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$500M Marion County Justice Center relies on novel funding

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A mainstay of the travel industry, all-inclusive packages are gaining traction with governments that want a simpler way to deliver new public facilities.

For an annual fee, a private-sector consortium will design, build, finance, maintain and operate a new road or building. The model is common around the world and in the U.S. transportation industry but still rare for buildings.

Indianapolis could become one of the first U.S. cities to ink such a deal with a new jail and courthouse on the former site of the GM stamping plant.

The project could cost as much as $500 million, but it won’t require a tax hike, and the annual fee won’t be any greater than the $122.6 million a year the city now pays to operate courts and correctional facilities.

At least, that’s the promise of Mayor Greg Ballard. Whether that promise is realistic is impossible to gauge because the mayor’s deputies won’t reveal details of their analysis.

Director of Enterprise Development David Rosenberg declined to state the maximum annual fee, which the city already has shared with three pre-qualified bidders. The mayor’s office also refused to release the request for proposals, a type of document typically considered a public record.

Indiana Public Access Counselor Luke Britt said he couldn’t think of an exemption to open-records law that would apply to the RFP. The city still had not cited an exemption as the story went to press.

Former city controller Jeff Spalding said the administration’s unwillingness to walk through the math behind its conclusions makes him skeptical the new facility won’t end up requiring more public dollars.

“I want the criminal justice center to happen,” said Spalding, who left the Ballard administration in April 2013 to become director of fiscal policy and analysis at the Friedman Foundation. “There’s more potential downside if you don’t do it the right way.”

Several other cities are considering the all-inclusive model for justice facilities. Houston issued a request for information but pulled it back after Indianapolis entered the market, Rosenberg said. He presumes Houston officials are waiting to see how Indy’s deal works out.

“We certainly have a lot of eyes on us,” Rosenberg said. “If this model becomes successful, a lot of other cities in the country will start to adopt it.”

Proposals from the three bidders are due in October. Rosenberg anticipates working with the preferred bidder on 35-year contract, which would be presented for the City-County Council’s approval in early 2015.

Eliminating inefficiencies

The city and Marion County currently spend $122.6 million on jail operations, rent for offices, rent for disparate correctional facilities and inmate care at Eskenazi Health, the county charity hospital, Rosenberg said.

That figure reflects inefficiencies like transporting inmates, much of which would be eliminated with a new, modern jail sharing a campus with criminal courts, Rosenberg said. He declined to go into detail about the expected savings on operations.

Spalding said he wonders whether the assumed savings are too optimistic.

Current spending includes an $18 million-a-year contract with Corrections Corporation of America, which operates one of two county jails. That contract expires at the end of 2017, and it won’t be renewed.

“I don’t disagree that they’ll end the contracts, but all of the expense for the services delivered under those contracts will not disappear,” Spalding said.

The annual fee won’t be the city’s only expense once the justice center is built. The sheriff will continue to provide jail security, food and laundry service, and the city will have to pay the utility bills.

Performance requirements

The certainty of predetermined annual payments from a government entity is attractive to private-sector players because it helps them find investors or lenders, said Allan Marks, a partner in the Los Angeles office of law firm Milbank Tweed Hadley & McCloy, which has a large practice in global finance.

Carrying the debt and turning a profit are up to the consortium of finance, construction and architecture firms. “A lot of these deals don’t work,” Marks said. “There are some that do. The private sector thinks they can manage the risk.”

Marks said the deals don’t mean lower costs across the board, but construction, financing and long-term maintenance, taken together, should be less expensive than if handled separately.

All-in-one contracts are less common for public buildings, but Indianapolis found examples in Ontario and California.

A new courthouse in Long Beach, California, cost $346.7 million, and the state will pay an annual fee to a consortium called Long Beach Judicial Partners, according to the state Administrative Office of the Courts.

The service fee for the 2014-15 fiscal year is $51.8 million, a courts spokeswoman said. That includes a capital charge of $35.9 million for the design, construction and financing.

The operations and maintenance portion of the fee is subject to inflation-based increases, and it can be reduced if LBJP doesn’t meet certain performance requirements.

One of the attractions of “performance-based infrastructure,” Rosenberg said, is that it requires the private-sector partner to periodically replace or refurbish things like heating and cooling systems and roofing.

Because of those life-cycle upgrades, the justice center should be in good shape when it’s turned over to the county after 35 years, Rosenberg said.

“We don’t get back a building that’s 35 years old. We get back a building that’s seven, eight, nine years old. We can operate it again for an additional 20 to 30 years,” Rosenberg said.•
 

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  1. "Am I bugging you? I don't mean to bug ya." If what I wrote below is too much social philosophy for Indiana attorneys, just take ten this vacay to watch The Lego Movie with kiddies and sing along where appropriate: https://www.youtube.com/watch?v=etzMjoH0rJw

  2. I've got some free speech to share here about who is at work via the cat's paw of the ACLU stamping out Christian observances.... 2 Thessalonians chap 2: "And we also thank God continually because, when you received the word of God, which you heard from us, you accepted it not as a human word, but as it actually is, the word of God, which is indeed at work in you who believe. For you, brothers and sisters, became imitators of God’s churches in Judea, which are in Christ Jesus: You suffered from your own people the same things those churches suffered from the Jews who killed the Lord Jesus and the prophets and also drove us out. They displease God and are hostile to everyone in their effort to keep us from speaking to the Gentiles so that they may be saved. In this way they always heap up their sins to the limit. The wrath of God has come upon them at last."

  3. Did someone not tell people who have access to the Chevy Volts that it has a gas engine and will run just like a normal car? The batteries give the Volt approximately a 40 mile range, but after that the gas engine will propel the vehicle either directly through the transmission like any other car, or gas engine recharges the batteries depending on the conditions.

  4. Catholic, Lutheran, even the Baptists nuzzling the wolf! http://www.judicialwatch.org/press-room/press-releases/judicial-watch-documents-reveal-obama-hhs-paid-baptist-children-family-services-182129786-four-months-housing-illegal-alien-children/ YET where is the Progressivist outcry? Silent. I wonder why?

  5. Thank you, Honorable Ladies, and thank you, TIL, for this interesting interview. The most interesting question was the last one, which drew the least response. Could it be that NFP stamps are a threat to the very foundation of our common law American legal tradition, a throwback to the continental system that facilitated differing standards of justice? A throwback to Star Chamber’s protection of the landed gentry? If TIL ever again interviews this same panel, I would recommend inviting one known for voicing socio-legal dissent for the masses, maybe Welch, maybe Ogden, maybe our own John Smith? As demographics shift and our social cohesion precipitously drops, a consistent judicial core will become more and more important so that Justice and Equal Protection and Due Process are yet guiding stars. If those stars fall from our collective social horizon (and can they be seen even now through the haze of NFP opinions?) then what glue other than more NFP decisions and TRO’s and executive orders -- all backed by more and more lethally armed praetorians – will prop up our government institutions? And if and when we do arrive at such an end … will any then dare call that tyranny? Or will the cost of such dissent be too high to justify?

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