Questions Mount Regarding City's Purchase of Garage

The City's purchase last February, of a garage at 101 N. New Jersey Street, has suddenly engendered a growing mountain of questions. At their core, the aim of these questions is to illuminate the legal authority under which the City made that purchase.

The garage is part of a complex deal proposed and approved by the MDC over a year ago (see "Dramatic Week for 450 E. Market Street (Bad) Deal"). The resolution, number 09-R-006, passed by the MDC included the following section:

The Commission's authorization of the purchase of the Parking Garage is conditioned upon the negotiation and execution of a Project Agreement between DMD and Market Square Garage/Ops Partners, LLC, substantially incorporating the terms and conditions set forth in the attached Term Sheet.

I requested a copy of the Project Agreement and a copy of documentation of available financing that should have been supplied by the developer, Market Square Garage/Ops Partners, LLC, within 3 months of the crafting of the Project Agreement, and prior to the purchase of the garage by the City. The response was "Bond Bank Manger Deron Kintner says the project Agreement has not been finalized. Evidence of financing has not been obtained to my knowledge yet; that would be one of our closing items."

The project agreement was never inked down, therefore the authority to purchase the property could not have come from this MDC Resolution.

I asked then, how does the City justify the purchased the garage. That was two days ago, and I have not received an answer to the question. This is an important question, because the laws for purchase and sale of property by governmental units, contain provisions to keep the process open to the public and to assure a fair deal for government assets.

The City should follow the laws.

I did obtain the sales disclosure forms from the Marion County Assessor's office. These are related to the purchase of this property and the purchase by Market Square Garage/Ops Partners, LLC, of the former Bank One Ops Center block across the street from the garage, and part of the proposed Project Agreement. Tadd Miller signed these sales disclosure forms for that LLC. The sales disclosure form for the garage, indicates that the property is being purchased by the City (by DMD on behalf of the MDC), under a land contract.

I have requested a copy of that land contract. Presumably the City has not bought a property for over $13 million with just a wink and a nod. I will update you when I receive that contract.

I also requested a copy of any payments made by the City on the garage property, and if they exist, from what fund the money came.

Also swirling around this purchase, is the fact that back taxes are owed on the garage, and are now the City's responsibility. The back taxes now amount to $533,529.16. The City's payment of taxes due the 2nd half of 2009 and both halves of 2010, was envisioned by the MDC resolution. So, two rhetorical questions arise from that. Why is the City in arrears on taxes it owes? And, since the MDC resolution cannot be the basis of the authority to purchase the garage property, from where will the money to pay those back taxes come?

Frankly, what I think we see play out here in this one really bad deal for the taxpayers, is a pattern of conduct by the Ballard Administration, particularly this past year. They find small and large loopholes in the law that they use to benefit well connected individuals and firms, with little regard to the risks to the taxpayers of those deals. They go through the motions of putting these deals through at least some of the appropriate governing bodies (in this case the MDC), but then ignore the actual resolutions that authorized the deal and do whatever they want regardless of the legal authority to do so. We saw that with the deal to pay $8 million in property taxes a year to the Pacers, where the Ballard Administration did not bring the issue before the Council for a vote, as required by law. We saw partial truths expounded upon with the parking meter deal. We see partial truths dosed out in the North of South deal, as well as hiding the fact that a 10 year 100% abatement is at the core of that deal - while keeping the Council from a vote on that abatement. And we see the use of an abatement deal that uses money that should go to schools and other governmental units, instead used to purchase a parking garage by the City, in the original intent of this deal.

More on this when the documents I have requested are produced or said to not exist.

Scratch That - City Bought Garage Last February

Sales disclosure documents obtained through Marion County Assessor, Greg Bowes, office, show that the City purchased the garage and property at 101 N. New Jersey Street on February 25, 2010, much earlier than I reported previously. They purchased it from Market Square Garage/Ops Partners, LLC, with Tadd Miller signing for the LLC. That means that public requests for information regarding this deal were being falsely denied for over nine months.

The sales price for the garage property was $13,600,000, and the sales disclosure document indicates that the City bought the property on contract, in keeping with the MDC Resolution authorizing purchase (approved on June 6, 2009). The wording in Resolution #09-R-006, specifies:

The Commission's authorization of the purchase of the Parking Garage is conditioned upon the negotiation and execution of a Project Agreement between DMD and Market Square Garage/Ops Partners, LLC, substantially incorporating the terms and conditions set forth in the attached Term Sheet.

That attached term sheet includes such things as a requirement that the developer prove within 3 months, that financing for the project 'is available', and that the developer commences development within 12 months. I have requested the 'Project Agreement' and the proof of financing documents.

Also on February 25, 2010, Market Square Garage/Ops Partners, LLC, purchased the garage property from Market District Garage, LLC, based in Columbus, Ohio, for the very same $13,600,000. They also purchased the city block with the address of 450 E. Market Street (and 450 E. Washington Street), the same day for $1,381,366.20, from MS Ops Center, LLC, based in Columbus Ohio, and using the same address as Market District Garage, LLC.

We Interupt This Series ....

We interrupt this series on the Indianapolis-Marion County 2010 budget, to mention a brief event that also occurred at Monday night's City-County Council meeting.

The rezoning petition for 450 E. Market Street was 'called down' by the Council. Councillor Joanne Sanders did it on behalf of Councillor Doris Minton-McNeill, who could not attend, but within whose district the parcel lies. 'Called down' means that it was specifically pulled out of the stack of rezoning decisions of the Metropolitan Development Commission. The remainder of the stack was approved in bulk, as is usual.

If you aren't familiar with the deal that TM Miller Enterprises is trying to cut with the City, you can review an earlier entry or two, or three.

Here -- Here -- and Here

The rezoning petition is automatically scheduled to be heard by the Council at its next meeting, but usually that is delayed to give sides a month to try to craft mutually acceptable terms.

I suspect that at the October 7 hearing of the MDC, this matter will yet again be continued.

Concerns Linger Over Ballard's Approach to Apartment Deal

Yesterday the MDC voted 7 to 2 to approve the particulars of a deal to provide more than $18.5M in taxpayer assistance to TM Miller Enterprises to build market rate apartments and retail spaces at 450 E. Market Street. In 'return' the City would become the owner of the 1677 space parking garage across the street. A central feature of the plan is to award TM Miller Enterprises a 10 year abatement, which he would return to the City each year, plus $100,000, as payment for either lease or purchase of 600 of the parking spaces. This money would be used to pay off the $18.5M loan that TM Miller Enterprises sets up to buy the two properties from the current owner. The abatement will not be voted on until June 17.

There are many characteristics of this complex deal that should send shivers down the spine of every Marion County taxpayer and every proponent of open government.

#1. This very complex deal was approved in backward order - tarnishing, if not outright spitting on the honor of the public hearing for the abatement to be held two weeks from now. If the abatement were to be denied, the deal could not be finalized as it is the central cog in how the deal 'works'.

#2. This very complex deal was approved without any real details about the project, with significant questions insufficiently answered, and with little time to really understand the deal. During the day, three meetings were held that in part dealt with this deal proposal. At a MDC committee meeting in the morning, a number of really cogent questions were asked. Ones that I would never have thought of, but which made sense the instant you heard them. Jim Curtis, VP of the MDC, asked why the MDC should put the taxpayers on the hook for $18.5M and not have both properties deeded to the City. The Ops Center deed could be transferred to the developer upon completion of the project. Randy Snyder, President of the MDC, took that one step further posing the scenario where TM Miller Enterprises goes bankrupt. Is the City protected insofar as actually acquiring the Ops Center property or would it be tied up in court for years? It was clear that this had not been discussed among the deal makers before and an inadequate answer, amounting to 'trust us' was given. More 'minor' questions also remain - if the garage does not generate enough revenue to cover the payments on the loan without the abatement money, how does the City make those payments should the developer not get his financing or the development stalls? If the developer defaults on the deal, how could the City sell the property, given how long it has remained on the market to date? These are just examples of a laundry list of questions without answers about this project and deal. No site plans, no real particulars of the project available for review. In common parlance its known as a pig in a poke.

#3. The apartment market is at capacity downtown, with rising rents to boot. If there ever was an example of a downtown market segment the taxpayers could expect to survive on its own, this would be it. Instead, Mayor Ballard is content to toss taxpayer money at it anyway. The Market Street ramp has come down, the street scape is being improved on this block -- additional reasons why the market for apartments here should be able to be totally market drive. The upshot here is the message that nothing downtown will be developed without significant taxpayer money involved. The Mayor doesn't give a hoot about cutting the Parks budget, but he doesn't blink when a business comes to him with hat in hand for tens of millions in corporate welfare. The taxpayers of Marion County will all be broke, they will have no services left for their own peaceful enjoyment of life in Indianapolis, and downtown will still be a money pit --- because there is no plan or interest in creating a plan for downtown's self-sufficiency.

#4. The use of an abatement in this manner creates a 'mini-TIF'. The Mayor's people feel it is superior to a TIF in that it is of shorter duration (10 years vs. until the debt is paid off). But on the negative side as far as the public is concerned is the lack of public input or Council oversight. The legislation for how the City can create a TIF District puts the whole deal out in the open for public scrutiny. Public hearings are required and the City-County Council must review and approve it. Not so with this clever mini-TIF. Even yesterday, the MDC did not have to hold a public hearing on the deal, although they did so - to their credit. There will be a hearing on the abatement -- but as noted in #1, that horse has already left the barn with the approval of the deal yesterday. Mayor Ballard has indicated he wants the authority to strike abatement deals without any oversight. But the legislature did not grant his wish. The public process developed for TIF Districts is being written off the books by the use of this mini-TIF approach and the public should be concerned about that reduction of transparency.

Public Input Impeded

On a very fast track that precludes extensive or knowledgeable input by the public, the Ballard Administration is pushing forward a complicated proposal to assist private developer Tadd Miller redevelop the old Bank One Administration Building at 450 E. Market Street.

Reported today in the Indy Star by John Ketzenberger and on the IBJ website by Cory Schouten, the deal raises many many questions.

The deal must be approved by the Metropolitan Development Commission at a hearing tomorrow at 1:00 pm (Public Assembly Room, City-County Building). At 11:00 am, the MDC's Economic Development Committee will meet and discuss the proposal. That committee will meet in room 2160 of the City-County Building, should you wish to attend. It is not clear at this point, if the City Council would also have to vote on the proposal, at least as far as appropriating the moneys.

The deal appears to be that Miller, through his TM Miller Enterprises, will arrange a loan to purchase the Bank One Administration Building which includes a surface parking lot, and a 1600 space parking garage across the street, for $18.5M. The City would make the payments on the loan and become the owner of the parking garage. The City would also grant a 10 year tax abatement totaling $6.7M. Miller would have 18 months to find investors to come up with an anticipated $65M to turn the building into 600 market rate apartments and retail spaces. If that timetable is not met, the City would become the sole owner of both the garage and the building - presumably still paying on the loan.

More complications are that Miller would lease 600 of the parking spaces for $100,000 per year plus the amount of the tax abatement for that year. Confused yet?

The revenues from the parking garage would be the payment stream from which the loan would be repaid.

This begs the question: if the parking garage revenues can pay for the loan and refund the tax abatement, why does Miller need the City in the picture at all?

Ketzenberger brings up the strong downtown market for apartments and suggests that taxpayer groups might balk at abating any more apartments.

Here's how strong the Downtown apartment market is: Although more than 750 units have been added since 2000, the vacancy rate remains the same -- 5 percent. The monthly rental price has increased from about 90 cents per square foot to $1.08 in the past eight years. And rental rates at two major developments, The Waverly on South East Street and the Cosmopolitan on the Canal, are $1.35 per square foot.
"That shows there is a lot of demand," Sweeney said. [Sweeney works for Indianapolis Downtown, Inc., which compiles occupancy numbers for downtown spaces]

Schouten concludes his article with:

Yet the city's abatements and investment in the former bank properties suggest a deal to redevelop the 4-acre MSA site still could be quite pricey for taxpayers. And if the current project doesn't materialize, the city would be left holding even more downtown real estate and paying down an $18.5 million loan.

Why is the City getting involved in this deal? If apartments already represent a strong market downtown, why not let the market work? When, exactly, will downtown be self-sufficient?

As an aside, TM Miller Enterprises donated $1000 to the Ballard Campaign on September 30, 2008. No campaign finance reports for 2009 have been filed. Those are not required until January, 2010.

What does the public think? Does Mayor Ballard really care? If so, you might think that this juggernaut would be a tad slower than coming to the public's attention the day before the decision is made.

[added 6-2-09] I have been informed that no public comments will be allowed on the topic of the purchase agreement with Mr. Miller as no public hearing is required. The abatement will be taken up as a public hearing at a future MDC meeting, likely in two weeks. I have also been informed that the City-County Council has no oversight on the agreement or the loan or receipts and payments accrued from the garage. So, poof ! Here's $18.5M more debt for Indianapolis secured not only with potential receipts from this garage, but backed up, if needed, with actual receipts from other City-owned garages. Public input is not desired.