Hold On To Your Wallets - Its Budget Time

Tonight's City County Council meeting will kick off the budget process for next year's spending and taxing.

Mayor Ballard will give his annual budget introductory remarks. 

Elimination of the local homestead credit is once again included - Prop 248.  Not to make ends meet anymore.  Not to contain the ballooning public safety budget 'deficit' anymore.  This time he wants to eliminate it to fund pre-K education.

I did not see increases in income taxes, but expect to see that appear soon enough.

Being introduced tonight is a second attempt to increase the stormwater user fee that appears on the property tax bill.  Prop 249 would automatically increase the fee each and every year going forward.  This feature was also included in the first attempt and drew speculation that the Ballard administration was just sweetening the pot so that he could sell off this utility to a private concern.

We are being treated again to a lobbyist-drafted ordinance sponsored by Councillor Mary Moriarty Adams.  Prop 250 would allow digital billboards in Marion County.

Prop 254 is offered in reaction to Ballard-Vaughn's recently inked agreement with Covanta for 'recycling', which contained a 70% tax abatement that was not called a tax abatement.  Prop 254 urges the State Legislature to make any agreement containing a rebate on taxes or a forgiveness of taxes to be subject to Council approval, just like any other abatement in a TIF district is.

Coming before the Council for a vote this evening are a few items, including:

Prop 241 urges IPL to abandon coal as a fuel at its Harding Street plant.  Check this one off as completed.

Props 162 and 163 would allow $100,000 from the Mayor's Office budget be donated to United Way.  This brings up two questions - why is there so much fluff in the Mayor's Office budget and why should taxpayers be subsidizing any non-for-profit that brings in millions of dollars a year on its own?

Prop 349, 2013 would establish a TIF in the Avondale Meadows area.  This TIF is much needed, no doubt.  But specificity regarding its funding remain lacking and of concern.  Also of concern is a lack of resident control of or input on the projects that might get funded.

Prop 195 would establish a landlord registry.  It would cost local residential landlords $5 per year, but it would require out of state owners to establish an in-state manager responsible for any infractions that might beset the property.  Failure to register a property would result in fines ranging from $100 to $500.  This is a good one in my book.

Another good one is Prop 232, which would require defibrillators in all public buildings and buildings housing a department or agency of the City County government.

Budget hearings start this week.  Tuesday will see the introduction by Controller Jason Dudich as well as the budget presentation his office, the Office of Corporation Counsel, and two others.  Wednesday will be the budgets of the Public Defender, Community Corrections, and the Child Support division of the Prosecutor's office.  Both hearings will begin at 5:30 pm in Room 260 of the City-County Building.  Thursday will be the hearing for the Parks Department budget.  That will begin at 5:00 pm, same room.

IndyStar Fails Journalistic Ethics Test

In two days, the Metropolitan Development Commission will vote on a $3 Million bond to enrich the Indianapolis Star owners by improving the existing Star building, thereby increasing its sales price.  Resolution 2014-B-002 bundles the "Pulliam Square" and the "Millikan-On-Mass" projects for a total of $5.5 Million in taxpayer dollars.  The project has already been through the MDC's Economic Development Committee and has been discussed at its Pre-Meeting.

The $3 Million gift from Mayor Greg Ballard to the Indianapolis Star has been in the works literally for months.  When approached by the Ballard folks about the gift, the Star could have said, "No thank you.  Such a handout would cloud the credibility we have built with our readers, and set up the perception of a conflict of interest."

But, they did not.

They also failed to alert readers of the many editorials and opinion pieces penned during these months, that supported Ballard or scolded those who did not agree with the Administration's policies, of Ballard's gift. 

The readers had an absolute right to know, and the Star had an absolute obligation to inform them, that they were awaiting $3 Million of taxpayer money.  Each reader had the right to decide for themselves if Ballard's gift was irrelevant to a Star position, slanted an editorial stance, or outright bought and paid for the Star employee's praise.  Each reader has the right to decide for themselves if this is an advance payment for another endorsement of candidate Greg Ballard in next year's run for re-election.

The Indianapolis Star failed its readers.  They also failed this fundamental test of its Journalistic Ethics.

Update on SB 188 and Its Applicability to Marion County

Last week I noted some of the exciting changes the Legislature enacted through SB 118.  Well, an alert reader gave me a heads up that the bill did not apply to Marion County insofar as giving the City-County Council the authority to review the annual budget of the Metropolitan Development Commission.   I dug down into the Indian Code and verified that the alert reader was in fact correct and my previous depiction was incorrect.

I will go back and edit the old entry.  Not wanting to leave a false impression with those of you who read that entry already, I am going to recap the highlights and note whether the item applies to all of Indiana's redevelopment commissions, or to all but the MDC and Marion County.

1) Establishment of a sunset date for all old TIFs that do not now have an expiration date:  As noted, the consolidated downtown TIF is the only set of old TIFs in Indiana that will not have to have a sunset date created.  The date sunset date for the rest will be the later of June 30, 2025, or the last scheduled payment of outstanding bonds secured with that TIFs revenue.

2) Marion County will be the only County where the legislative body will not review the budget of that County's redevelopment commission (assuming any particular County has one).

3) In all Counties except Marion, the legislative body will review all property purchases either over 3 years in term or $5 M in cost.  Our City-County Council gets to review the property purchases of the MDC if the repayment of the debt for the purchase takes more than 5 years.

4) The MDC already must have the approval of the City-County Council in order to issue bonds.  While the Code does not specify that the Council can make changes to the term, interest rate, provision for early payment or collateralized interest, the Council certainly can withhold its approval for any of those reasons.  The other Counties get this legislative approval requirement placed on the issuance of bonds by their redevelopment commissions.

5) All County's legislative bodies get to approve, and adjust if it suits them, the annual determination of how much TIF increment will pass through to the other taxing units, once the expected revenue exceeds twice what is required to make the schedule debt payments and cover expected pay as you go projects for the coming year.

6) All Counties' redevelopment commissions, including the MDC, will have to show that any new tax revenues generated by the creation of a new TIF or expansion of an old TIF, would not have been generated except for the creation or expansion of the TIF.  It cannot be a simple claim; there must be supporting evidence.

So, the busy lobbyists for Mayor Ballard/Vaughn kept some of the changes from impacting their coveted slush funds.  Luckily for us, there still are important changes coming to Marion County, as well as the rest of Indiana's Counties.

City-County Council Meets Tonight

The Indianapolis-Marion County City-County Council meets tonight and there are a couple of interesting items on their agenda.

Being voted upon tonight will be Prop 33, which seeks to allocate $3 million of RebuildIndy funds for infrastructure improvements in the Avondale-Meadows area.  The intention is for this expenditure to substitute for a TIF district proposed earlier, whose stated goal was to entice a grocery store to locate and serve the neighborhoods.  This same proposal was voted on at the last Council meeting, but did not get a required 15 votes either up or down (final vote was 14-13, with two absent Councillors).

Several items to be introduced tonight caught my eye.

First is Prop 58, which seeks Council approval for the MDC to refinance a series of old bonds.  From the proposal itself, it is impossible to say if the bonds are part of a TIF district or not.  But several characteristics of this refinancing are more than interesting.  The effect of the proposal would be to retire old bonds from 1999/2002, when the principle was $29,365,000.  During the intervening 11-14 years, the City managed to pay less than $2 million in principle, leaving the current principle at $27,445,000.  The hope is to float no more than $28.5 million and sell bonds with a term ending in 2029.  So, while the City managed to pay less than $2 million over 14 years, they'll have to pay at least that each of the next 16.   Lots of questions arise in my mind about the fiscal stewardship exemplified here. 

Another, somewhat alarming, feature of Prop 58, is the indication that the City just might take out bond insurance on this beast.  Is our ability to repay these bonds in jeopardy?  Isn't the $80 million sitting idling in the 'Stabilization Fund' enough to ensure our City's full faith?

Keep your eye on Prop 58.

Second is Prop 60, which is to my knowledge, the first time the Council has considered granting a 100% 10 year abatement of taxes on equipment likely to have a less-than-10-years lifespan.  If approved, Prop 60 would allow Exact Target to avoid paying taxes on 'information technology' it intends to install.  I have requested more information on this.

Third is Prop 72, which would appropriate $11,630,000 in the CIB's budget to allow them to give the City 100% of this year's proceeds from the two recent tax hikes, as well as a $5 million shuffle between the CIB-City-MDC.  This shuffle begins when the CIB pays the City $5 million instead of spending the money on repairs of the Capitol Commons garage - the repairs will be paid for by the MDC with TIF money. So, bottom line is that the City will get $5 million from the TIF for public safety - which I expect is not on the list of allowed expenses of TIFs.

Its all about spending money, shuffling money, not collecting money, and avoiding paying obligations in a reasonable time frame only to find that doing so has penalties. 

Interesting Reading - SB325 - Would Increase Council Oversight of MDC Actions

It surely may have been discussed and I simply missed it, but SB325 is new to me and quite interesting.  Authored by powerful Senator, Luke Kenley, the bill's effect in Marion County would be to impose additional Council oversight of some actions of the Metropolitan Development Commission.  SB325 passed out of the Senate and now awaits action in the House.  The LSA review of the bill is also available.

If enacted, the legislation would require City-County Council review or approval whenever the MDC wanted to commit public funds for the payment of bonds, leases and any other 'loan' type obligation.  It would require approval in most instances.  It would require only review if the purpose was sale or acquisition of real estate for more than $5 million or for 3 years or longer term of payment - if less than either it would escape review and approval.

The bill makes the MDC budget subject to review by the Council and their books subject to audit by the State Board of Accounts.  Their meetings and documents would be subject to the State's open door and open records laws.

Of particularly strong interest to me was the provision that any obligation of TIF funds for bonds, leases, loans, etc., (unless for the purchase of real estate noted above) would require prior approval by the Council.  Also, for any TIF that generates more than twice the amount of money the MDC needs to pay the obligations of that TIF, the MDC would have to return the excess revenue to the regular tax stream, thereby going to help the schools, library, townships, etc.  Currently, the MDC can and does return some excess to the regular tax stream, but there is no threshold above which they must. The Council would have to approve the amount each year, AND, would have the authority to change the amount up or down.

I tried to find others who had an eye on this bill and found this statement from the Indiana Farm Bureau :

Indiana Farm Bureau supported the bill because it provides much needed checks and balances and much more transparency.

Absolutely.

Let's Recap Where We Are At This Moment - Or - How The Diversion of Tax Dollars For Special Interests Is Going

It just feels like a good time to recap where our City finances stand.  Let's face it, you simply have to follow the money if you want to know what the priorities really are.

For the first couple of years of the Great Recession, the City's funding actually went up.  Last year and this, resources shrunk slightly.  Contributing to that was the erroneous calculation of income tax receipts, which the State has corrected with a lump sum payback and which has been deposited into the rainy day fund to spend next year.

The amount of potential revenue caught in the tax caps is growing, causing an corresponding decrease in revenues that the City qualifies for, but cannot collect.  The growth in tax caps is being driven by the increase in the amount of property value being pushed into TIF districts.  TIF districts continue to struggle, on the whole, requiring bailouts, transfers, and increased taxes to cover debt payments.  The city has $80 million from RebuildIndy funds sitting in an account; its sole purpose to convince bond rating agencies that we have enough money to cover our debts, at least for one year.  Meanwhile, the airport tries to shake down bond holders of the United TIF deal to accept 10 cents on the dollar.

We see a City-County Council approve two TIFs last year - one for a burgeoning area seeing ever increasing private investment - growth that was the 'old fashioned way', through a free market.  We see a proposal for development of a very valuable, city-owned block, being granted to a group who wants the block for free, plus millions in taxpayer assistance; not to the group that asked for tax abatements, but who was actually willing to pay for the block.  This pulls tax revenue from all taxing units and causes a reduction in the services that can be provided for the common good.

We see a City-County Council ready to approve one new TIF, which covers some of the most affluent areas of the County, along with one area of actual need, to fund public art and park improvements as two of the named uses for tax funds.  BTW, they have the temerity to also complain about crime as they move to strip off tax dollars that would have gone to fund public safety.  This, too will pull much needed tax dollars away from the common good.  In fact, they will take more than $6 million of promised tax revenue from the Broad Ripple parking garage away from the common good to make life more fun for some of our toniest neighborhoods.

We see two new tax increases on the verge of being passed that will be split between the City and the CIB.  The State Legislature granted the ability to raise these taxes as the final step in the CIB bailout.  One might wonder, if the CIB doesn't need the money, why would you raise the taxes? 

We see the formation of a public safety task force whose sole purpose is to make a case for higher taxes - once the mass transit tax referendum passes out of the State Legislature.  As we pull more money from our resources that pay for the common good, crime will rise.  Fearful residents are more willing to support a tax increase to pay for police protection that the City could have afforded had our City Fathers and Mothers not diverted money into TIFs and stadiums.

We see yet another $10 million going to the Pacers and their billionaire owners, who already get all revenue from the facility we taxpayers built for them.  Another deal is likely already written, but which will be kept from the public until the tax increases are finalized.  Even the CIB gets tripped up simultaneously saying they have enough money to give more of it away and that they may have to declare bankruptcy.

We see heavy hints that the taxpayers will soon be asked to build one of the Mayor's biggest campaign contributors a $200 million soccer stadium.

What is clear is that we are moving money into accounts that pay for corporate welfare, payback for campaign contributors, and sports welfare.  We see accounts shrinking that pay for the public good - good parks, good schools, and public safety to name some.

That's what is happening folks.  Follow the money.  The priority is not the public; the very public that trusted these folks enough to vote for them.   The priority is not to make Indy a better place to live.  The priority is not the common good.

The TIF for Snobs Passed the Committee, the TIF for the Needy Failed

We are truly a morally bankrupt City when our elected officials give to the rich and keep from the poor.

While I will have more to say, this pretty much sums it all up.

Most Intelligent Comments of the Night

Norman Pace, representing the Warren Township Development Association and the Marion County Alliance of Neighborhood Associations, had the most intelligent comments during last night's Metropolitan & Economic Development committee's meeting on the Mid-North TIF.  Here is the WCTY video of Pace's statement:



Mahern Posts Letter To The Editor RE: Tully's Column

First, you have to know it is there, and then you still have a bit of poking around to find it online...  But, today's IndyStar has a letter to the editor penned by Councillor Brian Mahern in response to Matt Tully's recent column (see my take on the column in my last post, "You Can't Fix Willful Ignorance and Greed")

Here's Mahern's letter:

In his Dec. 21 column, Matt Tully sets out to examine possible threats to Indianapolis successfully competing with suburban counties for taxpaying residents. Instead of exploring possible solutions to the serious and vexing crime problem facing our city, Tully instead settles for a full-throated personal attack against me.
He accuses me of political partisanship and failing to offer alternatives to the Ballard administration’s policies and proposals with which I have I disagreed. The fact is I have raised legitimate concerns regarding tax increment financing economic development policies that I believe were overused by the last two Indianapolis mayors, one a Republican and one a Democrat. My concerns about TIF are echoed by fiscally conservative Republicans in Hamilton County.
Mayor Ballard proposed balancing the 2013 budget on the backs of homeowners by raising their property tax bills by more than $8 million, these being the very people Tully suggest we are in fierce competition with the suburbs for. I suggested instead that the Capital Improvement Board should finally pay something for the large amounts of public safety resources used during the conventions and Pacers and Colts games held in CIB facilities. That seemed only fair to me. In response, the CIB threated a lawsuit, citing it lacked money to share with the city, only to turn around and give yet another $10 million to the Pacers on top of the previous $33.5 million it forked over during the last four years.
It is not helpful to give short shrift to the crime problem in Indianapolis. We all need to thoughtfully discuss the impact of crime and the importance of public safety funding. My now months-old invitation to Tully to join me for a chat still stands. All he needs to do is pick up the phone and return my call.
Brian Mahern
City-County Councilman
Indianapolis

TIF Fact #2 --- $490 million of property value was transferred from the base to the increment this year

I sent the following email message to all City-County Councillors, select media representatives, and Senator Luke Kenley.

One of the fairy tales told to the public before a TIF is approve is that the property taxes that flow to the schools, libraries, and other taxing units before the TIF was created, will continue to flow to those units after the TIF is established.  Nice story; just not a true story.

This year, in preparation for the pay-2013 property tax year, Marion County TIFs saw $490 million assessed value transferred from the base to the increment.  That is 1/3 of the entire value of the base.

Base = the property value within a TIF district where the property tax revenues flow to the various governmental units

Increment = the property value within a TIF district where the property tax revenues flow to the TIF fund to make payments on bond debt and other expenses or projects

Did you ask how secure the base is for the proposed expansion of the downtown TIF?

The Council should demand full disclosure before Prop 15 or any other TIFs are considered.  Otherwise you won't know what you are voting on.

Citation : TIF neutralization forms filed by the Marion County Auditor with the Indiana Department of Local Government Finance for pay-2013

Prop 15 Up For Public Hearing Monday Night

In a very unusual move for a non-fiscal ordinance, the Council agenda for Monday night includes a public hearing regarding Prop 15 - the expansion of the consolidated downtown TIF district.

This is the proposal for which we know little beyond the foot print for the 112 acre expansion to the east and the 614 acre expansion to the west and a deal worked out behind closed doors between Deron Kintner and Vop Osili.

This is the proposal that should, by Council rules, be dead on arrival because it was tabled for more than 6 months.

This is the proposal the was not legally amended at the committee level, yet passed out of committee 'as amended.

So, dear public, you have the weekend to prep your comments.  7:00 pm in the public assembly room of the City-County building.  Expect the usual suspects to be rounded up to speak on behalf of this very expensive pig in a poke.

By the way - yet another TIF is being introduced Monday night. 

Portland, Maine, To Study TIF Policy

An alert reader of this blog sent me a link to a Portland, ME, newspaper article regarding that City's venture into studying its policies on TIFs.  Thank you for that.

I can't say if our City's Study Commission had any role in Portland's decision to move in the same direction, or if TIF policies are finally pushing enough on common sense that cities are deciding reviews are necessary so elected officials know what is going on and how they should move forward.

For perspective on the numbers involved in Portland's TIFs, a little comparison with Indy might be in order.  Portland, like most cities, is not the entire county.  It covers 52.6 square miles, while Indy stretches to 372 square miles.  Portland also has a much smaller population - 66,194 vs Indy's 829,718 by the 2010 census.

The headline to Randy Billings' article in the Portland Press Herald kind of says it all:

Time to rein in tax breaks for Portland developers?

Lacking a framework for how to use tax increment financing fairly and wisely has led to something of a free-for-all. Now, some city officials say it's time to set limits.

Portland's TIFs appear to be different from ours in a couple of ways (all gleaned from the article, so do not take this as comprehensive research on my part).  First, they include tax breaks for 30 years for the project property- like a very long term abatement rolled into a TIF.  Second, the developer is on the hook for the tax break, instead of the city, if a project "went belly-up".

"When we approve TIFs absent a policy context and the rationale is little more than cheerleading, then we're sending the message: You get a tax break, you get a tax break -- everybody gets a tax break," said Councilor Kevin Donoghue.

Sounds familiar.

The Portland TIF process also appears to be different than ours, as there are goals associated with each project, but no clawbacks if those goals aren't met:

Each TIF agreement is unique, and spells out why that particular TIF is needed, the public benefit, and usually includes the projected number of jobs created.

But those figures are not firm commitments for which the developers are held accountable.

"There is a tendency to overpromise," said Charles Colgan, a professor of pubic policy at USM's Muskie School, who believes TIFs are a valuable tool for towns to stimulate economic development.

Like Indy, Portland has seen successful TIFs and unsuccessful ones.  So, like here, there is hope that forethought into which ought to be created and which avoided would result in better use of taxpayer funds.

While some of the particulars are different, the pursuit of a City Council to understand what it is implementing and what policy is actually in the best interest of their City, is to be applauded.

Statehouse Considers Tighter Redevelopment Commission Debt Rules

Today's Star has posted a letter to the editor from former Carmel City Councilor, John Accetturo, regarding SB 25, which would provide oversight of Redevelopment Commissions (called the Metropolitan Development Commission here in Indy) when they determine to accumulate debt.  This would apply to TIF districts in particular, I should think.  I do not know of another means available for a Redevelopment Commission to go into debt.  If one of my fantastic readers can clarify, please add a comment.
Here is Mr. Accetturo's letter:

In Indiana, certain boards and commissions can create taxpayer debt without any legislative approval and accountability to the taxpayers. One of these is a city or county redevelopment commission. The majority of the members of these commissions are appointed by the executive and, unlike elected officials, are not accountable to voters.

The power to encumber future generations of Hoosiers with hundreds of millions of dollars of debt is enslaving and potentially destructive. Therefore, checks and balances need to be in place to ensure this authority is used responsibly and in the spirit of the law.

In 2010, an opinion of the Indiana Attorney General upheld the existing statute that provides that power to redevelopment commissions. This opinion has opened the door in several cities for redevelopment commissions to borrow millions without limitation or public scrutiny for projects that are questionably titled “redevelopment.” Default on payments by any redevelopment commission could have a devastating effect on debt rating and borrowing capability for all redevelopment commissions in Indiana.

Existing Indiana law grants too broad powers to local commissions to unilaterally create debt. We need to change the redevelopment commission law to protect taxpayers and development in Indiana. I believe that Senate Bill 25 will do that. It will protect the public interest of Indiana taxpayers from an executive who chooses to avoid the scrutiny and diligence embodied in constitutional checks and balances.

Redevelopment Commissions and other boards serve a purpose in municipal government. However, checks and balances need to be in place over them just like any other part of government.

Here is the digest of SB 025 (emphasis added and digest reformatted by me):

Redevelopment commissions and authorities.  

Provides that a redevelopment commission may not enter into any obligation payable from public funds without first obtaining the approval of the legislative or fiscal body of the unit. Provides an exception if the obligation is for the acquisition of real property and the payments are for three years or less or the purchase price is less than $5,000,000.  

Specifies that the approving ordinance or resolution must include certain items.  

Provides that a redevelopment commission and a department of redevelopment are subject to oversight by the legislative body of the unit, including review by the legislative body of annual budgets.  

Specifies that a redevelopment commission and a department of redevelopment are subject to the same laws, rules, and ordinances of a general nature that apply to all other commissions or departments of the unit.  

Specifies that a redevelopment commission, a department of redevelopment, and a redevelopment authority are subject to audit by the state board of accounts and covered by the public meeting and public records laws.  

Requires a redevelopment commission to provide to the legislative body of the unit at a public meeting all the information supporting the action the redevelopment commission proposes to take regarding the sale, transfer, or other disposition of property.  

Provides that if the amount of excess assessed value determined by the commission is expected to generate more than 200% of the amount of allocated tax proceeds necessary to carry out the commission's plan, the determination of the amount of the excess available to other taxing units must be approved by the legislative body of the unit.

Permits the legislative body of the unit to modify the commission's determination

One item in particular jumps out  to me in this list of improvements to the law, and that is the review of the redevelopment commission's budget by the legislative body.  In Indy those would be the MDC and the City-County Council, respectively.  During the time of the infamous 'interlocal agreement' between the MDC and the CIB that gave the CIB $8 million annually from property taxes gathered in the Consolidated Downtown TIF District, which the CIB in turn gave to the Pacers, the City-Council ducked its responsibility to review that agreement, saying it was not the fiscal body for the CIB or the MDC.  This would make it absolutely clear that the Council does have that responsibility.

SB 025 is certainly worth following through this short session.