Indy Tax Dollars

The "Right to Know"

It is interesting to see that our morning paper has jumped into the Tiger Woods "spectacular" with a page 2 column about the "coulda', shoulda', woulda's" of the situation.

Last evening we watched a half-hour show on the Golf Channel, with legal and PR experts telling us where Tiger missed the boat.  (Yes, we know.  We didn't have to watch it.)  One PR expert even told us that Tiger has lost the confidence of his fans!  Other than his superb playing ability, in what area is a fan supposed to have "confidence" in a golfer?  Are we now supposed to start wondering if he sacrificed a million dollar purse so he could win a thousand dollar bet?

All the uproar is initiated by the media generated fantasy labeled the public's "right to know."  B.S.!  (Biased Sludge)  Under media rules, our right to know is rigidly limited by the media determination as to what "news" appears and what does not.

We don't know where he was going.  We don't know why he was going.  (Maybe she's pregnant and he was going after a dill pickle!)  We don't give a damn, and it is certainly none of our business even if we did.

But we do have suggestions for the local media.  We believe the public definitely has a "right to know" what happened to 25 years worth of tax revenues which were not used toward the specific purpose for which the tax was levied.

The public has a "right to know" why the city is even giving a thought to handing another $15 million annually to a business which claims it cannot make ends meet in a building for which it pays no rent and from which it retains all revenues.

The public has a "right to know" how much revenue is being generated for city operational expenses by that much hyped, wondrous economic engine called the Circle Centre Mall.

Mr. Editor, after you have these items investigated and give the public the answers it has a "right to know,"  we'll make a few more suggestions.  And they won't include a professional golfer's fender bender.

Words...meanings?

Our dictionary gives a definition of the word "cap" as follows: "An upper limit (as on expenditures)."  We would guess that is pretty much what most folks have in mind when they discuss the proposal for an amendment to Indiana's Constitution putting a "cap" on property taxes.

Judging from much of the conversation supporting the proposal, those same folks are under the impression that such a "cap" will basically end their property tax worries.

Nope.  Not the case.  The limitation proposed is set as a percentage of the assessed value of property.  The assessed value of any given piece of real estate is about as flexible as a rubber band.

Without considering the games that have been, can and probably will be played with assessments, we would guess that there is still on the books a legal requirement for a periodic reassessment of all real estate.  We're not sure what the length of that period is.  But whatever it is now, there is nothing to prevent the next session of the legislature from making it an annual event.  A safe, predictable limitation?  We don't think so.

We continue to insist that the present proposal, Senate Joint Resolution 1, is intentionally misleading and offers no real protection to the property tax payer.  A lid which simply floats on the contents will not prevent a container from overflowing.

And if the Resolution is adopted, we suggest the possibility of more word interpretation problems - for example. 

Property is classified as owner occupied real estate, other residential property, farm land and other real property not falling into the first three categories - business property.  The first category rates a levy limitation of 1% of the assessed value; the second and third - other residential and farm land - get a 2% limit; business real estate gets a 3% tab.

Question.  Does "other residential" property include all rental properties?  Are apartments considered "residential purposes" in that second classification?  If John Doe buys the house next door and rents it to a friend, does that property get the 2% rate?

Does Doe's rental property operate under the same rate as a high rise apartment building of 100 apartments?  Is, in fact, such a building considered "other residential purposes" at 2% or has it become a business to be taxed at 3%?  At what number of units would "property used for residential purposes" become "other real property...that is not other residential property?"

In short, we believe that assessment is the real problem in equitable property tax application.  It is totally unreasonable to expect a township assessor - or a professional appraiser - to be able to put a two-bedroom home, a downtown office building, the downtown mall and a manufacturer the size of Eli Lilly into a mix which will determine a "fair tax value" for such disparate properties.  To then make that figure the basis of "limitation" of tax liability becomes a travesty.

If equity is the problem, the real estate property tax is not the answer.

Puzzled...again

Maybe it's just another of our "dense" days.  We've been going over the article headlined "Bidders line up to manage venues" in the current IBJ.  They're talking about privatization of the "management" of the stadium and the convention center - and maybe the fieldhouse.

The first question coming to mind is, if in fact the decision is made to go this route, which city agency will complete the contract with the winning private firm?

The CIB already has contracts in place - food service, etc. - which would seem to indicate that might be the logical place to start.  But quite frankly if that is the case, and if precedent gives us any food for thought, adding a private management service to the current mix will only wind up being another hand in the till.

We're not quite clear on what the term "management" includes.  At one place in the news item, reference is made to "...operation and maintenance savings in the millions."  It is suggested that mass purchasing power (up to and including hot dogs!) will help lead to this very desirable end. 

But if some other municipal body contracts for the "operation and maintenance" of the properties, why is the CIB needed at all?  The city controller should be able to take over writing the checks to the state for  bond service.

One of the suggestions is that private management would be in a position to bring more activity to the stadium.  That would be a real plus.  The "Upcoming Events" schedule for the stadium dated November 22, 2009, shows a total of 43 days - 28 events - booked for the coming year.  Of the 28 separate events, at least ten appear to be gatherings of a size not requiring the use of the 135,000 sq. ft. open stadium area.  Surely we did not build this monster to host meetings which could be held in any downtown hotel

We continue to believe that "privatization" should not mean government hiring someone to do its job.  In this case, privatization should at least resemble what we have already suggested.  For instance, the city should deed the stadium over to the Colts, along with responsibility for operating and maintenance, then go directly to the assessor's office and put the property on the assessment rolls.  Then there will indeed be a "private" operation, just like any other private entertainment business in the city.

We've been warned that the team would turn down the offer.  Very likely.  But maybe rejection of a $1,000,000,000 gift would alert more folks that, somewhere along the line, the taxpayer has gotten the very dirty end of the stick.

An aside - An editorial in the same paper comments on the fact that the city is "playing hardball" with tenants of the City Market about over-due rent payments.  Right on!  We can't afford to let that fruit and vegetable stand free-load.  The city's got to find $15 million for the Pacers somewhere!

It's a puzzlement!

Isn't that the expression used by the late Yul Brynner in the movie "The King and I?"  We're finding the same feeling about a local situation, namely the fiscal realities of the operation of Conseco Fieldhouse.

We've been hearing the owners of the Pacers basketball team have been losing money hand over fist for most of the last 20-25 years, and suggestions that taxpayers assume an additional annual burden of $15 million to ease that pain.  During that same period of time, those same owners have demonstrated their admitted financial brilliance by becoming billionaires.

The question as to how this could happen is further expanded by considering the conditions under which the Fieldhouse operations take place, and public information about the current fiscal status of those owners.

The only answer we can think of must result from the corporate financial structure and the relationship between the Pacers' organization and the other business interests of the Pacers' owners.  What is allocated where?

The Pacers' organization pays $1 (one dollar) per year for the use of a $187 million property, from which they retain all revenues, basketball and non-basketball.  For instance, two days ago the morning paper carried a story about a performance "...for a capacity crowd at Conseco Fieldhouse...."  How much revenue did that generate?  To whom did it go?

Meanwhile this morning's paper tells us of the possibility of the Pacers' owners taking over the second largest mall operation in the nation - a move which would make them "...the most dominant mall operation in the world."

We can think of only one way in which this fiscal giant can show significant damage in this situation.  The Pacers organization is handed all costs for the operation of the Fieldhouse and the basketball team.  Revenues from the team, and other "capacity crowds," go to a separate business entity operated by the owners of the Pacers.

Even then, while admitting to lack of either an accounting or law degree, we'd guess that somewhere in a giant, consolidated federal tax return, that Pacers "loss" shows up somewhere as a write-off against those "capacity crowd" revenues.

The legality of such an arrangement is probable, but we would question the ethics of suggesting that the taxpayers be further burdened by it.  The attitude of community "leaders" who support it is beyond all understanding.

Memories

A story in yesterday morning's paper jogged a memory for us and we did a little research in our own archives.

The item in question was headed "DOWNTOWN BOON BABY!"  It reinforced, no doubt without meaning to do so, the thought we have held for along time.  This "boon" - the fabulous impact of professional sports we have had drummed into our minds by this same paper is just that - a downtown boon.

This is particularly true of the basketball franchise because of the large difference in the number of games, plus the fact that the fieldhouse seems to book more large events than the stadium.  As has been pointed out by many others, we're talking about discretionary spending and the money used downtown is, in fact, money not being spent somewhere else in the city.

This leads us back in time to a post we made on this blog on December 8, 2005.  On that date we suggested an alternative to Tax Increment District (TIF) financing of downtown projects, to be known as Revenue Increment District (RIF).  (Actually at the time we used the term "Income" Increment District.)

Briefly, an RIF would function by taxing the specific increases in revenues of downtown businesses which we are now told are easily identified.  This current story in the paper indicates how easy - and how appropriate - the use of an RIF would be.  There are quotes from several business owners who admit that their business revenues increase from 25% to 40% when there is an event at the Conseco Fieldhouse.  The same is undoubtedly true for Colts games.

Downtown businesses are obviously the very direct beneficiaries of taxpayer "investments."  And yes, we know the arguments about jobs, etc..  But it might well be the case that, while things are booming downtown, restaurants and bars in outlying areas are laying off  bartenders, cooks and/or servers simply because that money has moved downtown.

We've been told the economic impact of the situation involves hundreds of millions or even billions of dollars flowing into city coffers as a result of these taxpayer investments.  If these estimates are anywhere near the truth, why not tax these increased receipts directly, up front, to pay for the projects responsible for the revenues generated by their presence?

Property tax relief?  We wouldn't even try to guess how many property tax dollars an RIF would free up for legitimate governmental functions!