Indy Tax Dollars

A comparison

We were wondering if anyone else has noticed the seeming parallel between what is happening in Washington, D.C., and in Indianapolis.

One of the bases of the problems in Washington was the attempt to make a dream come true which was never in the financial cards.  Somehow the "ideal" concept of home ownership became an "entitlement" to people who, unfortunately, simply were not able to afford that position.

Here in Indianapolis the problem pretty much began with the idea that the city needed to be "world class" and that the only way to achieve that status was the presence of a professional sports franchise.

In the ensuing processes, in both cities, a lot of money got committed with little or no apparent look at future ramifications.  Now Pandora's box is open and the results are roughly the same in both cities.  (Except for the number of zeros in Washington computations.)

In Washington we learned that, without immediate passage of 1,000 page, trillion dollar legislation - without benefit of having been read by anyone - the world would come to an absolute stop and we'd all fly off in unknown directions.

In Indianapolis we are told that loss of professional sports will cause the implosion of the city as we know it, with Monument Circle likely turning into an ash heap within months or maybe even weeks.

Naturally, the solution in both cases is the insertion of the grubby hand of government into the pockets of the taxpayer to salvage the welfare of folks who actually have much deeper pockets themselves.  (After we've taken care of the billion dollar financial institutions and their congressional puppets, there may be an effort to help the ignorant and misled poor who took on mortgages they could not pay.)

Possibly the most distressing thing of all is the fact that, again in both cases, the people who led the nation and the city into the current fiasco are the same ones who now presume to try to lead us out.  A few businessmen, a handful of law firms, and politicians - the "leadership" of this city are now meeting "behind closed doors" to determine the fate of the local taxpayer.

So much for transparency and citizen input.  Would it be fair to compare the U.S. Senate Banking Committee and Sen. Dodd to the Capital Improvement Board and Mr. Early?  Well at least, so far, no local taxpayer has been called before the CIB to be grilled about why he/she did not voluntarily contribute more private funds in addition to the substantial public subsidy to help prevent the Pacers' "twenty five years in the red."

What the h....  We're only talking about Millions while Washington is shoveling out TRillions.  Almost makes us ashamed to have brought the whole thing up! 

More mis-direction?

A couple of days ago two items appeared in our daily paper which deserve comment.  Both refer to the ongoing fiscal fiasco at the Capital Improvement Board (CIB).

The first was co-authored by two proponents of the concept that the state owes downtown Indianapolis a living.  Which is, of course, a very un-subtle suggestion to the currently sitting General Assembly that bailouts are in order locally.

As is all too frequently the case, these gentlemen continue to lump professional sports with convention business as significant, appropriate sources of outside revenue for the city.  We disagree.  Convention visitors bring in money.  Professional sports re-allocate local spending.  Money now spent on Pacers' tickets will not be buried in the back yard if the team leaves town.

This attempt to put pressure on the state parallels the second item mentioned above.  An editorial, it contains equally misleading sentiments, as follows.

"The state took the lead in building Lucas Oil Stadium; it must not abandon the city now with operating costs pushing the CIB to the point of crisis."   (Our emphasis.)

Abandon?  The state did indeed "horn in on" the project - over strenuous objection of the city.  The agreement between the city and the state however, - signed in 2005 - very clearly declared that operational costs would be the responsibility of the city.

Presumably the city, had it handled the construction for which it had secretly planned for years, must have had in mind some idea of how to handle increased operating costs.   If there were such plans, where are they now?

A suggestion that fiscal problems are a recent phenomenon for the CIB is ludicrous.  We're told the Pacers have lost money for 26 of the last 28 years, and that the CIB itself has been in the red for 10 years - with at least one member of that board having been a participant in its decisions for 17 years.

We have, over the years, opposed subsidies and tax gimmick on the grounds that a private business which won't "happen" without them is a poor risk.  It is also true that decades of these policies have diverted untold millions of tax dollars away from legitimate municipal expenditures.

It seems to us that what we are now seeing downtown is the natural - and to be expected - results of the broad use of these financial crutches.  Once begun, they become a way of life upon which the recipients depend, for which there are ever new proposals for their usage, and in which the only changes in cost to the taxpayer are upward.

One may wonder whether the timing of disclosure of the Pacers' and CIB financial problems while the legislature is in session is coincidental.  We tend to worry that fast-moving, panic-driven legislative actions could become habit forming.  Visible results of this kind of effort elsewhere are not encouraging so far.

Best for the city?

A somewhat surprising "My View" column appears in this morning's paper, written by the vice president of the Capital Improvement Board (CIB).  In reference to a recent column by a regular staff member of the paper, he makes several points which deserve comment.

The first is to combine tourism, conventions and the Pacers into the extremely generous estimates of revenues for the city.  We deny  any such connection.  While admitting to not being much of a "tourist," over the years we did attend a good many meetings/conventions around the country.

We don't recall ever having received a meeting notice or invitation which included the fact that the host city maintained a basketball team as a reason to be there.  Nor did we ever go to any of these meetings where seeing that team was a part of the agenda, directly or otherwise. 

Significant municipal revenues?  Conventions, yes.  Basketball, no.

The gentleman makes this statement.  "Whether the Pacers play there or not will not make the cost of operating the venue disappear."  Quite true.  But it would give the owners of "the venue" - Indianapolis taxpayers - the benefit of the non-basketball revenue they are not now receiving.

Further, he says, "The team is losing approximately $30 million a year.  Private businesses that lose that kind of money are not long for this world."  Precisely!  In his eagerness to represent the team instead of the taxpayers, the gentleman apparently has forgotten that the basketball team is, in fact, a  "private business" which, as such, has no legitimate claim on the taxpayer dollar.  Perhaps a reasonable alternative would be just unloading the business.

After saying that "The Capital Improvement Board is in terrible shape financially..." he proudly announces that he has been a member of the board for 17 years.  So, who's responsible?

He claims to have done his best to explain the "big picture," but ends his column with a personal attack on the author of the original column, saying that it's not surprising that he "...doesn't get it; I didn't have any crayons."

Well, it is nice to know that the purchase of crayons is not among the outrageously wasteful disbursements of taxpayer dollars by his CIB!

Good sense

A column in the local daily a few days ago was headlined, "Sorry, Pacers, the answer's no."

Another column hit the desk this weekend, we thought indicating the good sense indicated in the earlier one.

The second is headed, "Pacers' owners deserve accolades, not scorn."  We would tend to agree.  It is particularly appropriate if indeed the Pacers have been as important to the city as some have alleged.

Those owners are billionaires, a position earned through a lifetime of smart, determined business decisions.  We congratulate them on their success.  We do not believe that their personal wealth gives the city any claim that they ought to continue to pour good money after bad simply because they have it.

Surely, if these nationally outstanding businessmen have been able to operate this franchise in the black for only 2 of 28 years - even with the aid of substantial public subsidy - this is more than enough demonstration of a losing battle.  It seems crystal clear that good sense demands losses be cut and a quick exit found.

If city leaders want to do the right thing, maybe they should help the current owners unload what has turned into a red-ink monster.

Assuming the continued operation of the Fieldhouse, the city would then receive the revenues from other activities there.  One source has cited at least 38 events other than NBA games.  Surely active promotion - by the convention center? - would produce more.

It's time to face the music, folks.  It is no municipal disgrace to admit the city cannot afford professional basketball.  We know "millions" doesn't sound like much compared to the "trillions" being scattered from Washington, but then we can't print the money the way they can!

The effort was made.  But we'll second the motion on the original headline we cited.  "Sorry, Pacers, the answer's no."

Distressing

Did something new last evening.  Almost sorry we did.  Went to a "Town Hall" meeting sponsored by a state representative and a state senator.

There were probably about 75 to100 people present, and the meeting was scheduled to run 90 minutes.  In all fairness, no member of the audience was allowed more than one "presentation" until everyone who wanted to speak had the opportunity.  Assuming 80 people and 2 minutes per question and response, that in itself obviously presented a challenge.

Topics ranged over a wide area, including, environment, government consolidation, effects and uses of federal "stimulus" funds, the abilities and attitudes of the Speaker of the House, with considerable time on property taxes.

We did get in our question about the effectiveness of tax caps as a percentage of a changeable assessment.  The response was that there are still assessment problems to be worked out.

The general tenor seemed to be that once we got everyone assessed at "market value" - whatever that may be determined to be by the state Department of Local Government Finance - things would be OK.  We had no opportunity to ask how one determines the "market value" of a manufacturing plant, or a high-rise office or apartment building, or a shopping mall.

Nor were we able to point out that the local football team - as a for-profit entertainment business - is provided a facility which under a realistic downtown tax policy might well add close to one billion dollars to the assessment rolls as the base for the team's appropriate share of municipal finance.

Of course, there were no questions about the effect on municipal revenues caused by tax abatements, Tax Increment Finance districts and the complete elimination of real estate from assessment rolls.

At one point, as the House member was indicating strongly that he would oppose any general tax increases, we popped in the question - without being recognized to speak - about a possible increase in the food and beverage tax.  The answer was, "Well, that's a consumption tax."  We didn't get to point out that the general sales tax is also a "consumption" tax.

A very dismaying part of the evening was the realization that a significant number of people have bought into the scam of "flexible" tax caps, almost certainly because of lack of information - or presentation of mis-information - about how the whole property tax system really works and is capable of being manipulated.

After hearing a brief commentary that downtown Indianapolis is likely to implode without the presence of professional sports, we're willing to predict that those who eat out, voluntarily or otherwise, should prepare yourself for a 3% food and beverage tax in the near future.  With any luck we may go another 3 or 4 years before the rate goes to 4 (5?) %!  And with even more luck, some of the proceeds actually may be used for the purpose for which we're being told the tax is levied.

The Capital Improvement Board lives on!

Threats - and lies

Our sports palaces were built under the threat that a team might seek greener pastures.  While the football team did refrain from openly saying that, it surely was common knowledge why the stadium was built. 

Now, with the CIB financially strapped, the threats, very thinly veiled, rise again.  Nowadays they sound like this.  "Well, we sure would hate to have to board up the place!"

Frankly, we think it all comes right out of the old playbook.  The public was first told about the operating shortage at the Oilcan several months ago.  At the time the CIB said, "There is no Plan B."  

In other words, we'll build the d....d thing, plead poverty, then suggest the possibility of having to shut down a quarter billion dollar property, knowing full well that won't be allowed to happen.

The agreement between the CIB and the state was signed in 2005 - 4 years ago.  Are they admitting that these community "leaders" - in four years - hadn't realized that a much larger building might run a few bucks more to operate?

It turns out that one of our earlier posts was sort of prophetic.  Seems the basketball team does expect the city - the taxpayer - to pay it to play in the Fieldhouse.  The operational costs - the only financial responsibility of the team - are very likely to land on the back of Joe Citizen.

We're now told the team has lost money in 26 of the last 28 years of operation.  It would seem that, by any exercise of logic, this is a business which ought to fold its tent (our tent!) and steal away into the dark of night.  At least the city would then receive the revenues from non-basketball events at the facility.

The threat to shutter the Oilcan sounds a bit hollow, too.  How many times have we been told the stadium will be an integral part of convention center action?  We've always heard that "other events" will pack the house again and again throughout the year.  Surely, under these circumstances, the departure of the football team would not be a total economic loss.

Or are the lies we've been told over the years now coming back to bite the liars?

On the other hand, maybe we should count our (relative) blessings.  Locally, the taxpayers will be stuck for only a few millions of dollars.  Chump change!  Bailouts in Washington are measured in the hundreds of billions.  Almost makes us embarrassed to have raised the question at all!

Homework...

...for our readers and help for your writer!

This is a three-part assignment for any of you who would care to take it on.  We really would like to have your reaction.  Here's the deal.  First - read this post.  Second - re-read our last post entitled "The whole story..."  Third - tell us what you would say to the gentleman who wrote the "reply" to us.

The following paragraph is the entire body of an email we got this morning in "reply" to that last post.

"That's one way of looking at it.  I was at Palominos downtown tonight and the place was packed.  I suspect like me this was discretionary income being used to dine.  It'd be one thing were it a tax on groceries.  But eating at a restaurant truly is optional."

As to his suggestion that "dining at Palominos" is the discretionary equivalent of downing a bowl of soup, a salad or a sandwich on a lunch hour, we would respectfully disagree.  And he seems to ignore the economic effect if all downtown workers took him seriously and started "brown bagging" as a realistic option.  (We suppose it is also possible to make the gas tax optional by using a bike or hitch-hiking around town.)

Actually, we think he makes our point of using a Revenue Increment Tax to fund all these downtown advantages which are alleged to be the result of the presence of the mall and the various sports palaces.  Let those who enjoy, and benefit from, the wonderful downtown "ambience" pay for it.  Why should a diner in Broad Ripple pay for it.  To say nothing of the Broad Ripple eatery subsidizing its competition.

But what we thought was most interesting was the the total dismissal of the rest of our commentary by the author of the "reply."

He makes no reference to the dismal financial performance of the Capital Improvement Board (CIB), including its failure to anticipate a huge increase in operational cost of the new football field.

He apparently is not concerned by the fact that 25 years worth of a tax revenue has been diverted to purposes other than that for which it was specifically adopted.  Was there misfeasance or malfeasance involved?

Nor does he seem to be bothered that, while the funds from the original tax evidently will continue disappear, the increase by doubling of the tax to fund the new football field turns out to be inadequate and he has no comment on current suggestions that the tax rate should now be tripled.

It is obvious that he has no trouble with throwing more taxpayer dollars into the pot before we really know where, how and why current revenues are really being used.

This is being written because we really do not know how to respond to his "reply."  Any suggestions or comments?