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August 3, 2013

State wants changes to ISU downtown housing plan

Budget Committee concerned about costs, school not owning housing building at end

TERRE HAUTE — When the State Budget Committee met Friday at Indiana State University, one item was noticeably missing from the agenda — ISU’s long-term lease for downtown student housing, a public/private partnership.

The item was tabled at the committee’s July meeting, and committee members say the lease agreement needs changes that are more favorable to ISU.

ISU sought approval for a 30-year lease agreement with private developer Thompson Thrift, which would build a four-story retail/residential building along Wabash Avenue between Fifth and Sixth streets. ISU would lease the upper three floors for student housing.

Annual lease payments are estimated at about $1.05 million per year and ISU also would be responsible for operations and maintenance of the residential areas.

ISU also would pay costs associated with preservation of existing historic facades of buildings, estimated at $2 million.

The total expected cost over 30 years was estimated at $33.6 million, according to information provided to the State Budget Committee.

“We think the lease agreement needs further work,” State Sen. Luke Kenley, R-Noblesville, chairman of the committee, said earlier this week. The proposed agreement as it is now “doesn’t look like a good arrangement for ISU.”  

The 30-year lease with the private developer “is a very long-term commitment,” he said.

Kenley said the proposed project involves an “unusual arrangement” and is unlike other traditional university housing projects that have come before the State Budget Committee.

Kenley said he appreciates that ISU wants to be a good community partner with the city of Terre Haute and he commended ISU for working with the community to take over the former federal building/post office to use for the Scott College of Business.

But the State Budget Committee’s priority is how the agreement would impact the university and its students, Kenley said.

The budget committee is not killing the proposed project, but it needs more work. “We’re just not quite ready to go forward with it,” Kenley said.  

It’s not just Republicans who are concerned. State Sen. Karen Tallian, D-Portage, said she’d feel better about the project if ISU eventually owned the housing facility.

She also has concerns about the cost of the long-term lease. “I think we really need to justify the numbers. What is it going to cost the university to build this project and own it versus be a tenant?” she said.

Tallian said she’s been a landlord before, “and landlords want to make money. But as kind of the guardian of the state’s finances, I need to make sure this is a good deal for the state of Indiana.”

State Budget Committee members visited the site of the proposed downtown housing on Thursday, she said.

Asked if committee concerns can be addressed, she said, “I hope so.”

State Sen. Tim Skinner, D-Terre Haute, an alternate on the State Budget Committee, has discussed the project with other committee members and tried to explain the project’s importance to ISU and the downtown area.

Kenley supports the idea and the community, Skinner said, but “he wants to see ISU with a better deal in this project” than what is currently on the table.

Skinner believes the concerns can be addressed. “I think we all share in the belief that this project has a lot of potential,” he said.

ISU President Dan Bradley said on Thursday he believes the issues “will be worked out.” Diann McKee, ISU vice president for business affairs, and Thompson Thrift representatives “are working on some changes to the agreement,” he said.

Because of the changes, the lease will have to go back to the ISU board of trustees, and its next meeting is in September. “It will probably be October before it gets back to the budget committee,” Bradley said.

He still anticipates the project will be completed and ready for occupancy by fall 2015. “We’re still pretty confident. Clearly, it’s disappointing it has taken so long,” Bradley said.

The ISU president said that State Budget Committee members “are somewhat uncomfortable about ISU not having a piece of property at the end, and they are concerned about costs.”

The committee also wants to ensure the costs to students who live in the downtown housing “don’t escalate at unreasonable rates,” he said.

In discussions, ISU will be working with Thompson Thrift to address those concerns, Bradley said.

Paul Thrift, president of Thompson Thrift Development, could not be reached for comment Friday.

Thompson Thrift does not yet own most of the property on the north side of Wabash Avenue between Fifth and Sixth streets, but it does have an agreement with Mike and Kal Ellis to purchase the properties.

Mike Ellis said that agreement is still valid, and he supports the downtown retail/housing project. “We will see this through one way or another,” Ellis said. “It may not be the timetable we’d hoped for, but I think the end result is a better downtown Terre Haute.”

The parties entered an agreement “with eyes wide open. We knew the process would entail multiple layers of governmental approval, and we made necessary provisions to accommodate that,” he said.

The Ellises are in the process of salvaging items of value from the properties, he said.

Sue Loughlin can be reached at (812) 231-4235 or sue.loughlin@tribstar.com.

Maureen Hayden, CNHI Statehouse Bureau, contributed to this report

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