Tuesday, April 14, 2009

The CIB - An Example of Bad Government In Action

The Capital Improvements Board (CIB) budget shortfall is causing no shortage of outrage and angst in Indianapolis. For the purposes of this blog entry, lets not go into the merits of that debate. Rather, lets look at what the CIB illuminates in how really perverse and structurally unaccountable our government can get.

The CIB is classified as a Municipal Corporation tied to Indianapolis-Marion County government. It provides a political 'arms length' between the duly elected officials - the Mayor, the County Commissioners, and the City-County Councillors - and the decisions of the CIB. These elected officials all appoint members to serve on the CIB, but the Mayor gets 5 of the 9
CIB members and it is really his organization to steer. The CIB has the authority to float bonds and has done so, although they have also used the services of the Indianapolis Bond Bank for other bonds. Part of the CIB budget is reviewed by the City-County Council which must approve that part of the budget. The state law that set up the CIB gave it the authority to levy a property tax, with the prior approval of the City-County Council to do so. So far the CIB has not dipped into that well.

The supposed purpose of the CIB is to manage or operate the Indianapolis Convention Center, Victory Field (triple A Indianapolis Indians baseball team stadium), Conseco Fieldhouse (Pacers stadium), Lucas Oil Stadium (Colts), Capital Commons (a park between the Convention Center and the Statehouse), and a parking garage underneath Capital Commons.

The northern third of Capital Commons was donated by the CIB to Simons Property Group for their new World Headquarters in 2004, as part of a $23 million package of incentives approved by Mayor Bart Peterson and the City-County Council. The building is right across the street from the Indiana Statehouse. The Simons also own the Indiana Pacers.

The CIB manages and operates the facilities, but does not own them. The Indiana Stadium and Convention Building Authority (ISCBA) built and owns the new Lucas Oil Stadium and will build and own the pending expansion of the Convention Center. Both are leased by the ISCBA to the Indiana Office of Management and Budget (IOMB) which in turns subleases them to the CIB. In addition to the costs of the sublease, the CIB must pay the expenses of the IOMB - presumably only those connected to the stadium and convention center. The other facilities are owned by the Marion County Convention and Recreational Facilities Authority (MCCRFA) which also owns the ill-fated United Maintenance Facility on the grounds of the Indianapolis International Airport. The MCCRFA leases Victory Field, Conseco Fieldhouse, the existing part of hte Convention Center to the CIB. Again, the CIB pays for the expenses of the MCCRFA in addition to the lease payments.

The CIB negotiates and holds the contracts with the ball teams that play in the stadiums run by the CIB. Bob Grand is the current President of the CIB and he and his law firm, Barnes & Thornburg, represent the Simons and the Indiana Pacers. Joe Loftus, also a partner in Barnes & Thornburg, is a member of the board of the ISCBA. Barnes & Thornburg also represent the City of Indianapolis at the Indiana Statehouse.

Why is it so convoluted? Whether on purpose or not, the result is a Rube Goldberg device that makes accountability and transparency pretty much impossible.

The CIB collects taxes from a number of sources -- cigarette, innkeepers, food and beverage, admissions tax, car rental tax, and the sales taxes captured in a special district around the CIB's properties. The CIB must share a fixed percentage of the innkeepers tax revenue it receives with the Indiana Convention & Visitors Association (ICVA). The ICVA advertises the Convention and offers discounts on hotel space through its website, www.indy.org.

The much touted reason for keeping the CIB afloat is to keep the Indianapolis tourist and hospitality industry afloat. Oft repeated number is 66,000 service industry jobs. To that end, we not only find taxpayers funding stadiums, conventions centers, and advertising, but the City also has been quite generous with abatements and financing for hotels, and the Circle Center Mall was funded by carving out a TIF area. In addition to the players already mentioned, the City, through a variety of agencies, funds Indianapolis Downtown, Inc. (IDI) to the tune of about $1 million a year. Besides advertising and monitoring downtown office occupancy rates, IDI hires off duty police officers to patrol the mile square. What? IMPD can't do that? Guess not. The Metropolitan Development Commission waived a $6 million fine for the early sale of the Pan Am Plaza by the Indiana Sports Corp. (ISC) A lawsuit has been filed to recoup that money as modest payment for loss of precious downtown public open space.

The CIB has asked major investors of the Circle Center Mall project to forgive $34 million of the money they are owed for their loan of Mall profits to help build Conseco Fieldhouse. They are $20 million short for the annual operating costs of the Lucas Oil Stadium. They anticipate being $6 million in the hole for operating costs of the expanded Convention Center. They owe $17 million to the Indiana Treasurer for a loan so they could get out of some bad swap options. They need another $26 million to create a cash reserve for the repayment of bonds it holds. They are asking for $3 million more to give to the ICVA. And, they want to volunteer to take over the $15 million operating costs of the Conseco Fieldhouse now obligated to be paid by the Simons/Pacers.

The CIB has not been demonstrably successful. From 1998 through 2007 (the latest figures released by the CIB), the number of events held, the number of attendees, and the revenues generated at CIB managed properties has remained flat - despite a 2005 expansion of the Convention Center that increased floor space by one-third.

All these folks are busy busy busy. What never gets done, though, is an analysis of what it has cost the taxpayers to build this 'thriving' downtown and when, if ever, it will be successful enough to fund itself.

Let's talk.

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