Three Year-Old E-Mail From City Controller Discussing ROC Funding Issue Foretold IMPD Funding Problem

As former Public Safety Director Frank Straub and other members of the Ballard administration scrambled to salvage Straub's ill-fated plan to establish a Regional Operations Center at the former Eastgate Mall site after the Administration & Finance Committee tabled the plan, an e-mail sent by former City Controller Jeff Spalding revealed big holes in the honestly-balanced budget meme on which Mayor Greg Ballard was touting as he ran for re-election to a second term against Democrat Melina Kennedy. The scramble to explain funding for the ROC came after the Administration & Finance Committee tabled a proposal to approve the leasing of 210,000 square feet of space at the committee's April 12, 2011 committee meeting. The committee members were completely caught off guard by the enormity of the undertaking (a lease costing more than $1 million annually over a 20-year period) at the same time Homeland Security Director Gary Coons and Jonathan Mayes, counsel for the Department of Public Safety, were unable to answer basic questions committee members had of them about the lease.

It wasn't until near the end of the discussion that committee members learned that the ROC had to be operational six months prior to the Super Bowl the following year, and that construction at the site had already commenced despite the lack of an approved and signed lease agreement as required by state law. "I am not amused," Councilor Jackie Nytes said upon learning that last fact as the proposal was tabled by the committee. Before giving any kudos to Nytes, you should know that she totally discredited herself earlier in the meeting when she told Coons and Mayes that she would have no problem supporting approval of the lease if they told her that this was something they needed to get done because of the Super Bowl. Nytes, of course, provided critical support for passage of the approval of the sale of the water and sewer utilities to Citizens Energy, which provided the necessary funding for Mayor Ballard's more than $400 million Rebuild Indy infrastructure spending program. Nytes was later rewarded with a paid board appointment on Citizens Energy's board, along with a six-figure job as the new CEO of the Indianapolis public library.

"I am sure Jon told you, they tabled it due to lack of information specific to the lease," Coons said in an e-mail later that evening to Director Straub. "Wow-that is ridiculous," Straub replied. Councilor Maryilyn Pfisterer, who chaired the committee meeting, e-mailed administration folks to let them know "the lease generated some heat tonight." "Lots of info about Public Safety--not much about the lease itself," Pfisterer wrote. She wondered "why the need for so much square footage?", how it would "impact DPS' budget going forward" and "how does this comport with the proposed new IFD headquarters?".

Councilor Ben Hunter, who co-sponsored the ROC lease proposal with Councilor Mary Moriarty-Adams, fumed over the committee's action in an e-mail to Ryan Vaughn. "Perfect platform for embarrassment," Hunter complained. "Someone should brief the Mayor he was very well thrown under the bus tonight." Hunter complained about the heat he and Mary were getting from area residents in their districts near Eastgate Mall and how Melina Kennedy was already capitalizing on the misstep. He complained that nobody raised any questions about the lease during the Republican caucus meeting the night before. "Mary vetted it in her caucus, and again not one councilor raised a red flag," Hunter said. He defended the fact that construction had already started on the project, noting "that's the owner's decision to do so." In a follow-up e-mail to Straub and his chief of staff, Hunter derisively said that he should have taken into account "this committee's past history in not passing simple leases." "My apologies and there will be some serious hand holding by Mary and I moving forward," he concluded. Hunter and Adams, along with Mayor Ballard, received large campaign contributions from the owner of the Eastgate Mall while these discussions were underway.

Over the course of the next two weeks, Straub's office scrambled to make the proposed lease agreement more palatable to council members. The square footage was cut substantially from 210,000 to 76,000 square feet. A decision had suddenly been made to move the East District IMPD headquarters to the ROC, allowing its current lease on Shadeland to expire in June. Councilor Adams wondered what happened to the plan to move K-9, Swat and ATF into the ROC. "These seem to be huge changes over a 10-day time frame," Adams wrote in an e-mail to Straub. "As we continued to model out the project it became clear that we could not afford the 210,000 sq ft at this time," Straub replied. Straub said the other specialized units might be consolidated at the ROC in the future if the financial picture improves.

By moving the East District to the ROC, Straub looked to save about $250,000 a year in costs from that lease. Straub further conceded that the FBI would not have any permanent presence at the building following the Super Bowl. He said the feds were, however, donating furniture and a "significant portion" of the wiring costs for the ROC. Around the same time, an e-mail from Mayes to Straub and other DPS staff members lamented that there wasn't enough space within the 76,000 square feet area to fit what was known as MECA before Straub made the decision to do away with MECA. That came in response to an e-mail from Straub's chief of staff, Carolin Requiz-Smith inquiring if "we can fit them in the ROC." Mayes said, "We can look at adding them in Phase II or III." MECA, by the way, served as Marion County's emergency planning agency prior to Straub doing away with it, in part, due to disagreements with its boss. Straub wasn't interested in hearing about better, more economical options for locating the ROC at a site near the airport that had already been identified.

Ten days after the Administration and Finance Committee tabled the ROC lease, Straub's staff asked to meet with then-Controller Jeff Spalding to discuss revenue options for funding the ROC lease. Spalding furnished a brief revenue outlook for IMPD funding in the coming years in an e-mail to Straub and his staff that was bleak to say the least. Spalding described the two largest sources of funding for IMPD's $195 million operating budget as coming from the local option income taxes ($105 million and property taxes ($40 million). IMPD also received about $3.5 million from a variety of smaller tax sources (vehicle excise taxes and financial institutions tax), along with $6.5 million from the county rainy day fund, $3.8 million from parking meter revenues and $5.4 million from the wastewater PILOT, with the balance coming in the form of federal and state grants. Spalding's discussion of local income tax revenues was particularly enlightening when he explained that the City only had a Rainy Day Fund because state officials had intentionally over-distributed local income tax revenues to Indianapolis and Marion County to lessen the economic impact of the Great Recession:

Even as economic recovery begins to raise taxable income in Marion County, there is the overhang of past over-distribution by the State. Through 2010, the State distributed more local income tax revenues to local governments than it actually collected on behalf of local governments. The reasons this happened require a much longer separate discussion, but this is how the City-County accumulated its Rainy Day Fund. The proposed state budget, now moving towards passage in the Indiana General Assembly, presumes that distributions of local income tax will be held flat through 2015 as the State recaptures this past over-distribution.

Spalding estimated that the "course correction" would take at least four years to correct unless the taxable income of Marion County residents substantially outpaced the statewide average growth in income tax collections. Spalding projected that property tax revenues would grow at 2.5% on average, although he noted the speculative nature of that projection without knowing the full impact of property tax caps in the coming years and the cumulative decisions of all local governments impacted by property tax caps. Spalding thought it was doubtful that IMPD would be able to rely on any county rainy day funds in 2012. Of particular note was Spalding's comment about the $3.8 million that IMPD had been getting from parking meter revenues. He warned Straub and his staff that "there is no guarantee that these $ can continue to be used to support IMPD.

Indeed, the City-County Council's approval of the privatization of the City's parking meter revenues in November 2010, which was taken over by the private operator in March 2011, provided that the City's share of parking meter revenues would be used to pay for street, sidewalk and infrastructure improvements in the downtown area and Broad Ripple Village. Spaulding added, "Not many councilors truly understand the 'funding box' that municipal government is operating within, but J. Nytes certainly does." "Does the possibility exist that some paradigm shifting change will happen over the next decade to alter current trajectory of local government revenues in Indiana generally or Marion County specifically?" he rhetorically asked. "Sure! But we can't plan on it."

E-mails produced to the ROC Investigating Committee don't shed any light on how the administration explained that it was going to pay for the costs of the ROC lease. A new model with the scaled-down lease footprint for the ROC was not fully devised until a day before the administration made a new presentation to the Administration & Finance Committee. Only two days before the committee hearing, DPS' attorney, Jon Mayes, was still learning details about the lease agreement according to one e-mail when he seemed surprised that it was shifting to a 25-year agreement (rather than 20) with the first lease payments not kicking in until January 1, 2013. The lease payments were revised to $685,000 for the first ten years of the lease, rising to $760,000, which didn't include substantial, ongoing maintenance and utility expenses. Although the leased space was reduced in size by nearly two-thirds, charge per square foot rose more than 40%. The 25-year term of the lease payments included the initial build-out costs of about $8.6 million. The building's owner received funding for the costs of the build-out upfront from its lender, Wells Fargo. As to the City's funding for the ROC lease, Straub cautioned his staff not to "go crazy." He told his staff in an e-mail that his was "comfortable" telling council members that "the controller projects [annual] property tax levy increases of 2 1/2 percent going forward, better fiscal mgt., potential fees, etc." Despite his "poor" revenue outlook, Spalding agreed to help Straub's staff articulate revenue assumptions to deal with any potential hang-ups council members might have.

During that second presentation to the Administration & Finance Committee, you will see in the video below where Straub and his staff deliberately lied to the committee members about being able to get out of the lease in the future at any point if the council simply chose not to appropriate funds to pay for the lease. Straub would also claim that only demolition work and not build-out work had commenced at Eastgate. After a snow-job of a presentation by Straub and his staff during which council members proved completely inept at delving more deeply into questioning the lease proposal in front of them, the committee unanimously voted to send it to the full council and the rest is history. City legal would claim that it never signed off on the lease. Yet we now know that the administration, even after learning of the one-sided lease agreement negotiated by Straub and Mayes and the laundry list of problems with the property that would force DPS to vacate the space until the landlord made repairs, signed another agreement with the landlord locking the city into the long-term, credit-tenant lease agreement and relieving the landlord of any liability to the city for all of the problems encountered after the City took possession of the leased space. And, of course, the council never got an answer to the big question about relocating IFD's headquarters until we learned much later that a sweetheart deal with a pay-to-play developer would result in the City incurring nearly $60 million in added costs related to that relocation of IFD's headquarters, the Station 7 and the Firefighter's Credit Union, along with the gifting of the valuable property currently owned by the City to the pay-to-play developer for its private development use.