Indy Tax Dollars

The whole story...

...and isn't it about time the media started telling it?

An article in the current issue (3/2/09) of the Indianapolis Business Journal (IBJ) is headlined, "Hotels wary of shouldering larger load."  Reference is to the availability of an increase in the innkeeper's tax to support the outrageous monetary policies of the Capital Improvement Board (CIB).

Granted, the basic approach of the article does concern the effect of the hotel tax on visitors.  But we strongly resent the general tone of the story which consistently refers to the multiple sources of revenue for the CIB as "hospitality" taxes, including the food and beverage tax, with the implication that outside visitors would be the only payers.

Thousands upon thousands of resident taxpayers of this county, who will never see the inside of the palatial facilities the CIB builds and operates, pay the food and beverage tax every working day when they leave their workplace for a regular meal.  They are not visitors, and they do not have a reasonable alternative to paying that tax.

The article makes many references to whether the city can remain "competitive" in the convention business with higher hotel taxes.  But the next-to-last paragraph slides over a supremely important question which desperately needs the glare of the public spotlight.

"Marion County passed the first food and beverage tax in the state in the 1980s, to help fund the construction of the RCA Dome in hopes of luring an NFL team to Indianapolis.  That tax, which never was rescinded, established a precedent for other communities to follow."  (Our emphasis.)

The RCA Dome has been destroyed with virtually nothing of the principal debt having been retired.  Are we to dismiss the disappearance of 25 years worth of revenue from that tax as irrelevant trivia?

The agreement for funding the new stadium, in part, says the "increase" of that tax - from 1% to 2% - will be used.  The original 1% tax apparently is still disappearing into that black hole surrounded by the smoke and mirrors so prevalent around downtown finances.

Now the economic prophets, who have told us time and again about the tremendous benefits these downtown, pie-in-the-sky fantasies are for the "city," are going to tell us, "Oops.  Sorry, but we're now going to have to triple the original tax to pay for a building that no longer exists and to meet other expenses which came as a complete surprise to us!"

Except that the word "sorry" probably won't appear.  We're more likely to be told how stupid it would be to force the issue with the owners of the professional sports franchises.  Nor are we apt to get a definition of the word "city" in identifying precisely where all these "benefits" fall.

It is time for a showdown.  Not one penny more of public funds should be made available until valid explanations are forthcoming about all CIB financial machinations, including the aiding and abetting by political, business and media leadership.

Where did these tax dollars go?  Would any new funds actually pay the new stadium debt or will they also disappear?

It is time for someone to step up, put a hand on the Bible, and swear to tell the truth, the whole truth and nothing but the truth in answering all these questions.

Uncle Santa...

...or, requests/suggestions for the local use of "stimulus funds."

We pulled off the Internet what is apparently the official wish list of the City of Indianapolis.  It's worse than we thought.

The items are divided into five categories, showing the suggested project, the estimated cost and the number of jobs expected to result therefrom.  We have no information on the prospective longevity of those jobs.

The largest category includes a list under "Community Development Block Grants" (CDBG) with nineteen projects, totaling $159,254,000.  Under CDBG items, the projection is for 710 jobs - a cost of $224,300 per job.

This category includes the goodies we can't afford to do ourselves, but, what the h..., this is someone else's money so let's have at it.  It starts small - $1,000,000 for "bike lanes" and 5 jobs - but scanning a few more items down the list brings us to $50,500,000 for "cultural trail bike paths and pedestrian ways."  (Our emphasis.)  This one predicts 150 jobs.  Quite frankly, we have no idea of the functional value of a "cultural trail" nor do we understand the priority of that kind of expenditure considering the over-all fiscal picture in this city.

In an "Energy" category we have $6,000,000 for promotion of "green" buildings (we prefer red brick), energy "audits," energy efficient streetlights, energy efficient city vehicles, etc..  We get 30 jobs for these bucks.

The "Public Safety" category includes three projects for a little over $2,000,000, including "shot spotters" and street cameras.  We have no idea what shot spotters are, but one of the five jobs estimated  goes with that deal.

"Transit" is an interesting category.  Nine projects total $20,350,000 for 66 jobs.  As far as we can tell, the only direct expenditure on actual transportation equipment is $600,000 to "Replace ten supervisor vehicles with domestic hybrid sedans...."  (Our emphasis.)

The last category is "Water" which includes three projects for sewer system improvements.  Here we have cost estimates at about $78,800,000, providing 370 jobs.  We cannot find fault with efforts to renovate the antiquated system with which we now struggle.  Perhaps, though, some attorney could enlighten us as to what the "Federal consent decree projects" are, which amount to $24,424,500 within that total of $78 million.

We rounded off the total costs at $266,522,000 with 1,181 jobs.  That comes out to something over $225,000 per job.  Is that a reasonable figure?  We don't know.  Nor do we know how many of the jobs will extend beyond the physical completion of a project.

Is there a question then, for any permanent employees, as to the source of funds to cover that increased payroll?  Is this a repeat of the concept of building a huge, palatial stadium without anticipating that the larger building will cost more to operate?  Shouldn't we be taking a look at this part of the equation?

Or are we stuck on the idea that we can't do for ourselves anyway, and that Uncle Santa is our only hope?  Was that really the thought behind so much of the campaign rhetoric?

Sleight of hand

It gets pretty complicated, but we'll take a stab at it.  "It" being the financial twists and turns of the downtown mall financing which are the subject of an extensive article in the Indianapolis Business Journal (IBJ) of 2/16/09.

At least part of the land purchase, and the construction of the buildings, was financed by a tax-exempt bond issue, said bond issue to be redeemed by property taxes through a Tax Increment Financing (TIF) district.  The real estate is owned by the city.  The improvements, we understand, are owned by the Circle Centre Development Company (CCDC), a private group which contributed to the original financing of the mall.

Since the property tax is paying for the land and buildings, and the current lease requires no rental payment for the land, we figured this must be a pretty good deal for the CCDC.  At least it seemed worthy of a second look.

A very cordial conversation with a gentleman from the Indianapolis Bond Bank enlightened us as to some of the details.  (We think we understood it!)

The IBJ said, in part, "After collecting about $15 million during the first few years of the lease, the city had to stop accepting lease revenue so it could preserve the tax-exempt status of its bonds."  We believe this decision was made in January, 1994.

Apparently IRS rules provide that private contribution to the debt payment makes the bonds taxable and therefore subject to higher interest rates.  That a separate lease of the land, specifically for that purpose, must be considered a part of the debt payment scheme which includes distinctly dedicated property tax funds seems unreasonable to us.  But we suppose that is an issue to be taken up with the feds.

What we do not understand is why this red flag did not go up immediately when the CCDC entered the equation with its initial investment.

It is fair to point out that participants in the CCDC include two banks, two insurance companies and two public utility companies.  We hope you'll pardon our touch of cynicism if we wonder whether some of the legal eagles involved with these organizations did not in fact count on the IRS to pull this chain, thereby negating any lease contract.

As it stands, by whatever reasoning, the City of Indianapolis owns some of the most valuable land in the entire State of Indiana, which land is occupied and used by private, for-profit corporations, and from which land there are no revenues for general municipal usage.  Is there something wrong with this picture?

Almost as an aside, the same article includes this paragraph.  "The city does continue to receive revenue from Circle Centre's World Wonders parking garage, but that income is diverted toward paying the city's $25 million contribution to the $100 million Conrad Indianapolis hotel."  (Our emphasis)

Our memory is not quite what it used to be, but surely we remember being told that deal was an "investment" rather than a "gift!"

There is so much smoke and so many mirrors in downtown financial arrangements, it's a wonder the criss-crossing checks don't get completely lost.  Then again, maybe that's a big part of the problem!

Irresponsibility

While waiting for some more detailed information, we'll dash off a memo on the downtown situation.

In a column in a Sunday morning paper (2/8/09) the author says he asked a member of the Capital Improvement Board (CIB) whether he would have "signed off on the stadium lease" if he knew then what he knows now.  The board member replied, "The answer would have to be no..." He went on to claim that it was the right decision at the time.

Interestingly enough, a week later the Indianapolis Business Journal (IBJ) carries a story referring to the downtown situation as being an economic "perfect storm," one phase of which was "...ten years of operating deficits..." at the CIB. 

In the same issue of the IBJ there is a story about the success of the Indianapolis Indians baseball operations.  Absurd as it may seem, there is also some suggestion that an increase of the current ticket tax on the baseball team - the only fan-friendly sports operation in the city - should be considered as helping toward the solution of the CIB plight.

The Indians already collect a 6% ticket tax to help fund the football team's palace.  It is our recollection that, when the football lease was being worked out, the team rejected a ticket tax on its operation as being a "deal breaker."  And, in the midst of these current discussions, the football team used the Valentine's Day paper to let their fans know that some seats were going to cost $10 more per game.  Love from the Colts!!  (Ten dollars, please!)

The last paragraph in that story quotes the director of sports marketing programs at the University of Indianapolis as saying, "At this point, it's not about fairness; its about need."

We were told about the "need" for an expanded convention center when the "Billion Buck Boondoggle" was crammed down the throat of the taxpayer.  Maybe even the CIB choked on selling the need of a football field while running a secret ten-year deficit in a smaller arena.

Questionable excuses

This morning's editorial - again concerning the fiscal outrage perpetrated by the Capital Improvement Board (CIB)  - once more puts forth an alibi for that board.  Here's a paragraph from the middle of the presentation.

"The state's takeover of the Lucas Oil Stadium construction project resulted in the doubling of an expected $10 million operating deficit, which the CIB wound up saddled with."

Can someone tell us why state "construction" doubled the size of the "operating" deficit?  Did the state add all the "cutting edge" features, like a picture window that opens and a sliding roof, over the objection or without the knowledge of the CIB?  Did the state arbitrarily erect a substantially larger building than the CIB planned?

If the situation came as a surprise to the CIB, may one ask upon whom the members expected that $10 million "saddle" to be placed?  Or did they hope that, had they issued the bonds themselves rather than signing a lease, they might secretly have rolled a few years of operating costs into the bond issue itself?

We also question the suggestion that the CIB will in fact be "saddled" with anything.  Looking at precedent it becomes fairly predictable that, after much moaning and groaning by the involved downtown entities, the "saddle" will be placed squarely on the back of the taxpayer...again.

How long it is going to take for the taxpayer to feel the burr under that saddle and buck these free-loaders off.

And while we're speculating...what ever happened to the 25 years worth of revenue collected from that first penny of the Food and Beverage Tax?  Will the new palace ever actually be paid for after we take care of all these gargantuan, "unforeseen" operating costs?

A million times, NO!

Or maybe 50 million times, since that's the expected deficit of the Capital Improvement Board (CIB) which the folks downtown seem to be ready to patch up with additional taxes.

The very first thing to do is require reasonable contributions from the prime occupants of the buildings.  The sweetheart deals both the basketball and football teams have are outrageous.

We were intrigued by a statement attributed to State Senator Kenley in the current issue of the Indianapolis Business Journal (IBJ), as follows:  "We've kind of asked the taxpayer to give their (sic) contribution."

Senator, you could not possibly be more wrong!  The taxpayer has never been ASKED anything about any of the downtown giveaways in Indianapolis.  You wheeler-dealer movers and shakers get together in the statehouse and city hall and make all the decisions in secrecy.

In the case of the new stadium, it was all worked out while the CIB was buying land for which it would give no reason, and with the then mayor simultaneously claiming, time after time, that nobody was even thinking about such a project. 

Then, when all the i's were dotted and the t's crossed, the taxpayer was finally asked...to bring a big fat checkbook to the table!  Frankly, Senator, and all the rest of you "players" downtown, it's getting pretty damned tiresome.  And even more expensive!

Now the CIB and other local folks are blaming the legislature for the current problem.  Never mind that this is 2009 and the agreement was signed in 2005.  One could hardly expect 4 years to be enough time to figure out that a substantially larger building might be more expensive to operate.

The CIB says there is no Plan B.  Simply not believable.  To us it is fairly obvious that the intent was to get the building in place, then say, "Oops.  We've run out of money.  But surely you don't want us to let the building stand idle!"

If you people are going to ask for still more taxpayer dollars, the very least you could do is stop lying to us.

Before one more red cent of tax is levied, some explanation is in order.  We paid the 1% Food and Beverage Tax, levied with the stated intent of paying for construction of the RCA Dome, for a quarter century.  Only as the building was being razed were we told that the debt itself was still intact.

WHERE WAS THAT MONEY SPENT?

Then that tax was doubled, again presumably for the purpose of erecting the new stadium, yet the formal agreement says the "1% increase" is to be a part of the source of funds to build the new palace.  We're still paying 2% but only 1% is being used for the new project?

WHERE IS THAT MONEY GOING NOW?

And now you're talking about 3%?  Puhleeeeze!!

Our recollection is that at one point then Mayor Peterson said the original tax was being used to pay off a debt of $496 million.  What debt?  Is that tax being used, for instance, to redeem the $100 million bond issued a few years ago to update public safety pensions?

We realize that, in our big picture, the Senator is a relatively minor player.  But as a part of the statehouse crew that horned its way into the situation to begin with, he has to take some lumps too.

The mayor, the CIB and you, Senator, owe the taxpayers of this city complete honesty about all uses of prior funds before you even think about additional taxes.

If the stadium has to stand idle while you all come up with the true facts, that's not our fault.

Dear Mr. Mayor:

The current issue (2/9/09) of the Indianapolis Business Journal (IBJ) discusses in great detail the financial fiasco resulting in great part from the secretive, arrogant operations of the Capital Improvement Board (CIB) for many years.

While a majority of the members of the CIB are appointed by you, we recognize that you inherited this very serious problem.

But, Mr. Mayor, in one of the articles the following statement appears; "In private discussions  Republican Mayor Greg Ballard's administration has proposed hikes to the CIB's existing mix of hospitality taxes, or, alternately, permanently shifting sales or income taxes away from other government agencies."  (Private discussions, Mayor?  Continuing secrecy, Mayor?)

Is this accurate information?  If so, which local agencies receive sales and income taxes specifically?  And from which agencies would you propose "permanently shifting" revenues?  Surely not public safety.  Can we let sewer renovation lapse for another 50 years?  Maybe we can furnish some sort of over-sized "thumb on a glove" so people who have to get across town to work, lacking public transportation, can be  recognized more easily as hitchhikers.

Or do you expect the General Assembly to ignore the state's financial woes and divert still more state funds into this money pit?

Mr.Mayor, you've been quoted in the papers as approving the concept of turning the city into a "village" for the coming Super Bowl.  It seems likely that, if you pursue the policy of hurling more and more public funds into these black holes, you may indeed wind up your term as mayor of a village as taxpayers continue to flee the ever increasing (world class?) tax burden.

As an aside - and without taking sides in the dispute - need we point out that township government has had no part in the development of this swamp of fiscal quicksand.

Sincerely,

An accurate headline

That's what we'd call the head on the editorial in this week's Indianapolis Business Journal (IBJ).  It reads, "CIB (Capital Improvement Board) failure isn't an option."

We'd have to agree.  Something that has already happened can hardly be called an option.  Reading the detailed discussions in the same issue of the same paper - discussions of a board drowning in red ink despite the availability of multiple sources of public funds - it certainly appears that failure is already upon us.  We would add it is a failure resulting to a great degree from secretive and arrogant operations over a number of years, aided and abetted by political and business leaders, and perhaps most of all by a seemingly disinterested, acquiescent news media.

But we wonder what is meant by "failure" in the paper's context.  Surely the disappearance of the CIB, as an expensive layer of non-elected government, would fit in with the current move toward consolidations.

We suspect the reference is in this sentence in the editorial; "No one wins if the city's landmark sports venues go dark."  (Our emphasis.)  Is this an indirect threat that the teams might abandon the city if they are asked to share the load?

Surely this is not a problem.  We've been assured, over and over and from multiple sources, that the new stadium is an integral part of the operation of the expanded convention center - almost to the point that one might have assumed football games were really an afterthought.  Is it now not true that the stadium will host a multitude of events other than football games?

Could it be that expansion of the convention center really was an excuse to demolish the RCA Dome - before the CIB got around to paying for it - which facility, of course, had to be replaced with a palace costing ten times as much as the original building?

Could the real fact be that the political/business/media folk have been "less than forthcoming" with the taxpayers?

The last paragraph of the editorial contains a sentence sounding vaguely like something we've been hearing from Washington, D.C., lately.  "The timing of this crisis couldn't be worse, but a remedy can't wait."

We remember being in a situation the other day where an aggressively eloquent salesman repeatedly warned us that "tomorrow would be too late."  We didn't buy that either.

Tangential speculation

How's that for a vague title?  A sub-title might be, "Do you believe this will really work?"  We think that's the question for Washington with the construction of the trillion dollar mountain of pork called a "stimulus package."  We intend, in this post, to speculate on the tangential impact on Indianapolis tax dollars.

We start with reference to the beginnings of the problem - partly brought to mind by a story in the morning paper just 2 days ago.  The article concerned so-called "payday loans" and, among other things,  cited conditions borrowers must meet, including submitting "...proof of employment such as a pay stub.,,,"

Compare this with a publication we pulled off the Internet entitled "To Each Their Home" and subtitled, "Success Stories from the ACORN Housing Corporation."  In this document we find the following:  "...ACORN Housing and its bank partners developed several innovative strategies... For example, income measurements include less traditional income sources such as food stamps, unemployment, part-time jobs, non-court ordered child support and foster care payments."  (All emphasis ours.)  (A few billions in the proposed bill will go to organizations like - and including - ACORN.)

This approach was fully supported by government action, leading to the undertaking of mortgage loans by individuals who, knowingly or otherwise, accepted financial obligations they could not possibly meet.  At the very base of the current fiasco were these so-called "sub-prime loans" - actively promoted home mortgage debt of thousands of dollars with less backing than required for a $500 payday loan.

We claim no expertise, but we see little reference in the machinations of the President and Congress to these specific situations.  What we do see is a frantic rush to appear to be "doing something," a significant part of which will be the dumping of unknown billions of dollars into the laps of local spenders.  This is "trickle down" economics in its worst possible application.

Will there be any directions on the spending of the money?  Can we count on the money being spent in ways which will truly effect the long range economy?  Does local history give us hope?  How much permanent employment will result from replacement of bricks on Monument Circle, the continuation of a cultural trail, or construction of bike paths - all "wants" suggested by our daily paper for the use of the funds.  Local pork with "free" federal money?

Could we give a tax break to virtually every local citizen by paying off the CIB debt and repealing the Food and Beverage Tax?