No-So Field of Dreams - Lie and They Will Build It

There are fine people of integrity who work in high positions within the Ballard administration, and I do not want to impugn them, by any means. But, it must be said that the public presentations of recent Ballard proposals, including the sale of the parking meter system and now the bankrolling of the North of South project, have crossed the line into outright lying in order to move the proposals forward. The buck for complete integrity of the Ballard administration must stop at Ballard's desk.

Headed to the next full Council meeting on Monday night, is Prop 292, which would bankroll the North of South development to the tune of nearly $140 million. (see previous blog entries "North of South - Details of Proposed Deal", and, "MDC to Vote on No-So Deal Today" for full details)

It is one thing to disagree about the relative merits of any proposed deal. It is quite another for the administration to allow lies to the Councillors, lies to the media, and lies to the public, be the standard operating procedure to push through any deal - much less one so preposterously detrimental to Indy's taxpayers as this one is.

Here's the roundup of lies and disingenuous implications...

Lie #1 -- Prop 292 would allow the floating of up to $98 million in bonds. It has been stated that these bonds would carry an early termination penalty. The lie is in the statement that prepayment penalties are normal for City bonds.
a) the City refinances bonds continually, as interest rates change, as the City thinks it can capture extra cash through an elongation of the term of a bond - for any number of reasons. An early termination penalty would be a ludicrous impediment for the City to voluntarily walk into.
b) a key term of the No-So deal is that at the 10 year mark, the developer would refinance the project on their own hook, with any financial institution they can convince at that time, in order for the City's bonds to be paid off. Why is the City deliberately placing a poison pill into its future ability to pay the 30 year bonds off after 10 years?

Lie #2 -- The No-So development is not receiving an abatement.
The deal stipulates that any property tax revenue generated by the development during the first 10 years, will be applied as a credit toward the developer's obligation to make each year's bond payment. So, say in year 5 the development is generating $1 million in property taxes, and the bond payment due that year is $6 million. The developer would only have to pay $5 million to the City and the City would apply the $1 million in property tax revenues to the bond payment. This is an abatement. And, it amounts to a 100%, 10 year abatement at that.

Lie #3 -- The City is only contributing $9 million to the project.
The deal calls for $9 million in infrastructure improvements. But, it also calls for the repayment of $14 million to Lilly that is being handed over to the developer. It calls for $5 million from the State due to the shenanigans to call this project a 'Certified Technology Park' - money that would flow to the City and be handed over to the developer by the City. The its-not-an-abatement abatement of property taxes is estimated by the City to amount to about $12 million. That's $40 million by my count. What also needs to be added, although I can't be sure how much, is the cost of additional fire and police protection needed for the area. Since the property tax revenues from the project would be used to pay off the bonds, the rest of us will have to pay for the additional services needed for the area.

Lie #4 -- There is no real risk to the City's taxpayers because the City will hold the first mortgage on the development.
So, let me get this straight... If the development doesn't happen either on time or to completion, the City can take ownership of it? Then what? Pour even more taxpayer money into it? Even banks only let out portions of a loan for a new building over time, as the building progresses - in order to reduce their risk.
This development is too risky for a financial institution. Yet the taxpayers should now act like bankers and fund this project. The taxpayers are being asked to put nearly $140 million at risk, while the developer only has to come up with $6 million. I conclude that the taxpayers are being asked to carry far more risk than the developer.

Implications for the City go beyond this, as well.

Statements are being made that imply this is the best way for the City to invest in downtown development. Let's assume for the sake of argument, that the City ought to put any or all of excess TIF revenues into one project. How was it determined that this project had the most merit? In short, there was no competition to establish any supremacy or advantage.

Let me propose two alternatives - please note that I am NOT backing these, just suggesting that the No-So deal is inferior to other possible uses of TIF revenue. I strongly back using excess TIF money to pay off the TIF bonds as early as possible, so that the TIF district can be retired and the wealth shared with all taxpayers.

The first would be to bankroll, in a similar fashion, the redevelopment of the old MSA site. This project has languished and it is not generating any taxes, due to the CIB's ownership of the land.

The second would be to build the long desired criminal justice center - perhaps even on the old MSA site. It would cost about $50 million total, but, it would allow the termination of a number of leases currently required due to lack of space for City-County functions. The taxpayers would be buying an asset.

The new attitude toward TIF district revenues is actually scary for the taxpayers. Under Ballard's leadership, they are now being used like slush funds. When established, they were sold to the public as means of priming the economic pump. Start development, and more development will follow. The TIF districts have also been sold as being of limited duration - the TIF districts would be retired ASAP and their tax revenues would soon be used to enrich all of Indianapolis.

North of South is a bad deal for the taxpayers of Indianapolis. But, the lies told about the project in order to sell it, the lack of competitive analysis for any project, and the new attitude toward TIF districts, creates a situation that is an even worse deal for taxpayers.