Sunday, September 22, 2013

Proponents Of Taxpayer-Funded Hotel In Evansville Claim Council Officials Are Making The City The Laughing Stock Of The Midwest By Demanding Due Diligence

Evansville Mayor Lloyd Winnecke has asked the city council to approve a plan whereby taxpayers will be asked to fund half of the $74 million cost of constructing a new hotel in downtown Evansville that Winnecke claims is essential for the future viability of the city's downtown. A number of council members have pushed back and demanded more information about the deal. In other words, they think the deal should be vetted before taxpayers are asked to finance half the costs because, God forbid, they do what former Gov. Mitch Daniels and Indianapolis Mayor Greg Ballard foolishly did in standing before cameras to announce a deal with Litebox that we now know was too light on details. Ken Newcombe, Jr., the head of the local F.C. Tucker office, complains to the Evansville Courier & Press that council questioning is making the city the laughing stock of the Midwest.  “This is making Evansville the laughing stock of the Midwest,” he said. “Owensboro (Ky.) is laughing and saying, ‘God, I hope they don’t build it.’”

What's interesting is that the council asked Indianapolis' Crowe Horwath to perform a financial analysis of the business plan of HCW, the private developer of the proposed hotel, on behalf of the council but the firm turned their request down. Crowe Horwath, of course, is the firm that employs our CIB President, Ann Lathrop, who doesn't think it's appropriate to ask the Pacers to reveal their financial statements to establish that the NBA franchise is actually losing money as a precondition to the CIB continuing to hand out tens of millions of dollars in subsidies to the Pacers annually. HCW had already refused to produce tax returns or personal financial statements that council members requested. The gist of the story in the Courier & Press is that the council members demanding public accountability through a due diligence process are making the city look unattractive to potential business investors--at least those seeking huge public subsidies. Here are some excerpts from the lengthy story:
The main questions: How much scrutiny is enough? Would the perception that city officials make unreasonable demands turn off business leaders who may consider Evansville in the future? How about those who may be considering the city now, without city leaders even knowing?
“I know the general public says,’Ah, well, we need to know everything about everybody.’ Well, why? Why do you need to know about somebody’s personal tax returns? Maybe you do, maybe you don’t,” said Greg Wathen, president of the Southwestern Indiana Economic Development Coalition.
It was a reference to City Councilman John Friend's previous request, since dropped, to have executives of Missouri company HCW produce their income tax returns and personal financial statements. The proposed $74 million hotel project, of which $31.5 million would be public funding, is a public-private endeavor with HCW.
Friend also has said he wants to know more financial details of other HCW endeavors, such as the company’s signature Branson Landing project and a Hilton Garden Inn in Manhattan, Kan.
Friend has asked to see the debt structure and performance of those hotels, along with comparisons of their preconstruction and actual construction budgets.
Friend could not be reached for comment for this story, but he has called these requests critical to the vetting process.
Councilman Dan Adams, an ardent opponent of the Downtown convention hotel project, said Friday that HCW has refused to provide requested information or placed unreasonable restrictions on it, making meaningful vetting impossible.
But it is perception, not the back-and-forth over any particular deal, that can have long-term implications for economic development in the region . . .  
Adams recalled that City Council leaders earlier called for Indianapolis-based public accounting and consulting firm Crowe Horwath to evaluate HCW. When Crowe Horwath recently denied the council’s request to do that review, council leaders spoke of trying to find another firm. But Winnecke has said that issue did not come up during a meeting with council leaders on Wednesday. 
To hear Adams tell it, HCW’s intransigence has made it impossible for City Council to properly vet the company. 
“HCW wanted to see (any report produced by Crowe Horwath) first, that we’re paying for, and they wanted to be able to redact the report,” Adams said. “They wanted to change what was in the report. Sorry, we’re paying for the report.” 
HCW also “never gave us a business plan,” Adams charged.
Hey, if taxpayers are fronting 50% of the costs for a business from which they will have no ownership interest or share in any of the profits, is it too much to ask for the basic business plan and other financial information about the company before you invest that much of the public's money?


Indy Rob said...

"But it is perception, not the back-and-forth over any particular deal, that can have long-term implications for economic development in the region . . "

What perception is that? That the city does not subsidize new hotels over the existing hotels? that the city does not pay $20 per fan per game to watch a basketball team? That the city lacks shopping centres since no new ones are being built? That the residents of the city lack jobs due to not building new hotels, or being able to drop hundreds or thousands of dollars to watch a basketball or football game, or that they have no where to shop for hats, sunglasses, overpriced clothing, leather goods, etc..

It is a good thing to have a city with low taxes where there is not the artificial desire to have shiny new businesses that require a steady influx of funds in order to operate.

Indianapolis's shiny new business include the Conrad, JW Marriott, Conseco fieldhouse, Lucas Stadium, Circle Center Mall (the new home of Gannett Company's Indianapolis branch). All of these put money into the pockets of the rich and connected using the taxes paid by actual residents who incorrectly thought that these taxes would be used for things like police, parks, roads, garbage pickup. I can hardly wait to see my taxes go up to pay for more police (which will never be hired) and watch the money get diverted to build another downtown hotel for the 2018 superbowl.

Maybe it would be a good thing to be thought of as a laughing stock, it would probably keep the hyenas and vultures away from your city while making it an affordable good place to live.

Btownmoon said...

One could argue that Indy has gone too far; Lucas Oil might be an example of that. But Evansville has not done very little. The funding for the public portion of the downtown hotel is TIF, casino and innkeeper's tax. There's no general property tax or food/beverage tax money. The public contribution allows for a downtown hotel near the Ford Center and the Centre where it's needed. without the contribution, if new development will to occur (a big if) it will be out of the city, continuing suburban sprawl, which then requires additional tax money for more highways, roads and stoplights. Exactly what the Evansville area does not need.