The Vigo County Building Corporation Friday approved lease and financial agreements in the first steps toward financing a new Vigo County Jail.
Part of a financial agreement includes issuing bonds not to exceed $80 million. While the new jail of about 500 beds is projected to have a construction cost of $63.5 million, which includes soft costs of furniture, fixtures, site preparation, said County Attorney Michael Wright, this financial agreement will allow for the sale of bond anticipation notes.
“When you are doing a lease-rental bond, the county cannot make a payment on that asset (county jail) until it is complete, so there will be a two year period where the county cannot make a debt service payment because it does not have a finished asset to lease,” Wright told the three-member building corporation.
Wright said the county is already collecting income taxes for the project and one way to reduce principal costs and long-term interests on the project is to issue a bond anticipation note, paid from the special use income taxes.
“The (bond anticipation) note would be done in advance to use cash on hand to try to buy down some of the debt, cash flow it up to the point where they can start making debt service payments,” Wright said.
The bond anticipation note would allow the county to reduce costs during a construction period of 18 to 24 months
Wright said the county’s municipal adviser -- Crowe LLP, a public accounting, consulting, and technology firm -- are “seeking ways to minimize long term interest costs to the county by using some of that money on hand to reduce the overall debt that needs to be issued ... to try to minimize the interest costs that this community will pay for the project.”
Council meets Sept. 10
That measure will be go to the Vigo County Council for approval. The council is slated to vote on the lease agreement and financing at its Sept. 10 meeting.
“The County Council is really holding the egg basket here. They are the body that controls the pledging of the local income tax toward this project, that is ultimately what will be necessary to make the project go,” Wright said. “This is more of a formality at this stage,” he said of the building corporation.
The Vigo County Council approved a 0.75 percent increase in the local income tax includes two components that would sunset after the new jail is paid off. Those components are a 0.25 percent in a special purpose tax and a 0.20 rate for new correctional and rehabilitative facilities tax.
John Wright serves as president of the building corporation with Pat Ralston as vice president and Becky Buse as secretary, each appointed by the Vigo County Board of Commissioners. The entity owns the Vigo County Courthouse, the current county jail and the Vigo County Juvenile Center.
The building corporation allows the county to construct high-cost facilities outside of its constitutional debt limit of 1 percent of assessed value as the Indiana Supreme Court has ruled lease payments are not considered debt.
“The school corporation has done something similar to this,” Ralston said of using building corporations. “This process has been going on for several years for a new jail and there has been delays. It is something that we have got to the point now that we have got to move forward. There is a federal court (lawsuit) to get this jail built,” Ralston said.
Wright also presented jail design renderings from DLZ archiects to the board. The new jail off the 500 block of W. Honey Creek Drive in Terre Haute will include space for the Vigo County Sheriff’s Office.