State has agreement to terminate public-private I-69 contract

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 announced an agreement Friday to take control of construction of the 21-mile stretch of I-69 from Bloomington to Martinsville, an admission that its touted public-private partnership failed.

The agreement terminates a contract with I-69 Development Partners, the private company responsible for designing and building I-69 Section 5 and maintaining it for 35 years. The move comes after multiple delays, much frustration for drivers in Bloomington and the near-insolvency of a key company involved in the project.

The agreement would settle all disputes and allow the Indiana Finance Authority to assume direct control of the project, which is about 60 percent finished.

The project was supposed to be completed by October 2016, but has been delayed four times since construction started. The new estimated completion date is August 2018, nearly two years late.

In a news conference, state officials said the state made no mistakes concerning the project. They also did not discount the possibility of using a public-private partnership for I-69 Section 6 from Martinsville to Indianapolis.

"I think we use them where appropriate," said Micah Vincent, director of the Office of Management and Budget. "You look at how successful we've been on Ohio River bridges. We've seen this model work very well. We'll continue to evaluate and take the best option for Hoosiers."

According to state projections, taxpayers will actually save money, when 35 years of maintenance and finance costs are taken into consideration. Those issues were being handled by I-69 Development Partners, and would now be covered by the state.

But the state now assumes the risk of costs increasing beyond projections to operate and maintain the road for 35 years.

The contract that was terminated called for the state to make annual $22 million "availability payments" to I-69 Development Partners for 35 years. That company was to have operated and maintained the road during that time.

State officials said Friday that — in today's dollars — the entire project, including maintenance costs, would cost $560 million. They say it would have cost $590 million with its now-former private partner.

In emphasizing the savings to taxpayers over 35 years, the state changed how it sold the project to the public in 2014. When the agreement was signed, the state emphasized the $325 million winning bid by I-69 Development Partners. That was the cost of construction.

And the state officials acknowledged Friday construction costs will rise.

The state will have to pay off bondholders and cover about $115 million in increased construction costs, Huge said. The state says it will get the money from a bond issue, at a lower interest rate than the bonds for the public-private partnership.

It also negotiated a $50 million settlement payment from the company. As part of the termination agreement, I-69 Development Partners also will pay $12 million to the bondholders.

State officials said Friday that a public-private partnership was the right decision initially.

"Technical requirements and financial requirements were reviewed by INDOT and IFA staff, along with outside professionals, and that vetting process we believe was appropriate," said Dan Huge, director of the Indiana Finance Authority. "The design-builder having their financial issues in Spain was one of the big drivers of the problem here."

Isolux Corsan, a Spanish company that effectively owned more than 80 percent of I-69 Development Partners, and its subsidiaries were an integral part of the project. That company struggled with I-69 — its first road project in the U.S. — from the beginning. It is now in a proceeding in Spain to avoid bankruptcy.

The state expects to have a signed agreement by July 31.

At its onset, the project was touted as an innovative deal that would take advantage of private sector expertise, innovation and efficiency to save taxpayers money.

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.