Wednesday, June 17, 2009
The tax cap situation is different this year than it will be in 2009, 2010 and going forward -- assuming the legislature doesn't monkey with things.
This year the homestead property tax cap sits at 2% of assessed value. So, if line 2 of Table 1 of your property tax bill shows a 'total gross assessed value of property' as $100,000, your total 'property tax liability' on line 5, should be no greater than $2,000. Table 2 shows the tax cap calculated maximums. If you are like me, the maximum tax cap was less than my actual total tax bill for the year.
According to the DLGF, this is because the school general fund costs are still split between the state and the property taxpayers. In my case, Decatur schools' general fund tax rate is 0.58%, so our cap is really more like 2.58%.
Next year, the state will take over the entire cost of the school general fund. So, we should see a full implementation of the 1.5% homestead tax cap, regardless of the amount of debt our school district carries. And, likewise, in 2010 and after, we should see a 1% homestead tax cap, regardless of debt. The schools will have to use operating funds for debt payments if the tax caps limit their tax revenue too much.
The schools have three ways to get around next year's and after property tax caps -- ways we should all be aware of.
First -- if the school district's property tax revenues, for all items besides the general fund and the pre-school program fund, drop more than 2%, they can apply to the state for a 'levy replacement grant'. The state will have a fixed amount of money in that fund and will distribute it proportionately to districts that fall in this category. The fund likely will not make up the entire shortfall, but it will make up some of it.
Second -- if the school district's property tax revenues, for all items besides the general fund and the pre-school program fund, drop more than 5%, they can apply to the 'distressed unit appeals board' for relief. This would entail public notice to the taxpayers of the district and public hearings before the DUAB. The DUAB would evaluate the testimony and would decide if the school district should be allowed to avoid the property tax caps.
Third -- the school board can call for a referendum, where the public would vote on whether or not the district should be allowed to avoid the property tax caps.
All three approaches deal with current debt, and not new projects. After this year, if the district pays for property or projects over certain amounts, depending upon the exact project, they will be required to hold a public referendum on that project and how much over the tax caps they can go. The voters would decide yes or no. If the district pays for property or projects that cost UNDER those certain amounts where they are not required to hold a public referendum, then they must abide by the property tax caps.
Decatur stands heads and shoulders above all other school districts in the County with its tax rate to cover debt -- indicating that the Decatur taxpayer can ill afford the largess that the school board allowed to happen.
Decatur's rate to cover its school debt is (1.57%), highest in the County. Decatur's total school tax rate (2.75%) is the highest in the County. This of course makes Decatur's total property tax rate (4.3067%) the highest in the County.
Looking at the tax rate to cover school debt only, Decatur is 1.7 times that of Franklin Township schools, its nearest 'competitor'. Listing the other school districts in ascending order, Decatur's debt tax rate is 2.5 times that of Wayne, 2.9 times that of Beech Grove, 3.4 times that of Warren, 3.6 times that of Perry, 4.5 times that of Pike, 5.1 times that of IPS, 6.1 times that of Lawrence, 16.4 times that of Washington, and a whopping 424.3 times that of Speedway school districts.
Monday, June 15, 2009
The bottom line is that our tax bill is LARGER than the 2% tax cap for pay-2008 would allow. I called the Marion County Treasurer and I was told that the Legislature passed a change to the tax cap legislation that would allow schools to charge a greater tax than the caps would allow.
I am furious.
I called the DLGF and had to leave a message. I would like to know more about the exception and how much it will erode the 1.5% tax cap and the 1% tax cap.
Because of profligate spending the the Decatur School Superintendent, Don Stinson, and the School Board, my school taxes now comprise 63% of my tax bill.
I am furious.
I called my Representative, Bob Behning. Had to leave a message.
I will yet call my State Senator and my school board members.
This erosion of the tax caps may be hitting Decatur harder than most Townships, but you should be concerned if you were hoping for relief from the caps. The schools were the primary reason for the excessive property tax bills to begin with.
More as I get it.
Thursday, June 11, 2009
This is a continuation of the effort by the Ballard Administration to craft a complex deal with TM Miller Enterprises that would leave the City to pay the loan for the acquisition of both the 450 E. Market site and the garage just north of it. The proposed abatement would be for 10 years and amount to about $6.7 M. In a twist, TM Miller Enterprises would return the abated taxes plus $100,000 per year to purchase 600 spaces of the 1677 space garage.
A number of citizens spoke against the purchase of the garage during public comments before the MDC on June 3rd.
I am still awaiting information from the City regarding their authority to use future market value instead of current fair market value of the garage in determining the fiscal propriety of the purchase. In addition, I still await information from the City regarding their authority to make the purchase while avoiding the requirement of a public hearing on the purchase AND review by the City-County Council.
Although the abatement is the central feature that makes the whole deal work, it is not yet finalized and cannot be finalized until the public has had a chance to give input. That, as mentioned above, is set for July 1 at this time.
Monday, June 8, 2009
We believe that any responsible effort to seek long-term funding solutions for the activities and facilities managed by the Capital Improvements Board must include an investigation to evaluate the CIB’s past history and financial transactions. We respectfully request that you, as the ranking elected officials for the City of Indianapolis and State of Indiana, call for a thorough examination of the function, responsibilities, policies and authority of the Capital Improvements Board through its entire history. This would include its procedures, or lack thereof, to ensure the retirement of debt, as well as its financial ability to fully and responsibly fund the requirements of its contracts with any professional or semi-professional sports teams (i.e., Colts, Pacers, Indians, Fever, etc.), or any other entity, public or private, prior to those contracts being signed.
It is certain that the current economic climate in our country has contributed to the difficult funding situation now faced by the CIB, but we believe that past practices and decisions have been a greater contributor to the general long-term decline of the CIB’s fiscal soundness. The investigation for which we call is not to point fingers, but rather to quantify all the factors that have led to the CIB’s current position and ensure that those factors do not recur and contribute to future financial conundrums. It is clear that, whatever solution is adopted to resolve the CIB shortfalls, the residents and businesses of Marion County, and perhaps the state, will be ultimately responsible for generating most, if not all, of the new funding streams needed. It is therefore incumbent upon the citizenry to demand establishment of protocols and policies that will safeguard against the creation of future problems.
As a City and a State, we must expect nothing less than one hundred percent accountability and transparency from any and all agencies and governmental units that represent and act on behalf of the public, particularly when those actions result in significant financial liabilities. We hope that you share this vision and will seek not only a solution to the financial crises of the CIB but also a resolution to the framework that led us to this crisis.
Thursday, June 4, 2009
That is the appraisal process that justifies the City's payment of a $18.5M loan whereby it gets one of two properties paid for by that loan.
Using the KISS principal, one might say - if a seller is willing to sell two properties for $18.5M, doesn't that mean that each property alone is worth LESS than $18.5M? Isn't the selling price the market value???
Not if you have your thinking cap on !
The City had two appraisals done for the market value of the garage alone. I presume this was required by law and that the intent of the law was to protect the public from an elected official or body from paying more for something than it is actually worth.
The appraisals used the assumption that the development proposed as part of the complex deal, was done. That's right, they took a future value for the garage and said it would some day be worth $18.6M and $18.9M. How very fortuitous that both appraisals came up with more than the amount TM Miller has agreed to buy two properties for !
Now I'm thinking that banks should operate this way, too. You go in for an equity line of credit on your house and bring in an appraisal for how much it could be worth in 10 years assuming the completion of all the plans that might increase your property values. You'd get the inflated line of credit no doubt.
This isn't conservative allocation of tax money by any means. It isn't fiscally sound risk management, either. It is a circumvention of the intention of the law. It is a gutting of a hurdle put in place to protect the public and their tax dollars. Ludicrous or clever?
There are many characteristics of this complex deal that should send shivers down the spine of every Marion County taxpayer and every proponent of open government.
#1. This very complex deal was approved in backward order - tarnishing, if not outright spitting on the honor of the public hearing for the abatement to be held two weeks from now. If the abatement were to be denied, the deal could not be finalized as it is the central cog in how the deal 'works'.
#2. This very complex deal was approved without any real details about the project, with significant questions insufficiently answered, and with little time to really understand the deal. During the day, three meetings were held that in part dealt with this deal proposal. At a MDC committee meeting in the morning, a number of really cogent questions were asked. Ones that I would never have thought of, but which made sense the instant you heard them. Jim Curtis, VP of the MDC, asked why the MDC should put the taxpayers on the hook for $18.5M and not have both properties deeded to the City. The Ops Center deed could be transferred to the developer upon completion of the project. Randy Snyder, President of the MDC, took that one step further posing the scenario where TM Miller Enterprises goes bankrupt. Is the City protected insofar as actually acquiring the Ops Center property or would it be tied up in court for years? It was clear that this had not been discussed among the deal makers before and an inadequate answer, amounting to 'trust us' was given. More 'minor' questions also remain - if the garage does not generate enough revenue to cover the payments on the loan without the abatement money, how does the City make those payments should the developer not get his financing or the development stalls? If the developer defaults on the deal, how could the City sell the property, given how long it has remained on the market to date? These are just examples of a laundry list of questions without answers about this project and deal. No site plans, no real particulars of the project available for review. In common parlance its known as a pig in a poke.
#3. The apartment market is at capacity downtown, with rising rents to boot. If there ever was an example of a downtown market segment the taxpayers could expect to survive on its own, this would be it. Instead, Mayor Ballard is content to toss taxpayer money at it anyway. The Market Street ramp has come down, the street scape is being improved on this block -- additional reasons why the market for apartments here should be able to be totally market drive. The upshot here is the message that nothing downtown will be developed without significant taxpayer money involved. The Mayor doesn't give a hoot about cutting the Parks budget, but he doesn't blink when a business comes to him with hat in hand for tens of millions in corporate welfare. The taxpayers of Marion County will all be broke, they will have no services left for their own peaceful enjoyment of life in Indianapolis, and downtown will still be a money pit --- because there is no plan or interest in creating a plan for downtown's self-sufficiency.
#4. The use of an abatement in this manner creates a 'mini-TIF'. The Mayor's people feel it is superior to a TIF in that it is of shorter duration (10 years vs. until the debt is paid off). But on the negative side as far as the public is concerned is the lack of public input or Council oversight. The legislation for how the City can create a TIF District puts the whole deal out in the open for public scrutiny. Public hearings are required and the City-County Council must review and approve it. Not so with this clever mini-TIF. Even yesterday, the MDC did not have to hold a public hearing on the deal, although they did so - to their credit. There will be a hearing on the abatement -- but as noted in #1, that horse has already left the barn with the approval of the deal yesterday. Mayor Ballard has indicated he wants the authority to strike abatement deals without any oversight. But the legislature did not grant his wish. The public process developed for TIF Districts is being written off the books by the use of this mini-TIF approach and the public should be concerned about that reduction of transparency.
Wednesday, June 3, 2009
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.
Tuesday, June 2, 2009
Reported today in the Indy Star by John Ketzenberger and on the IBJ website by Cory Schouten, the deal raises many many questions.
The deal must be approved by the Metropolitan Development Commission at a hearing tomorrow at 1:00 pm (Public Assembly Room, City-County Building). At 11:00 am, the MDC's Economic Development Committee will meet and discuss the proposal. That committee will meet in room 2160 of the City-County Building, should you wish to attend. It is not clear at this point, if the City Council would also have to vote on the proposal, at least as far as appropriating the moneys.
The deal appears to be that Miller, through his TM Miller Enterprises, will arrange a loan to purchase the Bank One Administration Building which includes a surface parking lot, and a 1600 space parking garage across the street, for $18.5M. The City would make the payments on the loan and become the owner of the parking garage. The City would also grant a 10 year tax abatement totaling $6.7M. Miller would have 18 months to find investors to come up with an anticipated $65M to turn the building into 600 market rate apartments and retail spaces. If that timetable is not met, the City would become the sole owner of both the garage and the building - presumably still paying on the loan.
More complications are that Miller would lease 600 of the parking spaces for $100,000 per year plus the amount of the tax abatement for that year. Confused yet?
The revenues from the parking garage would be the payment stream from which the loan would be repaid.
This begs the question: if the parking garage revenues can pay for the loan and refund the tax abatement, why does Miller need the City in the picture at all?
Ketzenberger brings up the strong downtown market for apartments and suggests that taxpayer groups might balk at abating any more apartments.
Here's how strong the Downtown apartment market is: Although more than 750 units have been added since 2000, the vacancy rate remains the same -- 5 percent. The monthly rental price has increased from about 90 cents per square foot to $1.08 in the past eight years. And rental rates at two major developments, The Waverly on South East Street and the Cosmopolitan on the Canal, are $1.35 per square foot.
"That shows there is a lot of demand," Sweeney said. [Sweeney works for Indianapolis Downtown, Inc., which compiles occupancy numbers for downtown spaces]
Schouten concludes his article with:
Yet the city's abatements and investment in the former bank properties suggest a deal to redevelop the 4-acre MSA site still could be quite pricey for taxpayers. And if the current project doesn't materialize, the city would be left holding even more downtown real estate and paying down an $18.5 million loan.
Why is the City getting involved in this deal? If apartments already represent a strong market downtown, why not let the market work? When, exactly, will downtown be self-sufficient?
As an aside, TM Miller Enterprises donated $1000 to the Ballard Campaign on September 30, 2008. No campaign finance reports for 2009 have been filed. Those are not required until January, 2010.
What does the public think? Does Mayor Ballard really care? If so, you might think that this juggernaut would be a tad slower than coming to the public's attention the day before the decision is made.
[added 6-2-09] I have been informed that no public comments will be allowed on the topic of the purchase agreement with Mr. Miller as no public hearing is required. The abatement will be taken up as a public hearing at a future MDC meeting, likely in two weeks. I have also been informed that the City-County Council has no oversight on the agreement or the loan or receipts and payments accrued from the garage. So, poof ! Here's $18.5M more debt for Indianapolis secured not only with potential receipts from this garage, but backed up, if needed, with actual receipts from other City-owned garages. Public input is not desired.