Monday, January 17, 2011

Why Is Indianapolis Investing In A Risky Business?

Sheila Kennedy has a spot on column in today's Star questioning the Ballard administration's decision to finance a risky downtown hotel, mixed use business project known as North of South. Kennedy, who once served as corporation counsel in the administration of former Mayor William Hudnut, notes once upon a time there was a real need to provide incentives to get businesses to locate downtown because businesses were fleeing the inner cities. Today, that's no longer true as downtown Indianapolis is flourishing relative to many other parts of the city. The Ballard administration says a public investment was needed because private lenders wouldn't loan money for the project--probably because the City just added 1,000 new hotel rooms with the J.W. Marriott project that included a $65 million public investment and hotel bookings are down due to the downturn in the economy.

There are probably cases where public investment in the urban center is still necessary, but many of us who participated in that early redevelopment process are scratching our heads over the Ballard administration's proposal to put $98 million (up from an originally announced $86 million) into North of South, a hotel and apartment complex being developed by Buckingham Properties.

The administration justifies this use of taxpayer dollars (at a time when libraries and public transportation are starving for funds) by pointing out that private lenders all rejected the project as too risky. It doesn't seem to have occurred to them that those lenders may have had sound business reasons for coming to that conclusion.

Indianapolis recently has added more than 1,000 Downtown hotel rooms; furthermore, hotel bookings in Central Indiana declined by 5 percent during 2010. Why would lenders risk financing a hotel project now?
Kennedy then observes questions fellow blogger Paul Ogden recently raised that may explain why the Ballard admnistration was so anxious to put so much public money at risk at a time when it is slashing budgets for basic city services and decided the city had to turn over the city's parking meter assets to ACS because it couldn't afford to invest $6 million in new parking meters.

Blogger Paul Ogden recently posed a fair question: Why is it too risky to borrow $6 million to buy and install new parking meters, but not too risky to issue $98 million in bonds for a project private lenders wouldn't support?

Ogden also noted that the project's lobbyist is Tom John, who just stepped down as Marion County Republican chairman.

Council president Ryan Vaughn cast the deciding vote on the ACS parking contract despite being ACS' lobbyist. More recently, Robert Vane resigned as a deputy mayor and won a no-bid consulting contract with the Capital Improvement Board.
It all looks a bit too cozy.
When there is an appearance of impropriety, taxpayers can be forgiven for questioning questionable deals.

Yep, that about sums it up.


Had Enough Indy? said...

I agree. Kennedy hit the right note on a number of points today.

The North of South proposal became slow-tracked once it hit the Council. I am hoping against hope that enough Councillors will regain or retain their senses and turn this one down.

Citizen Kane said...

I disagree with her premise. I would not characterize any of the downtown financial schemes as investments, to do so gives them legitimacy that they don't deserve; I would characterize all of them as transfers of wealth.

The key issue is that there is no risk for the private parties involved. Their risk has been eliminated by the taxpayers, just as it was for all who came before.