Port Financing Overview

The Ports of Indiana has always operated with a strong focus on its core maritime business, working to keep Indiana positioned as the "Crossroads of America." As the result of an extensive strategic planning initiative, the Ports of Indiana (POI) has also identified several new opportunities to leverage its capabilities and experience to make a greater contribution to Indiana's economic well-being. With the 2003 legislative changes, the ports can provide a new incentive for Indiana's economic development arsenal: statewide development financing.

The Need - Indiana has been caught in an economic catch-22 of sorts. At a time when increasing financial incentives for new investment could "prime the pump" of the state's economy, revenue shortfalls preclude new spending to stimulate growth. In short, policy makers and economic development professionals face a daunting proposition: finding ways to boost economic growth without spending money or reducing revenues.

One Solution: Development Financing - One strategy that meets these criteria is to make more attractive forms of development financing available to existing and prospective Indiana companies, a service currently offered by the Ports of Indiana to its traditional port-related clients. The Ports of Indiana obtained statutory changes during the 2003 legislative session that allow the agency to offer development financing to firms statewide, not just for port tenants.

Development financing involves the use of bonding authority to build or expand a facility on behalf of a private company. The company then repays the bond through a lease agreement. This allows the company to treat the cost as an operating expense rather than a capital investment, improving balance sheet ratios and conserving capital for other needs. We envision development financing as a "tie-breaking" economic incentive, used in consultation with state, local and economic development officials to solidify agreements with companies that might otherwise locate in another state or not pursue the project at all.

Why the Ports of Indiana? - The Ports of Indiana is uniquely well-suited to apply development financing:

• Currently offers this incentive on its own properties.
• Has extensive experience as a property manager and developer.
• As a quasi-government agency that works closely with the private sector, the Ports of Indiana is respected as a partner by local government, the financial sector and industry.
• Port authorities around the country engage in similar financing arrangements.
• Underwriters and investors have a high level of confidence in port authorities.

Low Risk-High Return - By using non-recourse bonds, the state assumes no financial risk for the debt. Development financing is a tested practice - Ohio port authorities have used this financing for economic development since 1988, with an impressive track record: 240 projects completed, $1.56 billion invested, and over 20,000 jobs created or retained.

Finally, instead of requiring additional appropriations, development financing may actually provide some budget relief for Indiana. POI could collect fees associated with the issuance of the bond, reducing its need for future capital requests from the General Assembly for new transportation infrastructure. And most importantly, the new economic development will create increased revenues for the state of Indiana from expanding the tax base.