Now that Miller has a commitment of more than $20 million in hand from the City of Indianapolis, he'll have no trouble finding equity partners to invest in his venture and line up the necessary financing to build a mid-rise building for 650 apartments and retail space. MDC members didn't ask a single question of Miller, and he wasn't asked to offer any testimony to explain why the 9 unelected commission members and the public should entrust him with such a large public investment. According to press accounts, this will be the first such development project that Miller has set out on his own to accomplish.
The general public only learned of this deal 48 hours ago. The MDC heard from only one city official, Deputy Mayor Nick Weber, who said the City couldn't pass up an opportunity to transform the dilapidated property. The deal he says will "level the playing field" and "ensure a robust downtown." "Level the playing field?" You've got to be kidding? It's more like stacking the deck. He says the City is protected in two ways. If Miller can't line up financing within 90 days, the City will take ownership of the two parcels of land, including the garage. If Miller fails to start construction within 9 months, the ownership will revert to the City. Some deal, eh? We get a grossly under-utilized parking garage and a vacant piece of property for $18.5 million and lose $184,000 a year in property taxes currently being paid on the property under private ownership.
The MDC appeared satisfied that the under-utilized parking garage is a steal at $18.5 million. Want to bet there isn't a parking garage operator in the entire U.S. who would pay that much for that parking garage at this point in time? One commission member seemed impressed that the developer might be paying $1.2 million a year in property taxes after the 10-year abatement expires, notwithstanding at least $2 million in revenues local governments will lose over the next 10 years from those abated taxes and the costly installment payments on the note that will finance the purchase of the parking garage, which magically will match the developer's payments to its lender. Another commission member seemed satisfied that the developer's annual payments to the City would be at least $600,000; however, the City is giving the developer 600 spaces in that garage that a market rate indicator would tell me is worth at least $1.1 million a year.
One of my favorite movies is "Back To School" starring the late Rodney Dangerfield in which he plays a multi-millionaire businessman, Thornton Mellon, who decides to attend college as a way of reconnecting with his distant son after his latest marriage failed. Dangerfield's character has a great exchange with the stuffy professor of his business class, who he says is leaving a lot out of a business plan for a mock company the professor utilized for demonstrative purposes that goes as follows:
Oh, you left out a bunch of stuff.
Like what, for instance?
First of all, you have to grease the local politicians for the sudden zoning problems that always come up.
Then there's the kickbacks to the carpenters.
And if you plan on using any cement in this building, I'm sure the teamsters would like to have a little chat with you, and that'll cost you.
Don't forget a little something for the building inspectors.
There's the long-term costs, such as waste disposal. I don't know if you're familiar with who runs that business, but I assure you it's not the boy scouts.
That will be quite enough, Mr. Melon. Maybe bribes and kickbacks and Mafia payoffs are how you do business, but they are not part of the legitimate business world, and they're certainly not part of anything I'm teaching in this class. Do I make myself clear?
Sorry. Just trying to help. That's all.
Now, notwithstanding Mr. Melon's input, the next question for us is where to build our factory.
How about Fantasyland? Mellon quips.
Young Tadd Miller's speechless moment before this MDC's hearing this afternoon looked a lot like Fantasyland to some of us in the audience. Hats off to Miller for turning a big profit today without investing a dime of his own money. I look foward to learning the names of the people who will jump into this deal now that Miller has a huge public subsidy in hand for his private development. Today's resolution adopted by the MDC was prepared by Barnes & Thornburg's Bruce Donaldson, who the Corporation Counsel's office has retained to represent the City's interests in this transaction.
UPDATE: Brendan O'Shaughnessy's online story at IndyStar.com late this afternoon captures my sentiments that I shared with MDC members at this afternoon's hearing:
But opponents included the Marion County Alliance of Neighborhood Associations, which questioned the zoning and why an abatement would be allowed before a plan is in place.
And Indianapolis lawyer Gary R. Welsh, who operates the blog Advance Indiana and earlier this week called the plan "yet another multi-million dollar give-away to a politically-connected developer at a time the City is struggling so much financially" today questioned whether a single person would have the wherewithal to get a deal done.
Weber responded that once this deal closes, he's confident that equity partners and debt financiers will emerge to do the deal.