Sunday, April 19, 2009

More On CIB Bailout Numbers Don't Add Up

You've seen my reporting on how the $48 million legislative bailout plan for Marion County's Capital Improvement Board doesn't add up. The IBJ has concluded the same. And now the Star's Brendan O'Shaughnessy reports the same. He writes:

Tax increases called for under Mayor Greg Ballard's rescue plan will go far in helping the city's ailing sports board, but millions of dollars more will still be needed to fully close its projected 2010 budget deficit.

It may be several years, if not longer, before Ballard's approach generates enough revenue to cover the Capital Improvement Board's higher expenses, including operating costs at Lucas Oil Stadium that are twice as high as those at the Colts' old home in the RCA Dome.

The Republican mayor's plan would give the City-County Council the power to raise taxes in Marion County on alcohol, hotel rooms, car rentals and stadium tickets. It also expands a special tax district Downtown to include the JW Marriott hotel complex being built next to the Indiana Convention Center.

Late last week, Ballard administration officials estimated that the most the mayor's plan can raise in its first year is $27.4 million. The CIB's deficit next year is expected to be $47.5 million.

Why should members of the City-County Council be asked to risk political suicide by voting for all of these tax increases in times of double-digit unemployment to adopt a plan that doesn't even come close to adding up? Members of the Municipal Corporations Committee pressed CIB President Bob Grand on the analysis Thursday night. Grand's response made it clear that neither he nor anyone else associated with the CIB had conducted a competent fiscal analysis. Instead, Grand deferred to the Indiana General Assembly to get it right. The public could only conclude that they don't know what they're doing, particularly when they tell us a plan raising parking fees that was included in the state bailout plan was simply a typo.

There are also a couple of items of note in the Star's "Behind Closed Doors" column today. Grand announced at Thursday's Municipal Corporations Committee meeting that the Capital Improvement Board had finally gotten its own website at which the public could access information on it for the first time. I thought he was just pulling our leg. I searched the City's website up and down and couldn't find it. That's because it's not on the City's website. A link on for boards and commissions draws a blank when you enter it. If you enter, you will be directed to a website for the CIB. It has the CIB's meeting schedule, board minutes, budget and financial reports on it, as well as its agreements with the Colts and Pacers. The most recent financial statement, 2007, shows the CIB's staggering debt: over $348 million in capital lease debt obligations; $34 million is owed to Circle Centre investors; $28 million owed on two separate revenue bonds of $3.1 million and $24.8 million. Close to $500 million more is owed to the State of Indiana. Who knew the CIB shares the operating costs for Capital Commons garage? Isn't that the garage Simon's employees use for free at their corporate headquarters? The audited financial statement prepared by BKD made no warning about the risks associated with the interest rate swap notes the CIB held. To say the report downplayed the CIB's future financial plight would be an understatement. One would expect a different read for an organization that has run a deficit 10 years in a row.

The "Behind Closed Doors" column also has an item on the discussion about Bob Grand's conflict of interest that I raised at Thursday's Municipal Corporations Committee meeting:

A hearing on the CIB's deficit in the City-County Council turned personal last week when a council member and blogger criticized Grand.

Ed Coleman, a Republican-turned-Libertarian councilman, asked Grand to resign.

Grand, managing partner of Barnes & Thornburg's Indianapolis office, has faced questions about conflict of interest since he took the CIB job last year. He said he had to go to great lengths to distance himself from his firm's representation of the Indiana Pacers and his own work for the Simon family, which owns the Pacers.

Critics say the measures he took weren't enough. They pounced again at the meeting, saying Grand is too conflicted to lead a board negotiating a new lease with the Pacers. The board has from the start assumed it would take over the cost of operating Conseco Fieldhouse -- $15 million per year -- from the team.

Coleman asked how Grand could lead the board if he has to abstain from votes on the major issue of the day. Grand said he would not step down.

"If you want someone of my qualifications, with my experience, and with my reputation, that's what you'll get," Grand told council members.

Local blogger Gary Welsh, a critic of Grand and the CIB, took a shot, too.

"I think the Pacers are very well represented here by the president of the CIB, Bob Grand, their attorney," Welsh said.

Grand responded that he was glad to see Welsh criticize him in person rather than online. He said he is aware of criticism "in blogs that most people don't read."

I might add that Grand said I had it wrong. It is his law firm and not he which represents the Simons. It still galls me that people like Bob Grand think that there aren't people in our community who are qualified to lead the CIB unless they have conflicts of interest like him. And contrary to Grand's assertion, the blogs were not alone in questioning his conflict. The Star's editorial board raised similar concerns.


jabberdoodle said...

I will need to go back through what I have read, but I believe that at least some of the funding of the ICVA by the CIB is statutorily required.

At Saturday's meeting of the Marion County Alliance of Neighborhood Associations, Barney Levengood (exec. dir. of the Convention Center and LOS) and CIB member Dorothy Henry, were the guest speakers. I believe it was Levengood who said that 40% of the innkeepers tax went to the ICVA. So, the proposed 1% increase (to 10%)in that tax would generate the annual $3 million more the ICVA has requested - if all of the increase is passed on. (LSA projects $3.7 million for 2010) So, I doubt the ICVA is too worried about the impact of the very tax that feeds its coffers.

However it evolved, the maze-like structure of governmental bodies that all have a piece of the action in what the public thinks the CIB's does - the convention center and sports stadiums business - is staggering. At least 5, by my count. Its a wonder that you can find only three Councillors whose interests may conflict in the CIB bailout debate.

jabberdoodle said...

The latest information from the Indianapolis Bond Bank shows nearly $500 million in bond debt owed by the CIB. That does not include the LOS bonds held by the State (which may be the $500 million you mentioned). Nor does it include any bonds for the expansion of the convention center, which the state would control as well.

The public deserves a full accounting of all of the tax money that has been spent and all that is still on the hook from old debts, from all sources - state and local - used to prop up the hospitality industry. Bonds (principal, interest, fancy swap options paid to keep things afloat), abatements, incentives, and anything else.

I know said...

Grand responded that he was glad to see Welsh criticize him in person rather than online. He said he is aware of criticism "in blogs that most people don't read."

Walk around the State Capitol and watch the Attorney's and Lobbyists strut with the same attitude. People do read what is out there. It is just simply the "people" get wacked and called kooks if they raise up and call out the crap.

Maybe the all the lawyers that represent big contracts, big cities and corporations might think about the consequences when the mess finally comes out. It did in Chicago.

For all those who claim pristine clean hands might want to check the prison terms for those that went before them with the same look down their nose attitude at the rest of us.

The Legislature might want to leave the money in the budget for more prison space. They are going to need it!

That's Me said...

I agree the numbers don't add up and that no one seems to be approaching the situation in a way that will work, but what is a good solution? I haven't heard anyone talk about a solution that will actually work, and I'm just wondering what I'm missing.

From where I sit, it looks like we're all going to be paying higher taxes on a lot of bad ideas.

Paul K. Ogden said...

That's Me,

Yes, there is a solution. It's called bankruptcy.

Sam Hasler said...


Congrats on the mention in The Star. Sounds like you are getting under someone's skin.

Unigov said...

Advance - I've very much updated - including commentary on 100 of the worst bills introduced this session, a letter to the General Assembly, and links to the previous videos.

Anonymous said...

I tried to post a comment over on Indianabarrister but is keeps rejecting my post so I'll put it here isntead:

It sounds to me as though there are three choices:
- cover the shortfall 100% with tax increases
- cover it with a mixture of tax increases and private contributions
- or cover it 100% with private contributions.

As much as I despise taxes of any sort (label me an extremist, but I'd almost rather live like the Amish than to have my money taken by irresponsible government by decree), I believe that there needs to be a compromise here. The compromise needs to be 100% linear, and it needs to involve retro-active contributions from private beneficiaries if the payment structure hasn't been linear in years past.

For example - open the books to CIB and all private parties who have been involved in CIB finance dealings. Look at the cost/return margins for private organizations vs public coffers. Align all CIB bailouts with the profit ratio that is equivalent to private:public and include terms assuring that private recipients make good on prior disparities - going back at least seven years.

Also, if during the course of audits it becomes apparent that there is a disparity in the ratio between public:private profits, let the arrangement state that involved parties will be investigated and convicted if any influence peddling is involved. Those who want to avoid prosecution may begin contacting the AG and/or prosecutor as soon as today to work out a plea arrangement.

It seems as though this mess is too deep to wade out of without some sort of compromise. But - make the compromise eqiuivalent in nature to the public/private profit ratio, make the audit process a formal/public effort, and hold any wrongdoers 100% accountable for any suspected and/or obvious disparities that benefit private parties with the use of public monies.

Diana Vice said...

You really know how to kick butt! The Johnny-come-lately media outlets are obviously following your lead.

jabberdoodle said...

I don't think one penny of public or private new money should be spent on the pacers, the ICVA, or to run the expanded convention center. Those are discretionary expenses that they do not have to entertain, they just want to.

That leaves an annual $20 million - which is more than plenty of money in this economy - that can be debated as to where the money comes from.

Then they have the $17 million one time for swap option buyouts and $26 million one time for a cash reserve for bonds. That could come from the airport authority as a one-time payment in lieu of taxes.

But, they got in hot water AND decided they might as well ask for as much money as they could for all sorts of things they don't have to do. So, no money from nobody for $28 million annual money request is my vote.