Jail funding takes shape
Council to consider initiating bond process after favorable financial review
Owen County is now closer than ever to beginning the long-awaited jail project.
With a site selected, prospective negotiations to lower utility infrastructure costs and a more favorable financial position, the process of issuing government bonds for the project could begin at the June 8 County Council meeting.
The Owen County Council heard a presentation from financial advisor Jeff Peters on the county's financial position at its May meeting. Peters is with Peters Franklin based in Indianapolis.
Peters has been a longtime adviser on the county’s finances, especially in pursuing the construction of a new jail.
In the update given by Peters, he said that the implementation of a new local income tax structure has been pushed back from 2027 to 2028 due to activity in the state legislature. This means that the earliest Owen County would see additional income tax revenue is 2029. This restructures the local income tax to consolidate the separate local income tax (LIT) funds into one, eliminating the jail LIT and the PSAP (Public Safety Answering Point) LIT.
Additionally, 25 percent of the revenue from one of the income tax levies had to be sent to municipalities. A new formula has changed the percentage, which is now based on the proportionate share of the municipality's population. This means more of that income tax revenue will go to the county.
“Based on the best information we have today, the way the legislation is written, your income stream is better than what we had previously anticipated for that reason,” Peters said. “The good news is based on the new jail project site and the two estimates that have been delivered, which is an option of 104 beds or 112 beds, we believe that you can fund either one of those scenarios based on these things we’re going to walk through.”
Peters also cited a growing income tax base for the county. The county saw a 4.3 percent increase from 2023 to 2024, the most recent year for which audited income tax receipts are available. He said that this means that income tax revenue for the operational side of the county’s budget is sufficient and growing.
“We would believe that you will have sufficient income tax revenue along with your other revenue to meet the needs that you’re going to have going forward and be able to cover the inflation on that,” he said. “If you think there are some big issues coming up where that’s not going to be true, then we probably want to talk about that because that is one of the primary assumptions, that you’re going to have enough revenue to do everything you wanted to do.”
He said that, based on this information, the county could support an annual debt service of $2.745 million for the new jail facility.
The 104-bed version of the facility would have an annual debt service of $2.25 million, while the 112-bed version would have $2.65 million.
The difference, beyond the number of beds available and price, also lies in the number of holding and detox cells in the area adjacent to what would be the sally port. If the county later needed to add to this portion of the facility, both the cost and the scope of work could pose challenges. For example, to add to that portion of the facility, they would have to tear down the sally port, expand the holding area and then rebuild it.
If the county runs into issues in the future funding the jail project through the current income tax levy, it can increase the levy to 2.9 percent, up from the current 2.5 percent. A 0.1 percent difference comes out to approximately $550,000 annually.
“I still think under the model that we’ve talked about before, at this point, you can stay at the 2.5 percent and fund everything that you want to do,” Peters said.
This honors the council’s desire not to raise property taxes to fund the jail project.
That being said, in order to move forward with the jail project before the income tax revenue comes through in 2029, the county will have payments due in 2027 and 2028 totaling approximately $3 million. The county ended 2025 with $6.5 million in cash reserves in the general fund, which is roughly a year’s worth of operating cash, according to Peters.
“That’s a great benefit to you and shows that you have been diligent about saving that money going forward,” he said.
Currently, the county also has $2.5 million in economic development, $1.6 million in their public safety LIT and $4 million in the correctional facility LIT funds.
“But as we had talked about before in the model that we had developed, we were going to take all of that $4 million, pledge it toward the project to buy down the bond size, so that’s already been accounted for and spent,” Peters said.
Doing so helps save on interest and total principal, and Peters said that it is possible to spend cash reserves on making the debt payments in 2027 and 2028.
Councilman Nick Robertson asked if the county’s financial position looked better than it did when Peters last presented information to them four months ago.
“It does, and the three biggest points on that is the formula that made you share with cities and towns got better to your benefit. We saw a 4.3 percent actual increase in your income tax base in the county, so that shows that you’re growing and the ability to share four percent of your income tax toward EMS is a big safeguard if you foresee a problem when we get into the future years,” Peters said.
Councilman Anton Neff asked about using the $4 million in the jail facility LIT to fund the debt service payment.
“In the model, we’ve already committed it to buy down the bond, so it’s already been committed to the project itself. If you want to utilize that, I think that’s an option, and we would just go back, pull the $4 million out and up the debt service. So instead of being $2.5 or $2.6 million, now it might be $2.75 and $2.8 million,” Peters said of the rates.
Neff pointed out that the county could also sell the property that the current jail and storage units sit on in order to help with the shortfall in year two after the jail is built.
Although that could not take place until the new facility is finished, which will take about 18 months.
Those two properties have not yet been appraised to know how much the county could make from the sale.
The total cost of the project, including purchasing the 17 acres between Walmart and the Owen County Family YMCA and the necessary sewer upgrades, would be $38.5 million for a 112-bed facility or $37.4 million for a 104-bed facility.
Neff did not share Peters’ optimism on the county’s financial position.
“I’m going to still need some time to look at these numbers, but I still think we’re scraping it pretty thin here. We’re on thin ice with these kinds of numbers, and it may sound good on paper,” he said. “I don’t think it takes into account the distribution to other units of government, which the state legislature in the next session will definitely be tinkering with again. So we’ve got to be careful about banking on the entire capacity because we may end up having to give some of that capacity up to support the towns, support the library, support the schools, because they’re all going to want their share.”
County Auditor Sheila Reeves asked if it was feasible for the council to be able to move forward with a decision at their June meeting.
“It’s really up to you as the fiscal body and what assumptions and risks you’re willing to accept at this point from the bond selling part of it,” Peters said.
He said that the county has demonstrated the needed reasonable expectation that they could pay the bond through income tax and not property tax. To do the latter, the council would have to begin demonstrating that property tax revenue could support it. That isn’t how the council wants to move forward.
In addition, the courthouse will serve as the initial security collateral for the bond's interest payments during construction as long as the value is considered equal to or greater than their interest payments due on the bonds. Once construction is complete and the county has the jail facility and property back in its possession, following the BOT or Build-Operate-Transfer process.
Robertson asked what Peters would think if he were a resident of Owen County.
“You made a commitment to build a jail based on income taxes that you imposed twice. I think you need to build a jail and try to pay for it with income taxes, and at this point in time, you have the ability to do that,” Peters said.
Councilman Joe Frye asked if Peters had seen counties in worse financial positions.
Peters said he had but that when he started working with Owen County six or seven years ago, the county was close to one of the worst that he has seen.
“I think operationally you’re in real good shape. If you need to undertake a project, which you all agree you should, you have the means to do it at this point in time,” Peters said. “I don’t think you’re in bad shape now. I think you were.”
Frye asked Peters what his vote would be if he were on the council.
“It would be yes. It’d go back to [the fact that] you as a fiscal body made an obligation when you raised those taxes to replace the jail, and if you have a viable option to do it, I think you know the time has come,” Peters said.
He added that the price of the jail project six or seven years ago was not $37 or $38 million.
“And it’s not going to get any cheaper,” Council President Polly Chesser said.
Peters will be at the council’s next meeting, which will take place at 6 p.m. June 8 in the Commissioners’ Room on the second floor of the Owen County Courthouse, 60 S. Main St., Spencer.
