The Indiana Finance Authority says the state’s planned takeover of I-69 from Bloomington to Martinsville won’t be impacted by the latest financial woes of the private developer’s parent company. The IFA presented its plans for the transition to the state’s budget committee Thursday afternoon.
Isolux Corsan is the sub-contractor that I-69 Development Partners contracted to perform construction on the project. It’s faced financial problems for months, causing ratings agencies to downgrade the private activity bonds I-69 Development Partners is using to fund construction several times.
Earlier this week, Isolux Corsan filed for bankruptcy in Spain.
“But that does not affect the USA subsidiary of Isolux,” Office of Management and Budget Director Micah Vincent says. “And we’ve negotiated agreements to be able to move forward with this deal with the USA subsidiary’s sign off. The bankruptcy in Spain won’t have an impact here.”
Vincent says that means I-69 Development Partners will still pay the IFA $50 million under the agreement to end the public-private partnership. The money will help offset costs the state will incur by taking the project over, which the IFA says will result in a total cost savings of nearly $30 million.
“The main thing we need to emphasize though is while there may be a small savings, the state of Indiana and INDOT now accept the risks of [operations and maintenance] and life cycle costs on this 21 miles of road,” says IFA Public Finance Director Dan Huge.
In order to fund completion of Section 5, the IFA plans to issue a Bond Anticipation Note, or BAN, by the end of this month. The BAN essentially acts as a short-term loan to allow the state to pay off I-69 Development Partners’ outstanding private activity bonds, at a cost of roughly $240 million. Later this year, the state will shift its focus to long-term funding of the project by issuing highway revenue bonds, which it will also use to pay off the BAN. Because of the state’s financial record, the IFA will be able to issue bonds at a lower interest rate than I-69 Development Partners.
As part of a provision passed in HEA 1002 earlier this year, the budget committee had to approve the IFA’s plans to issue the bonds.
INDOT is supposed to take control of the project by the end of July. In the meantime, it’s working to resolve any outstanding claims regarding I-69 Development Partners. Walsh Construction II is serving as a consultant until the financial aspects of the agreement are finalized.
INDOT is also negotiating new contracts with the subcontractors being used to build Section 5. A pay dispute with I-69 Development Partners last year caused one of the companies to temporarily walk off the job.
The state says Section 5 construction won’t be complete until August 2018, which is nearly two years behind schedule.
Correction: A previous version of this story said Isolux Corsan is the parent company of I-69 Development Partners, which Vincent stated during the committee meeting.