Despite the rocky finances of the parent company of the lead contractor on key section of I-69 through Bloomington, the state says it has not changed its plans to pay I-69 Development Partners in advance to finish construction.
Isolux Corsan, the Spanish parent company of the lead contractor, has started the process to avoid insolvency, Reuters reported. Isolux could potentially be forced to start the bankruptcy process if it doesn’t find funds in four months.
That could mean little for the I-69 project, even if the company does go bankrupt, said Paul Lewis, vice president of policy and finance for the Eno Center for Transportation, a nonpartisan think tank.
In order to fund section five — a 21-mile stretch from Bloomington to Martinsville — the state chose to use a public-private partnership between I-69 Development Partners and the Indiana Finance Authority. Using a partnership allows the I-69 group to access tax-free bonds, and those bonds don’t show up in the state’s debt portfolio. The state will pay I-69 Development Partners to maintain the road for the next 35 years.
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Lewis said public-private partnerships also shift most of the risk to the private investors.
“If you’re the public sector and you’ve shifted a bunch of risks and the private sector hasn’t gotten their act together and they go bankrupt, it’s in some ways no skin off your back,” Lewis said. “The public sector still owns the roadway, and now they get a brand new asset that they didn’t have to pay for — or that they paid a lot less for. And it wasn’t the public sector that got burned on it; it was the private entity that did.”
Lewis said due to the public-private partnership, even if Isolux goes bankrupt, I-69 Development Partners would be held responsible — unless the state decides to void the contract.
“Either case, the public sector is rarely getting the short end of the deal,” Lewis said. “It’s usually the private bond holders that invest in the project that get the shaft.”
But the state is still impacted by the well-being of I-69 Development Partners’ lead contractor. The project has been delayed 18 months so far, with construction traffic snarling the main route through Bloomington and near Indiana University.
“You’ve got all of these (citizens) driving that stretch of the road wondering how many more years of this there are,” said Rep. Matt Pierce, D-Bloomington, who has repeatedly spoken out about the delays.
In September, subcontractors stopped working after not receiving their paychecks. The issue was resolved, but the project was delayed again in February.
Christian Harper, a spokesman for I-69 Development Partners, did not provide an explanation for those delays, nor did he return multiple phone calls about I-69 Development Project’s plan moving forward.
In September, the IFA and I-69 Development Partners signed a memorandum of understanding pushing back the completion date. If approved by I-69 Development Partners bond holders, the memorandum also would require the state to make a $28 million payment in advance to I-69 Development Partners in order to finish construction.
Stephanie McFarland, a spokeswoman for IFA, said the terms of the memorandum haven’t changed despite Isolux’s financial concerns. Dan Huge, public-finance director for Indiana Finance Authority, said in a statement that they were moving forward as planned on construction.
“INDOT/IFA and the developer are currently in discussions regarding the developer’s design-build contractor,” Huge said. “Work continues on the road, and we will provide an update if any material changes occur related to the timeline of the project.”
Pierce worried about the potential for even more delays, if the state decides to wait for Isolux to potentially file for bankruptcy.
“So to me the big question for the IFA,” Pierce said, “is are they just pretty much waiting four months to see if this bankruptcy finally puts the stake in this company so they can move on and get a contract that can complete the work, because they think that will be the least litigious way to get out of a contract, or are they trying to find a way to make this work?”