Thursday, October 14, 2010

Did the CIB Really Need Those Tax Increases & Loans?

Remember the CIB bailout saga over the last two years?

Back in early 2009, the CIB and its local allies, pleaded with anyone at the Statehouse who would listen. Everything was bleak. They absolutely HAD to have $43 million more money for operations and $43 million to avoid catastrophe with their bonds. Lucas Oil Stadium had not yet opened, but it was projected to cost $20 million a year more to operate than the old Hoosier Dome. The Legislature ultimately gave the City-County Council the authority to increase the hotel tax, increase the footprint of the Professional Sports Development Area, and the opportunity to get a $9 million per year loan from the State for each of 3 years.

Unpopular though it was, and armed with assurances that none of the money would be given to the Pacers organization, the Council passed the Legislature's bailout package in 2009.

Given the dire prognostications, and the fact that the Legislature and Council actions would increase annual revenue by $22 million at the most, you might think it impossible for the CIB to squirrel away $20 million in 2009 and another $20 million again in 2010. But, you would be wrong.

Each year, as part of its budget ordinance, the CIB estimates what the fund balance will be that year, and also what the fund balance will be at the end of the next year - given the budget they submitted for approval.

Ultimately, the CIB operating budget for 2009 was set at $65 million. They ended up actually spending 'only' $44 million. Those savings showed up in their fund balance. They estimated the December 31, 2009, operating fund balance at $5.6 million back in 2008, as shown in the 2009 budget ordinance. A year later, they improved their estimate of the December 31, 2009, operating fund balance to $26.0 million.

In August of 2009, they estimated that the operating fund balance at the end of 2010 would be $22.8 million, given the budget they introduced for 2010. Now the CIB estimates the fund balance at the end of 2010 will be $45.3 million.

To recap, while the Council raised taxes and allowed loans totaling less than $22 a year, the CIB managed to pad their operating fund balance by $40 million in two years.

Meanwhile, they managed to give the Pacers $10 million and collect $4 million of property taxes from the MDC this year.

So, did they really need the increased hotel tax and the increased footprint of the PSDA and the loan from the State?

9 comments:

Larry Williams said...

It was all a lie from the beginning - one thing that can be guaranteed with respect to the downtown Ponzi scheme, by its very nature, is that the lies, deception, fraud and theft never end.

Jon said...

So the CIB is 40+ million in the black and it is using TIF dollars not their dollars to fund the ICVA! Does anyone see any sense in that?

Advance Indiana said...

Pat, Part of the predicate for that deficit was the coming due of that loan to the Circle Centre Mall investors. Normal lenders would insist on repayment of a loan when it came due but not these Circle Centre mall investors, which includes, ahem, the Indianapolis Star. The CIB, even after capturing all of this new revenue, has failed to pay off one dime of that loan. As Lathrop's budget presentation showed, no sinking fund had been established to repay that loan, which I believe is at least $26 million. The CIB is taking on a new state loan obligation of $27 million for which there is no sinking fund to repay. Add those two together and what to you get? The deficit the CIB claimed when this whole business started.

Advance Indiana said...

Another point, Pat, you always have to pay close attention to the part of the budget where the CIB explains its debt obligations for the coming year. The CIB historically will say one thing to support a certain budget appropriation during the budget process and then announce during the budget year that the CIB was able to get some change of modification in its debt repayment schedule that frees up money to be used in its operating budget. I think I can accurately say that what is in that budget for debt obligation is totally bogus. It's an old trick Lathrop learned during her days as Controller in the Goldsmith administration.

Had Enough Indy? said...

Gary - according to the 2009 financial report on the CIB website (http://www.capitalimprovementboard.org/financialreports/CIB%20Annual%20Financial%20Report%202009.pdf; see p 52-53 of the pdf, note 8)

"The loan from the civic-minded group that includes the Indy Star, has now grown to $33 million.

Below is much of that section:

Under a borrowing arrangement executed in 1998, certain civic-minded local businesses...began lending to the CIB ... certain funds paid to them from Circle Center Limited Partnership ... for the purpose of assisting with the financing of Conseco Fieldhouse and other CIB activities....
The original borrowing agreement provided that the initial notes would mature on December 31, 2007, with interest at a per annum rate equal to 3%. On December 31, 2007, the Board entered into an arrangement to refinance the original notes, including accrued and unpaid interest, with replacement notes that will mature on December 31, 2017, with interest at a per annum rate equal to rolling monthly average of the yield on 13-week United States Treasury Bills. Interest is payable annually beginning January 15, 2009. The notes can be prepaid a the CIB's option at any time without penalty.
During 2008 and 2009, no additional borrowing under such loans occurred. The aggregate balance of these loans at December 31, 2009 and 2008 is $33,759,000. Accrued and unpaid interest on these notes at December 31, 2009 and 2008 amounted to $50,301 and $562,425, respectively."

Had Enough Indy? said...

Also - Gary - the tax revenues all flow into the bond fund. The majority are then transferred to the operating fund. I am not clear if the CIB can decide on its own to transfer a different amount between the bond and operating funds, than was noted during the budget hearings.

But, they certainly cannot spend any more than was appropriated by the Council in either fund, without further review and appropriation by the Council.

Advance Indiana said...

As near as I can tell, Pat, the CIB is not subject to approval to transfer funds among budget line items like other city-county agencies. There was no appropriation for the $10 million "loan" to Herb Simon or for the $4 million it already passed-through from the MDC to the ICVA in this year's budget. They just did it. I know you have a lot of respect for David Reynolds, but do you honestly believe he was in the dark about all of these budget maneuvers by the CIB and was not complicit, if not a co-conspirator?

Had Enough Indy? said...

Gary - I believe you are incorrect about the CIB's restrictions once a budget has been approved by the Council. Once appropriated, the CIB cannot spend money in one character on items belonging to another character.

The $10 million for the Pacers would have come out of character 3 (other services & charges). That character for 2010 was appropriated at a total of $34.8 million. I have asked Barney Levengood, executive director of the CIB,for the exact savings from this category that allowed the $10 million to go to the Pacers this year. So far, no reply.

As for David Reynolds - I continue to hold him in high regard. But, I have no idea what he knew and when.

Anonymous said...

Pat, I hope you run for City-County Council.