Friday, October 9, 2009

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.


Anonymous said...

Thanks for your efforts! It is a shame that the masses don't come out to stop this sort of "legalized" theft. Snyder and Curtis were working behind the scenes to try to stop this - and they are huge fans of abatements etc., - and this deal made their blood boil, making it obvious to anyone how bad this deal was. One would think that it would at least raise a few eyebrows on the MDC. Instead we get Keller saying - "Hey, I got mine, so why shouldn't he get his." They perpetuate the lie that development could not happen with it city interference and taxpayer funding. The reason people sit on property is because they are waiting for the city to throw money at them. If the city would cease and desist and as you indicated "let the market work," or use tax policy to encourage redevelopment - Land value taxation - their justification (lies) would no longer exist. But the reality is that the only reason the city does what it does is to reward friends and punish enemies. They are just picking winners and losers, and there will always be an endless supply of people hoping to be picked for the winning team.

Had Enough Indy? said...

Anon -- thanks for your kind words and your perspective. I'm happy to hear that Curtis and Snyder were working behind the scenes. The MDC is the only backstop the community has to errant abatement proposals offered by the Mayor. And, as I understand it, Mayor Ballard was trying to get the Legislature to omit even the MDC step during the last Session.

If we could only get two votes, I'm happy to get the two most seasoned votes.

Anonymous said...

Link from the Urbanophile - thought you might be interested.

KC gets surprise windfall from the Sprint Center

Paul K. Ogden said...

Anon 12:52, I read about KC benefitting from the profit-sharing provision. Of course if it were Indianapolis, we wouldn't enforce the contractual provision as that would take money away from the private part of the public-private parntership.

I did find it interesting though how the arena is doing better without a professional sports team.

Anonymous said...

I've always said that I have no problem with a community deciding to build an "civic" arena to provide a recreational venue for events that the local, regional and occasionally national market might enjoy. However, the goal should always be for it to be self-sustaining and not merely a vehicle for transferring wealth from taxpayers to various private parties, like the NBA, NCAA, NFL and related team owners.

Gene Poole said...

The message: sell Indy, buy elsewhere.