Friday, April 18, 2014

History Has A Way Of Repeating Itself: Public Safety Tax Increase To Hire 500 New Officers Is Another Bait-And-Switch

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The IMPD Staffing Commission is about to wrap up several months of work after reaching the conclusion it was charged with reaching the moment it came into existence and the make-up of its membership was named. Every member of the commission to a fault came into this task with the preconceived idea that IMPD is grossly-understaffed, and that the only way hundreds of new police officers can be hired is if Indianapolis' individual taxpayers buckle down and agree to cough up tens of millions in additional taxes annually to hire the 500 additional full-time officers the Commission recommends be added to the current force of over 1,500 officers, an increase of nearly one-third in the number of full-time sworn officers patrolling Indianapolis streets.

The Commission has patched together a hodgepodge of revenue enhancements to pay for 500 new police officers. There's a 42% increase in the public safety income tax from 0.35% to the maximum rate allowed under state law, 0.50%, that will generate another $24 million a year, $15 million of which will go into a dedicated fund to support IMPD's budget. There's an increase in property taxes for some homeowners through the elimination of the homestead property tax credit that will generate $7.5 million dedicated to IMPD. By playing with the levy, seeking additional COPS grant funding from the federal government for hiring new officers, a paltry share of the money from the CIB's new taxes on car rentals and admissions (less than $1.5 million) and perhaps by charging a service fee to organizations which sponsor large special events that tax IMPD's resources, the Commission may be able to round up another $5 million a year. By my count, that's a little more than $25 million a year. Does anyone honestly believe that amount of money will fund 500 new police officers on a permanent basis? If you do, I have a bridge in Brooklyn to sell you.

During a presentation at the last meeting of the Commission, City Controller Jason Dudich laid out the most rosy scenario possible using this funding approach. Dudich candidly told the Commission members that this was only a temporary funding solution with a viable life span of four to five years. Even then, he acknowledged that city budget-makers would have to adjust the number of new hires to stay within budget. Dudich concedes that IMPD's spending will already overtake revenues by 2018 if all of his proposed revenue enhancements are enacted by the council. Dudich told Commission members they would then have to sit down and have this same conversation all over again to discuss how to find revenues to support IMPD's budget. Under the current budget deal pieced together last year, IMPD's budget we're told has a structural deficit of $15 million, and the City's overall budget faces a $40 million structural deficit going into the 2015 fiscal year. Those immediate problems we're told will magically disappear if these new tax increases are enacted.

I don't have the numbers at my fingertips as does Controller Dudich, but simple math tells me that from the outset there isn't anywhere near enough revenues in this tax increase proposal to support the hiring of 500 new police officers, let alone 100 new officers. A starting officer's salary is currently $39,000. Conservatively, I estimate that it costs at least $100,000 a year to employ a new police officer at that pay grade when you toss in all of his benefits, training, equipment, uniform, car, fuel and other expenses it takes to support each new police hire. That means at least $10 million to hire a class of 100 new officers. By the third year, new police hires alone would more than consume the amount of new revenues without taking into account the inevitable growth in IMPD's budget from the new police contract the FOP will insist upon to guarantee immediate and future pay raises over a several year period for all officers, and the increased health care, car, fuel and other costs that can't be avoided. [UPDATE--Actual cost per new officer annually is $120,000; however, IMPD expects to lose 42 a year through attrition, leaving about 58 new hires a year in actuality. So when Dudich said the City would start running short within 4 or 5 years, that's funding for far fewer than 500 new policers. In actuality, the net new number of officers would be well below 400, but the estimated cost of the net new officers is still close to $30 million a year by year four or five.]

Completely missing from this discussion is what happens if Mayor Greg Ballard gets his way and all of our criminal courts, prosecutors, public defenders, jail and all other criminal justice-related functions are relocated into a new criminal justice center the Mayor envisions being built within three years and leased back to the city-county government. Mayor Ballard boasts that his plan will allow us to get a new criminal justice center on the dime of private investors, but at what cost? The private investors will expect a nice return on their investment for providing a build-to-suit all-equipped criminal justice center. It goes without explanation that the new outlays in the budget to pay rent, maintenance, utilities and other expenses on that new criminal justice center will totally wipe out any gains from this tax increase. In fact, I would argue that the tax increase proposed is really in contemplation of meeting those future budget outlays, and that the promise of using the money for hiring 500 new police officers is nothing more than a ruse to fool the public into accepting another bitter pill.

If I've learned anything from watching past budget debates of the Indianapolis City-County Council, it's that things are never as they first appear. I first began paying close attention to Indianapolis budget discussions in 2007 when then-Mayor Bart Peterson, in the midst of a spike in the city's homicide rate, began pushing for a 65% increase in the local income tax rates from 1% to 1.65% to provide at least $85 to $90 million a year in new spending for public safety, which the Democratic-controlled council approved largely along party lines. Mayor Peterson promised that his plan would put 100 new police officers on the streets. At the time, the City was also faced with a half-billion dollar unfunded public safety pension liability. Peterson had planned to issue bonds to cover the unfunded liability and commit at least $20 million a year from the new tax revenues to pay debt service on those bonds.

Some of us at the time hadn't forgotten that Mayor Peterson's so-called Peterson Plan on which he ran when he was first elected 8 years earlier had promised 200 new police officers, none of which he delivered upon. He did, however, enact another food and beverage tax increase to pay for the $700 million Lucas Oil Stadium and find $20 million to build the Conrad Hilton and another $25 million to build a new corporate headquarters on a public park across the street from the State House for Simon Property Group, along with a free parking garage courtesy of the taxpayers. Peterson also engineered the merger of the Indianapolis Police Department and Marion Co. Sheriff's Department's law enforcement functions in a move that he promised would save Indianapolis taxpayers $9 million annually, savings I would remind you never materialized. He also gave up control of the police department to the sheriff as part of the original merger agreement.

At the time, we saw the city's overall budget jump from about $700 million annually to about $1 billion, helped along at the time by rising property taxes before the bottom fell out of the housing market and the firestorm erupted over the sticker shock from the switch to the fair market value assessment of real property that sent many homeowners' tax bills through the roof. The 2007 property tax protests and anger over the lack of transparency in how Mayor Peterson and the Democratic-controlled council in pushing through their public safety tax increase ushered in a new mayor, Greg Ballard, who promised to make public safety job one, along with a Republican-controlled council, most of whom had ran on the promise of not raising taxes during their campaign.

It's pretty much been forgotten, but when Mayor Ballard took office, he promised a top-to-bottom review of the City's budget and promised to reduce the City's budget by at least 10% during his first term in office or not run for re-election, neither of which occurred, unless you believe the Mayor's fantasy that he provided us a huge windfall and all kinds of savings by selling off the water company to Citizens Energy. The only real promise he kept was taking back control of the police department from the sheriff before quickly passing off control of it to his public safety director and thereafter washing his hands of all things related to public safety.

He also headed over to the State House and asked dumbfounded members of the House Ways & Means Committee to repeal the property tax. The Indiana General Assembly and Gov. Mitch Daniels instead gave us a comprehensive property tax reform law that capped property taxes at a percentage of fair market value (1% for homeowners, 2% for rental property and 3% for commercial property). In exchange, the state increased the state's sales tax rates, picked up entirely the cost of Indianapolis' half-billion dollar unfunded pension liability and assumed a substantial part of local schools' budgets that had previously been funded by property taxes. Ballard later agreed to shave a fractional percent off that 65% increase in the local income tax rate, which saved Indianapolis taxpayers a few million dollars a year, and kept the rest of the money as he boasted about his "honestly balanced" budgets. We never saw those 100 additional new police officers, and the City relied upon a COPS grant from the federal government that was supposed to fund new 50 new police officers that in actuality was used to fund existing police officers' salaries.

In due course, Ballard turned his attention to his true number one priority--downtown. To hear him speak, the greatest crisis facing the city during his tenure was the purported insolvency of the Capital Improvement Board posed we were told by the failure of the prior administration to include at least $20 million a year that would be needed to operate the Lucas Oil Stadium once it opened in 2008. A higher hotel tax, new annual subsidies from the state, a $29 million state loan and a one-time transfer of millions from the downtown TIF district were all required, according to Ballard, to return the CIB to solvency. Repeatedly folks asked if any of the new revenues were going to be used to provide new subsidies to the Pacers, and each time the public was told that none of the new money was earmarked for reaching a new, long-term deal with the Pacers.

Well, we've since seen two new tax increases for the CIB on auto rentals and admissions, and new agreements between the Pacers and the CIB that provide for more than $200 million in new subsidies to the NBA franchise over a 10-year period. While the city struggles with a $40 millions structural deficit, the CIB kicked off the 2014 budget year with a surplus of about $90 million to support its annual budget of about $150 million compared to the city's more than billion-dollar budget. In his infinite wisdom, the Mayor also decided to auction off our parking meter assets with our council's blessing for a paltry sum in exchange for, at best, a couple of million dollars a year more in revenue and a $20 million upfront fee after more than doubling parking rates and extending the hours that motorists must pay to park at metered spaces in downtown and Broad Ripple to evenings and weekends. He gave away a third of the upfront payment to a large campaign contributor to build a mixed use retail and parking garage in Broad Ripple. Not one dime has being used to pay for public safety. The private vendor can be expected to pocket more than $300 million over the 35-year life of its parking meter lease agreement with the City.

Once you understand that the City's budget is and has always been nothing more than a shell game, you learn to look skeptically upon any new proposals to raise taxes. There are inherent costs of funding government that can't be avoided. The problem always comes in how we pay for government services and how we prioritize the funding of those services. The priority of the current mayor and all of his recent predecessors, along with successive councils controlled by both political parties, has been spending on downtown to support the professional sports teams, convention industry and real estate development. It doesn't matter how much we raise taxes to support public safety or other essential city services. As long as we continue to erode the underlying tax base by diverting an increasing share of our tax revenues to TIF districts and by granting tax abatements to businesses like candy, we're only shifting a greater share of the burden of financing those priorities onto the backs of the vast majority of individual taxpayers and businesses who gain little from them, while leaving less money to fund what the majority would consider essential services that require a higher priority.

TIF districts consume nearly $120 million a year in property tax revenues; tax abatement consume a much larger amount of the property tax base. The revenue erosion is set to escalate in future years due to the recent expansion of the downtown TIF district and the massive new, Mid-North TIF district that encompasses the booming Broad Ripple Village business district. At least two new TIF districts are on the drawing board, including one that includes the entire Madison Avenue business corridor on the City's south side. We've handed out nearly $60 million for construction of the J.W. Marriott Hotel, at least $15 million in subsidies for the Artistry apartment building, close to a $100 million for City Way, $20 million for a new parking garage and grocery story development downtown, more than $6 million for a cricket sports park on the City's east side and $23 million for a high-rise luxury apartment building downtown. The City will spend more than $40 million to relocate IFD headquarters and a fire station to allow for redevelopment of a city block on Mass Avenue. There are plans for tens of millions of dollars more to publicly-subsidize real estate development projects in Broad Ripple and an office building downtown on the very site where Mayor Ballard said during his 2007 campaign should be set aside for the site of a new criminal justice center.

Our city's leaders have their priorities, and the people have their priorities. Our priorities are only considered when there is a discussion about the need to raise taxes. No sooner do we start paying those higher taxes than we learn that the money we thought would be there to fund our priorities no longer exists, but the money needed to fund their priorities is always there, carefully dedicated and earmarked, we're told, so that it can't be legally spent on our priorities. Fool us once, shame on them. Fool us twice, shame on us. Will you let them fool you again by enacting yet another tax increase when all evidence in advance already points to the fact that it can't possibly be used for its intended purpose?

And even if the rosiest of scenarios came true, and the City is able to hire 500 new police officers, does anyone honestly believe that hiring more police officers will reduce crime? The City of Detroit has more than 2,700 full-time police officers for its 680,000 residents compared to Indianapolis' 1,500 plus police force for its more than 830,000 residents. Not even 1,200 more police officers to police a much smaller city has resulted in less crime for Detroit's residents. Think about that. Or at least remind Mayor Ballard that he's constantly been telling us that crime has been down appreciably every year since he's been in office without hiring a single additional police officer. You owe him that.


Guest said...

I knew they would be back at it with some excuse to wrest the local homestead credit from us. They snidely tell us it is only $30 a year -well it is more like a hundred in most cases. We property owners are still dealing with a mess of an assessment system which lies each year on sales in order to raise assessments. They had warnings and the Ten Point Coalition called in about Adams and none of that prevented the murder. Change has to come from within the family. This money grab is a lie in my opinion and I hope everyone says no and contacts the city council.

Anonymous said...

If it cannot sustain the hiring, then the People of Indianapolis cannot have it.

We cannot TAX AND SPEND to oblivion with no hope of retaining the new-hires. I say: Mayor, OPEN THE BOOKS!

Anonymous said...

500 more lifetime public jobs that drain private pockets.

500 more gold-plated benefits packages.

500 more lifetime pensions.

500 more take-home cars.

500 more take-home cars getting free gas from the taxpayers.

500 more cars out writing tickets.

Not really seeing the benefit, here.