the 21-mile stretch of highway from Bloomington to Martinsville.
“It does concern me,” Pierce said. “If they can’t seem to get the highly visible construction part right, are they going to be able to handle maintenance?”
The $300 million public-private partnership, or P3, between I-69 Development Partners and the Indiana Finance Authority was signed in July 2014. The agreement allowed I-69 Development to use IFA as a conduit to secure tax-exempt Private Activity Bonds totaling $244 million, said Jim Stark, IFA’s director of public-private partnerships. That allows the I-69 group to access tax-free bonds, and those bonds do not show up in the state’s debt portfolio. Stark said it’s a common practice for IFA and nationwide.
The contract structure, including the way payment and performance bonds are set up, is similar to the Ohio River Bridge River Crossing project near Louisville.
After construction, I-69 Development will get money from the state to pay the bond debt down and maintain the road for the next 35 years. Stark said those yearly payments will be approximately $20 million. The IFA issued a notice of non-performance to I-69 Development on Sept.6 after subcontractors stopped working. Stark said the group has responded and is starting to pay back the money. He was not aware how much had been paid back.
It was not immediately clear if workers from Crider & Crider had returned to work on Section 5 yet. Representatives from the construction company did not return phone calls seeking comment Wednesday. Bloomington Mayor John Hamilton’s office said they were not aware of any new developments.
The initial issue seems to be confusion over who was responsible for geological studies performed on the site. Late last week, Isolux Corsan, the lead construction contractor on the Section 5 project, said via statement that “geological and permitting issues” had slowed the project and interrupted the company’s cash flow. This will lead to the construction being delayed from October of this year to June of 2017. The lack of payments also led to Crider & Crider employees walking off the site.
Isolux Corsan blamed IFA for the delay, saying they didn’t get the proper environmental permits and weren’t allowing an extension of time for the company.
Stark said the Isolux Corsan letter is littered with inaccuracies and shows the company isn’t aware of how the contract between I-69 Development and IFA is set up.
Per the P3 agreement between IFA and I-69 Development, it is the responsibility of the contractor to obtain the proper geological and soil samples prior to construction, Stark said.
While IFA officials are confident the matter is sorting itself out, Pierce is still skittish of the long-term contract given how slow progress has been. He said the Indiana Department of Transportation needs to step in and finish construction. INDOT handled construction on the first four sections of the Interstate 69 corridor from Evansville to Bloomington before the state opted for a P3 agreement for Section 5.
“My thought is, it’s better to get it (Section 5 construction) back in the hands of INDOT and get it done and then let the legal issues sort themselves out,” Pierce said. “This has become way beyond inconvenient for people who use the road.”
Pierce mentioned the state’s 10-year legal battle with IBM Corp. over the mishandling of the state’s welfare services as an example of how tough it can be to get out of P3 agreements if they go sour. He said he wanted assurance from Gov. Mike Pence that the current delay in construction wouldn’t be a sign of things to come. He said he is still waiting to hear back from Pence, who approved the agreement in 2014.
Pence’s press secretary Kara Brooks said last week the state is “holding its contractors and developers accountable.”
Sen. Luke Kenley, R-Noblesville, chairs the State Budget Committee that signed off on the IFA, I-69 Development contract in 2014. He said while the situation is not ideal, it shows the state still has the authority to hold partners responsible.
“I’m pleased the IFA has shown they are on top of this,” Kenley said. “The agreement still gives the state the authority to get it straightened out when things go wrong and the state is exercising its authority.”
At the time of signing, the P3 agreement was viewed as a cost-saving method, allowing the state to continue work on the I-69 corridor without occurring heavy debt. The state currently does not have a funding plan for Section 6, which is supposed to stretch from Martinsville to Indianapolis.