Similar to other poor urban cities, Indianapolis was facing a facilities crisis without the funds necessary to address the need. The school district faced a State imposed debt limit that was insufficient to embark upon the large scale capital program necessary to bring Indianapolis city schools into the 21st century. To deal with this challenge, the State allows school districts to establish not-for-profit holding companies to act as conduit issuers to secure funding for capital programs. The holding corporation is governed by a Board of Trustees made up of three private citizens.
What was the Indianapolis Plan?
Indianapolis Public Schools (IPS) proposed a $832 million program that would renovate or rebuild 72 schools. The program would be broken into four phases, each financed by an installment purchase agreement between IPS and the holding corporation. The Indianapolis holding corporation, issued the majority of the debt associated with public school projects, and is repaid by the school district over time. To secure the debt, the public school system transferred ownership of the school facilities being developed to the holding corporation, which in-turn signed a management agreement granting exclusive use of the facilities and management of the facilities to Indianapolis Public Schools. Much like with a conventional mortgage, ownership of the school facilities reverted back to the school system upon repayment of the outstanding debt.
Indianapolis Public Schools has taxing authority, so installment payments were made, at least in part, through a specific capital program levy approved by the voters through consensus or ballot initiative. The remainder of the funding for the project was obtained through debt issued by the schools system and capital funding from the state. The flexibility provided to Indianapolis due to the use of not-for-profit holding companies allowed the program to take advantage of the ARRA funding that became available in 2009 and 2010 and resulted in significant savings for the taxpayers of Indianapolis during Phase 3 of their program. Indianapolis currently expects Phase 3 of their plan to be completed in 2014.