Mayor Greg Ballard hasn’t settled on exactly how to spend the $425 million expected to result from selling the city’s water and sewer utilities to Citizens Energy Group, but he’s already got a blueprint in mind: the Major Moves initiative.

So far in public, Ballard has emphasized the long-term positive impact he expects the deal to have on utility rates, the $1.5 billion in city debt Citizens would assume, and the opportunity to improve residential streets and sidewalks.

But Ballard also has quietly prioritized another key objective—business attraction and expansion.

“Is it fair to say we want to use this money to address quality of life issues in Indianapolis? Yes,” said Ballard spokesman Robert Vane. “How broadly are we defining quality of life? Are we defining it to include economic development matters? Yes.
 

Ballard

“Obviously, it all goes together. The better the city is governed and connected, the more amenities, the better the infrastructure and the better the qualities we are able to offer companies … the better shape we are in.”

In June 2006, Gov. Mitch Daniels struck a similar deal with Australia-based Macquarie Group Ltd. and Spain-based Cintra Concesiones de Infraestructuras de Transporte S.A. In that transaction, the two foreign companies secured a 75-year lease of the Indiana Toll Road for a $3.8 billion upfront payment to the state.

Since then, Daniels, a Republican, has used the money to underwrite Major Moves, a series of highway improvements across the state. The theory: New roads and better infrastructure can instantly transform rural cornfields into shovel-ready business sites.

Indiana Secretary of Commerce Mitch Roob said Major Moves has had a simple but profound effect on state economic development.

“There’s an old saying that is pretty true,” Roob said. “If you build a road from anywhere to nowhere, all of a sudden nowhere becomes somewhere.”

When a company considers adding operations or moving its headquarters, Roob said, quality infrastructure is at least as important as low tax rates, generous incentives or a qualified work force. But if a location’s infrastructure isn’t up to snuff, businesses quickly focus their attention elsewhere.

“When companies are ready to expand, they’re not going to wait for that road to be built,” Roob said. “If it isn’t there and ready to go, they won’t even consider you.”

Deputy Mayor Michael Huber said Ballard has scheduled a series of public meetings about the Citizens deal because he wants input from the general public—including business leaders—on how to invest its proceeds.

But Huber acknowledged that the mayor’s administration already has identified economic development as one of the top priorities. Ballard doesn’t want to miss out on any business prospects for a lack of ready ground.

“Over the last several years, over multiple mayoral administrations, the city has lost the opportunity to attract companies because, in specific instances, infrastructure was not ready for that company,” Huber said. “What we’ve learned by working with companies that have expanded and relocated to Indianapolis [is that] speed to execution is so critical, and the ability to get these infrastructure projects done and sites shovel-ready is more a factor than the incentive packages cities can offer.”

Baker and Daniels LLP partner Melina Kennedy, who is pursuing the Democratic nomination to run against Ballard in 2011, declined to comment on the Citizens deal, or how its proceeds ought to be spent. Kennedy said she hasn’t been involved with the transaction, but legal ethics prevent her from addressing it because some of her associates have.

Kennedy pledged to prioritize economic development if elected. She pointed to the BioCrossroads life sciences initiative, which she helped launch as part of Mayor Bart Peterson’s administration, as an example of her approach to spurring business growth.

“My entire focus as a candidate for mayor will be bringing aggression and competiveness to the city in job development,” Kennedy said.

Venture capitalist Brian Williams, who also hopes to secure the Democratic nomination for mayor next year, is much more critical of Ballard’s Citizens deal. He’s not opposed to the concept, but Williams worries that the proposed contract’s terms aren’t strong enough to ensure the cleanliness of Indianapolis water in the future.

“If I were mayor, I would have started with the question, ‘What is the quality of water we expect in Indy, coming out of [the] tap, and going down [the] drain? And once we have that standard, what’s the cost we’re willing to pay to meet … and exceed those expectations?”

Williams also doesn’t believe Indianapolis will receive a full $425 million from the deal. He said under his own analysis of the city’s memorandum of understanding with Citizens, the city would get far less.

Daniels has shown how much economic development $3.8 billion generated by a one-time deal can spur. But unlike the toll road lease, which Daniels pursued in a robust economy, the recession is a buyer’s market.

Williams suggested a different deal in a better economy might produce a greater bang for Indy’s economic development buck.

“You have to question, if you’ve got the asset, and it’s a profitable enterprise, is now the right time to sell it? Am I maximizing value?” Williams asked. “And I’d have to say no.”•