The Invisible Hand(out) of the (Taxpayer Financed) Market

The war between cities and regions to attract business development generated the handouts known as 'incentives', 'tax increment financing', 'abatements', and more - a virtual cottage industry in how to funnel taxpayer funds to well connected developers.  There are more noble goals in play at the same time, like, hoping for a catalyst to spur private sector investment.  But the subsidies don't seem to ever end.

We have seen this cottage industry begin to morph from incentives to entitlements - industries that are begging for land upon which to develop, still expect hefty abatements to "level the playing field" and they no longer even try to tie job gains with those tax benefits.

Now, quietly yet out in the open, there is another transformation happening - the perpetual enrichment of favored landowner through taxpayer funded inducements for development upon leased real estate.

The North of South/City Way investment of about $100 M of taxpayer money involved development of the housing/retail/hotel/fake tech park built on top of land leased from Eli Lilly.  How much cash flow that provides Lilly is - well - none of your damn business, Ms. Taxpayer.

While the land lease model worked out in City Way, it does not always go so smoothly.  The airport has been trying to lease prime real estate where its old terminal used to be.  It has prominent frontage along I-465 and enviable access, not to mention an already existing parking garage.  Plus the old building has been torn down and hauled away.  Height restrictions do play a role here, but there is also the ingredient of who would want to lease the land upon which to construct a building.  Even a fifty year lease will find a day when the tenant must either re-up the lease or move on -- and at what cost?  The only offer they have noted in public has been a casino complex - which I personally root for, but the point here is the paucity of interest.

Last night the City-County Council voted to float $75 M in TIF bonds for the 16 Tech project.  Roughly $55 M would go to move water lines, power lines, and gas lines, and build a bridge and a park - all of which will make the land owned by IU Foundation, IU, Beurt R & Corena J  Servaas, the Benjamin Franklin Literary Medical Society, Health & Hospitals Corp. of Marion County, and Methodist Hospital much more valuable.  Yet, this land will be leased to eventual developers, not sold for the development.  But, it gets even better for these entities - 16 Tech Community Corp has been set up and will be funded by the rest of the bonds to the tune of just over half a million a year (with salaries ranging from $30,000 to $200,000) and their job will be to market the property to developers - so that these not-for-profits don't have to lift a finger or pay a single salary in order to cash in on the taxpayers' largess.

All that said, this one kind of amuses me.  I like the area in question getting a leg up and I like trying to promote biotech for the long run.  I do wonder, though, how viable the land-leasing model will be. In worst case, Mass Ave and Union Station and Circle Center Mall and the rest of the consolidated downtown TIF can all contribute to paying off the bonds.

I've wandered off the point of this post.  What we now have are the taxpayers being expected to fund a quarter to a third of all downtown development AND sustain abatements that need not include increased employment ALL THE WHILE our investments are quietly generating a perpetual revenue stream to well connected landowners.

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. 

Third TIF Study Commission - Heavy on Theory, Light on Practice

Last Thursday's TIF Study Commission meeting was the first I found unsatisfying.  Sure, the over three hours was chock full of high level information - the theory of how TIFs are set up and operated.  What was missing, however, was any mention or examination of the actual practice used for TIFs in Marion County.  This thought took a while to perk in my head, and I think the best way to express it is to list the instances where I saw the theory stated, but the actual practice left unmentioned.  And please note, I surely do not know all the ways TIFs are set up and to what purposes their funds have been put.  So, this a highly limited reflection on what was missing last Thursday.

The first instance of a divergence I noticed was actually in a recital of what purposes abatements could serve.  The theory stated was that residential abatements could be granted in places which were either 'residentially distressed' or for multi-family residential projects for low income or mixed income tenants.  What popped into my head was the abatement granted in the Peterson administration that was part of the incentive package for the Conrad Hotel.  The condos on the top floor were given an 8 year abatement - and clearly the area is not residentially distress, nor are these condos for low or even mixed income tenants/owners.

Thus the divergence struck me and here are more examples from the evening:

The theory -- the option to float Midwest Disaster Area Bonds were mentioned as being set up by the federal government to help recovery from 2008 flooding in the Midwest.  Marion County experienced this disaster and so is eligible for these tax-free bonds.  It was stated that these bonds are floated on the credit of the developer, not the municipality.

The practice -- the only instance of Indianapolis/Marion County using these bonds that I know of was for the North of South (aka City Way) project.  However, neither the credit worthiness of the developer, nor the investment worthiness of the project was used to sell those bonds.  It was the promised of a repayment revenue stream from the Consolidated Downtown TIF that was used to sell those bonds.

The theory -- Certified Technology Park designation, with the approval of the Indiana Economic Development Corp., must be used for 'public facilities' and the tax revenues redirected to the project may only be used to reimburse the City for its contributed infrastructure improvements.

The practice -- again we have to turn to the North of South (City Way) project that did not really have any tech component, but borrowed the relocation of some staff of Rolls Royce several blocks away to qualify. The redirected tax revenues are not going to repay the City for infrastructure, but rather to pay for the financing fees associated with floating the Midwest Disaster Area bonds.

While we are still on North of South (City Way), I must note that for the umteenth time, Deron Kintner, Director of the Bond Bank, said that no abatement was given to the project.  Then what do you call it when all property taxes 'paid' by the project for 10 years does not go to the taxing units, nor does it go to the Consolidated Downtown TIF fund?  It is being credited entirely to the developer and regarded as partial repayment of the bonds by the developer.  That sounds like a 100%, 10 year abatement to me.

The theory -- it was said that the purpose of TIFs are to build the tax base.

The practice -- two thoughts come to mind on this one.  First is the United TIF; since this was to provide for a non-taxable building on non-taxable land, then this TIF missed the mark by quite some distance.  Additionally, when you never retire a TIF district, then building the tax base is not really building a public asset, rather it is building a slush fund.

The theory -- a list of projects funded by the Consolidated Downtown TIF district was shown; things like Circle Centre Mall, Union Station, and the JW Marriott.

The practice -- not listed but leaping to mind is the $8 million per year going to the CIB (cough, pacers, cough), the $40 million being drained to balance this year's City-County budget, and the $600,000 to build the fourth spoke to the Artsgarden.

I hope the discussion can move to the actual practices being employed here in Indy.  Some are excessive and unwise, in my view.  But at the end of the day, if the Commission does not drag them into the open and discuss them, then they stand less chance of fixing what really ails the implementation of TIFs in our City.

Navistar/Pure Power Abatement Illuminates New Law - New Bad Law

The Metropolitan Development Commission is in the process of granting Pure Power, a Navistar company, a 7 year abatement amounting to about $897,712.76, or a 62.1% savings.  The MDC will hold a public hearing on this abatement at their regularly scheduled meeting on July 20.

The abatement resolution and statement of benefits estimates that Pure Power would retain 30 jobs, create 200 additional jobs by 2013, and invest $19 million in new equipment.

I send my readers over to Advance Indiana for a detailed look at the abatement failure of Navistar and clawback implementation of $5m of that abatement in his entry "Ballard Administration Continues to Bleed Taxing Districts With Abatements".  Scott Olson, reporter for the IBJ, published information about the abatement and Navistar's history in "Navistar seeks more tax breaks after old deal failed".

What caught my eye and got me to uttering "HUH?", was in the Star report by Ted Evanoff, "$19M upgrade to preserve 200 jobs at Navistar foundry".   The sentence was near the end:

"Over the seven years [of the abatement], the company would save $897,712 in property taxes and pay $574,879."

That's over half.  I hoped that was a typo of some sorts.  But, alas it was not.  [edited to add: the MDC is not considering utilizing the new law with this abatement.  The schedule they are considering is what the old part of the Indiana Code dictates for a 7 year abatement]

Long story short, the last Legislative session enacted a new law that is so watered down that abatements look to be ripe for the plundering and could result in 10 year, 100% abatements.

If you want to read it for yourself:

IC 6-1.1-12.1-17


Alternative deduction schedules

Sec. 17. (a) A designating body may provide to a business that is established in or relocated to a revitalization area and that receives a deduction under section 4 or 4.5 of this chapter an alternative abatement schedule based on the following factors:

(1) The total amount of the taxpayer's investment in real and personal property.

(2) The number of new full-time equivalent jobs created.

(3) The average wage of the new employees compared to the state minimum wage.

(4) The infrastructure requirements for the taxpayer's investment.

(b) An alternative abatement schedule must specify the percentage amount of the deduction for each year of the deduction. An alternative abatement schedule may not exceed ten (10) years.

The new law originated with HB1007.  The original language laid out a specific manner in which the percentage of an abatement could be calculated, based on the size of the investment, number of new jobs created, average wage of new jobs, and infrastructure already in place.  These rules were struck from the bill almost immediately.  It is now up to each city or county to determine. 

Lest you think the rules in the original language were tough...  Under those rules, Pure Power/Navistar would have qualified for a 10 year abatement, with 100% of property taxes forgiven for each of the first 7 years, 75% forgiven for year 8, 50% for year 9, and 25% for year 10.
 
This bill did a number of other things as well.  More on that later.
 
This past legislative session was nothing to be proud of.  Now the taxpayers can expect even bigger chucks of tax dollars given back to big business in the form of higher and higher abatements.

What If You Were Mayor?

What if you were Mayor of Indianapolis? What would you promote as the City's abatement policy?

There is an opening in the public dialog to discuss this economic development tool, thanks to a curious abatement situation recently reported on by IBJ reporter, Francesca Jarosz. In a new article entitled "Tax breaks for Rolls-Royce hinge on investment, not jobs" (sorry, the article is open only to online subscribers), Jarosz reports that the Ballard administration has agreed to two property tax abatements for Rolls-Royce. One would be a $1.2 million, 10-year abatement for the company to remodel the downtown Faris building, recently vacated by Eli Lilly. The second would be a $21 million, 10-year abatement for the company's $190 million update of two plants between Tibbs and Kentucky Avenue.

I was interviewed by Jarosz for this article and she passed on that Rolls-Royce has not actually applied for either abatement as yet. So, the approval process is in very early stages.

Over at Advance Indiana, Gary Welsh has made a couple of excellent points; that this is more of the pay-to-play relationship businesses have with the Ballard administration, and that once the Mayor decides his position on an abatement, the rest of the process is just rubber stamping by the Metropolitan Development Commission and the City-County Council. I can't really argue against those positions. If pay-to-play rumors are even 10% true, the Marion County Prosecutor or the FBI should investigate, prosecute, and jail those who are involved. As for a mutant public process, I am all for a more transparent, more responsive, and more accountable system than the one we currently 'enjoy'.

For my purposes here, I'd just like to get a little community dialog going about abatements, using the proposed Rolls-Royce abatements simply as a complicated, real life example.

So, you be the Mayor. Where do you stand on abatements?

Abatements are allowed by state law for any project that will bring an investment in buildings and/or secure new jobs. The company who is awarded an abatement, pays only about half of all new property taxes that result from their investment. An abatement is granted anywhere from 3 to 10 years. The practice in Indianapolis has been to enter into a contract whereby the company agrees to invest an agreed upon amount of money in new facilities, or upgrades of current facilities, and produce an agreed upon number of new jobs, in return for the abated taxes. This is called the "clawback clause". If the company fails to invest the money or produce the new jobs, the City can ask for the company to repay the taxes as a penalty.

As Jarosz points out in this article, 69 of the 80 abatements granted over the last 3 years have included increased job numbers as part of the agreement. Still, that means that nearly 14% have not included additional jobs.

So, if you were the Mayor of Indianapolis, what would you do? Would you allow any abatements?

Surrounding counties have been particularly aggressive with providing abatements to companies considering locating there. So, there is a regional competition for jobs and future taxes from companies choosing what central Indiana city to call home. Then there are the really big companies who can locate anywhere in the US or overseas. Would abatements be part of your approach to attracting new businesses to Indy?

If you, as Mayor, are open to abatements, then under what conditions would you support one?

Is it a certain type of business? In the past, just for examples, abatements have been granted to retailers like Kroger, hotels (with the condos atop the Conrad also being granted abatements), some housing stock, and industrial businesses.

How do you, as Mayor, balance the need of a company like Rolls-Royce, to make significant improvements in their plants in order to modernize them - but not to produce more jobs. If a major employer, like Rolls-Royce, is looking at two aged plants and has $190 million to spend, they have options to move to a new location and build new, or remain and update the existing plants. Should your City grant an abatement, even though no extra jobs will be created? I think the two proposed abatements for Rolls-Royce actually represent the spectrum of upgrades. In the smaller Faris deal, there is remodeling of an office building, presumably for layout and not modernization. Should your City grant an abatement for a company, even a major employer, to simply remodel a building? Should your City grant abatements for any company to locate downtown? Should your City grant an abatement for a major updating of an aging plant, in order to keep the major employer in your City?

There is no doubt that companies view abatements as routine anymore. If they can save millions of dollars in taxes, they are surely going to do so. So, one cannot be sure of the accuracy of any threat to relocate a business should an application for an abatement not be granted.

Would you as Mayor create a public list of what sorts of investments or job creation numbers will automatically result in an abatement?

Tax abatements are a fact of life, for sure. That does not make every one wise, nor every one foolhardy.

If you were Mayor, what role would property tax abatements play in your efforts to increase economic development and job creation?

The Devil Is Always In The Details

The spark for today's blog entry must be credited to Zach Adamson, one of the candidates for City-County Council At-Large. Zach posted a link to a WRTV investigative report by Kara Kenney on Facebook.

Kenney piece, "Indianapolis' Job Figures May Not Always Add Up", aired last night.

Kenney begins:

Indianapolis' job commitment claims may be more wishful thinking than reality after a six-week investigation of claims made in January by Mayor Greg Ballard and Develop Indy, the city’s economic development arm.

In January, the city announced that it had secured 8,737 new job commitments from 73 companies in 2010, touting the number as the highest number of new job commitments in a decade.

6News' Kara Kenney found that less than a quarter of the commitments are enforceable.

Twenty-two percent of the now 72 companies have a written agreement with Indianapolis to receive tax breaks, meaning that the city can hold the company accountable if the jobs don't come to fruition.

That means that 1,634 of the more than 8,700 job commitments have a written agreement with Indianapolis. Twenty-two of the 72 companies have no written agreement at all with the city or state.

Kenney interviews Mayor Greg Ballard and Develop Indy's President, Scott Miller. Develop Indy is the new name for the old Indianapolis Economic Development, Inc. Just last year, this group was the beneficiary of $3.5 million of tax money given to them by Mayor Ballard. This was part of the $5 million "clawed" back when Navistar did not live up to its job creation targets agreed to as part of its property tax abatement agreements (see "Abatements - Scary Loopholes Need Closing"). Also, Develop Indy pays for Mayor Ballard's numerous trip abroad.

The written agreements that Kenney refers to, are property tax abatement agreements. An abatement is a deal where the City forgives a fraction of the property taxes a company owes for a fixed period of time (usually between 5 and 10 years). These agreements anticipate that the company will be investing new money in new real estate or buildings and/or creating new jobs. The increase in value of the property due to the company's new investment, is the target of the abated taxes. For example, if Company XYZ intends on adding a building to its corporate campus, then they can ask the City for an abatement on the taxes that will be due on that one new building. The City and Company XYZ would agree to specific targets for the amount of money to be invested and the number of new jobs to be created.

The City's standard abatement agreement contains what is called a 'clawback clause'. This clawback clause says that if Company XYZ does not invest the agreed to amount of money on the new building and/or it does not create the targeted number of new jobs, then the City can get the owed taxes back as a penalty.

Unfortunately, as far as I am concerned, sometimes the City does not insist that new jobs be added, and instead clings to the number of old jobs to be retained.

From time to time, Develop Indy will send a representative to a City Council committee meeting, to tell the Councillors just how rosy the future looks for Indianapolis. They cite the number of jobs created in the recent past and the prospects for job creation in the future. They almost never report on the number of jobs lost, so the Council does not get a good look at where the City really stands and what its true prospects are. This is more than unfortunate, given that Council actions need to be grounded in reality and supported with accurate and fulsome data.

Kenney has waded into the obtuse world of jobs numbers. Sometimes the Mayor refers to new jobs promised, which seems legitimate. Sometimes its new jobs promised plus jobs promised to be retained. Then, you add Develop Indy's numbers of jobs discussed - not promised, and you have the very fuzzy math that adds up to fictional forecasts of Indy's job prospects.

Kenney also interviews Morton Marcus who has the most intelligent things to say:

"Public officials want to make themselves look good. They want to make their administration look good, and they're going to use every device they can, short of outright lying," Marcus said. “The numbers tend to be, I wouldn’t say imaginary, but hopeful. Sort of like a Christmas wish list.”

and

“I think the public should be careful about believing every press release that comes out of the mayor’s office or governor’s office, no matter who the mayor is or governor is,” said Marcus.

When it comes to jobs numbers, especially in this current economic recession, it sure would be nice to have an accurate picture of where we actually stand presented once in a while; and, not fictitious numbers all the time.

[edited to add: while I was writing this up, Paul Ogden posted on the same Kara Kenney report over at OgdenOnPolitics]

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.

City Bought Parking Garage - In July !

I must have been snoozing, but, back on July 19, 2010, the City of Indianapolis purchased the parking garage at 101 N. New Jersey Street. This from records on the County Assessor's website.

The reason this is important, is because this garage factored heavily in a really bad deal proposed by the Ballard Administration and Tadd Miller Enterprises, that was passed by the MDC over a year ago. (see "Dramatic Week for 450 E. Market Street (Bad) Deal" from October 9, 2009). The crux of that deal was to purchase the parking garage from Tadd Miller Enterprises for $18 million after that company purchased the parking garage and an entire city block across the street for that same amount, give the company a sweet deal to operate and use parking spaces for free, and abate Tadd Miller Enterprises and funnel that money into repayment of the bonds the city would use to purchase the garage.

The Assessor's records show that the garage (101 N. New Jersey Street), had a 2009 gross assessed value of $10.5 m, and a 2010 gross assessed value of $12 m. The owner is listed as "INDPLS, CITY OF DEPARTMENT OF METROPOLITAN DEVELOPMENT" and to have been the owner since July 19, 2010. I looked online for past Metropolitan Development Commission agendas to see when they approved this purchase, but only December's agenda is posted at this point. I have requested the resolution and any appraisals substantiating the purchase price. I will post an update once those records are provided.

The Assessor's records also show that the block across the street (450 E. Market Street), was purchased on exactly the same day, by Market Square Garage Ops Partners, LLC. The 2009 and 2010 gross assessed value of that property is shown as $3 m.

What surprises me the most is that I asked frequently for a copy of the final agreement between the City and Tadd Miller Enterprises and have been consistently told that 'the deal has not been finalize'. As coincidence happens, I actually last asked Maury Plambeck, Director of the Department of Metropolitan Development on July 29, 2010, "Has the deal with TM Miller Enterprises concerning 450 E. Market Street been finalized? If so, could I please get a copy of the agreement?" Plambeck's response that same day was "Pat, The deal has not been finalized. I'll remember that you want a copy, if and when an agreement is reached. Maury". Trusting Plambeck as I did, I stopped requesting the information.

It hasn't only been me who has been inquiring as to the status of the deal. I know that some reporters have tried to stay on top of it. I either snoozed through their articles on the City's purchase, or they, too, have missed this important development.

And, last but certainly not least, is that during the presentation on the proposed North of South deal to the Metropolitan Development Commission's, Economic Development committee, Commissioner Jim Curtis specifically asked how that deal was coming. He was told that there were still ongoing negotiations.

This is yet another example of Mayor Ballard's brand of "transparency". A bad deal gets morphed into a deal that is entirely invisible to the public.

The City Needs To Learn To Share

With the advent of the age of the tax caps, Indianapolis needs to learn to share property tax proceeds and not scarf as much of the pie as they can legally get away with.

As property tax caps are now in full effect and a ballot question in November could make them constitutional in Indiana, legal loopholes are being mined by the City of Indianapolis to allow the City to take a tad more than they are due.

The one power that the City of Indianapolis has that no other taxing unit in Marion County has is the right to grant abatements. Which it seems to do with abandon lately. Just look at the Jeff Swiatek's article in yesterday's Star business section, where he reports an abatement for CSO Architects, Harlan Bakeries, Greatbatch Medical, and Sharp's Academy - all in one fell swoop.

Now we are all lectured to remember that an abatement is a forgiveness of taxes in the future for businesses or expansions of businesses that do not exist today - taxes that we are supposed to believe would never have been generated because these businesses would have taken all their marbles and gone to another County to play, had Indianapolis not stepped up to sweeten the deal with a forgiveness of property taxes. The City forgives not only the money that would be owed to Indianapolis, but also the taxes that would be owed to our schools, the library, our township, etc. I'm actually not trying to build a case against abatements; not at the moment anyway.

One good aspect of the abatement process in Indianapolis, is the routine inclusion of 'clawback' clauses. If the business doesn't invest the full amount of money promised, or create or retain the full number of jobs promised, the City can get the amount of the forgiven taxes back.

The 25th floor, under Mayor Ballard, is very very clever when it comes to finding and mining legal loopholes. I don't want to discourage that sort of thing entirely, since the State wields a heavy hand when telling all cities and towns how to go about their business. Finding a good loophole from time to time could be beneficial.

But, in today's property tax climate, we should all be concerned that the tax revenues are meted out proportionately and therefore fairly.

The Ballard Administration found a loophole in the case of 450 E. Market Street (see "Ludicrous or Clever - You Decide" and "MDC Public Hearing On The TM Miller Enterprises Abatement" and "MDC to Hold Public Hearing on Abatement for 450 E. Market") and were set to abate about $6.7 million in property taxes, get paid that very same amount, and use the money to buy an overpriced garage. In short, the City was planning on taking the tax money that would have gone to the schools and library and township and health & hospitals and keep it for its own. On top of it all, it was going to waste that money on buying a garage that it didn't really need. This deal, even though it passed all MDC and Council votes, has not yet been inked down - and that is a very good thing.

The Ballard Administration found another loophole with the $5 million clawback of abated taxes in the case of Navistar. (See "Abatements - Scary Loopholes Need Closing") And they kept it all -- even though the property tax distribution formula would suggest they 'deserved' only about 20% of it. They kept all the money. Then, they wasted that money by sending it on to the Indianapolis Economic Development, Inc. and the Indianapolis Convention and Visitors Association; two not-for-profits living largely off government largess while paying handsome salaries for its operators.

Now the Ballard Administration has found an even bigger loophole whereby proper apportionment of property taxes is set aside to the benefit of the City over the rest of the taxing units. This one makes the $6.7 million and $5 million deals look like chump change. And this is the loophole on the carve out of the sewer utility from the property tax system.

Indiana Code 36-3-2-10, authorizes Payments In Lieu of Taxes (PILOT) from otherwise property tax free parcels in Indianapolis. Indiana Code 36-3-2-10(d)(4), lists "wastewater treatment facility", which at the time, was owned entirely by the City of Indianapolis.

The City-County Council recently increased the PILOT payments from the sewer utility and authorized the money be used to pay off 30 year bonds for infrastructure repairs. (See "City-County Council Should Vote Down Prop 132") The plan is to sell the sewer utility for another $260 million in cash to Citizens Energy. The sales agreement stipulates that Citizens Energy will not attempt to get the Legislature to change the sewer utility from a tax-free, PILOT paying, enterprise into a property tax paying enterprise. Now, this tax-free status is very different from the gas utility and the water utility - both of which currently pay and which will continue to pay property taxes after this sale goes through.

I have asked a couple of folks in City government this question: Are the PILOT payments from the sewer utility more than, less than, or equal to, the amount the utility would pay if it owed property taxes? I have not been able to get an answer. The law does not allow PILOT payments to be more than the utility would pay in property taxes - so let's just toss that possibility out.

Let's run through the remaining two possibilities.

If the PILOT payments are equal to the amount the utility would pay if it owed property taxes, then the City is actually keeping all of roughly $25 million per year for 30 years, when all it would be due is 20% of that. That means that roughly $20 million per year will not go to schools and the library and health & hospitals and the townships. And, over 30 years that would add up to $600 million.

If the PILOT payments are less than the amount the utility would pay if it owed property taxes, then the City is forgiving 80% of the taxes Citizens would otherwise have to pay and shafting the schools and the library and health & hospitals and the townships.

Why the Council voted to increase the PILOT payment from the sewer utility BEFORE getting a clear okay from the State Legislature that it will not rescind the special tax free status of that utility in the future, is beyond me. If the Legislature were to do that, then Indianapolis taxpayers could be on the hook for repaying those infrastructure bonds - and not just as ratepayers, but also as taxpayers. But, it all depends upon the answer to my question: Are the PILOT payments from the sewer utility more than, less than, or equal to, the amount the utility would pay if it owed property taxes?

In any case, I finally come to the final point of this post. With property tax caps fully implemented, the City should refrain from pulling any of the money owed to the other taxing units to use for their own purposes. And, if the City will not do it of its own accord, the State Legislature should step in and require this simple act of fairness.

City Council Meets Monday

The Indianapolis-Marion County City-County Council meets this Monday night. Unfortunately, the Council link to this agenda does not work. Nor are any of the proposals to be introduced Monday night available on their website.

So, all I can mention here is that two Proposals that are of interest to my eye, that are indeed set for a vote tomorrow night, are the consolidation of Franklin Township Fire Department with IFD (Prop 43) and the appropriation of the $5 million abatement clawed back from Navistar (Prop 35). Prop 39, the guns in parks proposal authored by Councillor Ed Coleman, is on the Parks committee agenda for Thursday night, February 25, at 5:00 pm in room 260 of the City-County Building.

If you live in Franklin Township, you might want to take a thorough look at Prop 43, as it appears that the Township loses assets, retains debt, and loses a portion of the County Option Income Tax revenue stream to IFD. It also must pay to change the decals on the equipment and the signs on the stations. IFD does appear to be required to assume all pension obligations.

Prop 35, passed out of committee last week with a vote of 4-1. Republican Councillors Cardwell, McQuillen, and Malone, were joined by Democrat Moriarty-Adams. The lone no vote was cast by Democrat Councillor Evans.

This proposal appropriates $5.5 million in abatement money that is being returned to the City by agreement with Navistar. I have addressed this issue before in "Abatements -- Scary Loopholes Need Closing". The short of it is that when a company is granted an abatement, certain goals in hiring and/or investment are set. Should the company not meet those goals, some portion of the forgiven property taxes are to be paid back to the City.

The returned money should be allocated back to the taxing units by the same formula as property tax revenues are allocated. In this case, the Navistar plant is in IPS territory and just over half of the $5 million should go to IPS, in my view. But, the City is taking advantage of the lack of governing law or policy on where returned abatement money should go. Also, no matter how much the City spends of these funds, they surely should not be spending it on the Indianapolis Economic Development, Inc., and the Indianapolis Convention and Visitors Association. The former is the group that funds Mayor Ballard's trips abroad and now a clear line links tax money to Ballard's trips. The ICVA already gets almost $10 million a year in tax payer funds to operate. Meanwhile we have potholes, streets, and sidewalks that need repairing - and Mayor Ballard has appointed a task force to look at raising money for those needs, including the sale of assets owned by the taxpayers. Meanwhile we have a Parks budget that was slashed by $5 million this last year. Meanwhile crime prevention grants to be announced tomorrow night, will total $4 million - down from the promised $5 million 'because we just don't have the money'. Meanwhile we have a City-owned water company looking to raise rates by 35% on top of its recent raise in rates. Meanwhile we have a mass transit plan being hawked around the region with its concomitant increase in sales taxes and diversion of money we use to repair streets. Meanwhile we have people living under bridges in our fair city. Meanwhile we have a whole lot better things to do with that money than toss it to IEDI and the ICVA.

I'll post more on the proposals to be introduced once the Council website issues are fixed. This is unusual for them, so I'm guessing it will be taken care of Monday morning.

Abatements - Scary Loopholes Need Closing

Documents of the City of Indianapolis' clawback of abated property taxes from Navistar, obtained by Cathy Burton on behalf of the Marion County Alliance of Neighborhood Associations, expose a scary loophole in the law and policies governing Abatements that simply must be closed. The $5 million clawback agreed to in the settlement, also raises questions of whether the City has an inherent right to keep the entire check, or if it should be distributed in the same manner as property taxes would have been collected, had they not been forgiven or abated.

The City routinely enters into tax incentive agreements with businesses. These are called 'abatements'. Abatements run from 5 years to 10 years in length and forgive a fraction of the property taxes that would have been due on an expansion of the business or creation or retention of jobs in Marion County. Abatements are proposed by the Mayor's Economic Development team and passed or rejected by the Metropolitan Development Commission (MDC). Notice to potentially interested parties is limited to the two weeks between the two MDC decisions - the latter of which is preceded by public comment. If an abatement is proposed within a Tax Increment Finance District (TIF District), then Council review is also required.

These abatements routinely (for Marion County, not necessarily other Counties) contain what is termed 'clawback clauses'. These clauses require the return of the abated taxes should the goals of investment or jobs not be met by the business.

It turns out that there is no state law or local ordinance or even City policy addressing how funds returned as clawback settlements are collected and distributed.

Back to the scary part of the Navistar settlement with the City over the size of the clawback funds. The agreement sets the amount at $5 million - a compromise between the City's position that all $27 million should be returned and Navistar's position that it is absolved of all need to repay abated taxes due 'factors beyond the control of the Applicant'. The settlement agreement was signed on November 30, 2009, by Jonathan L. Mayes (Chief Litigation Counsel, for the City) Eric Tech (President, Engine Group, for Navistar) and Billie Breaux (Marion County Auditor). The scary part is that the agreement originally intended for Navistar to cut a $5 million check made payable not to the City, but to Indianapolis Economic Development, Inc. (IEDI). Instead, reference to IEDI was scratched out with a pen and "City of Indianapolis" or "To the City" was scratched in by hand with the initials of the three signers also scratched in. Here's what the original agreement stated in Section K of the "Recitals" and Section 1 of the "Agreement":

K. Navistar believes the Auditor is a necessary party to this Settlement Agreement. Without agreeing that the Auditor is a necessary party and without prejudice to its ability to have the settlement payment described below directed to Indianapolis Economic Development, Inc. ("IEDI"), the City is not opposed to the Auditor's inclusion as a party hereto.

1. Settlement Payment and Satisfaction. Navistar shall pay a total settlement amount of five million dollars ($5,000,000). The settlement amount shall be paid by Navistar within fourteen (14) days of the complete execution of this Settlement Agreement, by check made payable directly to IEDI (defined above). The City agrees to accept payment of this settlement amount to IEDI in full, complete, and final satisfaction of any and all repayment of abatement savings and any other damages or liabilities relating to the Resolutions, the MOAs, and the Abatements arising with respect to the Tax Years.

WOW !!! What if the agreement had gone through as originally drafted? Who would have know that a $5 million check had been passed from Navistar to IEDI - avoiding that messy part where the City actually collects the back taxes and the City-County Council appropriates it?

That was close. Now, to its credit, the City decided not to go through with its original intention. The last minute is as good as any minute to change course from this huge mistake. Troubling enough as is. But word is that previous claw back payments may indeed have gone directly from the abated businesses to non-City recipients. I have not seen documentation of that, but that is the word I am getting. All claw back funds from the Peterson and Goldsmith administrations added together are said to amount to $700,000 and were not necessarily deposited into the City's coffers.

There is a glaring lack of State Law regarding abatement clawback funds.

There is a glaring lack of City Ordinance regarding abatement clawback funds.

There is a glaring lack of City policy regarding abatement clawback funds.

If funds do not have to be received by the City and can go directly to outside organizations due to lack of law, ordinance or policy, what is there to prevent the clawback funds from being deposited directly into a personal bank account?

So, the scary part is that abatement clawback funds do not have to be directed to publicly accountable governmental units.

Also needing definition, is who should be getting these monies in the first place. Clearly, the abated property taxes would have gone to the school district, library, health & hospital corp, and the City and County, among other governmental units, through a formula set for that taxing unit in which the business is established. It seems to me that the clawback funds should be distributed by that same formula. Instead of the City getting and spending the entire amount, they would receive roughly 20% of the funds. Big difference. In the case of the Navistar clawback funds, the Metropolitan School District of Warren Township would stand to get over $2.5 million, if the funds were distributed according to the property tax distribution formula.

Because the Navistar Settlement Agreement was amended at the last minute, the City-County Council will have to appropriate the funds. Mayor Ballard wants $1.5 million to go to the Indianapolis Convention and Visitors Bureau (ICVA) and $3.5 million to go to IEDI. It seems to me that there are more pressing needs in Indianapolis and whatever funds are expended by the City should be sent their way. The Parks budget has been slashed mercilessly by Mayor Ballard. He won't stand up to the Chamber for fully funding the Department of Code Enforcement with fees - maybe some dough spent there would work for everyone. There is a study group investigating how to get more money for City street and sidewalk repair. This money would be a good faith effort to spend public funds already in hand before pulling more money out of our civic assets or purses.

It is expected that the Council Proposal for appropriating the funds will be introduced at its February 1 meeting. I'll be letting you know to which committee it will be assigned once the Council agenda is published.

Meanwhile, Indianapolis, Marion County, and likely other municipalities in Indiana, need serious loophole darning done to regulate receipt of abatement clawback funds through a transparent, public process.

Is There Enough Oxygen on the 25th Floor?

What's with the folks who reside on the 25th floor of the City-County Building? Mayor Greg Ballard's Office, by the way. Is there enough oxygen that high up? Maybe we should send in some testing equipment.

I tell you why I am concerned. Its that wacky, light-headed way they have for figuring out how to generate new revenues for our City. Well, that's the ideas that are generated on the 25th floor, not those thought up on the lower floors or, even better, outside the Building altogether.

Good idea : Raising fees to cover costs in the new Office of Code Enforcement (OCE). I actually support this effort. There was an analysis done to calculate cost of services performed and the fees were set to those calculated costs.

Bad idea : The Mayor not standing up to the Greater Indianapolis Chamber of Commerce (GICC) and supporting the new Office of Code Enforcement THAT HE CREATED and which was always envisioned to be fee-supported. The introduction of this ordinance has been held up because GICC is supposedly worried about the cabbies. LOL !!!! Complaints about taxis are the number one category of complaints to public safety. Vehicles in poor condition, failure to speak English, refusal of credit cards, overcharging/surcharges, refusing short trip fares, lack of directional knowledge, illegal parking, unsafe driving, and failure to return lost goods are the topics of those complaints. According to OCE, IMPD and the hospitality industry cites cabs as a major downtown concern. Well you can't fix the problem with no money. Pretty simple.

Good idea : Raising fees to cover costs of zoning, variance, and related petitions in Current Planning of the Department of Metropolitan Development. Well, this one could have been funded in other ways. But, at budget time it was decided they would go fully fee funded just like OCE. Again, there was a cost of services analysis which was used to establish the individual fees. This new fee structure was approved by the Metropolitan Development Commission and the three Boards of Zoning Appeals after Councillor Lincoln Plowman and the Marion County Alliance of Neighborhood Associations spoke in favor. The Mayor sent nobody to support what HE DECIDED SHOULD HAPPEN.

Bad idea : Selling off parking meters and letting future downtown parkers pay exorbitant prices to park. Sounds like a sure fire way to get businesses who like having customers to move to the burbs. Idea generated on the 25th floor. See what I am saying? Paul Ogden over at Ogden on Politics has an entry on this proposal today.

Bad idea : Supporting a 35% hike in water rates so that you can build equity and privatize the company for an up front wad of dough. Water rates should be dependent upon the cost of delivery of said water. There should not be another increment to bankroll a privatization deal. Even if the expenditure of that wad of dough is on neighborhood infrastructure - which we really cannot count on. More likely the infrastructure in front of businesses will get the lion's share of any expenditures by this administration. All for the economic development thesis that spending tax money on businesses and granting abatements to businesses will, in some unspecified distant day, make Indianapolis better for its residents. I hope the IURC protects the water company customers from any portion of the rate hike that is not directly tied to the delivery of safe drinking water.

Bad idea : That wacky abatement deal with TM Miller Enterprises where the City would become owner of a downtown garage for more than it cost to buy that garage. Again the tag line is economic development. Again, an idea from the 25th floor. By the way, my recent inquiry for a copy of the deal came back with the response that the deal still is not finalized. Maybe there is hope for the 25th floor yet.

Bad idea : The latest loophole in the laws governing abatements seems to have been discovered - on the 25th floor !! The City has the legal right to grant abatements to businesses with the approval of the MDC, and in the cases of abatements in Tax Increment Finance (TIF) Districts, with the additional consent of the City-County Council. When an abatement deal is constructed, the business agrees to certain jobs goals or investment dollars in return for the abatement. Should those jobs goals or investment dollars not be met, they have to give back a pro-rated share of the property tax dollars forgiven -- its called the 'claw-back clause'. Property tax dollars are distributed to the schools, the library, the City-County, and the Townships, etc., in proportion to their tax levies. The Schools get more than half and the City-County gets about a fifth. But, the 25th floor is claiming that when an abatement deal goes belly up, IT should get ALL of the money clawed back from the business. Now, it might be legal, but it ain't right. Furthermore, what ain't also right is giving that money to the Indianapolis Convention and Visitor's Association and the Indiana Economic Development, Inc., instead of fixing sidewalks and putting in sewers and any number of infrastructure improvements that are always in the 'some day when we have more money' category of City priorities. Gary Welsh at Advance Indiana has a blog entry on this issue today.

Funniest idea : You have to admit that the spectacle of KFC vs PETA both vying to advertise on IFD smoke detectors and fire extinguishers is classic urban theater. Got to love it !! I'll even give the 25th floor props for the levity generated for only $5000 in freebies.

So, another day and another wacky idea from our most powerful floor of the City-County Building. But, really, is there enough oxygen up there?

I'mmmm Baaaacccckkkk !!!!!

Hope the holiday season has been good to you and your family. My hiatus was much longer than I anticipated - but fun and refreshing.

I do have a couple of comments on items that caught my attention in the paper and elsewhere this past month. No links to IndyStar will be possible, as those articles are now in the archives.

First and foremost, I sit in admiration of Paul Ogden and his efforts to see that folks accused of a crime are treated properly in our jails and also the latest lawsuit he filed to challenge the traffic court's practice of threatening higher traffic ticket penalties if you want your case heard by the judge. Both of Paul's efforts have seen others, Democratic Party blog "Indianapolis Times" and the Indianapolis Star's editorial board, respectively, try to diminish him with snipes. Their pettiness has only diminished themselves, in my eyes.

The traffic court judge is acting like a Boss Hog - and he needs to either clean up his act or be gone. Traffic fines are already too high - approximating a week's worth of groceries. For the judge to threaten to up the already too high fine just because an American wants his or her due process is an abuse of his authority. I'm not a lawyer, and I hope the judge's actions are not in accordance with legal tenets. But, I am a citizen and when anyone diminishes the rights of others, they diminish my rights as well. Good luck Paul Ogden !!! Keep fighting the good fight.

Prop 418 went down along party lines in committee. 418 was the Council Resolution asking the State Legislature to give Indianapolis-Marion County City-County Council the authority to review abatement decisions. Ours is the only County in Indiana where that authority does not reside with the Council. Mayor Ballard must have been throwing his weight around behind closed doors again. The Republican Councillors abandoned any commitment they have to being actual members of the Council and voted against strengthening the Council's position. Even Councillor Plowman - who championed the issue at the Legislature just last year - and Councillor Smith - who co-sponsored the Council Resolution - voted against the Proposal. Its a shame. I hope it is brought up again and again until the authority to review is granted our Council. Councillor Brian Mahern has shown himself to be an outstanding Councillor this year. We are all better off because he at least tried to make a real difference on the Council. My hat is off to him.

A huge victory was won, at least temporarily, by Charlie Goodman and Jerry Baker and others at the Indiana Tree Alliance. The Indiana Utility Regulatory Commission has set aside a key operational rule regarding the authority IPL has to trim trees on private property. The final decision on the permanence of this rule awaits a final decision on IPL's tree trimming practices, due sometime in late spring, if I understand the timing correctly. Goodman and Baker are hoping that the State Legislature takes up the issue and returns property rights to property owners this session. For more information about the issues, to find out how you can help, and to get the Alliance's newsletter, visit their new website : www.indianatreealliance.com

Mayor Ballard's new Chief of Staff, Chris Cotterill, continues to impress me. After the new head of the Animal Care and Control Board pulled another Boss Hog move, barring Channel 16 from covering his Board meetings, Cotterill stated on behalf of the Mayor, that he'd bring a video camera to the meetings himself, if that is what it took to re-open them to the viewing public. I don't know who the new AC&C Board Chairman is, but his appointment should be reviewed. How out of touch can you be? To pull the Channel 16 access when AC&C has seen one upheaval after another? That agency needs to prove itself and the more citizens who can see for themselves, the better. Cotterill is making the 25th floor a much more interesting place.

And bringing things closer to up to date - let me just say that the Colts organization should refund the ticket price to everyone who paid their hard earned money for a seat to yesterday's game - with the exception of season ticket holders. Those tickets are not cheap and those folks deserved a real attempt to win. They got bupkiss.

Hope your family is healthy and close as we finish up the holiday season. 2010 is just around the corner now. Wow ! 2010 ! Just think, ten years ago we were worried about the end of civilization as we know it because computers only had two digits to denote the year ! Now we have YouTube and Twitter !!!! And I-phones !!!! Wow ! What an incredible time to be alive !

Hearing on Prop 418 to be Delayed

The previously scheduled hearing on Prop 418 by the Metropolitan Development Committee of the Council on Monday night will be postponed until that committee’s next meeting on Monday, December 7 – again that committee’s meetings begin at 5:30 pm in room 260 of the City-County Building.

Prop 418 is the Council Resolution calling on the State Legislature to empower the Council to review abatement decisions made by the MDC.

Council Entertains a Bevy of Proposals

The City-County Council agenda for its meeting next Monday, November 9, 2009, is now posted. Not much caught my eye for decision on Monday night, but a slew of interesting new proposals will be introduced.

Prop 404 and 405 would allow the County Assessor to rent space at 7363 E. 21st Street for an Eastside Satellite Office, and 5526 Elmwood Avenue for a Southside Satellite office. My first blush question is, why can't we rent space from the Township Trustees - you know, keep the money moving government to government to help with tax rates? We'll see what develops as far as information is concerned. Money is not mentioned, but the length of the leases is for 7 and 5 years respectively. Both were initiated by the County Assessor and sponsored by Councillor Moriarty Adams, and will be assigned to the Administration & Finance committee which next meets on Tuesday, November 10, beginning at 5:30 in room 260 of the City-County Building.

Prop 413 sponsored by Councillor Scales and drafted by the interim Director of Animal Care and Control, Teri Kendrick:

DIGEST: amends the Code to clarify the definition and violation of animal at large, to expand the definition of serious injury, to specifically provide for court-ordered forfeiture and/or destruction of an animal if serious injury to a person results from the animal chasing or approaching a person in an aggressive manner while at large, and to change the reference to serious bodily injury to serious injury in the section on owner responsibility for animal attacks

Looking at the proposed changes to the existing ordinance, the most significant changes would appear to be changing the definition of 'at large' to (red text added by proposal; green text in parentheses deleted by proposal):

At large means not confined without means of escape of any portion of the animal’s body in a pen, corral, yard, cage, house, vehicle or other secure enclosure, unless on a leash and under the control of a competent human being.

Serious injury, (for purposes of this chapter) means any injury (which results in a broken bone, lacerations severe enough to require multiple sutures, or to render cosmetic surgery necessary, or appropriate or death) that results in permanent disfigurement, unconsciousness, extreme pain, or permanent or protracted loss or impairment of the function of a bodily member or organ.

Added, also, is that if an at-large dog seriously injures someone, then "the court upon request shall order the animal forfeited and/or destroyed".

Prop 413 will be assigned to the Public Safety and Criminal Justice committee that next meets on Wednesday, November 11, at 5:30 pm in room 260 of the City-County Building.

Prop 416, sponsored by Councillors Hunter and Moriarty-Adams, simply gives the right of way to bicycles when motor vehicles cross over a sidewalk. This goes to the Public Works committee that next meets on Thursday, November 19, at 5:30 pm in room 260 of the City-County Building.

Prop 417, "requests the General Assembly to amend existing statutes to provide that the Council has binding authority on reviews of township budgets in Marion County". This one was initiated by Councilor Malone and is co-sponsored by Councillors B. Mahern, Lutz, Smith and McHenry. The current law mandates that the Council undertake a non-binding review of the township and excluded cities budgets, which really looked like a huge waste of time this year. Although I did get some really good information that I would not otherwise have obtained, keeping the review non-binding does not make any sense. Prop 417 will be assigned to the Rules & Public Policy committee which next meets at 5:30 pm, November 17, in room 260.

Prop 418 is the most important Proposal being introduced Monday night, in my view. Initiated by Councillor Brian Mahern and co-sponsored by Councillors Lewis, Sanders, D. Mahern, Hunter, Smith, Mansfield and Malone, the Proposal is described as:

DIGEST: urges the General Assembly and Governor to grant additional authority to the Council to review and approve all tax abatements, postpone consideration of tax abatements and zoning changes, and review and approve any real estate acquisition by the Metropolitan Development Commission in excess of $25,000

A lengthy list of whereas clauses lay out the case for Council review of all abatements pretty clearly. This proposal would result in a Council Resolution, rather than an ordinance, because the State Legislature is the only body that can empower the Council with this authority. The truly bad deal that was proposed between the City and TM Miller Enterprises for a parking garage and a city block at 450 E. Market Street that was subject of zoning review by the Council this fall, is the poster child for why the fiscal body of this City should be able to review abatements granted by the MDC - much like they now have the authority to review zoning decisions of the MDC. More on this one in a later entry. Prop 418 will be assigned to the Metropolitan Development committee which next meets at 5:30 pm in room 260, Monday, November 16.

And rounding out list is Prop 419, initiated by Health & Hospitals Corporation and sponsored by Councillors McQuillen and Nytes.

DIGEST: approves the purchase, construction or acquisition by the Indianapolis-Marion County Building Authority of all or any portion of the Wishard Hospital project and a proposed lease or leases between the Building Authority and The Health and Hospital Corporation to finance all or any portion of the Wishard Hospital project

While the Wishard project was approved by the recent Referendum, the Council must still provide authorization for the IMCBA to participate in the overall bonding and leasing of the buildings. Still we have no breakdown of the fraction of general obligation bonds to be issued by H&H and the fraction of revenue bonds to be issued by the IMCBA. Perhaps someone at the hearing will pause and request this important information. Prop 419 will be assigned to the Admin & Finance committee which next meets at 5:30 pm, Tuesday, November 10, in room 260 of the City-County Building.

[edited on Nov 7 to mention that a public notice appeared in today's paper regarding public hearings on the proposed leases by the Marion County Assessor - 10:00 am, Nov. 17, room 260 of the City-County Building. The first lease agreement is for 2525 square feet of commercial office space at 7363 E. 21st Street. It is for 7 years at $39,137.52 per year plus utilities. The second lease agreement is for 3373 square feet at 5226 Elmwood Avenue. It is for 5 years at $30,342.50 per year plus utilities.]

Dramatic Week for 450 E. Market Street (Bad) Deal

No doubt the Mayor's Office was celebrating its victory over common sense this week.

The abatement and horrible deal surrounding it passed a Council vote and a vote in the Metropolitan Development Commission. Now all that awaits is inking down the deal, which even after much ado made about how a delay would cripple the financing, may not happen until late December.

The deal is for the City, and its taxpayers, to assume repayment of a loan for $19.5 million that is being arranged by TM Miller Enterprises with Regions Bank to buy the whole city block at 450 E. Market Street and the parking garage just north of it. TM Miller Enterprises will take ownership of the block for free while the City, and its taxpayers, take ownership of the garage for the full price of $19.5 million.

To abide by state law, the City had two appraisals done for the garage. Unfortunately for the taxpayers, current value appraisals weren't going to get the high numbers Mayor Ballard needed, so he authorized future values; clearly twisting state law and circumventing the intent of the law to prevent overpaying on taxpayer purchases - whether the intention be good or the intention be nefarious. The last sale of the garage in 2004 was for $10.5 million, which matches its assessed value for tax purposes. The $9 million disparity between actual value and purchase price was a problem for many who cast votes against the deal this week.

The deal is very complex in construction, but it all adds up to the fact that the City will take all the risks and TM Miller Enterprises will get a city block for free. In fact, he also gets to buy one third of the garage back from the City for $2 million -- when the City just paid $7 million for that same third, for an immediate loss to the taxpayers of $5 million.

The taxpayers also take a hit with the closing of the two gravel parking lots on the old MSA site that provide the CIB with about $790,000 a year in profits. This is the CIB for which Mayor Ballard has spent the good part of 2009 trying to get more and more tax money. Someone tell me where the logic is here on Mayor Ballard's part? The only consistent logic I can see is if Mayor Ballard just assumes there is always more money that can be wrestled from our pockets.

The deal has been documented by the Star (Jeff Swiatek), WTHR (Mary Milz), FOX59 (Derrick Wilkerson), the Indianapolis Business Journal (Scott Olsen), and an editorial in today's Star. You can view Monday night's Council hearing, which technically was on the zoning for the parcels, and Wednesday afternoon's MDC hearing, which was on the abatement at the core of the deal, on Channel 16's archives. For the Council - click HERE - then on 'video' for October 5, 2009. For the MDC - click HERE - then on 'video' for October 7, 2009.

The reason I am logging all these citations is because I have this huge nagging feeling that there are shoes waiting to drop. Whether it is in the list of names of future investors in this project, until now firmly held secret, or the word that the City's projections for paying off the garage loan are not coming to fruition, or something else entirely.

While I have disappointments in the obvious politics that took place in the 13-12 Council vote to support the zoning and in the 7-2 vote by the MDC to approve the abatement, I must say that I am rather more encouraged than disappointed. The risk will play itself out and what happens will happen. Mayor Greg Ballard will have to shoulder any shortfall for the CIB budget in 2011 and somehow explain to the taxpayers why we should bail them out yet again when Ballard himself saw no problem in undercutting their ability to raise revenue on their own hook.

Those Councillors who voted against the deal were Republicans Lutz and Hunter and Libertarian Coleman, who joined Democrats Bateman, Brown, Evans, Gray, Lewis, B. Mahern, D. Mahern, Mansfield and Oliver. Those who voted for the deal were Democrats Nytes and Moriarty-Adams, who joined Republicans Cain, Cardwell, Cockrum, Day, McHenry, McQuillen, Pfisterer, Plowman, Scales, Smith, and Speedy. Councillors absent were Sanders, Malone, Vaughn, and Minton-McNeill. Councillors who wish to cling to the idea that they were voting merely on a zoning matter, either authentically so or just for public cover, surely knew that killing the zoning would kill the deal.

The two Commissioners who voted against the deal were President Randy Snyder (Council appointee) and VP Jim Curtis (County Commissioners appointee). Voting for the deal were Mayoral appointees Diana Hamilton, Tom Morales, Dorothy Jones, and Lisa Kobe, Council appointees Tim Ping and Jason Gaines, and County Commissioner appointee Scott Keller. Commissioners who wish to cling to the idea that they were merely voting on an abatement, either authentically so or just for public consumption, surely knew that killing the abatement would kill the deal.

The reason I am more encouraged than discouraged is the effort Councillors Brian Mahern and Joanne Sanders put into trying to get a review of this bad deal before the Council. Mahern in particular did a yeoman's job of getting on top of this complex deal very fast. His summary of reasons to vote against it would have won the day, had party politics not been in play. Furthermore, I see real energy now to try to convince the State Legislature to give the Council the ability to review abatement decisions of the MDC, in the same manner they now review any zoning decisions of the MDC. We desperately need that legal capability for checks and balances on any Mayor of Indianapolis. And, we need for the public to be able to raise concerns that will be heard by an elected official. Right now we get little to no notice of pending abatements. Even the MDC got 48 hours notice of this one. We, the public, are denied documents simply to keep us in the dark as long as possible while the abatements are rammed through the MDC as fast as possible. In addition, there is energy to try to get State law changed so that these appraisals are not shielded from public review. I would further like to see energy behind changing State law so that future value cannot be used in appraisals, solidifying the protection of taxpayers from this scheme in the years to come.

So, a long, frenetic week capping a bad deal proposed by Mayor Ballard's office back in early June. Its good to be Tadd Miller. Its bad to be a taxpayer in Indianapolis.

We Interupt This Series ....

We interrupt this series on the Indianapolis-Marion County 2010 budget, to mention a brief event that also occurred at Monday night's City-County Council meeting.

The rezoning petition for 450 E. Market Street was 'called down' by the Council. Councillor Joanne Sanders did it on behalf of Councillor Doris Minton-McNeill, who could not attend, but within whose district the parcel lies. 'Called down' means that it was specifically pulled out of the stack of rezoning decisions of the Metropolitan Development Commission. The remainder of the stack was approved in bulk, as is usual.

If you aren't familiar with the deal that TM Miller Enterprises is trying to cut with the City, you can review an earlier entry or two, or three.

Here -- Here -- and Here

The rezoning petition is automatically scheduled to be heard by the Council at its next meeting, but usually that is delayed to give sides a month to try to craft mutually acceptable terms.

I suspect that at the October 7 hearing of the MDC, this matter will yet again be continued.

Abatement hearing for 450 E. Market to be Continued

The MDC hearing on the abatement for 450 E. Market Street will be continued to October 7, 2009.

MDC to Hold Public Hearing on Abatement for 450 E. Market

The Metropolitan Development Commission is slated to hold a public hearing this Wednesday, September 2, on the proposed abatement for 450 E. Market Street. You may recall that this abatement is the central feature in a complex deal between the City and TM Miller Enterprises to rehab the old Bank One Operations Building into apartments and retail. Through the deal the City would become owner of the parking garage just north of the block TM Miller Enterprises would get for free.

Even if all goes as hoped for with the planned development, there will be a net loss of property tax revenues reaching over $1 million in the first two and half years and a net loss of property tax revenues of $43,000 each year after. In addition, the Capital Improvement Board stands to lose $800,000 per year in revenue from the surface parking lots it owns on the old Market Square Arena site, if the City gets its wish that a variance to avoid paving those lots is denied an extension. It is unclear how profitable the parking garage can be without the surface lots closure, driving customers to the garage. More on how these number are calculated in a later blog entry.

See here for a description of the deal. The hearing would begin at 1:00 pm in the Public Assembly Room of the City-County Building.

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.