Star: Brainard Continues To Use Carmel 4CDC As Slush Fund To Thwart Council's Will

The Indianapolis Star's Brian Easton has an in-depth story today discussing how Carmel Mayor James Brainard is still managing to thwart the city council's will after earlier attempts at reining in the out-of-control spending by the Carmel Redevelopment Commission as part of a $195 million bailout of the agency. It seems the council missed something big that kept money flowing to the Carmel City Center Community Development Corporation ("4CDC") when it reached its agreement with the mayor to bail out the CRC. Although 4CDC is a nonprofit created by the city of Carmel, it views itself as independent from city government and not subject to laws that generally apply to government agents, such as purchasing laws and access to public records.

The story begins with the city selling land across the street from the Palladium several years ago to Pedcor for a mixed use development. After the bottom fell out of the economy in 2008, Pedcor sold the land to REI Real Estate Services, which built the James Building that houses Tarkington and Studio theaters and office space. Carmel taxpayers paid for the theaters, while 4CDC took out a loan to pay for the office space. REI then sold the theaters to the Carmel Redevelopment Commission and transferred the office space to 4CDC for $10. The latter deal provided a steady stream of income to 4CDC from office leases, which was primarily used to pay debt. When the Carmel City Council voted to issue $195 million in bonds to bail out the CRC, it also was picking up the $12.5 million in debt owed by 4CDC, freeing up all of the rental income from the office space to spend as it pleased.

As part of its agreement to refinance the debt, the council insisted upon the firing of Les Olds, the former CEO of CRC. Apparently nobody bothered to tell Olds he had to stop working and he continued to draw a paycheck after the council had voted to terminate his contract courtesy of payments made to him by 4CDC on Mayor Brainard's orders to the tune of about $34,000 after the city's clerk-treasurer refused to issue payments to him. This has led council members to complain that Brainard is using 4CDC to launder money that should belong to the city. "We are the poster child for bad behavior,” said Councilor Luci Snyder, head of the city’s finance committee. “And it’s because we have money and somebody says ‘figure out a way where I could get this money laundered.’ We are the poster child for stretching the limits of what is doable. We operate in the gray areas — and you have to save us from ourselves.”

Easton's article discusses the fact that Carmel is not alone in using nonprofit corporations to avoid public transparency. He mentions Indianapolis' use of the Circle Area CDC to secretly make land purchases out of public view using TIF dollars awarded to it by the Metropolitan Development Commission that are later given to private developers, along with additional taxpayers dollars derived from TIF sources. Steve Key says the Hoosier State Press Association is concerned about the increased use of nonprofits, but I can't recall his organization or its newspaper members putting up much of a fight over at the State House to do anything about it. Brainard, for his part, is non-apologetic. He claims that 4CDC is "more transparent" than any other one operating in the state. The council doesn't want to spend any money on a lawsuit to challenge him on the 4CDC so it looks like Brainard gets his way--again.