Saturday, September 01, 2007

It's Your Money, But It's None Of Your Business

The IBJ has a disturbing story today about how the City of Indianapolis receives no formal financial reporting from the owners of the Conrad Hilton after the city plopped down $25 million, or a quarter of the total investment for the project. Even worse, the Peterson administration isn't the least bit concerned and says verbal reports it has been getting from the hotel's owners have been sufficient. The IBJ's Cory Schouten writes:

. . . . The city ponied up $25 million toward the $100 million Conrad project, yet has received no formal reports on performance since the hotel opened 18 months ago.

The city owns the equivalent of an 8-percent equity stake in the swanky hotel at the corner of Washington and Illinois streets. Yet the agreement does not require regular reports—a standard method of monitoring taxpayer investments in hotels . . .

Of the $25 million public investment in the Conrad, $3.75 million was added at the last minute as part of a so-called participation agreement that provides the equity stake. City officials say they believe the 23-story project is performing fine, based on anecdotal reports they’ve received from the hotel’s controlling owners, Circle Block Partners, a group led by the founders of Kite Realty Group Trust.

But the deal puts the onus on the city to seek performance and revenue data. For several months, IBJ has been asking city officials about the arrangement, which hospitality consultants say is unusual.

Peterson said the reviews by an independent accounting firm will ensure the city’s interests are protected. He said the reviews will produce tracking documents, but he could not say whether the city would consider them public records.

The city wanted to give the hotel a 15- to 18-month period to “stabilize” before conducting the review, as hotel investors typically don’t expect much of a return during the first few years. The process will be similar to audits of other properties in which the city has a stake, including a handful of downtown parking garages . . .

The city’s portion of funding for the Conrad comes from revenue from two parking garages, the Circle Block garage next door to the hotel and the World Wonders garage at Circle Centre, said Barbara Lawrence, executive director of the Indianapolis Public Improvement Bond Bank.

The agreement provides for a participation right, which is a step below an outright equity interest. The participation right entitles the city to a share of profits on financing, condemnation or distributions, said Tom McGowan, one of the hotel owners and the chief operating officer for Kite.

“I give credit to the city in coming up with a creative way they could participate in the long-term upside of the asset,” McGowan said. “I believe it to be a prudent model for the city to utilize.”

The contract gives the city the right to review the hotel’s books, as opposed to receiving regular reports, in part to prevent the release of specific information that could put the hotel at a competitive disadvantage, McGowan said.

Schouten's report notes that the city receives regular reports on Circle Centre Mall, a Simon-owned project which was financed with $187 million in taxpayer dollars. But still, the Peterson administration isn't the least bit concerned. "[Barb]Lawrence, of the Bond Bank, is not concerned." "She said the city is comfortable with the information it has received on the Conrad." “The Bond Bank has taken the approach that it’s a new product in the city and it needs to be established, given the opportunity to go through the full marketing cycle and becoming an established name and presence,” Lawrence said. “We talk on a regular basis; we share information about the market and about what’s going on at the property.” And Barb Lawrence is in way over her head. Nice lady, but she doesn't have the background and training to even be put in the position of making this decision for taxpayers.

Meanwhile, the IBJ reports elsewhere that the Peterson administration is letting the Market Square project languish to the frustration of developers interested in developing the prime location. What's apparent from the story is that Peterson knows the project will require a huge infusion of taxpayer dollars to make it go so he is waiting until after the election to use some more of your hard-earned taxpayer dollars to line the pockets of fat cat developers who make generous contributions to his campaign committee.

12 comments:

Anonymous said...

Word from inside Kite is that the Conrad is ready to tank with occupancy running 40%.
If I were Peterson I'd not release anything either.
Ever wonder why the City didn't just sell the four acre Market Square site on the open market and get it back on the tax rolls?

I think corruption and cronyism have benn redefined in our town. With the tag team of the Capital Improvement Board, The Bond Bank at the Mayor's beck and call you may rest assured that when Peterson leaves office he will be a very wealthy man.

Anonymous said...

The Conrad also reduced the hours of a lot of its staff last year to part-time so they would lose their health insurance benefits.

Anonymous said...

Is anyone really surprised at all of this?? Bart Peterson has destroyed everything he has put his hands on! For those of you who like to come on here crowing about how he's a fantastic mayor, what will be your excuse this time? The report is not accurate, or wait till the audit comes in. I will give the mayor this much credit when it comes to success. He has been successful in destroying a perfectly good Police Department.He's also pretty competant when it comes to creating meaningless jobs for cronies at the taxpayer's expense. Yep and that deal that he made with Jimmy Irsay has never before been seen in the likes of the NFL and never will be again. Nope, I can't say I'm surprised this is stupidity at it's finest!

Anonymous said...

I gotta say, for a man from the real estate develpkment world, which is cut-throat and vicious, Bart has shown tremendously inept bargaining abilities.

He gave away the store on the Colts deal. Or, more correctly, that ace negotiator Fred Glass did.

Ditto the Kite-Conrad deal. And the Kites, big-time Republicans, make fun of him behind his back. They detest him.

They structured the corporation such that they won't lose a dime.

They did so on the back of those city gaurantees.

Still gonna vote for Bart, but not haooply. The alternative is sad.
And I gotta hand it to you, Gary...whenever you comment on a story which appeared elsewhere first, you credit that news source. Classy. I know that courtesy is not often returned.

Anonymous said...

Oh yeah--Bart was a millionaire before he ran for office, 9:21. Actually, given his family company's assets, I'd bet he's taken a huge pay cut to be mayor.

Anonymous said...

So, what's new. They are not interesting in protecting the so-called city's investment. People come to city officials to feed off the taxpayers. If there was a market for a Conrad Hotel or any other five-star hotel, it would have already been here without any city "investment." Developers know all they have to do is put there hand out and wait for hte dollars to fall from the sky. A few events a year does not generate the demand for a five-star hotel.

Anonymous said...

Anon 118, Just because Bart's daddy was a millionaire before he got into politics doesn't make him smart or a success. Bart has found several ways to destroy our city and has given himself some pretty hefty pay raises too.

Anonymous said...

Heck with developing MSA Site!!!!!
I would think that the needs of the local Justice system would be better served if the City leaders would do the following.......
between Delaware and Alabama streets (just north of the jail) is a parking lot.......... they should make a trade to the owner for one of the gravel lots (MSA site). Use the parking lot and build a jail with the APC facility in it and connect it to the existing MCSD jail. Take the other gravel lot (MSA site) and build a Justice Center/Courthouse housing ALL of the Courts, the Prosecutors and the Public Defenders offices.

Anonymous said...

"Still gonna vote for Bart, but not haooply. The alternative is sad."

My God, how does your mind work? You just stated several (of hundreds)reasons why somebody, ANYBODY But this criminally motivated bunch should be elected, and yet you still say you'll vote for HIM???????

You and people like you deserve what you get.

Anonymous said...

7:05, I'm gonna vote for Bart because his good outweighs his bad. By a long damned shot.

That, and the Republicans fielded a patheticlaly weak candidate. At the last damned minute.

THEY deserve what they get.

Anonymous said...

1:18, NOBODY takes a pay cut to be Mayor. Bart a millionaire? No, not in his own right, that's daddy's money my friend.
Obviously you are not informed enough to understand how the abatement kickback program works in this town.
Ever wonder why both Hudnut and Goldsmith left town?

Anonymous said...

Heck with developing MSA Site!!!!!
I would think that the needs of the local Justice system would be better served if the City leaders would do the following.......
between Delaware and Alabama streets (just north of the jail) is a parking lot.......... they should make a trade to the owner for one of the gravel lots (MSA site). Use the parking lot and build a jail with the APC facility in it and connect it to the existing MCSD jail. Take the other gravel lot (MSA site) and build a Justice Center/Courthouse housing ALL of the Courts, the Prosecutors and the Public Defenders offices.