GARY — Incoming Mayor Jerome Prince is softening his opposition to the current administration's controversial plan to sell and lease back the public safety building in a desperate attempt to keep Gary city government afloat.
Not doing so by Dec. 31 could lead to the city defaulting on $28 million in loans in the form of tax anticipation warrants, he said.
Having a clearer picture of the city's dire fiscal situation, Prince said such a default could lead to a state takeover, similar to the Gary School Corp.'s takeover by emergency managers and a state-run board overseeing its finances. He said he doesn't want to see that happen.
It's a stark change in tune to his stance earlier in the year, when Prince called the financial arrangement a "bad deal" for taxpayers. At the time, he said the long-term loan would tie the city’s hands even further and leave taxpayers on the hook for millions more in the long run.
Under the plan, the city would sell the building to the nonprofit for as much as $40 million, depending on an appraisal, then lease it back in a 20-year rental agreement. The lease payments would be financed through a bond issue, with an annual interest rate not to exceed 8%.
Critics of the Gary plan have dubbed the sale and leaseback an ill-advised shell game that would put the city on the hook for up to $80 million in high-interest payments while only placing a Band-Aid on current city financial woes.
Prince said he disagreed with the city's notion to the public earlier this summer that the deal on the table was a last, best and final offer.
"Right after the election, the suggestion was that this was the only deal, that we couldn't realize a lower rate, and I just didn't subscribe to that," he said.
Now, Prince said he and the current administration are involved with negotiations with Wells Fargo, which was persuaded this summer to come on board to finalize the deal with investors, to secure better terms and get the best interest rate possible for the city.
He said he didn't like how city leaders shaped this sale/leaseback as the only option on the table. He said he is pursuing other avenues, but declined to offer specifics.
"Equally importantly, I am continuing to pursue other options, and I may have a lead on something that might be more attractive to the city," he said.
Mayor Karen Freeman-Wilson said last week she believes Prince agrees with her administration's belief that is a do-or-die situation. The financial arrangement would free up much-needed capital and provide revenue in the city's coffers — but only in the short term.
"I think he realizes this now," Freeman-Wilson said.