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I-69 Pay Dispute Has Some Worried About Project's Future

I69 wide

Questions are swirling about the future of I-69 after the private developer responsible for construction on Section 5 once again failed to pay the subcontractors it hired to build the interstate.

The Indiana Finance Authority put the developer on notice this week, sending a letter of non-compliance to I-69 Development Partners. It's an effort to remedy the situation, but some Bloomington leaders say it's too late. They see the public-private agreement as a failure.

Subcontractor Stops Work Because Of Pay Dispute

The presence of orange barrels on the stretch of State Road 37 from Bloomington to Martinsville is as constant as the traffic.

Aaron Keller knows – he drives the 21 miles everyday. And he says the construction slows his commute down 20 minutes each way.

"Right now all they're doing is causing delays and making people very angry," Keller says.

Construction on Section 5 of I-69 started in 2014 and was supposed to wrap up next month. But ongoing problems with weather, contract disputes and payment to subcontractors have many wondering if the project will meet its new target completion date of June 2017.

"Right now all they're doing is causing delays and making people very angry."

Bloomington Mayor John Hamilton held a press conference along the side of the interstate this week to voice his frustrations.

"In a project that was to be completed within the next month, we now face, it seems, at least another year of construction, perhaps significantly longer," Hamilton says. "Every week it’s not completed is a week of inconvenience, lost productivity, and loss of life and limb."

Some of the construction equipment lining the interstate sits idle after subcontractor Crider and Crider walked off the job this week. The city of Bloomington says it’s the third time in the past year a pay dispute has halted work.

"These people have bills to pay," says Jackie Yenna, President of the White River Chapter of the Southern Indiana Regional Labor Council. "They can’t pay their bills if they’re not working."

State Tries To Remedy Situation, Others Say Public-Private Partnership Failed

According to the Indiana Finance Authority, other subcontractors are threatening to walk off the job, too. The IFA estimates the developer of section 5, I-69 Development Partners, owes subcontractors more than $9 million total.

It wrote a letter to the Development Partners this week to try and remedy the situation, demanding payment to subcontractors within 30 days.

Isolux Corsan, the parent company of I-69 Development Partners, said in a statement it's overseeing more than 30 subcontractors on the I-69 Section 5 project. The company blames delays in construction on geological and permitting issues.

"Per our contract, Isolux Corsan brought 10 of these issues -- referred to as 'relief events' in the contract -- to the attention of the IFA, requesting the state's review and consideration for extra work costs and/or a deadline extension due to these factors outside of our control," the company said in the statement. "Failure to grant extra work costs or a deadline extension impacts cash flow and may delay payments to subcontractors."

Isolux Corsan says it's unfair and misleading for the IFA to send a non-compliance letter at the same time it has "denied valid claims."

But Democratic State Representative Matt Pierce says the public-private partnership simply isn’t working.

He wrote a letter to Governor Mike Pence last week asking for answers about the continual delays along Section 5.

"This entire process of injecting a private company into what is normally a state public works project has been very opaque," he says. "It’s not been transparent from the very beginning."

I-69 Development Partners entered into an agreement with the state to design, build and maintain I-69 Section 5.

Pierce says he thinks the state chose to build Section 5 using a public-private partnership so it didn't have to borrow money for the project.

Back in July, credit ratings agency Fitch Ratings downgraded the private activity bonds the IFA issued on behalf of I-69 Development partners to junk. It cited the deteriorating quality of the company’s credit, as well as the projected 8-month delay in Section 5 completion.

And Hamilton says there are questions about whether the developer will actually meet that deadline.

"In July the bonds agency that rates those bonds said unless we see significant enhancement and increase of pace of activity in August and September on this project we do not see how they can possibly meet the June 2017 deadline," Hamilton says.

That’s why Hamilton and Pierce are calling on the state to step in to ensure the project is completed on time. They want the state to pay subcontractors the money they're owed so work can move forward on Section 5.

Because as equipment along the future interstate sits idle, frustrations are mounting.

"Public-private agreements, on the whole, have saved taxpayers hundreds of millions of dollars in building one of the largest highway projects currently in progress in the United States."

"I’ve got a question for Mike Pence, who’s running around trying to be vice president of the United States: if you can’t step in and help out the people of your own state, how in the world are you going to be expected to step in and help the people of 50 states?" Yenna says.

If I-69 Development Partners doesn't resolve the pay dispute within 30 days of receiving the IFA's letter, it will result in a developer default. The state has several options if that happens. Among them, the state could take control of the project and the developer would have to pay the recoverable costs. But the IFA says it’s premature to ask the state to do so.

"I-69 between Bloomington and Martinsville is being built on an aggressive construction schedule, and will be completed at a significant savings to taxpayers," IFA Director Dan Huge said in a statement."Public-private agreements, on the whole, have saved taxpayers hundreds of millions of dollars in building one of the largest highway projects currently in progress in the United States."

Spokesperson for Governor Mike Pence Kara Brooks said in a statement, “The State of Indiana is holding its contractors and developers accountable. Any accusations to the contrary are just a sad attempt to score political points.”

Want to contact your legislators about an issue that matters to you? Find out how to contact your senators and member of Congress here.

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