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Howard County Council approves pledge resolution to support new jail bonds
Summary
Council voted to approve Resolution 14, a pledge resolution designed to secure bonds for a new county jail by pledging certain local income-tax revenues and a property-tax backup (intended as credit enhancement). Bond counsel said the structure is bifurcated to address state LIT changes effective in 2029.
The Howard County Council on June 23 approved Resolution 14, a pledge resolution that will underpin bond financing for a proposed new county jail using a lease-and-building-corporation structure and a layered revenue pledge.
Max Adams of Barnes & Thornberg, bond counsel for the project, explained the financing plan: the building corporation will issue bonds and the county will lease the project and make lease payments that flow to bond debt service. "We're issuing bonds to um construct the new jail," Adams said, describing a lease structure and a plan to pledge local income-tax revenue streams toward lease payments.
Adams said the pledge is bifurcated to reflect near-term and longer-term changes in Indiana law. Through the end of 2028 (payments due Jan. 15, 2029, for 2028 collections), the county will pledge proceeds from the correctional facility local income tax (LIT) and the public safety LIT — including LIT receipts the county receives from the city of Kokomo — to cover lease payments. Beginning with the July 15, 2029 payment cycle, the county would shift to pledging the state’s restructured general-purpose LIT under Senate Enrolled Act 1, with property-tax revenues pledged only as a backup (credit enhancement) that Adams said the county does not intend to draw upon. "The intent is that we never have to draw upon property taxes," Adams said.
Adams and Jason Semler (municipal adviser, Baker Tilly) answered council questions about payment timing, standard semiannual payment dates (Jan. 15 and July 15) and the concept of parity and junior obligations. Adams described junior obligations as subordinate claims on revenue that would carry higher interest rates if issued; he said the resolution includes parity-language and coverage tests (125% coverage) designed to preserve marketability and allow future projects only if revenue projections support additional debt.
Councilman Roberts moved approval of the resolution and Councilman Falner seconded it; the motion carried by voice vote.
What’s next: County staff and outside advisors will proceed with final bond documentation, underwriting and rating work; Adams and Baker Tilly flagged timing considerations tied to the new LIT structure and the county’s planned issuance schedule.
