|Mayor Andy Cook at Grand Park's opening ceremony (Charles Nye/Star Photo)|
. . . On Monday, the City Council will consider the result of those ongoing negotiations: a proposal to pay nearly $53 million, with interest, over the next 25 years to lease the arena from that developer, Holladay Properties.
The city would use money collected from sports organizations and businesses that operate in the building. Ultimately, though, general city revenues — taxpayer dollars — would back the loan used to build the arena if those payments run short.
The city also has negotiated an option to buy the building outright after it opens in fall 2015. Cook said it's in the best interest of the city to control the cash flow and scheduling at the arena.
Cook told The Indianapolis Star on Thursday he was factually correct when he made the announcement in June. The facility will be built by a private developer. And revenue generated from the arena, he believes, will more than pay back the construction loan.
Cook believes adding the indoor arena will bring year-round activity to Grand Park that will foster economic development and grow the tax base.
"People should be saying, 'Hey, this is a great deal,' " Cook said. "I know everybody is going to question no matter what we do. There are people who don't support Grand Park at all. I get it."
The mayor's critics say the deal raises more questions about the viability of Grand Park as an economic engine for Westfield — and puts taxpayers on the hook for a sports arena.
"I thought this was a privately funded development," said former Councilman Ron Thomas. "But really, you're more than doubling the cost of the park." . . .Here's an even bigger question than the public-funding aspect of this proposal. What this project has become is a public-private partnership agreement by any other name pretty much like what the City of Indianapolis is undertaking for its proposed new criminal justice center. The problem is that the City of Westfield never followed the public notice and public bidding requirements through a Request for Proposals ("RFP") process for a "build, operate and transfer agreement" that it is undertaking as is required under state law. If it had, city taxpayers would have known before now that they were on the hook to pay for this arena and would ultimately wind up owning it, and Mayor Cook would not have been able to engage in crony capitalism at its worst by sole-sourcing the project to Holladay Properties. Someone should be filing a lawsuit post-haste seeking to block the project because Mayor Cook's administration violated state law.
Equally as concerning is the ability of a municipal government to once again skirt the referendum process enacted as part of the state's property tax reforms in 2008. Controlled projects costing above a certain dollar threshold are subject to a public referendum process if property taxes can be levied to pay for a project. Here, the City is pledging revenues it says the project will generate from private businesses and sports organizations that operate within the arena; however, if those revenues prove inadequate, which I'm guessing is quite likely in this case, the City will be required to turn to other taxes like property taxes to fulfill its legal obligations under the lease agreement with Holladay Properties. This is just another example of why the state legislature needs to revisit the property reform law it passed in 2008. We have the City of Indianapolis planning to skirt the referendum requirement for at least a half billion dollar project, and the Indianapolis Public Library planning to issue close to $60 million in bonds for construction projects, which it plans to do without seeking property taxpayers approval by breaking it up into multiple bond projects. Now we have a municipality committing $53 million in public funds for a new sports arena, which ultimately puts the city's property taxpayers on the hook to repay. Clearly, our local elected officials cannot be trusted when matters of public finance are concerned.
UPDATE: The council approved the deal tonight on a 6-1 vote. Efforts to delay the vote for two weeks were met with warnings that the entire project could be jeopardized or at least delayed for many months if approval was not given tonight. That's short-hand for rushing the deal through before the public has time to figure out just how badly their corrupt elected officials have screwed them over.
Just saw a copy of the 25-year lease agreement. Holladay Properties is represented by Ice Miller, which is the same law firm that negotiated the privatization of the Lawrence Water Company in direct violation of the Public-Private Agreements Act. A court later ruled that the City of Lawrence had illegally entered into the agreement with cronies of former Mayor Tom Schneider because it failed to follow the RFP process set out in the Act. Here are some other points I would highlight:
- The lease cannot be terminated by the city. The city is representing to Holladay Properties that it has "irrevocably pledged legally available revenues in order to satisfy its obligations under this Lease." Shades of Indianapolis' ROC lease? Typically, a lease of real estate by a governmental entity must include a provision that its continuance is based on the availability of appropriated funds. Not this lease agreement. The actions of this city council ties the hands of future councils for the next 25 years. This is effectively a purchase agreement as well. The City owns the property and improvements thereon at the end of the 25-year lease regardless of whether it exercises its option to purchase the property sooner.
- The City is liable for all claims arising from the use of the property and must indemnify and hold the landlord harmless from any claims arising under the lease.
- All repairs/maintenance/utility/insurance/landscaping, snow removal, etc. expenses are entirely the City's responsibility.
- The lease agreement assumes property taxes will be paid on the property and improvements. Yes, the City is responsible for paying the property taxes.
- The base lease payments start at $1.97 million per year and grow to $2.27 million by the last five years of the lease. The annual lease payments are subject to increases if the interest rate paid by the landlord to finance construction of the project increases. The net increase must offset any higher costs paid by the landlord.
- The additional rent includes all of the extra expenses for property taxes, repair/maintenance, utilities, management fees, insurance, etc. I suspect the city council members voting to approve this deal have no idea what those additional costs will be. I'm not sure what the management fee could be since the city is totally responsible for the property.
- All change orders after construction commences that raise the cost of the projects will be paid out of the city's pocket, not the landlord's.
- I never heard how much money was paid to Craig Wood's family for the land. I'll bet anything the amount was grossly inflated.
- Is the City going to manage the property itself, or is it going to pay an additional management fee to Holladay Properties or some other company to manage it? Property management fees can be substantial. It seems like that would have been openly discussed but apparently was a matter of no concern to clueless members of the city council.