Representatives from the city of Indianapolis were in New York City on Thursday selling more than $600 million worth of bonds to investors to fund the new criminal justice center—a milestone in the giant public project.
About $610 million in income-tax backed bonds and $12 million in property-tax backed bonds were put on the market Thursday to fund the construction of the $571 million project, along with funding a nearly $40 million debt service reserve fund and the cost of bond issuance.
The city expects to close on the bond sales in a few weeks.
Sarah Riordan, director of the Indianapolis Bond Bank, told IBJ the city has seen “overwhelming recognition” by investors on the bonds.
“We have worked very hard to build investor interest based on the nature of the project and the goals of the project, but also based on the fact that the city is a good investment because we have a good credit rating,” Riordan said.
Investors tend to be interested in municipal government and state government projects, because they typically are low-risk and because investors don’t pay income taxes on the interest they will earn. The city’s case is helped by the fact that it earlier this month earned a AAA rating from Fitch Ratings Service on the bonds.
Andy Mallon, the city’s corporation counsel, said the excitement from investors is also because “while we’re being socially progressive on the criminal justice policy, we’re being really financially conservative on the financing and the reserve funds.”
Mallon said that “tremendous interest” by investors could “translate into savings for taxpayers.”
The city plans to pay $38 million annually in debt service, funded by tax revenue, to pay back the dozens of investors—including individuals, hedge funds, life insurance companies, and wealth management companies—who are purchasing the bonds.
“The goal is to get underneath that today,” Mallon said, as the city negotiates with investors over interest rates.
The project, which will contain a jail, courthouse, sheriff’s office, and assessment and intervention center focusing on treating mental health issues, is being built on the site of the former Citizens Energy coke plant in the Twin Aire neighborhood. It is slated to open in 2021.
Mayor Joe Hogsett broke ground on the project last July.
The jail—which would replace the the Arrestee Processing Center, Jail I, Jail II and Hope Hall, which is inside the City-County Building—would have 2,700 general population beds and 300 specialty, mental-health focused beds.
It would also include 40,000 to 50,000 square feet for inmate education, job training, counseling and other programs, according to the city.
The Democrat-led City-County Council voted last April to prohibit the jail from being privately run. When the facility opens, the Hogsett administration plans to dissolve the contract with CoreCivic, which is currently running Jail II.
CoreCivic formerly was known as Corrections Corp. of America. It has managed Jail II since 1997.