State to take over I-69 section as development deal frays

Show Caption Hide Caption Why the I-69 extension is taking so long Construction of the troubled I-69 extension from Indianapolis to Evansville has been delayed again, with the state telling bondholders it will take over completion of Section 5.

The state of Indiana intends to take control of the troubled I-69 project from Bloomington to Martinsville as the public-private partnership used to finance and build the highway crumbles.

Bond analysts told IndyStar that terminating the deal could drive up project costs, but it is uncertain how much.

State officials confirmed Monday that the project's new completion date would be pushed back from May 2018 to August 31, 2018.

That's the fourth time the opening has been pushed back as the state's design-build contractor struggles to pay subcontractors and meet deadlines. The original completion date was October 2016.

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I-69 Development Partners originally bid $325 million to win the project, which started in 2014.

With the project about half finished, the state notified bondholders on Friday of its intention to take over.

The statement said it would take nearly $237 million to complete the project, and that $72 million was available. That means $164 million is needed to "complete construction and resolve claims."

But the extra cost to taxpayers is unclear.

State officials declined to tell IndyStar whether taxpayers would have to foot the bill for the $164 million that is needed. Stephanie McFarland, a spokeswoman for the Indiana Finance Authority, said the "official authority" who could answer IndyStar's question is off until Wednesday.

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The IFA issued a statement from Director Dan Huge on Monday, but it also did not address the issue of cost and where the money will come from. Huge has declined numerous interview requests.

Cherian George, managing director of the Fitch ratings agency, earlier told IndyStar that if a project is terminated for cause, the cost of completion typically would rise.

"As a result, there will be additional cost, because now the state has to take it back and actually deliver the project and fill in the gaps," George said. "It may be more than they thought they were going to pay, but it may not be an exorbitantly higher amount."

There will also be money available from the project's performance bond — insurance that it will be completed. But the state only required a bond covering 25 percent of the project's value, which bond analysts said was on the low end of what would typically be required. And getting money from that bond could also be held up by litigation.

What's more, the winning bid was $73 million lower than the next lowest bid, suggesting other contractors might demand more.

The project was originally touted by the state as an innovative public-private partnership that would take advantage of private sector expertise, innovation and efficiency to save taxpayers money.

I-69 Development Partners won a bid to design, construct and maintain the highway for decades after completion. But in March the Spanish company Isolux Corsan — which initially comprised more than 80 percent of I-69 Development Partners — entered insolvency proceedings in Spain.

It had four months to reach an agreement with creditors and avoid potential bankruptcy.

The state's negotiations to buy out the bonds for the project have been unsuccessful so far, but Huge's statement said "the state is moving forward with the goal of assuming control." The state has not, however, declared the developer to be in default.

When asked about the deal, I-69 Development Partners issued the following statement: "I-69 Development Partners and the IFA continue to participate in confidential discussions with the aim of ensuring the successful completion of the project. We are confident that we can reach an agreement with the IFA."

Rep. Matt Pierce, D-Bloomington, said the protracted construction has not only frustrated people but also created safety issues.

"I think they should have been willing to declare the company in default a long time ago," he said.

Gov. Eric Holcomb spoke to reporters about the project on Monday in Evansville, again not mentioning added costs.

“The good news is that work will continue during these negotiations and we have made it crystal clear that finishing I-69, Section 5 and finishing the complete I-69 is a top priority with my administration,” Holcomb said.

Call IndyStar reporter Mark Alesia at (317) 444-6311. Follow him on Twitter: @markalesia.

Call IndyStar reporter Kaitlin L. Lange at (812) 549-1429. Follow her on Twitter: @kaitlin_lange.

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