State budget panel weighs risks of additional $200M in IEDC requests

The quasi-public agency behind a mammoth innovation district reassured budget experts Thursday on the risks it’s taking to win competitive business investments and speedily close those deals.

Indiana’s State Budget Committee on Thursday approved a combined $203 million in additional requests from the Indiana Economic Development Corp. Nearly 78% of the total will go to projects in the controversial LEAP-Lebanon Innovation District.

“It seems like we’re just moving forward and seeing where we might wind up on some of these projects,” Rep. Greg Porter, D-Indianapolis, said. “… It’s just—it’s a lot of money, a lot of land. To me, there’s too much uncertainty.”

Other panel members, even as they weighed the chances some deals might fall through, offered sympathy.

“You’re attempting to (make) state government move at the speed of the private sector,” Sen. Chris Garten, R-Charlestown, told IEDC officials. “And that’s a tough job.”

“The reality is (that) the private sector works and operates and executes with a level of uncertainty,” Garten continued later. “… I’m willing to accept some of that, because I do understand the nature of the business.”

The committee is composed of lawmakers from both parties as well as state-employed fiscal experts.

More big state investments in Boone County

Committee members approved about $158 million for three more land acquisitions for the LEAP district, but not before pushing IEDC officials on backup plans and contractual safeguards.

That’s because the IEDC plans to use two of the land buys to sweeten the deal for companies that have not yet committed to investing in Indiana.

The largest line item, for $122 million from the state’s deal-closing appropriations, will go toward the purchase of about 1,000 acres of property. Indiana is a finalist in the siting of a potential $50 billion investment by an undisclosed global semiconductor company, according to the IEDC.

Executive Vice President David Rosenberg said Indiana has few mega-parcels suitable for such expansive projects. And the IEDC’s option on the land is expiring this summer.

“LEAP has been a focus on those types of mega-sites that need that speed. Speed is the new incentive,” Rosenberg said. “And being able to have the site ready for development—to make that billion-dollar investment and get that (return on investment) sooner—that’s very, very attractive to the market.”

Porter criticized the IEDC for the price: about $122,000 per acre.

He and other committee members also questioned the IEDC for seeking to buy the land before the company has decided on Indiana, and for its willingness to transfer ownership of the land before the company delivers on specific economic development commitments—as opposed to after.

“What’s the guarantee that they fulfill their end of the bargain?” State Budget Director Zac Jackson asked.

“I can’t speak in guarantees, because it’s an unknown,” said Brock Herr, senior vice president of business development at the IEDC. “But I have a high degree of confidence that, should this company or another select to build at this site, that they’re going to want to immediately take title to the land so they can get started.”

If the company doesn’t choose Indiana, the IEDC plans to sell the land—which it says is in high demand—and the money will go back to the state’s General Fund. Officials asked the committee to, in that event, put the money into a revolving fund for future acquisitions.

The committee also approved $16 million for a 290-acre purchase meant to help the IEDC woo a data center project worth an estimated $3.2 billion and creating up to 250 “high-wage” jobs.

The IEDC plans to sell the land to the company if it decides on Indiana. The money would similarly go back to the General Fund and the committee could also transfer it to the revolving fund.

And finally, the public-private partnership also won approval for a $20.2 million purchase of 220 acres to build a new interchange and make other roadway improvements. It’s meant to support a $3.7 billion manufacturing facility investment by homegrown pharmaceutical giant Eli Lilly and  Co.

Committee members appeared baffled by the purchase’s structure. About $18 million is for land the Indiana Department of Transportation will build upon, and that agency may ultimately reimburse the IEDC.

The line item also generated a brief spat between lawmakers on the committee over the non-usage of eminent domain.

“I don’t want to steal private land,” said Garten of the court-run process.

“I just think what we’re doing here is enriching some people at the expense of the public,” said Indianapolis Democrat Ed DeLaney said, who called eminent domain “the number one weapon we have to make negotiations level.”

Funding development

LEAP is at least 9,000 acres, according to the IEDC’s website, but its total size and budget is unclear. The IEDC previously spent $126 million on land in March, the Capital Chronicle first reported.

“It’s kind of piecemeal. So, I don’t have an overall cost because I don’t know how many acres (the IEDC) has options on,” committee chair Sen. Ryan Mishler told the Capital Chronicle.

The IEDC isn’t beholden to the same public reporting and transparency rules as other government agencies. And its officials often says they can’t publicly discuss key details of deals in which they’re involved. That has generated unease among transparency and fiscal responsibility advocates.

“It is kind of almost like a catch-22 because you can’t reveal (trade secrets), because you’re in negotiations, but then you’re asking us for money,” Mishler said.

He himself has signed a non-disclosure agreement in order to be let in on discussions. Mishler said his solution was to ensure the agreement would allow the state to “claw back” the land if the company in that deal didn’t deliver.

IEDC officials said Thursday they hoped to include provisions giving Indiana the right of first refusal if a company the state sold land to wants to drop the land later. That could prevent companies from profiting off transactions with the state.

Mishler said if he’s not comfortable with a budget ask, it won’t go on the agenda—although he expressed sympathy for committee members who must vote without knowing “all the details.”

“But I also feel like the IEDC wants to be upfront because, you know, … they’re going to come back and ask for more money,” he added. “So they have every incentive to make it work and not try to deceive anyone.”

Mishler said the state will continue evaluating spending in its two-year budget cycles, and that the budget committee will similarly continue its “oversight of the Legislature.” Key for Mishler was limiting tax credits, because they’re typically ongoing rather than one-time obligations.

The committee also approved two other IEDC asks for $35 million and $10 million in performance-based grants for projects in St. Joseph County and Fort Wayne.

Those incentives are delivered only after the state verifies and certifies the companies involved have made good on specific commitments, which can include investment amount, job creation and retention and wage metrics.

The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.