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.

Sound Bites - Mayor Greg Ballard Unplugged

I'm tight on time this morning, but I simply must recommend Jon Murray's stunning interview with Mayor Ballard.  It wasn't in the paper version this morning, unfortunately.  But it IS posted online at IndyStar.  Murray tosses out questions sent by the public via Twitter.  It is amazing how uninformed and short tempered our Mayor is. 

A must read:  click here

Principles Matter - But, Evidently, That's Negotiable

Some power brokers in the Republican Party and some power brokers in the Democratic Party only care about how much money flows their way.  To them, there is no 'enough'. 

There is no 'enough' just because your parks aren't kept up.  There is no 'enough' just because there are too few police and the City can't afford to give them contractual raises.  There is no 'enough' just because all the sellable public assets have been sold. There is no 'enough' just because good public servants are being laid off so that well-connected organizations can get more lucrative contracts to do their jobs - and poorly at that.

There is no 'enough' as long as the City can cash in future generations' welfare for more dollars today.   There is no 'enough' as long as there are more square miles that can be turned into TIF slush funds.  There is no 'enough' as long as the City can gain, even if that gain causes an equal loss to Township Schools.  There is certainly no 'enough' as long as taxes can be raised.

Jon Murray, IndyStar city hall beat reporter, wrote an article that was posted last night online and delivered to subscribers on paper today, that clearly shows how little residents and taxpayers mean to some of those elected to serve the public - not elected to serve themselves and their money backers.  Paul Ogden, over at OgdenOnPolitics, commented on the story last night.

Murray reports on negotiations between Council President Maggie Lewis and Mayor Ryan Vaughn.  These negotiations are about eliminating the local homestead credit and expanding the old IPD taxing district.  He says of those two 'tax changes':

The combined upshot would include a tax cut for central parts of the city, higher taxes for outlying areas and a hit to township school districts’budgets. 

Council President Maggie Lewis, a Democrat, said the Republican administration was holding firm on the tax proposals but has been open to discussing options that include tapping into utility sale proceeds and unused money from tax-increment financing districts.

That could soften the blow of the tax changes by paying for council Democrats’ priorities, she said.

Its not about softening the blow to taxpayers.  The power brokers behind Lewis want those taxes raised - the more the merrier.  Schools be damned, taxpayers be damned - keep the tide of cash flowing ever greater.  Lewis is actually trying to find MORE money to spend to 'justify' voting for raising taxes.  If she cared about the public interest, she'd be negotiating to supplant some or all of the tax hikes with money in the $80 million 'fiscal stabilization fund' that was created with the utility sales money.  But, no, its all about ever more money for the power brokers and the well connected developers and the campaign contributors.

Lewis and Vaughn are just trying to soften the blowback on Councillors who vote for these tax increases.  They are trying to come up with a one-year token infusion of extra money into the budget to somehow bedazzle the public with a forever-year increase in taxes and hit to Township Schools' budgets.

Lewis' branch of the County Democrat Party is as corrupt as Vaughn's branch of the County Republican Party.  And all they want is more access to your purse so their 'friends' can broker more bond sales, lobby for more deals for their clients, land more contracts, and turn their campaign contributions into more tenfold taxpayer handouts.

There still are Councillors who act on principle and for the public good - a couple, all of the time - some, only 'negotiating' that principle away from time to time.   It is up to these Councillors how the City will move forward.

There's Exaggerating - Then There's Outright Lying

I attended last night's Public Works committee meeting for two items - the proposed hike in stormwater management fees and the budget.  Among other agenda items, there was Prop 250, which looked to use some new gas tax money from the state, to float bonds to pay for infrastructure improvements.

Gary Welsh over at Advance Indiana, and Jon Murray over at IndyStar, both did a good job relaying particulars.

The late night newscast by WTHR, channel 13, however, did not do a good job.  All they did was quote the Mayor's press release - which was so far beyond exaggeration as to be an outright lie.

Here's what the press release said, from Murray's report:

“Democrats on the City-County Council turned their backs on every neighborhood in Indianapolis,” Ballard said in a written statement. “By placing politics ahead of the best interests of the community, they rejected a plan that would have provided sidewalks in many of our neighborhoods, repaved every one of our worst streets, made our bridges safer and fixed flooding problems in some of our poorest neighborhoods.”

Lie, lie, lie.

Here are the particulars from last night's debate on floating these bonds.

The state is sending the City/County an additional amount of money from the gas tax revenue it receives.  Lori Miser, head of DPW, and Deron Kintner, head of the bond bank/deputy mayor, said it was $7.8 million in new money.  Hope Tribble, CFO for the Council, said it was $6.2 million.  This is not guaranteed every year, although it appears that the State has committed to try to send it - if they can.  The gas tax has been a hot topic in Washington for years now, as it is not as much of a revenue source for transportation as they would like.

In either case, the proposal was to pay $9 million per year in debt service on new bonds.  Depending upon the interest rate at the moment the bonds were floated, this could generate anywhere from $135 - $150 million.  The bonds would be paid back over 30 years - so the taxpayers would spend $270 million over time to get maybe $150 million now.  That computes to paying $120 million in interest and fees - nearly half.

The City would add this $135 million to money it will spend on infrastructure anyway, to make a grand total of $350 million in spending over the next 3 years.  Without bonding, they would have $242 million to spend over the next 3 years (I added the $9 million per year to the base $215 million).  So, the City can still repave 'every one of our worst streets', and make 'our bridges safer'.  The flooding issues I'll leave to another blog post.  Suffice it to say, the City doesn't direct stormwater projects to the poorest neighborhoods in any case - they direct the money to flooded neighborhoods.

DPW has been circulating a list of infrastructure projects that total between $500 and $600 million.  Of course, any neighborhood looks to see if it's roads are listed.  But that is clearly far more projects than can be done with the money - bond or no bond.

So, the pivotal question was, is it fiscally sound to borrow additional funds using a shaky revenue source as collateral?

The committee vote was along party lines - 5 to 2.  The Democrats were fiscally responsible, choosing to avoid the situation where an unreliable stream of money from the State would be used to float bonds that would have to be repaid even if the State stops sending that extra.  If the extra money continues to come in, well we and the next generation will have $270 million to spend on streets and sidewalks.

I just don't understand why $242 million is somehow chump change to spend on infrastructure over the next 3 years, and why we have to continually reach into the pockets of the next generation to get what we want today - and wasting half of the money we steal from them on interest and fees, to boot.  There should be no sin in patience, prudence, and protecting the next generation.  There is, however, a sin in lying to the public.  Shame on Mayor Ballard for lying and shame on WTHR for passing that lie along as the entire story to its viewers.

Dazzle Them With Numbers

Tonight the Admin & Finance committee of the City-County Council will consider eliminating the local homestead credit (again - Prop 274) and expanding the old Indianapolis Police District taxing district (Prop 275) from basically the old city limits to the entire county minus the excluded cities.

The local homestead credit is applied to homestead property tax bills.  The money used to supply the credit comes from local income taxes.  It costs more in income tax money than it saves taxpayers in property taxes, because so many property taxpayers have already hit the tax caps and can be billed no more than the 1% value of their homes.  I'll give you graphs and numbers below, but suffice it to say without numbers, that the City/County government stands to reap millions of dollars and those Townships that retain their fire departments stand to gain in tens to hundreds of thousand dollars if the homestead credit is eliminated.  The remaining Townships, the School Districts, and three municipal corporations (IndyGo, the Library, and Health & Hospitals) all stand to lose anywhere from $50,000 to nearly $1 million if the homestead credit is eliminated.

The expansion of the old IPD taxing district would still collect the same total amount of money - but more property taxpayers would pay a share.  Therefore the tax rate in the old city limits would go down and the tax rate outside would go up.  Through the magic of the property tax caps, this would cause the City/County to again reap millions more from this change, IPS would see millions more, and Center Township along with the three municipal corporations would see hundreds of thousands more in revenue.  All other Townships and School Districts would see a drop in revenues from minimal to just over $700,000.

If you do both - eliminate the homestead credit and expand the IPD taxing district - you get a mixed bag of effects because the list of winners changes with the two.

The administration is basically holding forth the notion that those who stand to lose revenue through these changes, will make up for the losses because other revenue they get is scheduled to increase and would absorb most, if not all, of any losses.  This ignores two facts - one is that the School Districts have already signed teacher contracts obligating them through June of next year.  These contracts were crafted in anticipation of the increased revenues.  The other fact is that the City/County will also see an increase in revenues and can, using the same logic, forgo both the homestead credit elimination and the expansion of the IPD tax district.

Below are some charts showing the impact of eliminating the homestead credit, expanding the IPD tax district, and doing both, on most of the taxing districts in Marion County.  I have uploaded the raw data supplied by Jason Dudich, the City Controller, to Google Drive (here and here) should you want to look over those districts I've not followed below.  The data for the elimination of the homestead credit is from the Policy Analytics presentation to the Review Commission.

City/County Government

 

 

The City clearly finds advantage in any combination of changes.  It is the big winner.

Townships

Center Township and the westside Townships see the real 'action'.  Center gains if the tax rate in the old city limits goes down, by reducing the number of taxpayers who are at the property tax caps - thereby increasing the amount of property tax revenue that becomes collectable.  The westside Townships are the only three that retain their fire departments.  They receive income tax revenues and thereby gain when income tax money is freed up by the elimination of the homestead credit.  They lose, however, property tax revenue if the old IPD tax district is expanded, because the tax rate will go up in their district and more folks will hit the tax caps - decreasing the amount of collectable tax revenue.  The least difference for these Townships is if both the elimination and the expansion move forward, or if neither is enacted.

School Districts

I show the school districts with and without IPS, as that district's gain dwarfs the losses of any one of the other districts.  IPS gains only with the expansion of the IPD tax district.  The other school districts lose any way you cut it.  Beech Grove and Speedway have the lowest property tax dependence and thus the lowest impact from any proposed changes.

Municipal Corporations

 

Last but not least is the impact of the elimination and expansion on the Library, IndyGo, and Health & Hospitals.  These three depend upon both property tax and income tax revenues, but mostly the former.  They lose money if the homestead credit is eliminated and gain if only the IPD tax district is expanded.

 

There is no threading the needle here; if any changes are made, some taxing district will lose and some other will win.  Clearly these proposed changes are being proposed only because they increase the revenue to the City/County government no matter what combination is enacted.  But, the impact and fallout from changing the status quo is quite real.  The elimination of the homestead credit has had time for its impacts to be considered and weighed.  The full impact of the expansion of the IPD district and the full impact of the combination of changes, have not been granted the same study.  That will be unfortunate, to say the least, should any Councillor vote on these matters without reviewing the exact impacts for themselves. 

Proposal to Increase Stormwater Management Fee On Thursday's Public Works Committee Agenda

The proposal to increase the City's Stormwater management fee (which appears on property tax bills), is scheduled to be considered by the City-County Council's Public Works committee this Thursday, August 26.  The meeting begins at 5:30 pm and is held in room 260 of the City-County Building.

DPW expects to make 40% more from the fee than they currently collect, by changing the way the fee is calculated and how much is charged per square foot of impervious surface on the property.   There is also a stipulation for an automatic annual rate increase to the fee going forward.

Homestead Credit Elimination and Expansion of IPD Tax District On Agenda for Next Admin & Finance Meeting

This Tuesday evening, August 27, the Admin & Finance committee of the City-County Council will consider Props 274 and 275.  Prop 274 would eliminate the local homestead credit on property tax bills, while Prop 275 would expand the old Indianapolis Police Department tax district from the old city limits to the entire Unigov city limits (entire county minus the excluded cities).

There will be another public hearing on Prop 274 at the September 9 full Council meeting.

If you want to attend either, the committee meeting on Tuesday begins at 5:30 pm in room 260 of the City-County Building and the full Council meets in the Public Assembly room, 2nd floor of the City-County Building, beginning at 7 pm.

Chair of the Admin & Finance committee, Angela Mansfield, confirms they anticipate taking testimony and voting on both proposals on Tuesday.

Why the D's Should Be Nicer to Brian Mahern

My friend Jon Easter penned a thoughtful piece over at Indy Democrat Blog, about the coup attempt by Councillor Brian Mahern at Monday night's Council meeting.  Lot's of comments.

Mahern began this term as Vice President of the Council.  I understand he ruffled feathers and some Councillors felt he did not play well with others.  What he did do, is what he has consistently done.  Stood on the side of good public policy and government expenditures that benefit the public.  He is a true believer and the real deal.

It was clear to all that he was looking to run for Mayor.  However, the powers that be could not continue to ride the gravy train if that were to occur.  The usual suspects didn't contribute to his coffers because it would not get them the coziness they can buy with contributions to other politicians of both parties.  He stopped running.

The Council leadership and their power brokers didn't like all that talk about being sensible with TIFs - nor, for completeness sake, do the Council minority leadership and their power brokers.

The Ds stripped Mahern of his Chairmanship, of his VP position - and just last week they stripped him of even serving on the coveted Rules committee. 

I would not be surprised to have confirmed, that once the State removed At-Large positions from the Council, the County Party decided that At-Large Councillor, Zach Adamson, would win the Slating contest for the local district held by Mahern - such is the integrity of the slating process and all.

But, the Ds should worry about continuing their harsh ways.  Mahern could do an Evans and switch party allegiance to the Rs.  What would he lose?

That one seat would swing the Council to an R majority.

They could cut millions from all Democrat-elected County office budgets - with abandon.

They could re-re-redistrict the Council seats and end the chance that the State Supreme Court would redraw the maps as they did a decade ago.

They could eliminate the homestead credit.  They could redraw the old IPD tax district.  They could increase the COIT and PST income tax rates to max.

They could reassign all members of standing committees of the Council, and taking the D lead, assign a lone D to each one.  Just for fun, they could assign Mahern to all the really nifty committees.

They could create as many new TIF districts in Republican held Council districts as they wanted.  They could continue to snub D Councillors and still not invite them to ribbon cutting ceremonies when key projects are commenced in a Democrat held Council district.

The Mayor's office could go back to ignoring them.

My god, they could even switch the side of the room they sit in.

Clearly, Maggie Lewis would not remain Council President if the Rs gained the majority.

Yup.  A little strategy might be a good thing here. 

Shifting the Fallout is NOT Fixing the Problem

Shifting the fallout from too many TIFs, is not fixing the problem - and it is NOT fair.

TIFs are syphoning off roughly 15% of all property taxes - and will do so in some cases FOREVER.  Two years ago, TIFs caused half of the circuit breaker penalties which limit how much property tax revenue taxing units can actually receive.  We are approaching the point where, for every tax dollar captured by TIFs, a dollar will be taken from the taxing units that provide needed services with those revenues.

There is currently a barrage of tax and fee increases being proposed, as well as a proposal to float 30 year bonds with new gas tax money provided to Indy by the State. 

Let's look at them one by one - as there is a pattern here.

The ongoing effort to eliminate the local homestead credit has, for the moment, been denied by the Council.  Put simply, if the local homestead credit is eliminated, the City gets more money, but most others lose tax revenues - most notably the various school districts.  It is a zero sum game.  The Mayor wants to shift the fallout from his coffers to other units of government.

The local homestead credit is now being repurposed and packaged with the fact that those property owners within the old Indianapolis Police Department footprint are paying an additional 0.3486 tax rate that the rest of us do not.  (see excellent article by IndyStar's Jon Murray)  This additional tax rate is calculated to bring in $35.3 million this year, minus the circuit breaker penalties caused by TIFs and too much debt.  Now, this is about one tenth of the total tax rate paid by most taxpayers.  When IPD and the Sheriff's Department were resorted/merged, this tax footprint was not reconfigured to the entire IMPD district; likely because it is a tax increase and may have scuttled the merger.

The marketing folks have decided to market this proposed reconfiguration as 'only fair'.  While there is a grain of truth to that, implementing this change will induce another 'unfair' reaction.

If the IPD tax is spread Countywide, the $35 million would be pulled from more peoples pockets - lowering the amount paid by those in the IPD district, and increasing the amount paid by those outside the IPD district.  The tax rate inside the IPD district would drop, and the number of property owners hitting the tax caps would drop as well.  The tax rate outside the IPD district would increase, and the number of property owners hitting the tax caps would increase. 

To avoid getting too far into the weeds, and simply put, the City and IPS would see a rise in the property tax revenue they collect, while the Townships and Township School Districts would see a loss in property tax revenues they collect.  It is a zero sum game.  It is simply a shift of tax revenues from the areas outside the old city limits to those within the old city limits.

Now, personally, I could find my way to support this shift IF the City passed an ordinance tying the creation of any new TIFs to the retirement of old ones - a step in the right direction of actually fixing the negative effects of capturing too much property in TIF slush funds.

There is also a proposal to increase the stormwater management fee that appears on your property tax bill, but is a so-called 'user fee' rather than a tax.  There are too many facets to this proposal to go into all of them right now.  Again, simply put, the marketing arm of the City has decided a winning pitch is to cast this current configuration of this fee as 'unfair'.  The contend that residential property owners pay a fixed $2.25 per month ($27 per year), while non-residential property pays by the amount of stormwater-impervious surface on the property.  The proposal would increase the amount collected by 40%, and change all property to pay $1.10 per month for each 1000 square foot of stormwater-impervious surface.  It would be only by 1000 square foot increments - so if you had 1001 square feet, you'd pay $2.20 per month.  Gravel drives are considered impervious surface for this fee calculation, by the way.

All this begs the question - what happened to the $20 million a year they already collect for stormwater management projects?  Well, the first $10 million per year from the initial fee in 2002, did not go to any new projects, but was assigned to paying back old bonds floated for anything attributable to stormwater - freeing up money for projects having nothing to do with stormwater.  Most of the second $10 million per year, from the 2006 fee increase, has been consumed by the practice of floating bonds for projects, rather than paying as you go.  This caused about a third of the fee dollars to be flushed down the toilet in paying bankers, bond salesmen, and interest.  Additionally, the City has also stopped using any other funds to pay to operate the stormwater system - about $4.5 million per year.

By not paying as you go, the City has yet again reached into your childrens' purses to pay for your stuff today.  Sure, it helps get politicians reelected, but it is not prudent fiscal policy.  If they had been prudent, we'd have $20 million a year for projects and stormwater problems countywide could have been resolved within 10-15 years (they said the need was $246 million in improvements in 2001).  Instead, they floated 30 year bonds and wasted a third of the money for 30 years.

Have they learned their lesson?  Nope.  The already plan, should the fee increase be granted, to float at least 7 bonds which will consume 60% of the fee and leave only 40% for pay as you go projects.  Who knows what the fate of the 40% will be when the next Mayor seeks re-election.

The last item I want to put into today's hopper is the proposal to float a $135 m bond for streets and sidewalks using the additional $7 million in gas tax proceeds the State has decided to share with the City.  Here's the math.  $7 million over 30 years is $210 million, but the bond would only generate $135 million.  That's $75 million flushed down the toilet to pay bankers, bond salesmen and interest.  Again, spending $135 million on sidewalks sounds good in a 10 second reelection campaign ad, but it is bad fiscal policy to do it this way.

Putting too much property value in TIF districts, has consequences.  Floating bonds unnecessarily, has consequences.  Shifting the fallout from these bad practices is NOT fixing the problem.  It merely makes life easier for the current City elected officials and their buddies.

This City continues to create TIF districts, the effect of which is to reduce property tax revenue for basic services - like police, fire, and schools.  City leaders continue to float bonds that rob the next generation, instead of paying as you go.  They figure that the lack of services and a good marketing pitch will get you to dig deeper in your pocket.  There's a sucker born every minute, as PT Barnum used to say.  Guess who our City leaders think the suckers are?

Which is Better for Indy's Tourism - Inflation or the CIB?

The 2012 Annual Report of the Capital Improvement Board is posted on their website.

In the latter portion of the Report, the CIB lists the preceding 10 year history of a number of items - from tax revenues, operating revenues and expenses, as well as number of events and attendance numbers.

As you know, the CIB is responsible for the Indiana Convention Center, Lucas Oil Stadium, Banker's Life Fieldhouse, and Victory Field, as well as some other parking properties.  They take in tax revenues from the Innkeepers, Food & Beverage, Car Rental, and Ticket sales at their venues.  There is also a "Professional Sports Development Area" designated downtown, where all of the State Sales and Use Taxes, State and Local Income Taxes, and the F&B Taxes go to the CIB.  Furthermore, the MDC gives the CIB $8 million of property tax revenues from the consolidated downtown TIF each year.

In looking over the table of tax revenues, it dawned on me that one could determine the size of a variety of entertainment/tourism market segments from the taxes recovered from those market segments.  For instance, the CIB takes in the revenue from a 1% F&B tax, imposed on all food and beverage outlets in Marion County.  Simply multiplying that tax revenue by 100 gives the size of the MC F&B market segment. 

Similarly, if one uses 2003 (the first of the 10 year data noted) as the starting point, one can calculate the growth of any of these market segments over the decade.  Again, for instance, if one divides each year's F&B tax revenue by the amount the CIB got in 2013, one would have the growth in the MC F&B market segment over time.

All of these can be compared to the rate of inflation, to ask the question, has the CIB helped grow the entertainment/tourism market more than inflation has?

PSDA Allocation - original footprint only

 

The revenue captured by the CIB from the original PSDA footprint was $6.45 m in 2003, and grew to $7.27 m by 2012.  All revenue numbers from 2004-2012 were divided by the $6.45 m figure from 2003 to generate the red line in this graph.  The blue line is the growth in inflation.

Of note is the fact that in mid-2005, the MC F&B tax doubled, and in 2008 the State Sales Tax went up from 6 to 7% and the Local Income Tax went from 1 to 1.65%; thus increasing the expected revenue to the CIB from this area.  Of course, the Great Recession struck in 2008.  In 2012, the City hosted the Superbowl.

If the CIB is to have an effect, one would most expect an increase in the PSDA, which is the footprint of the buildings owned by the CIB and nearby hotels.  One is hard pressed to see any particular effect on the original PSDA besides inflation and random bounce.

 

Admissions Tax - original 5% tax on events held in CIB facilities



 

 

The revenue captured by the CIB from the original ticket tax was $4.54 m in 2003, and grew to $6.5 m by 2012.  The red line is growth from the ticket sales market segment.  The blue line is the growth in inflation.

Of note is that Lucas Oil Stadium opened in 2008.  Also, the Great Recession struck in 2008 and the City hosted the Superbowl in 2012. 

There would seem to be some indication of an early increase in these sales beyond inflation, followed by a slightly greater than inflation growth in the admissions tax revenue - but I do not have any numbers to indicate if ticket prices rose faster than inflation, or if the number of tickets sold increased.  As with the PSDA, one would expect any effect of the CIB to show up in its own facilities first and foremost.

 

Auto Rental Tax - original 2% tax on cars rented in Marion County

 

The revenue captured by the CIB from the original auto rental tax was $1.85 m in 2003, and grew to $2.35 m by 2012.  The red line is the growth in the car rental market segment.  The blue line is growth in inflation.

Of note is that the Great Recession struck in 2008 and the City hosted the Superbowl in 2012.  The airport opened its new terminal in 2008, along with new car rental facilities.

The CIB, and those who supported the recent hike in the auto rental tax, keep telling us that only visitors pay for rental cars.  There is not strong evidence that the car rental business has improved much beyond inflation over this decade.

 

Food & Beverage Tax - original 1% on Marion County establishments

 

The revenue captured by the CIB from the original 1% tax on food and beverage sales in Marion County was $15.62 m in 2003, and grew to $21.36 m by 2012.  The red line is the growth in the Marion County F&B market segment.  The blue line is growth in inflation.

Of note is that the Great Recession struck in 2008 and the City hosted the Superbowl in 2012.

Once again, inflation bounce could easily account for the 10 year growth in the F&B market segment.  We will have to see what 2013 and beyond bring, if we are to decide if the 2012 increase is Superbowl bounce or a sustained increase.

Innkeeper's Tax - original 1% on Marion County hotels

The revenue captured by the CIB from the original 1% innkeeper's tax was $3.21 m in 2003, and grew to $4.52 m by 2012.  The red line is the growth in the Marion County Hotel market segment.  The blue line is growth in inflation.

Of note is that the Conrad Hotel opened in 2006 and the JW Marriott in 2011.  Also, the Great Recession struck in 2008 and the City hosted the Superbowl in 2012.

Any growth in the hotel market segment appears to bounce around inflation.  Again, we will have to see future years' numbers in order to interpret the 2012 number as being caused by the Superbowl or by sustainable growth.

All Tax - this is the growth in all tax revenues and 'other assistance' received by the CIB over the decade from 2003 to 2012

The total tax revenue received by the CIB was $48.07 m in 2003, and grew to $138.78 m by 2013.  The red line is growth in all tax revenue.  The blue line is the growth in inflation.

There is little evidence that the growth in the entertainment/tourism market segments touted as being enriched by the activities of the CIB is anything but due to inflation, and perhaps the Superbowl.  That is reflected in the fact that the initial taxes levied for the CIB were not growing well enough to support the ambitions of the CIB.  Thus, additional tax hikes were implemented and other sources of cash were found.

The footprint PSDA was expanded twice in the decade from 2003 to 2012; the Admissions Tax was increased once; the Auto Rental Tax was increased once; the F&B Tax was increased once; the Innkeeper's Tax was increased twice; and the MDC began gifting the CIB.  Just this year, the Admissions Tax and Auto Rental Tax were increased yet again.  The two $9 m loans from the State to the CIB are not included in these numbers.

Bottom line - inflation accounts for nearly all, if not all, of the growth in several entertainment/tourism market segments in recent years.  The only thing growing beyond inflation is the amount of taxes being levied to feed the CIB.

Ballard Tax Revenues About $100 Million More Than Peterson Had

What can you say about the Ballard Administration's request to drop the local Homestead Credit (increasing taxes on most property owners and foisting higher circuit breaker penalties on schools, IndyGo, and the Library system), increase County Option Income Taxes, and a new proposal to increase the stormwater drainage fee to property owners - when Ballard's combined property and income tax revenues have been $70 million, $100 million, and more, than Peterson enjoyed in his last two years in office?  Why, you have to wonder where it all went. 

The spate of proposed tax and fee increases sent me to City budget documents to pull out the property tax and income tax revenues enjoyed by the City/County government from 2006 through 2013.  These numbers are 2006 actual, 2007 actual, 2008 actual, 2009 actual, 2010 actual, 2011 expected from the adopted budget, 2012 expected from the introduced budget, and 2013 expected from the adopted budget.   Circuit breaker penalties began in 2011 and are reflected in the revenue numbers listed below.  In 2012, the State returned $46.6 million in additional income tax revenue to the City, for errors in 2011 and 2012 - this windfall is accounted for in 2012, as that is when it was received.

 

 

 

 

Peterson's last two years in office were 2006 and 2007.  He increase the income tax by instituting a Local Option Income Tax (to reduce, somewhat, property taxes) and a Public Safety Tax, with the expectation that he would hire 100 additional police officers and handle the ever-growing pension obligation.   So, he handed Ballard an enriched budget.  In fact Ballard has enjoyed combined property and income tax revenues $70 million to $100 million more than his predecessor.  In 2010, I do not know what happened, but there was an additional windfall of about $150 million.  One also has to note that in 2009, the State took over a number of expense obligations; the aforementioned pension being one, and a $100 million annual obligation for the Family and Children's Fund that was supported by property taxes, being another.

 

The new City Controller, Jason Dudich, anticipates an additional $20 million in tax revenues for 2014.

 

The City is also just sitting on $80 million in a 'stabilization fund', that could help us eke by with 'only' $20 million more.

 

The revenue impact from tax caps, much focused on by the Ballard Administration, was easily compensated for by Peterson's income tax increases.  So, where did the money go?  And, why can't the City handle its current budget obligations with $100 million more in revenue, and fewer obligations, than Peterson had?