Sunday, July 28, 2013

Shenanigans By Fountain Square EID Proponents May Sink Proposal

As Proposal No. 105 goes before the Indianapolis City-County Council for approval tomorrow night, which would establish Indianapolis' first economic improvement district ("EID") within the Fountain Square business district, there are signs that its passage may be jeopardized after opponents have brought to the attention of several city council members deceitful, if not illegal acts, committed by the proponents in the petitioning process to advance the EID. Advance Indiana has learned that several business owners who initially signed the petition after being apprised of the true proposed assessments on various properties in the gerrymandered district boundaries have withdrawn their support, calling into question whether a majority of the property owners within the EID now support it, the minimum threshold required under Indiana law.

What came as a shock to many business owners is the disparate tax treatment of the proposed assessments on businesses within the EID. An analysis prepared by opponents of the EID found that the largest buildings with the highest assessed value within the EID are actually receiving a discount of 55% based on the proposed assessments of their properties compared to a premium as high as 400% proposed to be assessed on several properties with the lowest assessed value within the EID. Some business owners who own multiple parcels have been given more than one vote, while other property owners owning multiple parcels have been afforded a single vote. Moreover, at least one parcel owned by one of the EID's proponents appears to have been omitted from the proposed assessment list despite its location within the EID. Opponents' experience in fighting the proposal has pointed up a number of flaws in the state law and the lack of oversight by city officials to determine whether a petition filed by the proponents of an EID conforms to state law.

In the case of Fountain Square, a handful of business owners have pressed for the creation of an EID for at least a decade now with the backing of Southeast Neighborhood Development, Inc. ("SEND") and Indianapolis' Local Initiatives Support Corporation ("LISC"), two nonprofit organizations that rely chiefly on public funds for their existence. In 2010, the proponents sought and obtained a change in state law that lowered the required percentage of business owners for petitioning for an EID from 2/3 to 50%. The legislative body of the city in which the proposed EID is located may only conduct a hearing and consider adoption of an ordinance creating the EID after it receives a petition signed by both a majority of the real property owners within the EID and those representing more than 50% of the assessed value within the district. Exempt properties are not counted unless assessments are proposed to be levied on them.

Opponents complain that the proponents of Fountain Square's EID resorted to subterfuge to get its petition before the council. The boundaries of the proposed EID were changed several times to reach the magical number the proponents needed. Parcels owned by nonprofits were added to the list to gain support, while some parcel owners located within the EID complain that they never learned of the proposal until after the ordinance approving it had already been heard the first time by the Metropolitan & Economic Development Committee and sent to the full City-County Council for approval. After several business owners complained about the unfairness of the process, the co-sponsors whose districts include the EID, Jeff Miller (R) and Brian Mahern (D), asked that the proposal be returned to committee and reheard a second time. Mahern has subsequently withdrawn his support of the EID after complaining that the proponents deceived him about the breadth of the EID's support among the business owners, while Miller continues to push for its passage.

What is particularly odd about the state law is that it allows proponents to craft any assessment method they desire, absent any equal protection concerns. Fountain Square's EID is based on the linear feet frontage of each parcel within the district without regards to the building's size or assessed valuation. As a consequence the owner of a parking lot with an assessed value of $40,700 will be assessed $2,210 annually by the EID, while the owner of the Murphy Building with an assessed value of $897,100 will pay an annual assessment of $2,456. Opponents complain that multi-story buildings like the Fountain Square Theater are being subsidized by much smaller business owners like Peppy's Grill. Fountain Square Theater's assessed value is $764,000 compared to an assessed value of only $40,900 for Peppy's Grill. The theater building would be assessed an annual tax of $3,794, while Peppy's Grill would be required to pay $491 to the EID. The building with the largest assessed value is owned by SEND, which is exempt from property taxes, would pay an assessment of $1,636. Opponents found that the EID would levy a combined $8,800 annually from the district's five highest assessed parcels compared to $7,846 proposed to be paid by the five lowest assessed parcels within the EID. On average, property owners will be required to pay an additional $1,300 to the EID.

Opponents have questioned the linear footage calculations contained in the petition, as well as the calculation of the number of property owners. For example, they assert that the linear footage for Fountain Square Theater measured only one side of its frontage despite it having street-facing frontage on two sides. In one instance, a parcel located within the EID was not assessed. Some property owners who owned more than parcel were afforded additional votes for each parcel, while other multiple parcel owners were allotted only one vote. Opponents believe that these were not innocent mistakes made by the EID's proponents.

Opponents complained that the proponents were not forthcoming in disclosing information that it was required to disclosed with the petition it filed with the City-County Council. State law requires the petition to include:
  • the boundaries of the proposed district;
  • the name and address of each parcel and owner of land within the district;
  • a detailed description of the economic improvement projects to be carried out in the proposed district, the estimated cost of those projects and the benefits to accrue to the business owners;
  • a plan for the application of the assessment revenue to the cost of the proposed projects;
  • a formula for determining the percentage of the total benefit to be received by each parcel within the district;
  • the number of years in which assessments will be levied; and
  • a proposed list of members of the board governing the district.
In considering the fairness of the assessment, the council is required look at the following factors:
  • proximity of the parcel to the project;
  • accessibility of the parcel to the project; 
  • true cash value of the parcel; 
  • true cash value of any improvement on the parcel; 
  • age of any improvement on the parcel; and 
  • other similar factors.
If the council approves Proposal No. 105 as voted out of committee, the tax assessment formula contained in the adopted ordinance will be applied by the EID's board. The board is required to mail the assessment proposed to be levied on each parcel to the parcel's owner, providing at least 20 days' written notice to the parcel owners of a hearing at which they can remonstrate against their proposed assessment. The board has the final say on the assessment, which it is required to certify to the county auditor. Assessments will be included on the parcel owner's next property tax bill and become a lien on the property until paid just like other property taxes assessed against the parcel.

No comments: