Third TIF Study Commission - Heavy on Theory, Light on Practice

Last Thursday's TIF Study Commission meeting was the first I found unsatisfying.  Sure, the over three hours was chock full of high level information - the theory of how TIFs are set up and operated.  What was missing, however, was any mention or examination of the actual practice used for TIFs in Marion County.  This thought took a while to perk in my head, and I think the best way to express it is to list the instances where I saw the theory stated, but the actual practice left unmentioned.  And please note, I surely do not know all the ways TIFs are set up and to what purposes their funds have been put.  So, this a highly limited reflection on what was missing last Thursday.

The first instance of a divergence I noticed was actually in a recital of what purposes abatements could serve.  The theory stated was that residential abatements could be granted in places which were either 'residentially distressed' or for multi-family residential projects for low income or mixed income tenants.  What popped into my head was the abatement granted in the Peterson administration that was part of the incentive package for the Conrad Hotel.  The condos on the top floor were given an 8 year abatement - and clearly the area is not residentially distress, nor are these condos for low or even mixed income tenants/owners.

Thus the divergence struck me and here are more examples from the evening:

The theory -- the option to float Midwest Disaster Area Bonds were mentioned as being set up by the federal government to help recovery from 2008 flooding in the Midwest.  Marion County experienced this disaster and so is eligible for these tax-free bonds.  It was stated that these bonds are floated on the credit of the developer, not the municipality.

The practice -- the only instance of Indianapolis/Marion County using these bonds that I know of was for the North of South (aka City Way) project.  However, neither the credit worthiness of the developer, nor the investment worthiness of the project was used to sell those bonds.  It was the promised of a repayment revenue stream from the Consolidated Downtown TIF that was used to sell those bonds.

The theory -- Certified Technology Park designation, with the approval of the Indiana Economic Development Corp., must be used for 'public facilities' and the tax revenues redirected to the project may only be used to reimburse the City for its contributed infrastructure improvements.

The practice -- again we have to turn to the North of South (City Way) project that did not really have any tech component, but borrowed the relocation of some staff of Rolls Royce several blocks away to qualify. The redirected tax revenues are not going to repay the City for infrastructure, but rather to pay for the financing fees associated with floating the Midwest Disaster Area bonds.

While we are still on North of South (City Way), I must note that for the umteenth time, Deron Kintner, Director of the Bond Bank, said that no abatement was given to the project.  Then what do you call it when all property taxes 'paid' by the project for 10 years does not go to the taxing units, nor does it go to the Consolidated Downtown TIF fund?  It is being credited entirely to the developer and regarded as partial repayment of the bonds by the developer.  That sounds like a 100%, 10 year abatement to me.

The theory -- it was said that the purpose of TIFs are to build the tax base.

The practice -- two thoughts come to mind on this one.  First is the United TIF; since this was to provide for a non-taxable building on non-taxable land, then this TIF missed the mark by quite some distance.  Additionally, when you never retire a TIF district, then building the tax base is not really building a public asset, rather it is building a slush fund.

The theory -- a list of projects funded by the Consolidated Downtown TIF district was shown; things like Circle Centre Mall, Union Station, and the JW Marriott.

The practice -- not listed but leaping to mind is the $8 million per year going to the CIB (cough, pacers, cough), the $40 million being drained to balance this year's City-County budget, and the $600,000 to build the fourth spoke to the Artsgarden.

I hope the discussion can move to the actual practices being employed here in Indy.  Some are excessive and unwise, in my view.  But at the end of the day, if the Commission does not drag them into the open and discuss them, then they stand less chance of fixing what really ails the implementation of TIFs in our City.

Brian Mahern Comments On Disaster Bonds for No-So/City Way

Today's paper had a letter to the editor from none other than Council Vice President, Brian Mahern.  In it he takes the Ballard administration to task for using disaster relief bonds for the North of South (aka City Way) project instead of for, well, disaster relief.  Here is part of what he had to say:

The City Way complex consists of a luxury hotel, high-end apartments and swanky retail shops. Its developers benefitted from two forms of disaster aid, which were created in response to extensive Midwest storm damage in 2008, despite no logical reason to do so. 

Both $70 million in low-cost disaster relief bonds and a $6 million disaster relief grant were used to fund the private City Way development at a site untouched by storm damage. Meanwhile, affordable apartments like Falcon Pointe on the Far Eastside are still being slowly repaired from tornado damage four years later without so much as a penny of disaster aid. 

Mayor Greg Ballard’s effort to funnel precious public disaster aid to a fancy Downtown development while ignoring the legitimate recovery needs in outlying neighborhoods is inexplicable and unconscionable. One can only hope that the next round of aid for the more recent tornado victims in Southern Indiana is used solely for their benefit.

Six Councillors Stand Up for the Taxpayers

On Monday night the full City-County Council took up the issue of whether or not the North of South (aka City Way) boondoggle warranted a Certified Technology Park status (see "Taxpayer Fleecing for NO-SO (aka City Way) Continues").  Six Councillors stood up for the taxpayers of Indiana and Indianapolis and voted 'no'.

The six were Democrats Adamson, Brown, Gray, Hickman, Mahern, and Oliver.

All remaining Councillors, with the exception of Hunter and Mansfield, who were not present, voted in favor of declaring shops, hotels, and a few apartments, with their attendant minimum wage jobs, the very high tech jobs we need to be attracting to our City.

To view the discussion, click here and then scroll down to Prop 66 under "all items".

Councillor Brian Mahern began with a statement, in which he clearly outlined the lack of an actual high tech component.  He also mentioned the $98 million financing for the City's loan to the developer was with Federal 'Disaster Relief Bonds', which just might have been put to good use in Southern Indiana about now.  Excellent point.

Councillor Zach Adamson, who voted against the boondoggle in Committee, also made a statement - saying outright that "Designating City Way a CTP is dishonest and would further add to justify the distrust the public has in its elected officials".  Exactly.

So, from one taxpayer, thank you to all six Councillors.

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.

City Way - The Rebranding Of North of South

You know that a deal stinks to high heaven when the powers that be are forced to rename it.

So it went the other day, when Mayor Greg Ballard helped break ground on the renamed North of South (aka No-So) project.  The new name is City Way (aka City No Way To Run A City).  Lest the Google bots not find sufficient linkage between the worst deal for taxpayers to come out of the Ballard years as Mayor and its new name, let me provide some contextual linkage here.

City Way is the new name for North of South.

This project takes all of the risk off the developer and puts it squarely on the taxpayers of Indianapolis.

The taxpayers loaned the City Way (No-So) developer $86 million that it got by floating a $98 million bond that was secured with property taxes gathered from the Consolidated Downtown TIF district.  The developer gets to pay the loan back with whatever money it would pay in property taxes on its development, in effect granting the developer a 10-year 100% abatement on the project.  Should part of the project be profitable, swell -- the developer can pay back the City for that portion and pocket the rest of the profit.  Should part of the project be unprofitable, no problem -- the developer can default on that portion despite the fact the rest of the project is profitable.

The developer is supposed to seek refinancing for the project in ten years.  But, the City floated 30 year bonds - and whether or not the City will use the money to pay off the rest of the $98 million bond at that time is anyone's guess.  Should there be a problem with the development, no problem - the City will  foreclose on it and add millions more taxpayer money to finish it.

The City will also put in some $9 million of streets and sewers and parking meters.

With about 30,000 square feet of office space and, hopefully one small wet lab, the State of Indiana designated it a Certified Technology Park and tossed a free $6 million to the developer. 

Eli Lilly stands to benefit substantially.  Although they are credited with donating $30 million to the project, half is a way early payment from the City on another TIF district set up specifically to benefit Lilly and half is credit for the value of the land upon which City Way (No-So) will be built.  The latter is not really a contribution, as Lilly will retain ownership and lease the ground to whomever owns the buildings erected on it. 

The developer is only putting up $6 million.  The developer could not get a bank to finance the deal. So, Mayor Ballard stepped up and put the taxpayers on the hook.

Hopefully the Google bot has enough clues in this blog entry to make sure that City Way and North of South both come up whenever City Way is the search term.  The taxpayers of Indianapolis need a good historical record about how huge a boondoggle this City Way (North of South) project is.

If you want more information about the City Way boondoggle, you can read my earlier blog entries "North of South - Details of Proposed Deal", "No-So Field of Dreams - Lie And They Will Build It", and "No-So Deal Worse Than Even I Thought" for the highlights.

No-So Deal Worse Than Even I Thought

I returned home today to find a simultaneously chilling and revolting story in the IBJ, written by reporter Cory Schouten, about the recently approved North of South deal.  Both Gary Welch over at Advance Indiana and Paul Ogden at Ogden On Politics cover Schouten's article extremely well.

Regular readers of this blog know I have been following closely, the details of this now-approved project since it crawled out from under a rock back in October (in particular, see my blog entries  "North of South - Details of Proposed Deal",  "MDC To Vote On No-So Deal Today", "No-So Field of Dreams - Lie & They Will Build It", "Council Considers No-So Deal Tonight - Hold On To Your Wallets" & " No-So Bonds - Do They Meet Standards Set By Law?")

Even trying to keep up with this lousy deal as it snaked its way through the process, I was stunned to read a couple of new 'details', expensive to the taxpayer details, in Shouten's excellent report.

One is that the value of the land that Lilly is 'contributing' to the project actually weighs in at $2 million, not $15 million.

The city also gives credit to Lilly for contributing the 15-acre site on which North of South will be built, valuing the property at $15 million. For tax purposes, though, the current assessed value of the 12 parcels set for development is $2 million.

Another is that the $15 million the City paid to Lilly to donate to the project, was in fact, not repayment of a loan long overdue. Rather, it was an early payment due in 2020, on money that Lilly was contractually obligated to put up for the rerouting of Kentucky Avenue around their manufacturing plant on the near southwest side of town. They had to put up that money because the property taxes used as collateral for the bonds the city floated for the project were inadequate to cover the bond payments.

City officials agreed in 1989 to vacate a portion of Kentucky Avenue and spend $36 million to widen surrounding roads to accommodate an expansion of the Lilly Technology Center.

The city sold bonds backed by property tax revenue on the property, but starting in 1997—thanks in part to a new round of abatements, Kintner said—the bond payments due exceeded the property tax payments, triggering an agreement for Lilly to cover the shortfall.

Lilly paid about $13 million toward the bond payments over the years, and would have been entitled to reimbursement from the city of the remaining balance after the original bonds were retired in 2020.

And, last but not least, I am beside myself with disgust at the revelation that the developer will get to sell of pieces of the project and pocket profits on those pieces, while leaving the taxpayers holding the bag on unprofitable pieces.

Buckingham could start cashing in profits from the project by selling individual components before taxpayers are paid back in full.


The hotel, office and apartment phases each are assigned a “base release price” at which the bonds for that portion are considered satisfied. For instance, the release price for an office component starts at about $2.4 million (and falls as payments are made on the bonds).

If the developer can sell that portion, it can pocket any profit above the release price. A potential consequence of the arrangement is, taxpayers could get stuck holding underperforming portions of the project while the developer cashes out of profitable ones.

Just to remind everyone - Mayor Ballard keeps repeating that his administration values transparency.  When they continue, time after time, to withhold important information on deal after lousy deal, then there is NO transparency in his administration.  Its called lying by omission.

Now, fellow taxpayers, you and I are underwriting a deal far, far, more risky than anyone ever mentioned.

No-So Bonds - Do They Meet Standards Set By Law?

Over at Advance Indiana, Gary Welsh has a new post where he follows the bonds that the City is trying to finance for the North of South project. I would suggest anyone interested in just how out on a limb this City has ventured, read Gary's entry in its entirety. He has done a great job laying it all out.

I just want to pull a part of it over here for repetition. The bonds being used so that the City can 'loan' nearly $100 million to the developer, who only has to come up with $6 million of their own money, are called "Midwest Disaster Area" bonds. Gary has walked them back to their origin in Congress and finds that they MUST be used for, well, Midwest disaster relief. He cites the law thusly:

In the Heartland Disaster Tax Relief Act of 2008, Congress imposed the following specific requirement:

“[except that in determining whether a bond is a qualified Midwestern disaster area bond--paragraph (2)(A)(i) shall be applied by only treating costs as qualified project costs if -- in the case of a project involving a private business use (as defined in section 141(b)(6)), either the person using the property suffered a loss in a trade or business attributable to the severe storms, tornados, or flooding giving rise to any Presidential declaration described in subsection (b)(1)(A) or is a person designated for purposes of this section by the Governor of the State in which the project is located as a person carrying on a trade or business replacing a trade or business with respect to which another person suffered such a loss, and in the case of a project relating to public utility property, the project involves repair or reconstruction of public utility property damaged by such severe storms, tornados, or flooding…]"

and “such bond is designated for purposes of this section (on the basis of providing assistance to areas in the order in which such assistance is most needed).”

I have been following the No-So deal for a while and through a variety of legally required processes, including action by the MDC and the Council. This is the first I have heard that these bonds are dedicated for a narrow purpose -- a purpose that cannot be claimed for the No-So deal. If anyone has heard of anything regarding a City determination that the No-So area qualifies for disaster relief money, please note it here in the comments section, or contact me at hadenoughindy@gmail.com and I'll post the information.

What won't the Ballard administration do to get taxpayer funds into the hands of the well connected?

Council Considers No-So Deal Tonight - Hold On To Your Wallets

The Indianapolis-Marion County City-County Council meets tonight, beginning at 7 pm, in the Public Assembly Room of the City-County Building. Their agenda again includes Prop 292. This is the proposal that would put the taxpayers in the banking business and loan $98, plus provide $40 million in actual taxpayer investment, to the proposed developer of the North of South project. Said developer only has to come up with $6 million for their part of the deal.

A number of proposals are being introduced tonight. These caught my eye:

Prop 46 -- Would approve a property tax installment plan for those who have homestead property in Marion County. After approval by the Council, the State Department of Local Government Finance would also have to approve the plan. Mike Rodman, County Treasurer, drafted the plan. The plan would be voluntary, and presumably appeal to those homeowners who either have no mortgage, or those whose mortgage company does not escrow funds for property tax payments.

Prop 47 -- Would establish a $100 cash fund so that the Assessors office could provide change to those who make small, cash payments for services.

Prop 52 -- Would amend the sign ordinance to allow two types of signs on IndyGo bus shelters and City-owned benches at bus stops - advertising signs and transit related signs. It is hoped that more bus shelters would be erected to City specifications by firms interested in selling ads for the City, and that the ads would bring in some additional revenue for the always struggling IndyGo.

Prop 62 -- Would add licensing requirements and regulation of flea markets into the ordinances.

Prop 77 -- Would give $2 million to the Indianapolis Parks Foundation for crime prevention grants. I assume that most, if not all, of this amount would be passed on to crime prevention grant awardees. But, the proposal as posted online, does not specify how much of this money is intended to be used by the Foundation for administration and evaluation of the grantee projects.

No-So Field of Dreams - Lie and They Will Build It

There are fine people of integrity who work in high positions within the Ballard administration, and I do not want to impugn them, by any means. But, it must be said that the public presentations of recent Ballard proposals, including the sale of the parking meter system and now the bankrolling of the North of South project, have crossed the line into outright lying in order to move the proposals forward. The buck for complete integrity of the Ballard administration must stop at Ballard's desk.

Headed to the next full Council meeting on Monday night, is Prop 292, which would bankroll the North of South development to the tune of nearly $140 million. (see previous blog entries "North of South - Details of Proposed Deal", and, "MDC to Vote on No-So Deal Today" for full details)

It is one thing to disagree about the relative merits of any proposed deal. It is quite another for the administration to allow lies to the Councillors, lies to the media, and lies to the public, be the standard operating procedure to push through any deal - much less one so preposterously detrimental to Indy's taxpayers as this one is.

Here's the roundup of lies and disingenuous implications...

Lie #1 -- Prop 292 would allow the floating of up to $98 million in bonds. It has been stated that these bonds would carry an early termination penalty. The lie is in the statement that prepayment penalties are normal for City bonds.
a) the City refinances bonds continually, as interest rates change, as the City thinks it can capture extra cash through an elongation of the term of a bond - for any number of reasons. An early termination penalty would be a ludicrous impediment for the City to voluntarily walk into.
b) a key term of the No-So deal is that at the 10 year mark, the developer would refinance the project on their own hook, with any financial institution they can convince at that time, in order for the City's bonds to be paid off. Why is the City deliberately placing a poison pill into its future ability to pay the 30 year bonds off after 10 years?

Lie #2 -- The No-So development is not receiving an abatement.
The deal stipulates that any property tax revenue generated by the development during the first 10 years, will be applied as a credit toward the developer's obligation to make each year's bond payment. So, say in year 5 the development is generating $1 million in property taxes, and the bond payment due that year is $6 million. The developer would only have to pay $5 million to the City and the City would apply the $1 million in property tax revenues to the bond payment. This is an abatement. And, it amounts to a 100%, 10 year abatement at that.

Lie #3 -- The City is only contributing $9 million to the project.
The deal calls for $9 million in infrastructure improvements. But, it also calls for the repayment of $14 million to Lilly that is being handed over to the developer. It calls for $5 million from the State due to the shenanigans to call this project a 'Certified Technology Park' - money that would flow to the City and be handed over to the developer by the City. The its-not-an-abatement abatement of property taxes is estimated by the City to amount to about $12 million. That's $40 million by my count. What also needs to be added, although I can't be sure how much, is the cost of additional fire and police protection needed for the area. Since the property tax revenues from the project would be used to pay off the bonds, the rest of us will have to pay for the additional services needed for the area.

Lie #4 -- There is no real risk to the City's taxpayers because the City will hold the first mortgage on the development.
So, let me get this straight... If the development doesn't happen either on time or to completion, the City can take ownership of it? Then what? Pour even more taxpayer money into it? Even banks only let out portions of a loan for a new building over time, as the building progresses - in order to reduce their risk.
This development is too risky for a financial institution. Yet the taxpayers should now act like bankers and fund this project. The taxpayers are being asked to put nearly $140 million at risk, while the developer only has to come up with $6 million. I conclude that the taxpayers are being asked to carry far more risk than the developer.

Implications for the City go beyond this, as well.

Statements are being made that imply this is the best way for the City to invest in downtown development. Let's assume for the sake of argument, that the City ought to put any or all of excess TIF revenues into one project. How was it determined that this project had the most merit? In short, there was no competition to establish any supremacy or advantage.

Let me propose two alternatives - please note that I am NOT backing these, just suggesting that the No-So deal is inferior to other possible uses of TIF revenue. I strongly back using excess TIF money to pay off the TIF bonds as early as possible, so that the TIF district can be retired and the wealth shared with all taxpayers.

The first would be to bankroll, in a similar fashion, the redevelopment of the old MSA site. This project has languished and it is not generating any taxes, due to the CIB's ownership of the land.

The second would be to build the long desired criminal justice center - perhaps even on the old MSA site. It would cost about $50 million total, but, it would allow the termination of a number of leases currently required due to lack of space for City-County functions. The taxpayers would be buying an asset.

The new attitude toward TIF district revenues is actually scary for the taxpayers. Under Ballard's leadership, they are now being used like slush funds. When established, they were sold to the public as means of priming the economic pump. Start development, and more development will follow. The TIF districts have also been sold as being of limited duration - the TIF districts would be retired ASAP and their tax revenues would soon be used to enrich all of Indianapolis.

North of South is a bad deal for the taxpayers of Indianapolis. But, the lies told about the project in order to sell it, the lack of competitive analysis for any project, and the new attitude toward TIF districts, creates a situation that is an even worse deal for taxpayers.

No-So Deal Back At Committee Tonight

The North of South deal, Prop. 292, goes back before the Economic Development committee of the Council tonight. The meeting begins at 5:30 pm in room 260 of the City-County Building.

No-So Sent Back to Committee

Just seconds ago, the City-County Council voted to send Prop 292 back to the Economic Development committee. This is the proposal that would float a $98 million bond and finance the North of South development.

Due to the short notice, this was absolutely the right thing to do. Congratulations to all.

The committee will take up Prop 292 again at its next regularly scheduled meeting on February16, beginning at 5:30 in room 260.

No-So Passes Out of Committee - Council Agenda For Monday Night

Yesterday afternoon, with a ten minute committee meeting, the members of the Council Economic Development committee first amended, then voted to move Prop 292 to the Council with a do-pass recommendation. The amendment limited the interest rate to 6.5%, requires Council review should the project be substantially changed, and a couple technical points. This proposal would allow Mayor Ballard to float $98 million in bonds and use the money to fund development just north of Eli Lilly's headquarters - a project that could not qualify for a bank loan. Property tax revenues from the consolidated downtown TIF district would be used to secure the bonds. I could not hear the voting by the committee members, so I do not know the final vote.

Monday night's full Council meeting agenda includes Prop 292. The final committee vote is left blank. Two other proposals also are listed with blank final committee votes. The Rules committee will meet Monday night at 5:15 pm in room 260 to consider Prop 14 and Prop 15, which would certify referenda questions for Franklin and Perry Township School Districts, respectively.

Also on the agenda is Prop 18, which is a Council resolution in favor of State legislation to allow County Option Income Tax revenues to be allocated to the Indianapolis Marion County Public Library. This proposal passed out of the Municipal Corporations committee by a 6-0 vote.

No-So Hearing - Is the Council Skirting State Law?

As I noted earlier this week, the Economic Development committee was scheduled to meet on Wednesday. This was not a regularly scheduled committee meeting date and the only item on the agenda was Prop 292, which would authorize Mayor Ballard to float a $98 million bond, backed by property taxes from the consolidated downtown TIF district, and loan it to the developer of the proposed North of South project - a project which was not considered worthy of a loan from any financial institution.

The ice storms caused cancellation of Wednesday's meeting.

But, lo and behold, notice put out just today (Thursday, February 3), says that there will be a meeting of this committee Friday, February 4.

State law mandates 48 hour notice of public meetings in Indiana.

[edited 2-4-11 : the meeting is set for 4:30 pm in room 260]

Perhaps the rush is due to the full Council meeting set for Monday night. But, at least they can follow state law. It really isn't asking too much from our elected officials.

Is the committee's chairman, Jeff Cardwell, skirting or even outright violating Indiana's public notice laws?

No-So and Library Funding on Committee Agendas This Week

There are a goodly number of City-County Council committee meetings this week - click here for list and links to individual public notices. Of particular note are meetings for the Economic Development committee and the Municipal Corporations committee. Neither committee has a regularly scheduled meeting this week, making both meetings specially called. The full Council meets next Monday, February 7.

The Economic Development committee will meet this Wednesday night, February 2, beginning at 5:30 pm in room 260 of the City-County Building. Prop 292, 2010, which would allow $98 million in bonds to be floated and loaned to the developer of North of South, is the lone item on the agenda. This development could not find any financial institution that was willing to back it. Why the property taxes of the City of Indianapolis are being put at risk is beyond me. (for more details on how horrendously bad this deal is, see previous posts "MDC To Vote On No-So Deal Today", and "North of South - Details of the Proposed Deal")

On Thursday night, February 3, beginning at 5:30 pm in the Public Assembly Room, the Municipal Corporations committee will meet. The sole item on their agenda is Prop 18, 2011. This is a Council resolution urging the General Assembly to enable the use of County Option Income Tax revenues as a source of Library funding.

Flurry of City County Council Committee Meetings

This week will be a full one for committees of the City-County Council. The public notices can be found here.

The Metropolitan Development Committee meets Monday night at 5:30 pm in room 260 of the City County Building. On their agenda is Prop 298, which would do a couple of things. It would move the business of towing of vehicles to the Department of Code Enforcement to contract out, and authorize the Code Enforcement Officers of that Department to have vehicles declared a public nuisance and be towed. Currently, only Police Officers are authorized to do so. The language of the proposed ordinance seems to imply that instead of multiple towing companies, each contracted for its services within specific geographic 'zones', there would be only one towing company awarded the contract for the entire City.

The Rules Committee meets Tuesday night - same time, same place. Their agenda has two particular proposals that caught my eye. First is Prop 225, introduced back in August. It would require that contracts for all construction projects over $250,000 for the City or any of its agencies and Municipal Corporations, be awarded only to companies that meet certain criteria. Among those criteria is the requirement that 67% of their workforce be Marion County residents, and 60% of the subcontractors must have businesses that are owned and based in Marion County. The companies must also have 15% of its workforce from an apprentice or training program, all of whom must be City and County residents. After that is Prop 377, which would allow donations to the City at the same time as taxpayers pay their property taxes. The Committee will also get updated on the fiscal impact of the Police and Fire contracts.

The Committee on Committees meets right after the Rules Committee, in the President's Conference Room. The agenda only mentions 'Committee Assignments'.

On Wednesday night, the North of South deal comes before the Economic Development Committee. This committee will meet at 5:30 pm, in room 260 of the City-County Building. Curiously enough, Prop 247 has been moved from the Admin & Finance Committee, where it was originally assigned. This proposal would refinance the 1991 Harding Street TIF bonds and increase the principle enough to repay Lilly for an associated loan of $15 million. The total new principle would become $45 million (the original principle back in 1991 was $35 million). This is part of the North of South deal, in that this money has been earmarked for Lilly to give to the developer as part of their financing. Prop 292, which contains the meat of the North of South deal, is noted to be "For purposes of public testimony only. No vote is expected at this meeting.". This proposal would allow the City to float $98 million in bonds, secured by property tax revenues from the consolidated downtown TIF district. This money would be 'loaned' to the No-So developer. All property taxes derived from the development, would be applied to the repayment of the loan - resulting in a 10 year 100% abatement for the developer. You will recall that no bank found this development sound enough for a loan. The City would become a first mortgage holder on the project and assume the risk. The developer only has to come up with $6 million cash for a project that is claimed to be valued at over $155 million.

Thursday night, the Public Works Committee rounds out the week, with Prop 393, an interlocal agreement with the Town of Fishers for road work within Marion County, at our mutual border. Among other things, Fishers would be authorized to use eminent domain within Marion County, only to acquire right of way for improvements to the intersection of 96th Street and Allisonville Road. This committee will meet at 5:30 pm in room 260 of the City-County Building.

Council Business Light This Week

Two of the three City-County Council committee meetings scheduled this week have been cancelled. The Admin & Finance and Public Safety will not meet this week and not again until after the next full Council meeting on January 24. The Parks committee meeting will be held as scheduled.

I looked to see which proposals are pending before the first two committees. Their further postponement could be an indicator of disinterest, behind the scenes negotiations, or lack of urgency to compel a meeting.

There was one pending proposal before each committee that caught my eye.

Admin & Finance will not consider Prop 247 this week. This proposal would authorize the refinancing of the 1991 Harding Street TIF bonds. An important aim of this refinancing is to raise $15 million in new money to repay a Lilly loan to the City that was tied to this TIF district. This is part of the bigger effort to loan a private developer roughly $98 million for the North of South project. This proposal was introduced back on September 20, 2010. Its getting kind of long in the tooth - suggesting an interesting story somewhere in the City-County Building.

The other is Prop 368, introduced on December 6, 2010, and assigned to the Public Safety committee. I tried to view the committee meeting on December 8, to see what the issues were, but, the WCTY archives are not working at this time. This proposal would replace the current 11 member Crime Prevention Advisory Board with a 5 member Crime Prevention Grants Board to continue the job of issuing grants based on a competitive application process. The differences between the two appear to be the number of appointees from the Council equaling the number from the Mayor's office, the grantee list proposed to go to the Council's Public Safety committee for review (its not clear if it is binding review or not), and the job of monitoring the performance of the grantees would move under the City Controller and away from a service contracted by the Board. Not having access to the WCTY archives, I can't say if there is some hiccup with this proposal, or no urgency pushing the matter through.

Schedule of Hearings for City's $98 Million Loan (Plus $45 Million Incidentals) for No-So Project

The sweetheart deal proposed for the developer of the North of South project, is working its way simultaneously through the Metropolitan Development Commission and the City-County Council.

See my October blog entry for more details of the project ("North of South - Details of the Proposed Deal"). Briefly, the deal is this: the City will float a bond up to $98 million, loan the No-So developer up to $86 million, pay the first three years of interest only payments from the proceeds of the bond, put in $9 million of infrastructure, pay Eli Lilly $14 million from an old loan on the Harding Street TIF (which Lilly will give to the developer), turn over its $5 million in proceeds from the area being designated a 'Certified Technology Park' to the developer, and help the developer pay the loan back by applying 100% of all property taxes collected in the area for 10 years. This is the project that was rejected by all financial institution(s) approached by the developer. The City would get a first mortgage on the development, but Eli Lilly would retain ownership of the land - so if there is a default by the developer, the City would become owner of partially completed buildings and have to pay the bonds off from property taxes collected elsewhere in the consolidated downtown TIF.

The MDC will take up the issue at its Economic Development Committee meeting at 8:30 am, Wednesday, December 1, 2010 (room 2001 of the CCB). They are expected to consider and vote on the deal that afternoon at 1:00 pm at their regularly scheduled MDC meeting (public assembly room of the CCB). The rezoning of this property will not be heard until December 15. The reason the zoning is claimed not to be required prior to voting on the deal, is that there is no abatement involved. Because Mayor Ballard's crew simply decided not to call the 10 year, 100% return of property taxes, an 'abatement', allows them to slide on the laws regulating such things, and to avoid protections built in for the taxpaying public.

The Memorandum of Understanding underlying this deal is posted here (you will have to put in a google account to access - so if you prefer, just email me at hadenoughindy@gmail.com and I'll send you a copy directly).

The Council has already introduced Prop 292, and assigned it to their Economic Development Committee, which next meets on December 15, 2010 (5:30 in room 260 of the CCB). The full Council would presumably take it up at its December 20 meeting - just in time for opening presents by Lilly and the No-So developer, but not the taxpayers of Indianapolis.

North of South - Details of Proposed Deal

The North of South development is the next big thing to be promoted by City officials. Presumably their timetable had been predicated upon the completion of the parking meter deal by now.

North of South is anywhere from 10 to 14 acre development proposed for land owned by Lilly and just north of their main campus. A rezoning petition is in process, and is scheduled to be considered by the Metropolitan Development Commission on November 17.

Just yesterday, the economic development committee of the MDC heard for the first time, details about the proposed deal between the City of Indianapolis (who would finance the lion's share of the project), Buckingham Companies (who would develop and own the project), and Eli Lilly (who developed the plan and who will continue to own the land upon which the development would occur). The Commissioners requested that their vote on this proposed deal also be postponed to November 17. At the moment it is scheduled for November 3. Should the MDC approve the proposed deal, it would move to the Council for its verdict. The City hopes to be floating the bonds before the end of the year.

I made an open records request for the proposed deal, and received a document titled "Memorandum of Understanding As of September 27, 2010 With Respect to North of South - Mixed Use Development". I have posted that document. (you will need to sign in with a google account to access it -- if you just want me to email it to you, please send me a note to hadenoughindy@gmail.com) This document alludes to two attachments, neither of which did I get. I have requested those, and when I get them, I will post those as well.

Between the presentation at yesterday's MDC committee meeting and the MOU, here are the details of the proposed deal.

Two years ago, Lilly began planning for the undeveloped ground it owns north of its main campus. It currently serves as parking lots, primarily. One year ago, the City entered the picture, and has been working with Lilly and Lilly's chosen developer, Buckingham Companies. Lilly sees development of the area as a means of creating a link from downtown to the southeast quadrant and as a way to create a sense of place that is 'interesting and energizing', which would help them attract and retain talent. The Lilly representative at yesterday's meeting said they had chosen Buckingham because of their commitment to Indianapolis, and their 'strength both financially and in developing this kind of thing'.

The exact square footage, like the acreage of the project, shifted slightly, depending upon who was talking. Therefore, I will stick with the MOU and the presentation yesterday of Deron Kintner, Executive Director of the Bond Bank, and evidently the City's spokesman on the deal. He relied upon a PowerPoint presentation, which I have also uploaded.

The project includes:
320 apartments
150-152 room hotel
15,000-18,000 square feet conference center
30,000-40,000 square foot retail & restaurants
10,000 office/lab space
a new YMCA
sustainability garden/city park with significant public art
the MOU mentions 'parking garages' as well.

The total cost would be about $163 million. ($155 million for project costs and $8 million for capitalized interest)

The City would float a bond large enough to generate $86 million in cash for the project, plus $8 million to cover the first three year's payment on the bond - those three years being interest-only payments. More on how the bonds would be paid off later.

The City proposes spending $9 million from the consolidated downtown TIF on infrastructure improvements - roads, sewers, sidewalks, and the like.

The City would also pay $14 million back to Lilly for a loan Lilly made on the Harding Street TIF in 1991. This money would become Lilly's cash contribution to the project. It also will be allowing the development to occur on its land, valued at $14 million - but would retain ownership of the land.

The YMCA is expected to cost $18 m, most of which was said to be coming from a 'significant donation' from the Lilly Foundation.

Buckingham has to come up with its own cash investment of $7.5 million, plus about $6.25 million to be set aside as insurance of one year's bond debt payment. The latter could, instead, be guaranteed by a letter of credit or similar instrument, instead of with cash.

The City considers the total contributed by the Developer and Lilly to amount to $41.75 million - but it could be argued that the $14 million for the land isn't really a cash investment, the $6.25 million to be set aside for one year's debt payment isn't cash if its just a line of credit, and the City is providing the $14 million cash to Lilly - which would drop the actual developer/Lilly investment to $7.5 million. In addition, there is the $18 million for the YMCA, evidently to be supported by a Lilly Endowment grant to the Y.

More investment money is expected from the State. Indiana Economic Development, Inc., is supposed to give $6 million to the development. The 10,000 square foot office portion of the development, is anticipated to contain within it, a wetlab, which is evidently being used as the hook to get the State to designate the entire project a 'Certified Technology Park'. CTP designation allows income, sales, and use taxes that usually go to the State, to go to the City instead. This could add up to at least $5 million for the City, who through the MOU, has agreed to send it to the developer for either project development funds or repayment of the bonds.

The bonds are to be repaid by the developer within 10 years, unless the agreement is extended at that time. Except, significantly, ALL property tax money generated by the project will be used to pay down the amount of money that the developer has to come up with. The first three years payments are interest only, and will come from the $8 million portion of the bond mentioned earlier. In year 4, the developer's payments begin. The City, in its presentation yesterday to the Commissioners, and in its statements to the press, have downplayed the contribution of the property taxes to the repayment of the bond. These funds should definitely be included in the cost to the City, just as Kintner included the abated taxes as costs to the City in other developments he used for comparison. Kintner estimated the property taxes to amount to $1.7 million per year, which over 7 years, amounts to just under $12 million.

Under the proposed agreement, the City would get the first mortgage. The Lilly representative said yesterday, that Lilly would get the second mortgage on the project.

While Kintner is trying to present the proposed development as a $155 million deal that costs the City only $9 million, I would beg to differ. This proposal would cost the $9 million for infrastructure improvements, the $12 million in property taxes that would be applied to the bond payments, the $5 million for the Certified Technology Park designation, and the $14 million cash to repay Lilly for the loan back in 1991. That comes to $45 million. And, that is only if the project is a success. If it is not, then the City and its taxpayers will be on the hook for the bond payments and own a partially completed project that will undoubtedly need another infusion of cash. The risk is all on the City here.

In addition, the City will use Buckingham Construction as its construction manager for the City's infrastructure projects, with City paying Buckingham an undefined amount of fees for those services.

Of interest is one item in the MOU and another mentioned yesterday, regarding Wellpoint, which leases a building abutting this area. Kintner mentioned that their lease is up in 2015, and the City is already talking with them. The MOU mentions that the City is 'obligated' to build Wellpoint a parking garage.

It never stops, does it?