State Government and Legislation and Government & Economic Development and Government

Proposal would expand public-private partnerships

January 16, 2014

Private firms may soon be able to build, abolish, or repair state facilities – and also operate them.

Current law allows private firms to partner with the state to build or operate highways, rail lines, or bridges. The projects could involve the private firm giving the state an upfront sum in exchange for future toll revenue. Or they could make other financial arrangements that give the private companies a profit.

Under Senate Bill 225, authored by Sen. Luke Kenley, R-Noblesville, the facilities would not be limited to transportation. Firms could construct correctional, mental health, regional health and some communications facilities.

Sen. Karen Tallian, D-Portage said Thursday the bill appeared to allow these firms to contract facilities without permission from the General Assembly.

“I don’t think we’re extending anything. We’re just making it simpler to do these things,” Kenley said.

But Tallian said she “respectfully disagreed” with Kenley’s analysis.

“I’m still a little bit – well I’m still a lot – concerned about not having to come back to the legislature if you’ve got some big project plans,” Tallian said. “If you’ve got some big project to build a new prison with a third party – I have a problem with not having to come back to the legislature.”

She also disapproved of firms being allowed to operate the facilities rather than the state.

Kenley worked with the Indiana Finance Authority to create the bill to expand the use of public-private partnerships, which are called P3s.

“I think the intent here that we had was to allow us to use the P3 model as an additional procurement method to bond financing facilities” for prisons, said Andrew Kienle, general counsel for the Indiana Finance Authority.

Kienle also said existing law requires a public-private partnership to get State Budget Committee approval to move forward.

“Let me just say, directly and unambiguously, that it’s not the intent that this would authorize us to just go out and do projects without asking the legislature,” Kienle said.

Tallian said she “had a whole discussion yesterday about between what’s intended and what’s written.”

“It’s unfortunate this bill has a whole lot of good things I could support, but it’s got this big red flag (and) I can’t support the way it is here,” Tallian said. “I would be very happy to support everything else in here except the P3 stuff because I think it needs some major explanation.”

Kenley stood his ground on removing the public-private partnership amendment from the bill completely, but he agreed to amend the language – in an effort to make it more clear – and bring it back to the committee at a later date.

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