Can any company qualify?
No. Only credit-worthy companies qualify for this type of financing. This is a necessity because the repayment of the bonds is entirely the responsibility of the company entering into the financing arrangement. Therefore, the bondholders (buyers) must be assured through a full disclosure process that they are buying investment grade securities. For this reason, it is much more likely that well-established, publicly owned and financially healthy corporations would seek this type of financing.

Why should the state's Port Authority be involved in development financing?
Ports, as public enterprises, are empowered to offer a broad range of products and services to private industry as means of inducing commerce, investment and economic growth. Usually these products and services are related to goods and passenger transportation. However, many ports today engage in economic development much more broadly in partnerships with other public agencies and the private sector. In essence, Ports have been able to leverage their traditional capabilities to fill additional needs in the economy and add value for the private sector.

With respect to development financing, ports are viewed favorably by the investment community as a "best of both worlds" bridge between the pubic and private sectors. Moreover, investors value the security and dependability of a governmental entity, but also appreciate the more business-like approach and structure of ports.

Will this require any statutory changes?
Yes. The Ports of Indiana obtained legislative authority in April 2003 to operate outside the confines of its three ports. The current statute enables the ports to develop intermodal facilities and provide development financing beyond existing port properties. The change would essentially extend the ports' existing powers to other locations within the state of Indiana, allowing for:

• Development of "rail ports" at strategic locations
• A new, statewide development financing program

Is this a smart strategy in today's economy?
The competition for attracting businesses and creating jobs has become extremely aggressive among surrounding states. It's more important than ever before that Indiana keep up with economic incentives being offered to relocating and expanding companies. Not only will this tool help Indiana attract more businesses, it will help the state keep and grow the industries it already has.

Does development financing involve any kind of risk for the State?
No. These transactions are structured as non-recourse bonds. That means if a company would have trouble making a payment, the owner of the bond - the purchaser - would be at risk, not the state or the POI. Neither the state nor the POI can ever be held liable to repay the bonds. The bondholder would look to the assets for collateral, much like a bank would treat a mortgage. In the worst case, the POI might be asked to relinquish ownership of the asset to facilitate a sale or reuse. However, it is important to note that no POI or state investment will be made in the facility, so nothing is at risk financially.

Will the POI use the program to target any particular industries?
At least initially, we have no plans to favor one industry sector over another. Unlike tax-exempt municipal bonds, there is no volume cap on these transactions. So, we think the market is the best determinant of the funding allocations.

Is there a market need for development financing?
Yes. Financial advisors and economic development advocates have identified a definite need for this type of statewide development finance program in Indiana. They have concluded that communities in Illinois, Ohio and Michigan that have such programs provide competitive advantages in attracting and retaining businesses in those jurisdictions. For example, the Dana Corp.'s technology center to be built in Toledo will be financed by the Port of Toledo as an operating lease. Fort Wayne, Ind., competed vigorously for this project. With authority similar to ports in Ohio, the POI could have partnered with Fort Wayne to level the playing field with Ohio.

Will the POI profit from this program?
The POI would typically earn a nominal fee for issuing the bonds and a smaller annual fee over the term of the lease. This revenue would cover administrative costs and possibly generate excess revenues available for other uses. To the extent that the program did generate any excess revenue, the POI would use it to off-set its own capital development needs at the state's three public ports. This could reduce the need for future capital funding requests to the Indiana General Assembly. The POI does not receive any operating funds from the state, and uses any excess revenues to replace and build new infrastructure at the ports.

Would the POI use eminent domain power to assemble land?
While the Indiana Port Commission does have the power to condemn property for authorized port development purposes, the Commission would prefer to defer to local government to determine if and when condemnation would serve the public interest with respect to any particular development project under review.

How will the POI identify "good deals?"
POI staff will conduct extensive "due diligence" on each prospective financing transaction, as is performed today on all lease and bond financing deals. Staff will also be assisted, as needed, by outside financial advisors with no financial interest in the transaction under review. It is important to keep in mind that only companies with strong credit ratings will be eligible for lease financing.

What governmental oversight will be necessary for this program?
The POI is governed by the Indiana Port Commission, whose members are appointed by and accountable to the Governor. Final approval of all development financing activity would be granted by the Port Commission. The POI would be pleased to make ongoing reports on development financing projects to the appropriate legislative committees as deemed necessary by the General Assembly.