Sunday, March 16, 2014

What is the True Role of the Circle Area CDC?

Regular readers of this blog know full well I am not a journalist.  Just this once, though, I will try my best not to bury the lede.

Why is the City of Indianapolis funneling millions of dollars through an obscure group housed in the Indianapolis Bond Bank on the 23rd floor of the City-County Building?   Of what benefit is keeping this middleman's actions just out of sight?

I speak of the Circle Area Community Development Corporation.  I will tell you about grants from the Metropolitan Development Commission to spend millions of dollars that the MDC can easily spend on its own.  I will tell you about land purchases on behalf of the City.  I will tell you about transfer of operations for City assets to the group.  I will tell you about one documented instance of the creation of 'nesting doll' corporations, further removing the expenditure of public funds from accountability and transparency.  All that I will tell you has documentation that I will provide, should you want to review it for yourself.

This story is still developing.  At this point I am being actively pushed back from my requests for further documentation from the Circle Area CDC and the City that harbors, supports, and guides its actions.  My hope is some investigative journalist with better talent at navigating these warrens than I, will step forward and beat me to the rest of the story.  I will keep digging in any case.

1997 - Establishment of CA CDC and Purchase of Circle Block Parking Garage

The Circle Area CDC was set up by then Mayor Stephen Goldsmith in 1997, in order to purchase a parking garage near the Circle, primarily for the use of Emmis Communications.  This property is referred to as the 'Circle Block Parking Garage'.  I believe the reason for creating the CDC was because the City is barred from taking out an ordinary bank loan, but a CDC is not so barred.  Receipts from the garage were used to pay off the loan over the years.

The CA CDC has 5 board members, all appointed by the Mayor.  It is listed among the Boards and Commissions on the City's website.  Current board members include Nick Weber, former Deputy Mayor, who serves as the Board's President.  The By-Laws for the CDC are also posted on the City's website.

A series of filings about the CA CDC with the Indiana Secretary of State, show an initial Board composition including John Klipsch of the Department of Metropolitan Development and James Snyder of the Mayor's Office.  Beginning in 2000 a lineage of all the Executive Directors for the Bond Bank through today became integral to the organization -  Robert Clifford, Barbara Lawrence, Kevin Taylor and Deron Kintner. 

The principle office address is the same as the Indianapolis Bond Bank in the Secretary of State filings, on the City's Board's and Commission webpage for the CA CDC, and in the SOS filing last year that notes Nick Weber as President of the CDC.  The City's website reports that the Bond Bank is, in fact, the 'Administering Agency', just as DMD is the Administering Agency for the Metropolitan Development Commission.

The same address is also listed on, which gets its documents from the IRS.  According to GuideStar, the CA CDC is registered with the IRS and that "the organization is not required to file an annual return with the IRS because it is an arm of a state or local government".

Even though it apparently claims to be an arm of government, it is not currently being audited by the State Board of Accounts.

2004 - Participation in Financing Conrad Hotel

According to an email from Deron Kintner, the CA CDC parking receipts from the Circle Block Parking Garage were pledged for the repayment of the 2004 bonds used to finance the construction of the Conrad Hotel.  That would have been during the Peterson Administration.

2009-2010 - Takes Over Operations of Market District Garage

In 2009, after a lengthy public debate on its wisdom, the MDC signed a lopsided agreement designed by the Ballard Administration, with Tadd Miller Enterprises to purchase an existing parking garage at 101 N. New Jersey for $18.5 M, which was the actual cost to Miller's organization for the parking garage plus the old Bank One Ops Center building plus the block that building sits on.  The parking garage, now know as the 'Market District' garage, was purchased by the MDC/DMD on July 19, 2010.  From one of only 4 sets of minutes of the CA CDC Board meetings that I have been able to obtain, the CDC voted on November 17, 2010, to enter into an agreement with the City to operate the Market District garage on behalf of the City.  According to the MDC/Tadd Miller Enterprises agreement, receipts from the garage were to provide part of the payment for the $1.85 M loan Miller arranged with a bank.  It is not clear at this point how the money collected by the CDC makes its way to the bank, or even if that method of payment was altered in a later agreement.
From the minutes, "Mr. Kintner also explained that the CAC [what I am calling the CA CDC] will not own this garage and will only be an intermediary".  And, "Mr. Kintner recused himself from voting on this resolution, citing that the Bond Bank has been working with the City on this deal and will be accepting a fee for consultation on this deal".

2011 - Purchase of 302 E. Washington St. Parking Lot, $600K Grant From MDC

At its July 26, 2011, meeting the CA CDC, approved the purchase of a privately owned parking lot across the street from City Hall, and directly south of the two MSA parking lots, at 302 E. Washington Street.  The purchase price was $4.34 M.  The Assessed Value of the property was half that; $2.2 M. 
The minutes report, "Mr. Bice asked how the purchase price was determined? Mr. Kintner stated that the price was based off of negotiations and the amount that the CAC organization could afford to repay."  And, "Mr. Pratt gave a brief overview of the financials for the parking lot and was confident that the parking lot would generate sufficient revenues to repay the loan for the purchase of the real estate." 

On April 5, 2011, the CA CDC approved a Resolution to
"allow the Circle Area Corporation ("CAC") to oversee the distribution of proceeds from the Metropolitan Development Commission in the amount of six-hundred thousand dollars for the PNC Bank and Indianapolis Arts Garden connector. 
"Bruce Donaldson explained that there will be a process put in place that would document the tracking of disbursements for the project.  The Bond Bank will oversee the tracking.
"Board Member Jennifer Pyrz, asked if the project would need to abide by City guidelines in terms of selecting contractors?  Mr. Kintner answered in the negative stating that since the CAC is administering this loan, the project is not required  to follow those procedures."

The MDC dispersed the $600,000 in the form of a grant to the CA CDC.  The MDC used TIF funds and passed it through to the CDC, presumably for the reason queried at the Board meeting - the CDC did not have to following rules governing competitive bidding and transparent selection of contractors; procedures that were required of the MDC.  The grant document does not require that the CDC report back, provide invoices, nothing except return any money not spent.  Here is the most 'demanding' paragraph of the grant:
"CAC hereby agrees to accept the grant of the Project Funds in the amount of $600,000 and to use such funds solely to pay or reimburse costs of the Project.  CAC agrees to enter into a project agreement with the owner or manager of the PNC Center pursuant to which CAC will disburse or provide for the disbursement of Project Funds only upon submission of proper evidence of work completed on the Project and the value of such work.  Any interest earned on the Project Funds shall be returned to the Commission.  If CAC has not spent all of the Project Funds on the Project by December 31, 2012, any remaining balance shall be returned to the Commission."


2012 - $9 M Grant From MDC

On April 2, 2012,  the MDC 'granted' the CDC money for the construction of two parking garages in City Way (aka North of South).  This grant was for $9 M.  This time, some review by DMD was required prior to spending the money. 
"CAC hereby agrees to accept the grant of the Project Funds in the amount of $9,000,000 and to use such funds solely to pay or reimburse costs of the Project upon receipt of DMD's approval of such payments or reimbursements.  Any interest earned on the Project Funds shall be returned to the Commission.  If CAC has not spent all of the Project Funds on the Project by December 31, 2013, any remaining balance shall be returned to the Commission."

2013 - Purchase of 131 N. Alabama Parking Lot and Creation of Nested LLC

On May 6, 2013, the CA CDC purchased two parcels with the common address of 131 N. Alabama Street.  This parking lot abuts the north side of the two MSA parking lots.  The financing for the development of the northern MSA parking lot goes to the City-County Council tomorrow night for a vote.  The purchase price for 131 N. Alabama Street was $1.08 M.  Assessor records show a combined Assessed Value of the parcels to be $1.103 M. Nick Weber signed for the CDC.

On September 20, 2013, at a Special Meeting of the CA CDC, they voted to authorize the creation of CAC 1440, LLC, for the sole purpose of purchasing property at 1440 N. Meridian, and potentially another parcel only referred to as 'the 1520 site'.  The minutes indicated that the City was providing the funds.  The City's complicated deal to create the Mass Ave TIF and relocate the IFD station and headquarters located there, hinges on relocating the Red Cross as the last domino to fall in place to make the entire deal actually work.  The desired new location was 1440 N. Meridian, but due to delays by the national organization, it was feared that the closing could not occur by the target date of September 30.  The site was referred to as the 'Norle site'. 

From the minutes:
"Mr. Fullbeck agreed that the situation was accurately explained.  He added that he has spoken to the Director of the Indianapolis Red Cross, who apologized for the delay and the need to take this step.  The Director has indicated to him that the holdup is simply bureaucracy and has nothing to do with the actual site.  The City of Indianapolis did originally ask for an extension from Norle when they learned of the need to do additional environmental work.  Norle said they would be willing, but asked for a significant sum of money in order to do so.  City feels that involving the CAC in the purchase in this manner is the more prudent option."

So, the CDC set up a nested organization, CAC 1440, LLC, that very day.  The CDC is the lone member of the LLC, but is not mentioned at all in the filings with the Secretary of State.  Why was it so important to remove the City from the purchase to an organization nested within the CDC? 

I have not found any evidence that the parcel was actually purchased by the City, the CDC, or the LLC.


From simply glancing at the timeline of the history of the Circle Area CDC, one can see that its utilization by the Ballard Administration is novel and picking up speed.  Understanding why it is being used so heavily is another matter.  The CDC does nothing in concept that the City cannot do on its own and out in the open.

Perhaps the utility of the CDC lies not in what it can do, but rather in the polices and practices it can circumvent, and its ability to hide its actions from public view, that makes it so attractive to Ballard and his crew.  So, what policies does diverting City functions to the CDC avoid?  What public records laws don't apply to the CDC, but apply to the City?  What bidding processes can be avoided?  What hiring quotas required of the City, can be circumvented by the CDC?  Why go to the trouble of creating nested organizations?  (It sure looks like they were trying to cloud the trail to the real purchaser's identity.)  What accountability and transparency is sacrificed by the granting of public funds that the MDC could easily spend without employing a middleman?  Does it relieve the City of its obligations for due diligence and proper oversight of the expenditures of public funds?

I don't know.  But, something is going on that needs a whole lot of explaining. 

I'll keep trying to get documents.  All I have obtained to date are minutes from a mere 4 meetings of the Circle Area CDC Board.  Just look at the curious activity they revealed.  Imagine what might be in the rest of them.


Gary R. Welsh said...

Excellent work, Pat. The short answer is that the CDC is subject to the public bidding laws and the open records law because it is an instrumentality of the city. If they are acting otherwise, they are acting in direct contravention of the law. This CDC is obviously being operated as part of money laundering scheme to circumvent laws governing public expenditures. If we actually had a city council that performed its proper oversight role, this would have never happened.

Had Enough Indy? said...

Thanks Gary. Its a curiosity, for sure.

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