Saturday, February 05, 2011

Marion County Legislators Need To Show CIB They Mean Business

Sen. Mike Young (R-Indianapolis) and Sen. Pat Miller (R-Indianapolis) amended a vehicle bill this week, SB 269, to enact a new law to repeal the authority of the Capital Improvement Board of Marion County to increase the auto rental tax or the admissions tax to events in Marion County. In light of the gross misrepresentations made by the administration of Mayor Greg Ballard and the CIB to gain approval for that 2009 bailout legislation, lawmakers are wise to eliminate this additional taxing authority for the CIB; however, I remain skeptical that these lawmakers are doing little more than political posturing.

Both of these revenue options were granted to the CIB under legislation enacted in 2009 to help bail out the CIB when its leaders claimed the government agency that oversees Lucas Oil Stadium, Conseco Fieldhouse, Victory Field and the Indiana Convention Center was facing a $47 million budget deficit and was teetering on bankruptcy. After lawmakers passed the bailout legislation, the Indianapolis City-County Council approved a hike in the city's hotel tax rate and taking out a $27 million loan from the state of Indiana over 3 years, two measures included in the state bailout legislation. The downtown sports authority district was also expanded to divert more state tax revenues to the CIB as part of the bailout plan. At the time the bailout was approved, the public was assured none of the money being raised from these new sources of revenues would be used to provide more subsidies being demanded at the time by the Indiana Pacers.

The CIB later borrowed the first $9 million from the state, even though the CIB said at the time it approved the loan it really didn't have an immediate need for the money. A few months later, the CIB announced a $33.5 million subsidy deal it had reached with the Pacers, which provides $10 million a year to the NBA franchise over a 3-year period to offset operating costs for Conseco Fieldhouse and $3.5 million in capital improvements, including a new ribbon board and digital scoreboard, both of which create new advertising marketing revenue opportunities for the Pacers. The owners of the Indianapolis Indians, which is a much smaller professional sports team franchise, purchased a digital scoreboard for Victory Field with their own funds to increase their advertising revenues a year earlier. Soon after the new Pacers subsidy was announced, the public was informed the CIB had entered into an agreement with the Metropolitan Development Commission to begin transferring $8 million a year from a downtown TIF to the CIB to award to the ICVA. Previously, the ICVA had been paid out of the CIB's general operating budget. Mayor Ballard had often reminded the public the CIB was funded entirely without property tax revenues, unlike other governmental agencies, in supporting new revenue funding for it That long-standing public commitment to fund the CIB without property tax revenues has been flushed down the toilet.

If that wasn't enough, we later learned the CIB has miraculously ended its 2010 budget year with an $11.5 million surplus and held cash reserves of $62 million. The funny numbers should have come as no surprise. As I pointed out frequently when the CIB claimed it was slashing its budget to help erase its claimed $47 million budget deficit in 2009, the CIB had deliberately inflated its budget numbers in 2009 by overstating its true expenses. Most of the claimed savings in staffing, for example, were made from temporary staffing expenses, not from eliminating full-time regular employees. The avoidance of one-time expenses and refinancing mechanisms created the illusion of further cuts in the CIB's budget. At the same time, the CIB grossly underestimated the windfall it would get from the tax increases and state tax diversions that were approved as part of the state bailout legislation. I remain convinced state taxpayers are being raped by these diversions made from the state's general revenue fund out of receipts claimed to have been generated from an expanded downtown sports development district. If the actual tax receipts generated by this expanded sports development district were audited, I suspect we would learn that more money is being diverted from the state's general revenue fund than are warranted based on actual receipts.

Reading a story in today's Star on the motivations of the lawmakers seeking to repeal the CIB's expanded taxing authority, I am more than skeptical that these Marion Co. lawmakers' efforts are more than just idle threats. Take this quote from a story in today's Star by Jon Murray:

After they learn more about the CIB's financial prospects, Young said, they will decide whether to move forward with the pre-emptive repeal.

CIB and city officials plan to meet with the lawmakers soon and will urge them to retain those tax options, particularly as insurance for millions of dollars in recent state loans to the CIB . . .
If the CIB's expected revenue over the next decade is enough to pay back those loans without exercising the two tax options, Young said, "then we'll get rid of them. If there's any question, then we won't."
Sen. Young, of course, came up with the bright idea of offering the CIB the $27 million loan over 3 years as an option to take instead of these other tax increase measures the city council chose not to enact. People like myself warned Sen. Young at the time he was making a big mistake by offering the loan option because he was only helping the CIB build up its baseline budget for future budget requests, which would lead to a call for even higher taxes down the road. And to no one's surprise, the CIB is not about to give up this additional taxing authority without a fight:

CIB and city officials plan to meet with the lawmakers soon and will urge them to retain those tax options, particularly as insurance for millions of dollars in recent state loans to the CIB.

In these officials' view, the CIB's fiscal health is encouraging but still fragile. Its budget for 2010 ran an $11.5 million surplus through November, the most recent figures available, and CIB leaders are working to build cash reserves.

"The General Assembly cast some very tough votes (in 2009) to give the CIB the resources it needed to become solvent again," said Robert Vane, a former mayoral communications director now serving as a consultant to the CIB. "The board stands ready to answer questions and work with people who are serious about its long-term stability." 
As Abraham Lincoln once aptly put it: "Fool me once, shame on you. Fool me twice, shame on me." We've gone well past the point of being fooled by lies and misrepresentations made by the CIB and the Ballard administration about the CIB's finances just once or twice. If our elected representatives in the legislature really mean what they say, they will simply repeal the additional taxing authority and ignore any explanations offered by the CIB in defense of itself. If this is all just political posturing as I suspect, then nothing will become of this legislation and the joke will once again be on taxpayers who will be on the hook to pay higher and higher taxes to continue funding the longest running Ponzi scheme in the history of Marion County.


Paul K. Ogden said...

Gary, I'm a little more optimistic about the motives of Pat Miller and Michael Young. I have heard a lot of grumbling from Marion County legislators about the CIB.

I agree though that at the end of the day nothing will happen.

I like the homer headline in the Star article that said the CIB taxes won't be increased unless they are "needed."

Gary R. Welsh said...

Young is already saying that if there is any question about whether the CIB will have the money to repay the state loan, he won't push forward with his legislation. The deal with the Pacers is only good for 3 years. Do you think Herb Simon is going to say they don't want the continued subsidy after 3 years in order to agree to abide by the lease for a longer term? The CIB will produce numbers that will lead Young to say he was convinced of the need to leave the law alone. Every time anyone at that State House says they are going to do something to deprive the CIB of something they want they always wind up doing the exact opposite. I've seen it happen too many times.

dcrutch said...

Audit. Why are we tolerating a governmental entity that seems limitless in it's ways to access our tax dollars, while depicting itself fiscally robust one minute and headed to the poorhouse the next? If Governor Daniels truely wants to live a live not devoid of a moral compass as depicted in his New York Times interview, or lose fewer brownie points than attempting to wholly privatize FSSA, then I wish he'd authorize an audit or investigation of the CIB.

If we've decided it's more important to spend millions for grown adults to throw balls around in semi-palaces while we're reducing library hours, we got trouble in River City.

Gary R. Welsh said...

State lawmakers and the governor should be totally ashamed of themselves for diverting state dollars to the CIB while slashing budgets for basic services, but they would rather get free tickets to the Colts or Pacers games.