GARY — A controversial plan to sell and leaseback the city's public safety building to shore up much-needed money has received the endorsement from Jerome Prince, the city's presumed next mayor.
Prince, once the plan's fiercest critic, now insists he's saved Gary residents nearly $4.5 million over the life of the loan in the latest negotiations with investors, when compared to the agreement previously inked between the current administration and investors Preston Hollow Capital.
Under the plan approved by the Gary Common Council earlier this year, the public safety building at 555 Polk St. will be sold for as much as $40 million to a nonprofit group, created solely by the city to buy the building. The city would then lease the building back from the nonprofit, rather than owning it outright, shoring up much-needed dollars.
Critics of the Gary plan have dubbed the sale and leaseback an ill-advised $40 million shell game that would put the city on the hook for millions more in high-interest payments.
A few months ago Prince publicly criticized the plan, calling it a "bad deal" for taxpayers. At the time, he said he worried that the long-term loan would tie the city’s hands further and leave taxpayers on the hook for millions more in the long run.
"Even if the deal was done right, it doesn't correct all of the issues before us," Prince said at the time. "I can't, in good conscience, endorse this."
In his latest statement, Prince said he "intervened" in the negotiations to get a better deal. He said he made it clear to all parties that he would not support the sale-leaseback "as written."
He said he demanded the interest rate be significantly lowered, that proceeds be used to retire a large portion of the city's debt, and that the city have an opportunity to buy out the investors once he takes office.
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All along, the city's plan was to use the loan to retire a large portion of the city's debt and have the option to buyout/refinance down the road, Gary Mayor Karen Freeman-Wilson said.
"We were always going to use it to pay off the debt," she said.
City financial advisers admitted earlier this year they struggled early on to secure investors willing to work with them because of Gary’s poor credit and reports of its reputation for shoddy fiscal management.
Freeman-Wilson said Prince helped secure a 5.9% yield for the interest rate, versus a 6.3% yield.
"Half of that is contributable to his intervention, and half of that is due to a change in market conditions, but I'm willing to give him all the credit," Freeman-Wilson said.
Freeman-Wilson said investors have agreed to the latest terms, but it's not official until the bankers accept it. The bankers will send the city a revised list of terms, and a closing date will be set, she said.
"I'm sure that his position had something to do with their willingness to lower the rate, because obviously, their bankers want to get something done. It helped in the end," Freeman-Wilson said. "It benefits me and benefits every resident. I'm not about to balk at it. I'm appreciative."