Tuesday, October 12, 2010

Behind the Curtain

Like a modern day Punch & Judy show, a complex marionette dance has been playing out, with the real actors just out of sight, behind the curtains. The characters have been the Capital Improvement Board, the Pacers, and the Metropolitan Development Commission. Behind the curtain, has been Mayor Greg Ballard and his administration, Barnes & Thornberg, and possibly the City-County Council.

A document uncovered by WRTV investigative reporter, Kara Kenney, lays bare the fact that the Administration was plotting for the transfer of property tax money from the Consolidated Downtown TIF district even as it was finalizing the deal between the Pacers and the CIB. That deal calls for the CIB to pay the Pacers $10 million a year for 3 years, plus make $3.5 million in improvements to Conseco Fieldhouse that will increase advertising revenue for the Simons.

The document is dated July 19, 2010, and is a memo from Barnes & Thornberg and Bingham McHale, two law firms, to the City Controller, David Reynolds. There are no authors specified. The title of the memo is "Council Appropriation of Tax Increment (TIF) Funds".

The gist of the letter is that Council review is not required for the MDC to spend TIF revenues.

It begins:
This memo will address whether the allocated property tax revenues under IC 36-7-15.1-26 commonly known as "tax increment" are required to be appropriated by the City-County Council of the City of Indianapolis and Marion County (the "Council") before being spent by the Metropolitan Development Commission of Marion County, acting as the Redevelopment Commission of the City of Indianapolis (the "Commission").

It concludes:
For the reasons discussed in this memo, our conclusions are that (1) Tax Increment funds belong to the Redevelopment District, as a special taxing district and political subdivision separate from the City, (2) the Commission has sole authority under the Redevelopment Act to expend the Tax Increment, (3) Tax Increment is not required to be appropriated before being spent by the Commission, and (4) Council approval of the Commission's expenditure of Tax Increment is not required.

I will leave you to read the entire document.

The memo is clearly in response to a proactive inquiry by Reynolds, on whether the Council must review the property tax money that the Administration was hoping to send to the Pacers via the CIB. What remains unclear is whether the purpose was to devise a funding stream for the Pacers that avoided Council review, or to protect the Council from HAVING to take a public vote on a funding stream for the Pacers.

As noted, this letter is dated July 19, 2010. The CIB - Pacers deal was announced on July 12. The strings were already being pulled months ago.

This letter is being cited often by the Administration, as proof that the Interlocal Agreement does not require Council review. But, the legal opinion is only about the MDC spending TIF revenues. It does not cover what the CIB can do with the money it gets from the MDC. Nor does it cover the vehicle ultimately chosen to send the TIF money to the CIB. That vehicle was the creation of an Interlocal Agreement between the CIB and the MDC. That is governed by its own set of laws - IC 36-1-7. Section 4 states that the 'fiscal body' of the parties must review and approve any interlocal agreement. The Council is clearly the fiscal body of the CIB, as evidenced by its sole authority to appropriate funds for the CIB's budget. The puppet master got a couple of his strings twisted.

Also being mentioned in response to public questions on the Interlocal Agreement, is that the MDC and the CIB had public hearings on the matter. Not actually true. Sounds good though. This is supposed to quell the misgivings that the public has about how sneaky it all has been.

The CIB voted on the Interlocal Agreement on August 30, 2010, as part of its budget. You can view it in the WCTY archives (click here, then on Aug 30, 2010, video). It comes up between time stamp 41:58 and 42:31, with random, insignificant, references after that. At time stamp 46:40 to 48:04, President Lathrop calls for a vote on the budget along with the Interlocal Agreement. At no time does she ask for public comments nor mention a public hearing on any matter.

The MDC docket for September 1, 2010, is the only available indication that there was anything afoot. Here is the description of Resolution # 2010-B-024:
RESOLUTION NO. 2010-B-024 Approves an Interlocal Cooperation Agreement with the Capital Improvement Board of Managers, Marion County, Indiana.

That's it. That's all. Nothing more is there. Even the Pollyanna in me thinks that the summary was expressly designed to keep this deal under the radar.

Even if you saw that summary before September 1, why would you think it had anything to do with the transfer of $8 million a year, of property taxes no less, to the CIB?

Please note the absence of the words 'for Public Hearing'. This phrase accompanies all resolutions of the MDC for which there is to be a public hearing. Viewing the WCTY archive for this MDC meeting, clearly shows that no public hearing was held for the Interlocal Agreement. At the opening, the Secretary reads all of the resolutions and mentions if each is to be a public hearing. This resolution is not indicated for public hearing. Then, at time stamp 4:00, the MDC Vice-President, lists all resolutions for which a public hearing is to be held. The Interlocal Agreement is not on that list. (click here, then on Sep 1, 2010, video link)

Real, honest, public notice of the consideration of the MDC-CIB Interlocal Agreement was never made. And neither body held a public hearing.

The matter of the CIB budget is now before the Council's Municipal Corporations committee. Any amendments and a final committee vote is set for next Tuesday night, October 19. The full Council will vote on the CIB budget on October 25.

Was the purpose of the memo unearthed by Kenney, to keep the MDC actions from the Council, or to protect the Council from having to take a public vote to approve the transfer of property taxes to the Pacers via the CIB? The Council can answer that question by stepping up and claiming its legal obligation to review any interlocal agreement that includes the CIB. The public has a right to know which side of the Punch & Judy curtain the Council is really on.


Gary R. Welsh said...

The document link to the memo is broken, Pat.

Had Enough Indy? said...

Thanks Gary. I'm working on it. If you have a google account and are signed in, you get a different set of choices than someone who is not.

If anyone wants this doc - email me at hadenoughindy@gmail.com and I'll send it on to you.

I'll work on a permanent solution.

Paul K. Ogden said...

Your legal analysis is:

"This letter is being cited often by the Administration, as proof that the Interlocal Agreement does not require Council review. But, the legal opinion is only about the MDC spending TIF revenues. It does not cover what the CIB can do with the money it gets from the MDC. Nor does it cover the vehicle ultimately chosen to send the TIF money to the CIB."

I read the opinion letter and you're exactly right. This document has nothing whatsoever to do with the powers of the CIB or whether the CIB can enter into an interlocal agreement with MDC. It only has to do with the MDC having the power to spend TIFF money. Well, duh, we know that. I can't believe it took them four pages to reach this obvious legal conclusion, which is irrelevant to the question at hand. (I can only assume they were trying to pad the memo...and their bill.)

By the way, I've never seen a legal memo where the attorney(s) who wrote it weren't identified. This is very strange.