Monday, November 24, 2014

Criminal Justice Center To Cost At Least $1.75 Billion Over 35 Years

Now that the bids from the three handpicked bidding teams led by foreign investors for construction of a new criminal justice system have been submitted, the Ballard administration has finally disclosed to the public that bidders had to agree to charge no more than $50 million a year for construction of the nearly half-billion dollar project according to the Indianapolis Star. The Ballard administration has refused to disclose the contents of the RFP it issued to the competing bidders up until now in clear violation of Indiana law. The administration plans to upload the RFP to the City's website for the first time later today.

The Ballard administration claims it will actually save taxpayers money by having a new center built to house the county's jail system and criminal courts. It says it currently spend $120 million annually for the criminal courts and the county's two jails. Part of the deal means ending the $19 million a year contract the sheriff currently pays to Corrections Corporation of America to operate Jail II. City-County Council member Angela Mansfield (D), who chairs the Administration and Finance Committee, says she doesn't trust the administration's cost estimates. "This administration has a history of rising costs on projects and doing things halfway and not in public," she said. "I don't trust it. The plan doesn't consolidate all of the criminal justice agencies at the new center as originally envisioned--a move apparently made to hold down the buy-in costs. The plan, however, includes an opportunity to the P3 operator to expand the existing project in future years to further consolidate all agencies at the new center.

Taxpayers have already shelled out over $12 million for no-bid professional services contracts the administration issued last year to begin work on the project. The Ballard administration claims those costs are being repaid if the council approves the 35-year deal; however, the taxpayers turn around and repay those costs again with interest since they are rolled into the $50 million fee being paid to the private operator over the 35-year period. The notion that a $50 million annual expense is being traded for the current $120 million costs is extremely misleading. There are many costs not included in that $50 million figure that are included in the $120 million figure. Make no mistake about it. At the end of the day, it will cost more annually for the criminal new justice system than what is currently being spent. In addition, the $1.75 billion figure is arrived at by multiplying the $50 million annual payment times 35 years. I'm pretty certain the $50 million is just for starts. There is likely an escalator clause that increases those payments during the life of the agreement if it is structured like other P3 agreements.

UPDATE: Sure enough the RFP allows for escalating payments to as high as $68 million a year. The center's payments will cost at least $2 billion over the 35-year period. If my math is right, the City could borrow the money by issuing 30-year bonds at today's low interest rates, have annual payments of about half, or $25 million  less than what it will be paying to the P3 operator and would wind up paying less than half what it will wind up paying to the P3 operator, or about $1 billion less.


Anonymous said...

so what's the cost, with inflation, over th same period, of doing nothing (and of course, can we really do nothing)?

Had Enough Indy? said...

Typical bait and switch - they said it would cost $400 M, maybe $500 M tops.

Anonymous said...

Piper will bail it out like the toll road when honest folk prevail.