Indiana Finance Authority to Northwest Indiana: Drop dead
ESPN has a great series entitled “30-for-30” where the narrator asks, “What if I told you …?”
What if I told you that a state agency, charged with protecting the interests of Hoosiers actually endorsed the bid of an offshore equity fund to buy the Indiana Toll Road lease rights over a viable Hoosier bid? You wouldn’t believe it, would you?
How did we get here? Well, when the Indiana Finance Authority (IFA) took a pass at exercising its rights to reversion of the road, both LaPorte and Lake counties put together a bid for the lease rights. A world-class team was assembled to aid the County Consortium in its bid, including financial advisers from investment banking firm Piper Jaffray. Bank of America/Merrill Lynch was signed as lead underwriter to sell more than $5 billion in nonrecourse municipal Toll Road revenue bonds. The world’s second largest infrastructure management firm — Globalvia — was enlisted as operator to clean up and modernize the Toll Road.
Four law firms supported the legal justification that would allow establishment of a regional, not-for-profit entity (the Northern Indiana Toll Road Authority or NITRA) that would have issued the bonds (at no risk to either county or their taxpayers) to acquire the lease rights. NITRA would plow back a guaranteed $5 million annually to each county in “founders’ payments” and then award a split of “excess revenues” after debt service to each county, as well as to cities and towns in each county and to qualified not-for-profits. Because of the lower cost of capital involved in issuing municipal debt (vs. private bank financing available to our competitors), we knew our bid would be competitive.
While we were taken seriously by UBS (the bank administering the sale) and our bid moved from an original field of eight to the final four, it was heartbreaking to encounter vigorous opposition from our own state government. IFA, which apparently had no qualms about seeing Toll Road profits shipped to an offshore tax haven, vigorously challenged our plan to distribute profits to counties along the Toll Road.
Mind you, LaPorte and Lake counties have suffered under some of the highest unemployment, poverty levels and infant mortality rates in the state and have some of the worst, decaying infrastructure. Yet when county officials looked to state leaders the past 10 years for assistance, they have been told repeatedly, “Sorry, you’re on your own. There’s no money. Fix it yourself.”
Well, that’s exactly what both counties did. Yet our bid was opposed by the state. To add insult to injury, IFA gave its endorsement to the winning Australian bid without asking anything in return. IFM Investors, the equity fund, knew its bid was contingent on state approval. The Aussies need not have worried as our state agency rubber-stamped their bid within hours of the announcement. No questions asked. No additional guarantees sought. Why not seek immediate replacement of the rest plazas or even cash grants to the Toll Road counties? Nothing.
What about checking out whether the Australian bid was even realistic, since it topped the second-place bid (our bid) by half a billion dollars? Nah. The Australian Financial Review is now reporting experts there say the IFM bid of $5.725 billion is “nuts” and should set off “warning bells” about the bid and its “uncanny parallels” to the last Australian bid in 2006 that went bankrupt.
IFA, the same agency that sanctioned the Toll Road bid from Macquarie/Cintra in 2006 and that declined reversion rights of this valuable, revenue-generating asset last fall, is the same unpatriotic agency that just stuck a knife in the backs of all Hoosiers when it supported profits going offshore rather than being reinvested in Northwest Indiana. Isn’t it time the governor and legislators reform this incompetent and misdirected agency?
