Monday, September 27, 2010

Outrage: Indianapolis Taxpayers To Finance Another Downtown Private Development

We may be in the worst economic recession since the Great Depression, and city government agencies might be facing across-the-board reductions in essential city services due to plummeting revenues, but Mayor Greg Ballard in his infinite wisdom thinks Indianapolis taxpayers should borrow $86 million to finance a $155 million hotel, apartment and retail complex with another YMCA that will largely benefit workers at Eli Lilly and Wellpoint on the City's near southside, nothwithstanding the layoff of thousands of high-paid workers at Lilly in recent years and the company's failure to satisfy the promises made when taxpayers awarded them tens of millions of dollars in property tax abatements and incentives to expand their business operations in the city. And to nobody's surprise, there is an urgency in ramming this latest proposal through as quickly as possible so the new hotel financed at your expense will be ready in time for the 2012 Super Bowl. An online Star report clues us in on this latest outrage:

Indianapolis officials will finance most of the cost of a $155 million project to build a hotel, apartments, retail space and an office incubator building on land donated by Eli Lilly and Co. on the south edge of Downtown.


"This is a great project. It's an innovative project," Mayor Greg Ballard said today as he announced the project with developer Buckingham Cos. of Indianapolis and Lilly officials.

The Star reported in June that the Indianapolis developer was talking with the city and Eli Lilly and Co. about building a hotel and conference center with retail stores, apartments and a fitness center next to Lilly's headquarters campus Downtown.

The 10-building project, tentatively called North of South, will spread over 14 acres along South Street, bordered roughly by the rail tracks on the north, Virginia Avenue on the east and Delaware Street on the west. Groundbreaking is planned for late this year, with construction lasting about 2 years.


The 152-room hotel will be a high-end Dolce brand hotel that specializes in corporate bookings. It might open in time for the 2012 Super Bowl in Indianapolis. Plans also call for about 320 apartments, 30,000 to 40,000 square feet of retail space and 10,000 square feet of office space that will be leased to life-science-oriented start-up companies . . .
 
The city will finance about $86 million of the cost by floating bonds guaranteed by revenues from the Downtown tax increment financing district, said Deron S. Kintner, executive director of the Indianapolis Bond Bank.


The property tax revenues from the project would be used to pay off the bonds over 25 years, he said.

The city got involved in financing the project because private banks and other commercial lenders have largely pulled out of the market for new commercial development, he said.
Did it occur to anyone that private financing cannot be lined up because it may not be a viable economic development project absent huge public subsidies? Has any downtown project for that matter been undertaken in the past two decades that has not been heavily subsidized by Indianapolis taxpayers? And please, Mayor Ballard, what the hell is "innovative" about a private development project that is financed at the public's expense? Is it not forced slavery for those of us who have to work to pay the taxes to benefit these private developers? Welcome to Fantasyland, otherwise known as the City of Indianapolis. Tax the poor and give to the rich.

This comes after we just learned Mayor Greg Ballard approved the diversion of $8 million a year in property tax revenues derived from the downtown TIF to the CIB to help fund the ICVA's efforts at promoting business for the downtown convention business. Indianapolis taxpayers paid $60 million to finance the J.W. Marriott Hotel adjoining the convention center. We spent another $20 million to finance construction of the Conrad Hilton and gave $25 million to Simon Property Group to build their new corporate headquarters on a public park, along with a free parking garage to boot. We spent more than $700 million to build Lucas Oil Stadium for the Colts to use rent-free. We spent close to another $200 million to build Conseco Fieldhouse for the Pacers to use rent-free, but we still have to  subsidize their owners with another $33.5 million in public subsidies. Mayor Ballard now wants to turn over control of the City's parking meter business to the politically-connected ACS and more than double our parking rates in order to fund $35 million in downtown and Broad Ripple improvements prior to the 2012 Super Bowl. He already committed $10 million to a Georgia Street project using federal stimulus dollars for another Super Bowl project, on top of another $10 million used for an expanded downtown Cultural Trail.

Add it all up and you find the cost of hosting one Super Bowl game, which may or may not ever happen because of a collective bargaining dispute between NFL owners and players, will top $100 million. Yes, we have the worst public schools in the country. School closings and teacher layoffs are the norm. We have the worst public transportation system in the nation for a city our size. We are closing public pools. Our public parks are falling into desperate disrepair as the parks budget is slashed. We have entire neighborhoods without sewers or sidewalks. We are closing libraries and slashing other essential city services, but when it comes to finding money for the latest dreams of the downtown elites, there is no limit on what taxpayers will be asked to shoulder. The priorities of these people are so misplaced it is simply beyond belief. If the voters of this city don't rise up in revolt and throw every last one of the bums that run city hall out of office next year, they deserve the absolute worst of what government has to offer them.

And as a YMCA member let me add my further outrage. I will never donate another dime to your organization when you come asking for contributions for your capital campaign. You closed the Fall Creek YMCA rather than improving it. You refuse to expand the Athenaeum YMCA despite the parking lot adjacent to it that is for sale.  And now you're building another downtown YMCA just a few blocks away from the current downtown facility. Obviously, the YMCA doesn't have a clue how to manage its resources economically so the organization isn't deserving of future support from their members. Doesn't Lilly and Wellpoint already offer on-site fitness centers to their employees, by the way, not to mention the new fitness center down the street at the Villaggio?

UPDATE: A reader sent an e-mail communication sent this past Friday by a city planner responding to an inquiry today's announcement. Here's is what the planner wrote:

 . . . [W]e do not have renderings or drawings of any sort of this project that Buckingham is putting together with Lilly.  Apparently, there is a big announcement planned for Monday that will reveal the development proposal.  Yesterday, a rezoning petition was filed to rezone the area to, I believe, CBD-2, which will be heard on October 20th by the MDC.  They requested and were approved, a right to hear this at the MDC for its hearing rather than going through the Hearing Examiner step first.  We did meet with Buckingham on two occasions recently where we were shown plans, but none were actually given to us.  We gave feedback based on the Guidelines. We appreciated that we were involved in this project before plans were drawn in a more firm mode.
Obviously the city planner is a bit out of the loop. The plan had already been greased for approval with taxpayer funding by Mayor Ballard before any renderings or drawings were even shown to the city planners at DMD.

20 comments:

Paul K. Ogden said...

This is such an outrage

"The city got involved in financing the project because private banks and other commercial lenders have largely pulled out of the market for new commercial development, he said."

As you point out, Gary, that's because it is a BAD INVESTMENT.

Had Enough Indy? said...

Is there no intelligent life on the 25th floor?

Why should the property taxpayers pay for another hotel?

When are we going to get priorities set first - then pursued according to the money we have?

Instead, any smuck that shows up on the 25th floor peddling a plan, gets OUR money thrown at him.

I'm going to trot out that old campaign slogan - Had Enough Yet?

James said...

Okay... what is our cost on this exactly? Honest question.

Sounds like the City provides financing that is repaid using TIF - so there's no real cost to the City. If these bonds aren't GO bonds, is the default risk to the bondholders or the City?

No TIF, no development. No development, no tax revenue. I don't see how that impacts other city services. If I'm not seeing this correctly, let me know.

Look, unless I'm not understanding the deal (and there are few details, so that's possible) this seems appropriate.

I have some issue with the market demand for hotel rooms. And I would have liked to have seen this happen at the MSA site.

We need to have more higher-income families living downtown. That will spur demand for retail, office space, etc. Right now those people are going to Carmel, clogging up the roads and spending their money outside of Marion County.

I wish it wasn't so "closed"... meaning that it would be good if it wasn't such a "Lilly Compound" sort of development. However, I understand that it's the proximity to Lilly that makes this work.

I would much rather do this than an outright gift of $30 million to the pacers (for the first couple of years).

I think that the lack of private financing is irrational to some extent - and that we should be looking at demand 3-5 years from now (it will take 2 or more years to get it built).

I'd be in favor of doing likewise for the MSA site.

Advance Indiana said...

James, Where the hell do you think TIF monies come from? Do you think they just fall out of the sky? No, they are paid out of property tax revenues that would otherwise go to the schools, libraries, townships, city, etc. And the last time I checked, higher income families aren't looking for apartments and there is a glut of empty condos on the market for sale downtown. The other downtown hotels are already prepared to take a hit on the opening of the new J.W. Marriott because the ICVA is booking rooms left and right for their complex of hotels at the expense of the other downtown hotels. Add another new hotel into a mix while the economy is already depressed and I wouldn't be surprised to see a couple of existing hotels facing closure for lack of occupancy.

Had Enough Indy? said...

James - this is tax money collected to pay off specific debt already on the books. Where is it written that THIS project deserves taxpayer subsidy by half of its costs? Why not pay off the old debt and retire the TIF. Then the tax money will go to all of the taxing units.

It is not free money, or found money, or extra money. It is taxpayer money and it should be spend on higher priorities that another hotel. I vote we retire the TIF.

James said...

TIF money comes from the increase in property taxes that are a result of a given development vs a parking lot. So, if this deal would have happened without TIF then yes, we are taking money away from schools, etc.

But if the deal wouldn't otherwise happen, it's a wash... at least in terms of property taxes.

I know that's a really simple analysis - it's not clear what the TIF district is and there are a lot of other details.

Again, I'd be interested in knowing the net cost to the City and the risk involved.

I'm with you on the hotel rooms.

James said...

@Had Enough: My assumption is that this is a TIF district that includes the development area - not some other area.
They said it is funded from the "Downtown TIF district" which isn't much info.

Again, we don't have a lot of details.

If this is in fact a TIF district around the proposed development, and captures tax revenue that otherwise wouldn't have happened, I don't think it's a bad idea -- particularly because I believe the private lending market is still somewhat irrational.

If that's not the case, and the tax revenue could be used to pay off existing debt, then we have a different story.

Cato said...

Why do you call this an "outrage?"

This is what Republicans are - government for hire.

They have always done this, and they always will. When you elect a Republican, you're electing someone who is looking to shift public assets to private ownership and benefit. You're also electing someone who believes in crony capitalism and will use the regulatory power for the benefit of his friends. They're exceptionally good at making the government a conduit from your wallet to the pocket of their friends.

They're criminals on a grand scale, but they always act according to their nature.

You might as well get outraged at your dog for liking dog biscuits.

Advance Indiana said...

Like we were told downtown TIF moneys would be used to fund the ICVA or the Pacers, depending on which story you want to believe. It seems to me we are financing 50%of the cost of this project out of existing TIF revenues, not new revenues.

Advance Indiana said...

Not so fast, Cato. These are the exact same policies pursued by Democratic Mayor Bart Peterson and his Deputy Mayor Melina Kennedy as his chief economic development person, who is your presumptive nominee for mayor in 2011.

Southsider said...

Help from the City (taxpayers) for another project..but no raises for IMPD, only one recruit class instead of two, which means less police hired.....Lilly has enough money let them fund it.

Downtown Indy said...

I KNEW IT! I'd been seeing/hearing the preliminary PR snippets all weekend and not one mentioned what WE would be kicking in on it. I just knew we'd be funding part of it. But of course they weren't being at all forthright on that 'minor detail.'

I was perusing the IndyStar site on Sunday - a lengthy piece on the Circle Center, including a timeline of how it progressed.

Funny thing - they got to the part where they put money into it and all it said was:

"9/13/94 - Central Newspapers Inc. approves investment of an undisclosed sum in the mall, joining 17 other investors."

The amount WAS disclosed to be $2.3 Million and was at the time a 'loan.'

Circle Centre Timeline

So it goes...

Cato said...

Gary, I don't understand your defense. If I tell you that the Yankees field nine guys who play the field, bat and steal bases, it's no defense to say "Well, the Red Sox do that, too."

Further, what's with this binary thinking? I was indicting the Republicans. Whatever the Democrats do is irrelevant to the charge.

There are a variety of positions and parties besides the two main offerings.

Advance Indiana said...

It's not a defense, Cato; it's a factual statement in the interest of fair and balanced disclosure in this debate. The Democrats had 8 years running the Mayor's office after decades of Republican mayors. Peterson approached these issues no differently than Ballard or other Republican mayors for that matter.

Paul K. Ogden said...

James,

The private market won't finance this development because they don't think it will raise money. As a result, the City is using tax dollars to fund the development. That is all one needs to know.

Citizen Kane said...

The citizens will not rise up, as it appears that people don't mind having their money stolen from them, as long as the government does it in really big chunks - not small ones like raising parking or toll rates or local income taxes.

Regardless of whether this is a new TIF or an existing TIF, this is an additional obligation that the taxpayers must pay, either through the diversion of taxpayer funds from funding basic services to instead pay debt, resulting in higher taxes, reduced services or both.

TIFs, as with every other so-called economic development scheme, is just a method to subsidize profits of the already wealthy while transferring any and all loses to the remaining taxpayers.

dcrutch said...

Let's say the funding of this development is completely independent of funding needed to keep libraries open, sidewalks repaired, sewers in good working order, schools with air conditioning, parks and pools that are open, and a graduation rate that doesn't nationally disgrace us.

There's still no symbolic association, no double-take, no shaking of the head, no disbelief at how we can find dollars for building yet another hotel, but not enough for basic infrastructure?

If we were flush, back in our economic heyday, not in a Great Recession- I might buy it. After the string of sports stadiums, rebuilt library, rennovated Wishard, and not yet hearing the words, "We can't afford it."

Naaah. I ain't buying it.

It's incredibly cornball to say it, but this city is owned by the rich and powerful. Project after project, if we only use their lawyers, and architecture firms, and building suppliers, and construction firms, and unions, supported by our newspaper, mass media, and sports teams- we'll be "big" like the rest of them. No need to have holes in the ground for years any more. We'll show 'em!

How's being "big" working out for you, Indy? Is "Naptown" sounding quite as bad as it used to?

Sean Shepard said...

AI wrote, "Did it occur to anyone that private financing cannot be lined up because it may not be a viable economic development project absent huge public subsidies?"

Ding. Ding. Ding. We have a winner!

Cato rightly points in the direction of crony capitalism and Citizen Kane makes the great observation that voters and taxpayers somehow make a mysterious disconnect between those things they pay directly for (parking meter rates) and those that the government takes by force from them and hands out in big chunks (sports team subsidies and backstopping uncreditworthy private business ventures).

artfuggins said...

Gary, you are correct. A TIF district will only suck money away from libraries, schools, public safety and parks. Those groups already have budgets that are stretched to the limits. This is a bad deal. HAD ENOUGHT???

Bill said...

This has Bob Grand and Tom Johns hands all over it.Big fees for the firms and Tom Hirons.Hirons is making tons of cash off of the fact that the Mayors son works for them.NO BID CONTRACTS.

CONFLICT

Hirons did all of the PR for this yesterday and has the contract to promote the project