Wednesday, February 29, 2012

Taxpayer Fleecing For NO-SO (aka City Way) Continues

On Monday night, the Council's Metro & Econ Devel Committee heard a number of interesting Proposals.  One of those was Prop 66, approving the designation of the old North of South (now City Way) fleecing of the taxpayers extraordinaire as a 'Certified Technology Park'.

So many things are brewing in my mind about this that I struggle to find a logical flow for all of them.  So, this blog entry will have more of a staccato effect than I would prefer.  Just a warning.

Let's start with the downplay of the Council's role in this designation of No-So (City Way) as a CTP.  It was said that the role of the Council is merely to allow the President of the Council to sign on the agreement.  Balderdash.  The Council is in fact, the only duly elected body that will review the CTP to determine if it is in the best interest of the public.  All other signatures are of appointees who surely know which way the wind is blowing.

Now, a CTP will allow the City to collect from the State, all new sales taxes and state income taxes that flow to the state from the development.  In addition new county option income tax revenues that normally flow to Indianapolis City/County government, would instead flow to a fund specific for this development.  Combined, these new state and local tax revenues, up to a maximum of $5 million, usually go to pay for infrastructure improvements in the immediate CTP area.  With No-So, the proceeds will go to help pay for the financing costs associated with the $98 million in bonds the City floated to make the loan to the Buckingham Group for the project - the costs anyone would say should be the developer's responsibility to repay, not the taxpayers'.  No mention was made Monday night regarding the anticipated split between sales tax and income tax revenues that would be generated in City Way.  But, please note, the COIT revenue could be a good fraction of the money since the COIT tax rate is 1.62 %, or a full third of all non-federal income taxes paid by Marion County residents.

No-So (City Way) is not a technology park.  The plan put forth last year (see  "North of South - Details of Proposed Deal", "No-So Field of Dreams - Lie And They Will Build It", "No-So Deal Worse Than Even I Thought", and "City Way - The Rebranding of North of South") called for a residential, retail development with a minor 30,000 square feet of office space (now only 10,000 square feet).  Within that office space, the developer hoped to lure one wet lab.  It was said back then, that this lone wet lab would qualify No-So for designation as a CTP.  Well, I guess that plan fell through.  The new scam is to define the CTP area as much larger than No-So's footprint, all while stating that only tax revenues from No-So (City Way) would be bundled.  Below are the outlines of No-So (City Way) in blue and the outline of the rest of the CTP area in red.  You will notice a gold arrow and a small area outlined with a dashed gold line.  This is the Faris Building which will house the new offices of Rolls Royce - no new jobs were created, just relocated to this space from other parts of the County and Central Indiana.  Rolls Royce is the only tech part of the CTP area.  It will receive no value from the CTP designation, and like the rest of the CTP area beyond No-So (City Way), it will provide no revenue to the cause.  It serves only as the legal underpinning for a CTP designation for No-So.  In normal parlance, that is called a scam against the taxpayers of Indiana and Marion County.

This matters because the CTP designation was created as a means to supplement the infrastructure improvements needed to attract high tech businesses to Indiana.  No-So is just bilking that intention.  It means that, like Prop 67 which was also discussed by the Committee on Monday night, two legitimate technology parks must share one CTP designation and split their $5 million in state sales tax, and income tax revenues for their infrastructure needs.  So, the fake CTP gets a full $5 million, while two legitimate high tech ventures (Purdue Technology Park and Intech Park) must share a $5 million.  Now how is that helping to attract high tech to Indiana?  It is not.

Before wrapping this entry up with the Committee vote, I also have to correct the numbers presented by the proponents of No-So (City Way).  They continue to overstate the investment by the developer and Lilly, while understating the taxpayer's contribution to the development.  They never did mention the allocation of risk being exclusively in the direction of the taxpayers, but I will.

The developer must, at a minimum, secure a $6 million line of credit with a bank.  That's all.  Eli Lilly is touted as putting up about $30 million, but that does not hold up on any level of inspection.  $15 million was from an unnecessarily early payment to Lilly for its part in a complex Harding Street TIF deal that benefited Lilly.  The taxpayers paid Lilly the $15 million and Lilly gave the developer that money.  The rest of Lilly's so called investment is the value of the land upon which No-So (City Way) is to be built.  Yet, Lilly retains ownership and expects an undisclosed lease payment from the owners of No-So (City Way) year after year. 

Marion County taxpayers, however, floated $98 million in bonds and loaned $86 million to the developer, when a bank would not.  The payback guarantee on the bonds is from the consolidated downtown TIF.  In addition, all property taxes paid by the developer/owners of the development over the next 10 years, will be credited as their partial repayment of the loan.  So, no property taxes will be paid on this property to the tax coffers of Indianapolis, nor to consolidated downtown TIF, but will be considered payment from the developer for the loan.  This is estimated to be about $12 million.  Add this to the $9 million in infrastructure improvements (the ONLY money acknowledged to be contributed by the taxpayers, mind you) and the $5 million from the CTP designation and taxpayers are into this project over $40 million.  While the developer is required only to have a $6 million line of credit with a bank.

But, the icing on the cake came when the final deal was revealed.  For repayment of the loan, the project is segmented.  The developer can default on one segment, while profiting on others.  The risk is on the shoulders of Indianapolis taxpayers alone.  If there is a default, the taxpayers will need to put in even more money to finish the project and more money to pay off the outstanding bonds.

Now, on to the Committee vote.  All Councillors on the committee voted for this boondoogle of a CTP designation, save one - Councillor Zach Adamson.  Many thanks to Councillor Adamson for voting against this last fleecing of the taxpayers for the largest boondoggle of the many boondoggles of the Ballard Administration.

The full Council will vote on this matter Monday night.  Again, despite the downplay of the role of the Council in legalizing this CTP designation, the City-County Councillors are the only elected officials who will evaluate the appropriateness of granting the designation.  This is a boondoggle, and a scam, and will do nothing to bring high tech jobs to Indianapolis.


Anonymous said...

In a perfect world,your article is the kind we should be reading in the city's newspaper. Thank you for all you do.

Jon said...

Your title says it all, "Taxpayer Fleecing", and here we sheep sit waiting to be sheared yet again by our own government.