Let’s talk about the proposed Criminal Justice Center, shall we?
First: I think the project itself makes all kinds of sense.
Second: The way it is being planned, financed and constructed makes no sense at all–if by “making sense” we mean serving the public interest and creating a long-term public asset.
It’s the parking meter fiasco redux. The city could have upgraded the meters for a relatively reasonable sum, raised the rates as the vendor did, and retained additional millions of dollars to be used for public purposes. Instead, we enriched a private contractor and ceded control of our parking infrastructure for fifty years.
The proposed approach to the construction of the Justice Center promises to be far, far worse, because all of the incentives are perverse. The current plan (to the extent the Administration has shared any information, which it has been largely unwilling to do) has private developers designing, constructing and financing the center, then leasing it to the city.
The “virtue” of this approach is simple: the Administration has devised a clever financing mechanism that allows it to avoid the pesky requirement of a public referendum and the level of public scrutiny such a referendum would require. (Any project that would result in taxes exceeding the now-constitutional tax cap must be submitted to public vote.)
The defects of this approach are numerous.
- It will cost more. Cities with excellent credit ratings (Indy’s is triple A) can borrow money at lower rates than private entities. I’m told the interest rate spread is at least 2%; on 500 million dollars, that’s a chunk of change. Furthermore, private entities must include a profit (and usually cover taxes) in the quoted price.
- That need to build in a profit margin is a powerful incentive to cut corners on design and construction–decisions will be based on return on investment considerations rather than quality and/or the long-term value of what will eventually be a public asset. (As my husband says, public financing gives us buildings like the old Federal Courthouse; leasebacks give us buildings like the post office on South Street.)
- Public projects of this size and scale provide lots of opportunities for crony capitalism–for spreading the goodies among one’s political donors and friends.
And there remain important unanswered questions.
For example, what happens if the City defaults, or finds future revenues insufficient to make lease payments high enough to cover those higher costs? The Administration’s estimate of available revenues includes some highly problematic “savings” it anticipates by reason of the new construction. Which City services will be sacrificed to ensure that the required payments are made? Will our already underfunded public safety budget be cut? Will even more roads go uncleared or unrepaired? Will our public parks be even more neglected?
The problem with “deals” like this one– delivered to the City Council as “take it or leave it” propositions with no meaningful opportunity to ask tough questions or consider potentially superior approaches–is that we taxpayers get stuck with decades-long liabilities agreed to in the dark by people who will be long gone when the bills come due.