Prop 15 - A Nightmarish Mess

The tortuous life of Prop 15 through the Indianapolis-Marion County City-County Council is not the Council's finest hour by any stretch of the imagination.

The ridiculoucity continued this past week with two evenings of meetings of the Metropolitan & Economic Development committee.

Even before Monday night's meeting began, the committee knew it would be recessing that night without passing Prop 15 due to a disagreement with the Ballard administration over a proposed amendment that sought to add language guaranteeing two microloan programs and one job training program.  Councillor Vop Osili had a memo from Deron Kintner to the effect that the City agreed to those programs, but wanted it written into the proposal.  I uploaded to Google Docs the disputed, and never introduced, amendment.  What you'll notice is it's clarity of language.  The header suggests this amendment was intended to be voted on at the full Council meeting where, instead, the Council decided to send Prop 15 back to committee.

What was introduced Friday night, after they had four full days and nights to come to an agreement, was a mess - tortuous language construction, dubious protections for the intended beneficiaries of the programs, and massive loopholes.  Not to mention the misspelling of the word "Councillor" - which is defined in Council rules, by the way.  Plus you'd think commas were an endangered species that had to be included sparingly.  This amendment passed by a vote of 6 to 1, with Councillor Zach Adamson providing the sole no vote.  I have uploaded my copy of this amendment, as the Council website has not yet updated their version of Prop 15.  Sorry for the scribbling, I wasn't thinking I'd be sharing it with everyone.

From the header one might think this amendment would be introduced at the full Council.  The meeting Friday night did start 5 minutes late and the amendment was not available until seconds beforehand.  So, it may be the negotiations were deemed done enough and this messy amendment was introduced at the committee instead.

Here are some attributes of the amendment that catch my eye:

The $10 million microloan program will require "the leveraging of current resources" which usually means floating bonds to be repaid with some revenue stream.  There aren't many details provided on this proposed program.  One thing that is stated is that it would be a county wide program.  It would be a violation of state law for the funds to come from the downtown TIF.

I looked through google street maps and the Marion County Assessor's interactive map to try to locate the "Bryant Heating & Cooling Facility located at 21st and Montcalm".  All parcels at that intersection are owned by private entities, none of which are Bryant.  To the west, however, at 1100 W. 21st Street, there is a large parcel with large buildings that appear abandoned, which is owned by DMD.  Why the lack of specificity when an address or parcel number is three mouse clicks away?  This is important because there is an attempt to require the demolition of this facility.

In multiple places the phrase "the area" is used.  From context it seems like it refers to possibly different boundaries at times - but the phrase is never clearly defined, which results in little to no protection of the residents of the Bush Stadium area that any of the promises made to them will actually be fulfilled - or even be required to be fulfilled.

The $2 million microloan program can be awarded to any business within a two mile radius of the enlarged downtown consolidated TIF.  The language is poor, again a comma or two might clarify, but it is either attempting to say the business must be located in a lower income area (median household income 75% or less of the median income in the County) or that the 2 mile perimeter must be centered on a low income area.  Just by the way, the median household income in the County is $40,421.  But a two mile radius?  How does that adequately target the Riverside or UNWA residents who came out to say they needed help?  Looking at maps, this perimeter could reach the Speedway to the west, Garfield Park to the south, Butler University to the north, and nearly Emerson Avenue to the east.  The intent is to take the funds from the TIF.  But TIF revenues must be spent within the TIF.  These requirements are a clear attempt to circumvent the state laws regarding the expenditure of TIF revenues, and it does not target the folks who live in the Bush Stadium area.

The exact same thing can be said of the $1.5 million job training program as was just stated for the $2 million microloan program.

And the last I'll mention is the really botched attempt to get work for the TIF district residents.  The language seems to say that any business receiving TIF money, should they require new hiring, would have to ensure that 40% of those hired lived in the TIF district.  The business could get out of this by filling out a form that indicated why it tried but failed to get to the 40% figure.  Or, they could bring in all their additional help from out of state, since those folks will not be counted.

Osili has been all over town touting the targeted benefits he personally negotiated for the residents and businesses of the Bush Stadium expansion area.  But, he is not delivering on that promise with this language.  Someone is being scammed - its either Osili or the residents.

Prop 15, that twice beaten dead horse now burdened with the worst amendment in the history of amendments, was voted on twice by the committee Friday night.  The first time the phrasing of the motion left off the key part where it would be sent back to the full Council with a do-pass recommendation.  On the advice of Council counsel, they did a do-over with the correct motion.

Both times the vote was 6 yeas and 1 nay.  Councillor Zach Adamson was the lone no vote both times.  The yeas were Councillors Robinson, Talley, Adams, Osili, Miller and Cardwell.  The last two are Republicans and the rest are Democrats. 

Prop 15, that raggedy, tattered zombie that it is, returns to the full Council Monday night.

Matt Tully - Wrong on TIFs - Not Just Merely Wrong; Most Sincerely Wrong

There is no doubt the IndyStar columnist, Matt Tully, is a talented writer.  As a person, Tully's opinion is of no more importance than the next guy's.  As a paid opiner for the Star, with its wide reach, his opinions are amplified in the community.  With that reach, and with being a journalist, one would hope Tully would be fastidious in checking what he promotes as facts.  Unfortunately, in his column on the proposed Mid-North TIF, Tully fails the accuracy test.

Tully repeats that tired old fairy tale that TIFs only capture new development.

First, the TIF captures only new property tax revenue -- meaning money from new investment over and above what is already collected.

We see this year, where $490 million of base - which is the 'old stuff' - in Marion County's TIF districts, was converted into increment - which is, according to the fairy tale, supposed to be only the 'new stuff'.  That's a full third of the existing base.  How much time would it take to accumulate an additional $490 million of property value for our tax roles through development?  And yet, in one year that huge amount of property value is yanked from producing tax revenues for the schools, libraries, IndyGo, Health & Hospitals, fire departments, IMPD, parks, as well as the city-county government.

Where Tully gets alarming is where he promotes brand new fairy tales about TIFs.  He actually most succinctly framed the idea in a short twitter debate he had with Amos Brown a week ago.  Below is a screen shot of the back and forth so you can get the context in which Tully said

"If Midtown continues losing high income families that's a disaster for the city--particularly the most struggling parts of it."  Huh?  And, from the context, TIFs are apparently the answer.

Let's face it, a Mid-North TIF is a solution searching for a problem. 

Tully is promoting the idea that TIFs are designed to bring tax dollars into well to do neighborhoods to make them even better places to live so that rich people stay in Marion County.  His logic is other worldly when he can reach the conclusion that improving the lot of the well to do has a positive impact on those who struggle daily.

If it were just Matt Tully, a person, with this attitude, it would be part of the community conversation.  But, it is Matt Tully, the print media columnist, who is spreading this insidious meme that TIFs are for the better off areas.

You likely remember that extraordinary series of columns Tully wrote about the Meadows years ago now.  Where is that Matt Tully?  TIFs were designed to help just this type of neighborhood, where no dollars are going and a few dollars has a shot at making a real difference; first in the real estate, then in the lives of those who can't afford the rent in Tully's neighborhood.

If there were a prioritization of neighborhoods in need in this city/county, Meridian Kessler, Broad Ripple, and Butler-Tarkington wouldn't be anywhere near the top of the list.  Yet, they want to get theirs first, before the reality sinks in that TIFs have consequences, not all of which are good for Indianapolis and its future.

The last couple of years, Tully has taken immense amounts of time to experience IPS, and he penned riveting and pivotal pieces that helped to elevate the discussion of education in Indy.  Where is that Matt Tully?  Doesn't he know that existing TIFs already harm IPS' bottom line?  And yet he is promoting the creation of another square mile TIF in the IPS district. They call the downtown TIF the "dead zone", because of all the property value that does not send revenue their way.  IPS already has 22% of all taxable property within its district caught up in a TIF increment.  One-fifth.  That's twice the average for the County as a whole.  40% of the circuit breaker penalty (the property tax revenues that government qualifies for, but cannot collect due to the property tax caps) in the County can be attributed directly to TIF districts and their sequestration of property value.  With its higher percentage of property valued contained within TIFs than the County as a whole, one would estimate that TIFs cause an even greater percentage of the $15 million circuit breaker penalty that IPS will see in 2013.  What could IPS do with an extra $6 to $12 million a year more?

But this Tully, the one for whom there is no valid and valuable community conversation about TIFs going on, this Tully would add another square mile of untouchable tax revenue in IPS's district.  He seems to think that excluding residential property from the proposed Mid-North TIF is a positive.  But, lets face it, residential property has a 1% tax cap, and the TIF would capture the commercial values - which are higher in assessed value and which have 2 % and 3 % tax caps, so pay a greater proportion of property taxes from the same size lot.

Tully does columns on crime in a variety of areas in our city-county.  Yet, he doesn't mention that TIFs take revenue away from IMPD - not just shelter revenue from IMPD's grasp, but take it away in the form of the circuit breaker penalty.   According to Jeff Spalding, City Controller, the 2013 circuit breaker penalty will be over $5 million for IMPD and over $7 million for IFD.  As currently configured, the 2013 budget calls for no IMPD recruit class and one for IFD only if they can get their hands on a federal grant.  Again, at least 40 % of those circuit breaker amounts are directly attributable to existing TIFs.

Well, with or without Matt Tully, the community conversation about the reality of TIFs will continue.  Personally, I had hoped by this time our conversation would be about how much of our property value should be tied up in TIFs for the next 25 to infinity years.  Other jurisdictions that use TIFs and place a limit, set that limit at 5% of property value.  We are at 11%.  With the ramrodding of TIFs through the Council prior to the implementation of the recommendations of the TIF Study Commission, based on incomplete information, one has to wonder what generational damage these folks are doing.

Tully has a soapbox courtesy of the Star's circulation.  He also has a responsibility to be accurate with the facts he sprinkles throughout his columns to support his opinions.  On the TIF issue, he completely and utterly fails on the accuracy test.

Dust Up - For Reasons Unknown, But I Speculate Anyway

I have the greatest admiration for Councillor Brian Mahern, but last night he flubbed.

The Rules committee began their consideration of Prop 316, which would implement the recommendations of the TIF Study Commission.  After a thorough and really well done overview of the findings of the Commission, Councillor Bob Lutz introduced an amendment that would strike the very last part of Prop 316:

(d) Any proposal creating or expanding a TIF allocation area must be approved by a standing committee of the council before it can be considered for adoption by the full council.

The discussion, which actually preceded the motion to amend, revolved around current Council rules and how the proposed change would impact the ease with which the full Council could call a TIF proposal out of committee.  Currently, if a committee kills or votes down a proposal, the full Council can call it out of committee by the vote of a simple majority; or 15 votes.  This change would require the suspension of the rules in order to call a TIF proposal out of committee, which requires a 2/3 vote; or 20 votes.

After the motion and a second, Mahern refused to take a vote and asked to postpone the proposal until the next meeting of the committee.  He said postponing would allow time to discuss this amendment as well as one Councillor John Barth would be introducing.  He noted that Barth's amendment was only received that afternoon.  There was no second to his motion.  Mahern then tried to move off Prop 316 and on to the next agenda item.  After some brief, heated discussion, a recess was properly motioned and voted on.

After the recess a vote was taken on Lutz' amendment and approved by a vote of 5-1, with Mahern being the lone dissenting vote.  Then there was a motion and second to postpone further consideration of Prop 316 until the next meeting.  That vote was 4-2, along party lines.

I got no indication from the cheap seats why Mahern was so intent on getting the proposal to the next meeting.  While I would welcome a requirement for a super majority vote on any TIF proposal, it didn't seem to rise to the occasion of clearly violating parliamentary procedure in order to avoid a vote.

Barth's amendment was available at the Secretary's table.  This amendment would gut the entire proposal.  Barth is promoting his own TIF for his own neighborhood - Prop 291; the Mid-North TIF (see "The Mid-North TIF -- Developer Driven and Sans Critical Financial Details").  He introduced his proposal at the last full Council meeting.  Prop 316 was introduced at the same time.  One might expect, therefore, that any implementation of the recommendations of the TIF Study Commission would not apply to the Mid-North proposal.  But, Prop 291 was not placed on the Metropolitan & Economic Development committee agenda for Monday night, and it will not be until after the next full Council meeting that the committee would take it up.  So, as of yesterday morning it looked as if the TIF recommendations would indeed apply to the Mid-North TIF.  I can't read minds, but it is very suspicious that Barth introduced his amendment just hours before the meeting and that amendment would gut the entire list of recommendations contained within Prop 316.

Besides a technical correction, Barth's amendment would add one line to section (b) of Prop 316.  Here is (b) with the added sentence underlined:

(b) The factors set forth in subsection (a) [which enumerated the recommendations] are not exclusive, and the council may consider any other factors it deems appropriate in exercising its discretion to approve or disapprove proposals under I.C. 26-7-15.1(9)(a).  Likewise, the absence of any factor or part thereof does not limit the council's discretion to approve or disapprove a proposal.

With that last sentence included, none of the recommendations would be securely implemented.  The administration, or any that follows, could continue its pattern of withholding key financial information from the Council.  That information is necessary to a realistic look at the TIF being proposed.  Without that information the Council cannot make an informed decision and it cannot carry out its duty to review and vote to approve or disapprove as required by law.

TIFs do not generate free money, as many continue to believe.  TIFs have consequences, as many continue to avoid believing.  TIFs always caused increases in property tax rates.  Now they increase substantially the circuit breaker penalty caused by the property tax caps.  Property tax caps that were voted on by the people.

In this age of property tax caps, it is time for the Councillors to learn about the reality of TIFs. It is time to act as the fiscal body of our City that is different from the Mayor's office and that has a distinct role and responsibility.  It is time to demand full disclosure on proposed TIFs so that a reasoned decision about TIFs can be derived.  It is time to implement, not blow off, the Council's portion of the TIF Study Commission recommendations. 

Finally - TIF Study Commission Recommendations At Committee

The TIF Study Commission did extraordinary work - and its knowledge base should be used by each and every Councillor in order to do what is best for Indianapolis.

The recommendations that pertain to the Council are being considered in Prop 316, which is being heard by the Rules committee tonight, beginning at 5:30 pm.  The agenda notes room 260, but it would be really nice to see such a crowd of supporters that it had to be moved to the public assembly room.

The meat of prop 316 is cut and pasted below.  The bottom line is that it will require full disclosure from any administration wanting to create or expand a TIF district.  Its a first.  Its important.

Here are the recommendations in the proposal:

SECTION 1. Chapter 151, Article VI of the Revised Code of the Consolidated City and County is hereby amended by adding a new Section 151-88 to read as follows:

Sec. 151-88. Special requirements for consideration of proposals concerning creation and expansion of allocation areas under I.C. 36-7-15.1.

(a) In exercising the council’s discretion under I.C. 36-7-15.1-9(a) to “approve or disapprove” proposals creating or expanding tax increment financing (TIF) allocation areas under I.C. 36-7-15.1, the council and its committees shall consider the following factors:

(1) Whether the city has provided a cost/benefit analysis that includes a description of how the project plan aligns with the county-wide comprehensive economic development planning document; a description of how the project plan aligns with the local/neighborhood planning document; a market analysis of the existing, possible or likely future free market unsubsidized private development in the proposed geographic area; an analysis of recent changes in the assessed value in the individual parcels located within the geographic area of the proposed project; and an analysis of use of a project TIF as compared to a TIF district.

(2) Whether the proposed geographic area of the proposed TIF district would include parcels that are in the process of being improved, even if not substantially complete enough to be assessed and added to the county’s inventory of taxable property.

(3) Whether the city has created and implemented a uniform TIF application, employing best practices and including all information needed to evaluate the proposed project and all data elements required for a TIF database, including a financial pro forma.

(4) The extent to which the city has employed the use of alternative or complementary economic development tools and infrastructure funding prior to the use of TIF.

(5) Whether the proposal minimizes the duration of the TIF district to the amount of time reasonably required to accomplish both the economic development goals of the TIF district and to provide for the permanent return of incremental assessed value to the base taxing units as soon as possible by decommissioning the TIF district.

(6) Whether the proposed TIF district targets the use of tax increment financing in a targeted, limited and compact geographic area.

(7) Whether the existing TIF districts in the jurisdiction of the redevelopment commission have sunset dates established.

(8) Whether the existing dormant or partially dormant TIF districts in the jurisdiction of the redevelopment commission have been terminated.

(9) Whether the proposal would expand an existing TIF district that does not have an established sunset date.

(10) Whether the proposal is for redevelopment projects or economic development projects.

(11) Whether the proposal includes local hiring goals and MBE/WBE participation goals.

(12)Whether the proposal includes provisions for educational, work training, and worker retraining programs.

(13)The extent to which the base taxing units and community organizations that may be impacted by the creation or expansion of a TIF district were included from the beginning of the process and provided with meaningful economic impact analysis including projections of foregone revenue, not limited to current financial reporting requirements in state law.

(14) Whether the city has adopted semi-annual local reporting requirements, including a three-year capital spending plan for pay-as-you-go projects and other estimated spending for eligible uses of TIF funds.

(15) Whether the proposal includes accountability and remediation requirements for the performance of the TIF district, including progress reports measuring performance against stated goals at the time the district was established.

(16) Whether the proposal captures more incremental revenue than is necessary to cover debt service and reasonable reserves for the associated projects.

(17) Whether the city has established a uniform documentation, reporting, tracking and monitoring system for TIF districts and projects, including a TIF database and a TIF website which would be a repository of the TIF data and information made available to the public.

(18) The extent to which the proposal would remove from the base the incremental assessed value of projects that were completed or substantially completed before the adoption of the declaratory resolution.

(b) The factors set forth in subsection (a) are not exclusive, and the council may consider any other factors it deems appropriate in exercising its discretion to approve or disapprove proposals under I.C. 36-7-15.1(9)(a).

(c) Prior to voting to approve or disapprove a proposal creating or expanding a TIF allocation area, a council committee must publish notice and an agenda of the meeting at least ten (10) days in advance, and the proposal must be specifically included on the noticed agenda.

(d) Any proposal creating or expanding a TIF allocation area must be approved by a standing committee of the council before it can be considered for adoption by the full council.

Prop 15 Gets Public Hearing Tonight - With Notice

Unlike the August 27 meeting of the Metropolitan & Economic Development committee of the City-County Council, the agenda for tonight's meeting does list Prop 15, which seeks to expand the downtown TIF to include the Mass Ave TIF and the Bush Stadium TIF for a total additional footprint of 1.1 square miles.

Proposal 15 remains dead, according to Council Rules, but I expect it to get vigorous debate and a vote regardless.

Not on the agenda is Prop 291, which would approve the proposed Mid-Town TIF.

There is also a budget hearing for the Department of Code Enforcement to be held at the committee meeting tonight.

So, look for a long night.

Proposed Bush Stadium TIF - Google Aerial View

The proposed expansion of the consolidated downtown TIF district (Prop 15, dead, but still being considered by the Council) has two components - a 112 acre eastward expansion to Mass Ave and a 604 westward expansion to capture the Bush Stadium area.  I previously posted a set of Google maps for the proposed Mass Ave TIF for folks to see the fine detail of the TIF footprint (see "What's Wrong With This Picture - The Proposed Mass Ave TIF").  Now I am posting Google maps for the Bush Stadium TIF area. 

I uploaded all the maps to Google docs - google streets, google aerial overview, map 1, map 2, map 3, map 4, map 5, map 6, map 7, map 8, map 9 - so you can zoom in as much as you like.

The Bush Stadium TIF consumes 604 acres and 419 parcels supposedly to support development over a couple of blocks.

Below are a number of maps.  The first two are the street and aerial maps of the proposed TIF footprint.  The aerial map has been enlarged and split into 9 component maps that show street names and building structures in more detail.  Numbers on the aerial map denote the location of the 9 component maps.

Mid-North TIF - Developer Driven and Sans Critical Financial Details

A letter to the editor in yesterday's Star, signed by Councillor John Barth and leaders of a number of Mid-North Neighborhood Associations, claims that the proposed Mid-North TIF is not developer driven.

Hogwash.

Developer Leif Hinterberger testified a number of times at the TIF Study Commission.  During his testimony he noted the several years he has been working with Ryan Vaughn, and also listed a number of people in the City administration who he claims promised him that a TIF would be created to fund his project.

The project is 'The Uptown', on the northwest corner of 49th & N. College; a mixed use project of retail and residential.  The southern half of the block is owned by 49-50, LLC, whose agent is Leif Hinterberger.  The northern half of the block was owned by Leif Hinterberger, but recently sold to a Tom Melangton.

Many of these neighborhood groups signed letters asking for quite a bit of public money resources to be aimed at this project.

HOME funds and CDGB grants
Indiana Housing and Community Development Authority tax credits and grants
tax abatements
infrastructure curtesy of DPW
 

The entire block has been subject to a very large number of high weeds and grass complaints, forced mowing and legal action in environmental court, as well as a Health & Hospital demolition order on a building at 4902 N. College.

The Mid-North TIF as proposed (Prop 291 now before the Council) encompasses over a square mile of real estate.  The footprint is known, but nothing else has been disclosed to the public.  This is another pig-in-a-poke being pushed through before full disclosure is required through the passage of Prop 316.

If you take a peek at Prop 291 you'll see next to nothing as far as information, valuable or not, contained in it.  The MDC resolution, which I uploaded to Google Docs, does have the list of 1971 parcels contained in the footprint along with a map. 

Almost 1/3 is in Center Township and the remainder is in Washington Township.  All appears to be within IPS' district.  Center Township already has 30% of all taxable property contained within the increment of a TIF district.  IPS has 22% of all taxable property contained within the increment of a TIF district - what's another 700 some acres and over 1 square mile more.

And, lets not continue with the fairy tale that only new property value will have its property taxes diverted from IPS and placed within the TIF fund.  16 of 40 TIF districts have seen their base converted entirely to increment over the years.  So there is a track record that strongly suggests a high probability that the current value of property within the footprint will partially or entirely become another dead zone for contributing to the services of IPS, and the city-county.

Yes, the proposed Mid-North TIF is entirely project and developer driven.  And it puts an unknown amount of property value at risk, and stands to drive even higher the $15.2 million that IPS qualifies for but cannot collect because of the property tax caps.

If there is financial evidence that any of this is leaping to erroneous conclusions - the City has not provided it to the public.  With a lack of evidence to the contrary, we must conclude that past performance is the only indicator of future performance that we have.