Standard & Poor's Statement on Indy Bond Ratings

From Standard & Poor's website, this statement on their drop in rating for various Indianapolis bonds.  Please note the emphasis in red is mine:

CHICAGO (Standard & Poor's) Dec. 17, 2013--Standard & Poor's Ratings Services said said that it lowered its issuer credit rating (ICR) to 'AA' from 'AAA' on Indianapolis, Ind., based on our recently released local general obligation (GO) criteria. At the same time, Standard & Poor's lowered its ratings on the city's GO and ad-valorem property tax-backed debt to 'AA' from 'AAA', certificates of participation (COPs) to 'AA-' from 'AA+', and moral obligation-backed debt to 'A' from 'AA'. The outlook on all debt is stable. The 'AA' ratings are based on ad-valorem property tax pledges, subject to state circuit-breaker legislation. The 'AA-' rating on the COPs reflects annual appropriation risk, and the 'A' rating on the moral obligation debt is based on the city's moral obligation pledge to replenish debt service reserve funds, if needed, subject to council appropriation. Standard & Poor's also lowered its long-term rating to 'AA-' from 'AA' on certain moral obligation debt, reflecting the rating on the insurance provider (Assured Guaranty Municipal Corp.) now being higher than the underlying rating. "The 'AA' rating and stable outlook reflect our assessment of Indianapolis' very strong budget flexibility and liquidity," said Standard & Poor' credit analyst John Sauter, "along with its strong management." Another supporting factor is its adequate economy. Offsetting factors include the city's:

Weak budgetary performance, factoring in forecasted deficits for fiscal years 2013 and 2014; and

Weak debt and contingent liabilities position, mostly reflecting high direct debt.  

"We do not anticipate any of the positive factors wavering within the two-year outlook period," added Mr. Sauter.  

Rating improvement is likely contingent on an improved management score and more balanced budgetary performance in the near term (compared to projections), particularly given we do not anticipate the debt and contingent liability assessment or economy assessment to improve in the near term. Should the management and budgetary performance assessments improve, a higher rating would be likely.

Hmm.  "mostly reflecting high direct debt".  The Ballard administration will be adding more and more debt as fast as it can and as much as it can before they are out of office.  Maybe its time the Council reflect on this high debt load and make Ballard pay off some before he hands the next generation more.

Council ROC Review Committee Includes District Councillor and Original Lease Proposal Co-Author, Ben Hunter

The Council has taken on the task of investigating the lease agreement for the Regional Operations Center.  Unfortunately, they include on the ten member committee, Councillor Ben Hunter, a co-author of the Council Proposal that authorized the lease and the home Councillor of the ROC itself.

The others appointed are: Councillors Freeman, Gray, Hickman, Mansfield, Miller, Osili, Pfisterer, Sandlin and Simpson.

The announcement, put out on behalf of the Council and listing Simpson as the media contact is as follows:

Indianapolis– On Monday, October 14, 2013, the City-County Council unanimously passed a resolution establishing a special investigating committee regarding the lease for the Regional Operations Center (ROC), located at 401 North Shadeland Avenue (the old Eastgate Consumer Mall facility), entered into by the Department of Public Safety (DPS).  Council Resolution No. 63, 2013 (Proposal No. 332, 2013) calls for an investigation to be conducted examining why DPS entered into an allegedly unfavorable long-term lease, whether or not the information provided to the Council with regard to the lease was complete and accurate, whether there are other such leases with unfavorable terms entered into by DPS or other departments and agencies, and whether the City has made other formal or informal commitments relating to the ROC lease that have not yet been disclosed. 

Earlier this year, it came to the Council’s attention that the Office of Corporation Counsel and the City Controller both allegedly refused to sign the original lease, which contains many unusual provisions that are highly unfavorable to the City.  The current Director of DPS, Troy Riggs, recently ordered the evacuation of the facility due to allegedly unsafe conditions, and there are reports that the drawings of the facility originally submitted to the Council are substantially different from the facility the owner was told to build, and that DPS may have entered into additional “confidential agreements” with the owners. 

Following passage of the resolution, the Council appointed a ten-member bi-partisan committee made up of the following members of the Council:  Aaron Freeman, Monroe Gray, Jr., Pamela Hickman, Benjamin Hunter, Angela Mansfield, Jeff Miller, Vop Osili, Marilyn Pfisterer, Jack Sandlin, and Joseph Simpson.  Councillor Joseph Simpson, who was designated by the President of the Council to serve as committee chair, stated, “This committee process provides an opportunity to gain a clearer understanding about how the ROC lease was put into place; and, more importantly, to understand how City business practices and related legislative policies can be strengthened to avoid a similar situation in the future.” 

The committee will hold its first meeting on Monday, November 4, 2013 at 5:30 p.m. in Room 260 on the second floor of the City-County Building, 200 E. Washington Street. 

Republican Lunatic Zealots Damage America

A few dozen Republican lunatic zealots, enabled and abetted by many more pseudo-sane Republicans, damaged America's reputation, its economy, and its borrowing power over the last 16 days of their insane acting out.

The fact that they put the pin back in the grenade at the very last moment does NOT make it alright.  They must be held accountable.

Hundreds of thousands of federal employees were unemployed for over two weeks.  About 4 million more worked without pay for the duration.  While all are expected to receive compensation at some point, this is no way to make a statement about fiscal responsibility.

Jobs in the private sector, especially ones dependent upon federal employee spending, grants, or keeping government sites open, were also lost.  Small businesses were damaged, without anticipated Small Business Administration loans coming through.  Large businesses, whose third quarter earnings data are now coming out, are pulling back on their fourth quarter expectations.  Regular families will think twice about their holiday spending.  Consumer confidence is down.
 
Interest rates on T-bills due around the time of the new deadlines of January 15 and February 7 are already spiking, as prudent investors recognize the risk that these lunatic zealots will hold the USA and its full faith and credit hostage yet again.

According to Standard & Poors, the shutdown cost the US economy $24 BILLION and cut growth in the next quarter by at least 0.6 %.

President Obama and the Democrats held firm - for the first time in recent memory - denying the hostage takers any payment.  Whether or not this will be enough to keep them from trying it again waits to be seen.

Speaker Boehner's performance was instrumental to the lunatic zealots' prolonged influence.   He was clearly erratic in the last couple of days, trying to torpedo an emerging Senate bill with an on-again-off-again-back-on-again-back-off-again proposal to come from the House.

Minority Leader McConnell was gifted a $2.9 BILLION appropriation for Kentucky hidden in the bill that passed both Chambers last night.

The Senate voted 83-16 to fund the government to January 15 and raise the debt ceiling to February 7.  You can check how your Senators voted here.  The House voted 285-144 on the bill.  You can check how your Representative voted here.  For Indiana, both Senators Coats (R) and Donnelly (D) and Representatives Visclosky (D), Carson (D), Brooks (R), and Young (R) voted in favor.  Representatives, all Republican, Walsorski, Stutzman, Rokita, Messer, and Buschon voted against.

If you know a lunatic zealot, you don't give them the keys to your car, much less the keys to your gun safe.  The Republicans in Congress must take away the keys from those in their caucus who would take aim on the economy of the US and the world again.  Voters need to step up and unseat the lunatic zealots and replace them with sane public servants when next they are up for election.  Otherwise, there is no telling how much more damage these people are willing to inflict upon us all.

There Needs to Be an Independent Investigation of the ROC Deal

Tracing the tentacles of this deal are madding.

I refer to the deal made to lease space in the old Eastgate Mall for a Regional Operations Center - in time for the 2012 SuperBowl.  The ROC was to be used as the heart of surveillance for the public gatherings - Homeland Security, IMPD, IFD central commands combined with federal agencies in one spot away from the action downtown.

The latest tentacles to be revealed were broadcast during last night's WTHR 11 O'clock news.  Sandra Chapman did an interview with Alex Carroll, owner of the facility.  He discloses that there was a secret deal with the City that involved a sizable up front payment to him, and that the City was responsible for drafting the lopsided lease agreement that puts all of the maintenance burden on the taxpayers.

Gary Welsh, over at Advance Indiana, did an excellent job of recapping the interview and putting what is known about the whole deal in perspective.  Previously, Paul Ogden described how lopsided the agreement is and that representatives of City Legal and the City Controller refused to sign off on the lease - leaving then Public Safety Director, Frank Straub, on his own (see here and here)

There must be an independent investigation of this deal.  All business conducted on behalf of the public must be made public - there can be no secret deals.  What is disclosed to the public must be accurate - officials cannot say they are making lease payments when they are paying off a loan directly.  The City may not take out a loan.  The City cannot float a bond without disclosing what that bond is to be used for and what dedicated revenue stream will repay it.

At this point it is unclear IF there was a secret deal, IF there was a sizable upfront payment and how much that was, IF there was a concerted effort to keep information from most of the Council and the public, IF there is a bank loan or a bond, and IF campaign contributions were part of the big picture.

The lease was put forth as Prop 102, 2011 with no lease details.  It originally was for 210,000 square feet, but that was reduced to 76,000 square feet before passage by the full Council on May 16, 2011.  The sponsors of the proposed lease were Councillors Ben Hunter and Mary Moriarty Adams.  The Eastgate Mall is in Hunter's district, but almost in Adams'.  At the time, Hunter Chaired the Public Safety Committee and Adams was the senior Democrat on that committee.

Below I have embedded a portion of the April 12, 2011 meeting of the Admin & Finance committee meeting - the first of two committee meetings to consider this lease.  This portion begins after Homeland Security Director Gary Coons' half hour presentation on what a ROC would be and why one was needed.  The embedded portion are the questions that the Councillors had.  Jon Mayes, Deputy Director, Special Counsel for the City responded to the questions.  It is instructive as to how little information these committee members were given initially.  Look for Councillor Barbara Malone's question of whether there any upfront fee for renovation of the facility and Councillor Jackie Nytes inquiry as to whether construction had already begun on the facility.

The answers by Mr. Mayes include that this was to be a 20 year lease, with no upfront money and all construction and renovation costs amortized in the lease payments.  Those payments were to be $1.2 million per year.  The Proposal was amended later and his statements may only refer to the introduced situation.  Construction had already begun on this site by the time the committee was given Prop 102 to consider.

There needs to be a full vetting of exactly what the arrangements were, who authorized them, and how honest everyone has been in divulging the details of that arrangement.

IMPD Budget Recap - It's Probably Not What You Expected

Last night's budget hearing for IMPD was quite well attended.  For those who missed it, let me recap.

Public Safety Director Troy Riggs, Police Chief Richard Hite, and Public Safety Deputy Director Valerie Washington present limited IMPD budget numbers; noting only that the money flowing to IMPD from one fund (the IMPD General Fund) would remain the same, at $187m.  

In 2014, the want to hire 35 civilians to take over duties now conducted by sworn Officers, allowing those Officers to return to patrol duties.  They also want to set up a recruit class of 50 new hires.  That, combined with 10 civilian hires this year, make the 90 new sworn Officers that is being bandied about in the media today.

But, in order to accomplish all of this, they need to have their budget cut by $5.65 m.

Now, I know you want to go back and re-read that last sentence.  Go ahead.  I'll wait.

Yes the IMPD budget is being reduced by $5.65 million.  This includes a $7.09 million decrease in salaries from the current year budget.  No wonder they glossed over all the numbers except that one fund's expenditure total.

So you say, but Pat, what about the $1.4 million in fees to be charged the Officers for use of their take-home cars?  Well, I assume that's in the budget somewhere, but there is  no line that says 'fuel surcharge fee' in the numbers available to the public.  And, all I can say is, what one hand giveth, the other taketh away.

And you say, but Pat, what about the two tax hikes the Council gave the CIB - the increased ticket tax and car rental taxes?  Wasn't the first year's $6m supposed to go to IMPD and IFD?  And, after that isn't 25% of those increases to continue to flow to IMPD and IFD?  Why, yes, that's true.  But the year began on March 1, so the is only two months of 100% CIB 'public safety' revenue in 2014 and the rest is at 25% - so maybe $1m to IMPD. 

But, Pat, you say, what about the proposed increase in the old IPD Tax District?  Isn't that assumed in the 2014 that is on the table?  Why, yes - yes it is.  I know they say it will net about $3 million in additional funds, but the additional revenue IMPD collects is only $1.6 m.  And it actually should show up as a decrease in the property tax circuit breaker.  But that number is just about the same as it was for the 2013 budget.  So, you got me.  I'm sure its in there.  Yet again, what one hand giveth, the other taketh away.

What about the $9 million that is supposed to come from elimination of the Local Homestead Credit?  Surely that's in the IMPD budget.  Ryan Vaughn and Troy Riggs are all over the media saying that if that credit isn't eliminated then the IMPD budget will lose $9 million and there could be no new hires next year if that happens.  Well, this one gets a 'not really'.  Should the Local Homestead Credit be eliminated, the IMPD budget would actually go down about $300,000.  IMPD is better off if its not eliminated.  The elimination frees up County Option Income Tax revenue, but IMPD doesn't see a penny of that money.

Lets add up all the new money that the Mayor Ballard, Vaughn and Riggs imply is in the IMPD budget, shall we?  $1.4 million in fuel surcharge fee, $1 million from the CIB, $1.6 million or $3 million from expanding the old IPD Taxing District, and the $9 million from eliminating the Local Homestead Credit - sounds like $13 million to $14.4 million more money to IMPD, doesn't it?

But - nope.  No $14 million more for IMPD.  The 2014 budget really is $5.65 million less than 2013.

Its all a game to use public safety to secure public support for this round of tax changes. 

They Call it "COUNTY" Option Income Tax for a Reason

In a previous blog entry I showed graphs comparing the impact of eliminating the Local Homestead Credit, expanding the old IPD Tax District, and doing both, on various units of government.  In that I showed only the aggregated impact on City and County government.  That is the government run out of City Hall.

Now, because of obfuscation and deliberate confusion being tossed around by the Mayor's Office to the media, I'd like to show you what effect these tax changes would have on the pieces of City and County government.

But, first...

The Local Homestead Credit is a reduction in property tax bills that is paid for by using County Option Income Tax (COIT) revenue.  They call it County for a reason - the income taxes collected go to the COUNTY.  Not the City of Indianapolis.  Not to the IMPD fund.  Not to the IFD fund.  But to the County of Marion. If the Local Homestead Credit is eliminated, there would be more COIT money to spend on other things.  But, again, it is COUNTY Option Income Tax.

There are 6 different property tax districts that provide money to City and County government.  Each has a different footprint in Indianapolis/Marion County.  I will give you the impact data for each of these at the bottom.  But, for clarity and a bit of simplicity, I want to concentrate on the tax impact on the Police district, the Fire district, the consolidated City, and the consolidated County.

So, without further ado...

The overview of how eliminating the Local Homestead Credit, expanding the old IPD Tax District, and doing both will affect the coffers of the Police, Fire, City and County.

The scale is Millions of Dollars

As you can plainly see, most of the additional revenue would go to the County government coffers.  That's the Sheriff, Clerk, Prosecutor, and more.  By comparison, IMPD sees only a blip in increased revenue, Fire less so and nearly imperceptible changes for the City. [edited - my mistake here, the consolidate County is actually the City's general money - but none of that fund is used for police or fire.]

Looking more closely at each individual group...

POLICE

The scale is Thousands of Dollars

The Police fund would see its best gain if only the old IPD Tax District were expanded and slightly less if both changes are made.  It sees a loss of just over $200,000 in revenue if only the Homestead Credit is eliminated. 

FIRE

The scale is Thousands of Dollars

The Fire fund would see less than half the gain that Police see if only the old IPD Tax District is expanded.  It would experience a loss of almost $800,000 if only the Homestead Credit were eliminated.  And it would see a modest loss if both changes are made.

CITY

The scale is Thousands of Dollars

City funds would grow by a bit if the old IPD Tax District were expanded.  It would see roughly a $2000,000 loss if the Homestead Credit were eliminated, and about $150,000 loss if both are enacted.

COUNTY

The scale is Millions of Dollars


The County gets buckets-o-cash if the Homestead Credit is eliminated and next to no change if the old IPD Tax District is expanded.  Please note that while the scale of the preceding three graphs has been Thousands of Dollars, this scale had to be Millions of Dollars.

Here are the exact numbers for all 6 tax districts.  You'll notice an additional 'County' district that brings in even more money to the County coffers.  Please do not ask me why there are two County districts.  Loss of revenue is highlighted in red.  Gain in revenue is black.

Name	HSC Elim. Only	IMPD Exp Only	Both
Marion County	$1,346,500	423,000	1,720,400
Indianapolis Sanitation (Solid)	(254,400)	94,000	(171,600)
Indianapolis Police Special Service	(234,100)	1,671,000	1,332,800
Indianapolis Fire Special Service	(749,400)	645,000	(130,600)
Indianapolis Consolidated City	(225,100)	90,000	(164,100)
Indianapolis Consolidated County	8,442,000	173,000	8,576,300

So, what have we learned here today?  While the Mayor's office continues to connect these tax changes with some improvement in IMPD's budget, it is a fabrication intended on selling the tax changes.  Expanding the old IPD Tax District does have a small, but real, affect on IMPD's revenues.  But eliminating the Homestead Credit has a negative affect on IMPD. 

It is a shame that we cannot get the real story from the Mayor or his Chief of Staff and that we citizens have to resort to examining the minutia of the numbers to learn the truth.

Gas Tax "Windfall" - Not What the Mayor Makes it Out to Be

Here's how it looked back on August 14, 2013, when IBJ reporter Kathleen McLaughlin penned an article about Mayor Greg Ballard's proposal to float a bond to add revenue to the nearly depleted RebuildIndy fund:

City officials said Thursday that they intend to spend $350 million over the next three years to improve streets, sidewalks, trails and bridges.

Most of that money will come from existing funds, but $135 million will be borrowed against increased state transportation funding.

...The city expects its share of state gas tax revenue to increase by $7 million, and will leverage that into the bond issue.

The increase in gas tax revenue sent to the City from the State was refined to $7.8 million.  That's were it stood on August 29, when the Public Works Committee of the City-County Council rejected Proposal 250.  I noted in a blog entry the next day that the Mayor's statements to the press were far from the truth.

Well, add one more lie to the list.

I received the real gas tax revenue numbers from the State Auditor's office.  The estimated 2013 distribution of the "Motor Vehicle Highway" revenue to the City of Indianapolis and the County of Marion is $20.25 million.  The estimated 2014 distribution is $23.75 million.  That is a difference of $3.5 million.  Less than half of the $7.8 million the Mayor, Bond Bank Director/Deputy Mayor Deron Kintner, and DPW Director Lori Miser have been touting as the windfall that will pay for the bond.



I added the color highlights to better direct attention to the figures applicable to the City and County

As I noted earlier, the Proposal actually called for annual payments of $9 million on the bond.  So, given that the real gas tax revenue increase is a paltry (by comparison) $3.5 million - they had plans to tap $5.5 million every year for 30 years of money that is usually needed for other things in DPW.  That's not only taking the next generation's increased gas tax, its also trading existing services that by rights should remain in place for the next 3 decades.

There still remains the $240 million of revenue that is already earmarked for road and sidewalk repair over the next 3 years - and that is no small amount of money.

But, to hear Greg Ballard tell it, if the Council does not allow the City to float this additional bond, there will be no infrastructure improvements at all.  That's the story he and his administration are repeating to the media, to the neighborhoods, and to the Council.  It is all a pack of lies.  Mayor Ballard even went so far as to accost Democrat At-Large Councillor Zach Adamson at the Hob Nob with "We're going to murder you guys on this.  You're dead."

They must think they have a lock on the press, a lock on what information gets to the neighborhoods, and a lock on the facts as they prefer to make them out to be.  They must think we are all stupid.

As more of the truth comes out, and it will, I am increasingly grateful to the members of the Public Works committee who voted against this fiscally unsound and cynically presented Proposal to float these bonds - Councillors Vernon Brown, Pam Hickman, Bill Oliver, Monroe Gray, and Zach Adamson.