Wednesday, June 3, 2009

IPS 2nd Biggest Loser in Proposed TM Miller-City Deal

The public is certainly the biggest loser in the proposed deal for the City of Indianapolis to aide TM Miller in developing the abandoned Bank One Administration Building into apartments and retail spaces. In the deal, the City would purchase the 1600 parking space garage across the street by making all the payments on a $18.5M loan for both parcels. The City would grant TM Miller a 10 year abatement that would amount to $6.7M in that time. Meanwhile, TM Miller would purchase from the City, 600 parking spaces - paying the amount of that year's abatement plus $100,000.

It has been extremely curious to me why that circulation of the abatement money is part of this deal. I haven't settled on anything at this point. But, it is clear that the 2nd biggest loser will be IPS.

Abatements are a forgiving, if you will, of a percentage of the property tax bill owed on a parcel. In this case a 10 year abatement would begin in year one with 90% of the bill forgiven, followed the next year by 80% forgiven, followed by 70% forgiven, etc. This straight line frontloads the tax benefit to the property owner.

In Marion County, roughly half of all property taxes collected go to the schools. So, over 10 years, about half of the City's generous abatement offer to TM Miller would actually come out of IPS's cut. There are two more complicating factors here to consider. In the pre-tax cap days, granting of abatements just increased the tax on the rest of the taxpayers, so IPS would not be out a dime. But, with the tax caps fully engaged in 2010, it would not all be recouped by higher taxes on all taxpayers, since many would have hit the cap.

So, it is difficult to say without a complex mathematical model of Marion County property, but IPS will surely see a drop in property tax collections due to this deal. It would be anything up to $600,000 in the first year and up to $3.4M over 10 years. That's just this one deal. Keep adding deal upon deal upon deal.

It is incumbent upon the decision makers to find the real hit IPS would take and to seriously consider the impact.

No comments: