Redevelopment: New Rules?

February 1, 2011

For release noon Feb. 1 and thereafter (800 words); note South Bend and Fort Wayne pegs.

Carmel’s Center for the Performing Arts opened its doors last weekend with a glamorous debut. Featuring Indiana limestone and Italian stone beneath a Palladio dome, the center will last 500 years or longer, its website says, “creating a legacy that will be passed along to our children and grandchildren for generations to come.”

That’s not all that will get passed on to future generations.  So will heavy debt incurred by the Carmel Redevelopment Commission (CRC) to complete the $170 million project.

Taxpayers should hope for one more legacy. A bill before the Indiana General Assembly would require elected officials to vote on major decisions of redevelopment commissions. Although Carmel’s arts center is the latest example, a host of projects around the state, ranging from sports stadiums to senior citizens halls, have been approved by appointed commissioners using taxpayers’ money following different rules than apply to typical public works projects. These are often financed through complex bond deals worked over by high-priced lawyers — and obscured from public view.

“Shadow city government,” is the term state Sen. Luke Kenley uses. Kenley, R-Noblesville, is co-sponsoring SB 550 along with Sens. Phil Boots, R-Crawfordsville; Mike Delph, R-Carmel; and Scott Schneider, R-Indianapolis.

Their primary motivation is to close the loophole Carmel found to issue $95 million in long-term debt without getting permission from the Carmel City Council. Under a 2008 law, a legislative body must approve debt exceeding $3 million, but in the case of the performing arts center, Carmel bypassed the requirement by contracting with a third party that would assume the debt, then lease it back to the commission.

SB 550 does more than close a loophole. According to the Legislative Services Agency, the bill requires local legislative approval of a commission’s budget, tax levy, spending, bond and debt financing, any leases pertaining to bonds or debt financing, payment of capitalized interest and allocation of excess tax revenue. All the big stuff a commission can do.

“I’m not trying to pick on Jim,” said Kenley, referring to Carmel Mayor Jim Brainard, who has spearheaded the Performing Arts Center among numerous improvement projects. “My main concern is to make sure these thing are approved” by elected bodies that are accountable to taxpayers.

The bill is in keeping with efforts to rein in excessive spending on public buildings, such as schools, which until recently in Indiana were costing 40 to 50 percent more than the national average. Under the 2008 property-tax cap law, schools and municipalities must seek approval from voters before launching multi-million-dollar capital projects.

Yet no such requirement applies to redevelopment commissions (called the Metropolitan Development Commission in Marion County), which were authorized by state law in the 1980s to “address conditions of blight and underutilized land of economic significance.” Members are appointed by mayors, town or city councils or county commissioners.

They are unelected but powerful. That’s because a redevelopment commission comes with its own special taxing unit, which enables the commission to borrow money and levy property taxes to finance construction, often done in partnership with private developers. In Indianapolis, Conseco Fieldhouse is an example.

Ron Reinking, a CPA in Fort Wayne who spent years watch-dogging a local project called Harrison Square, said the commissions have piled on to their municipalities’ debt loads, and it’s hard to keep track of the totals.

“Everyone complains how bad the federal government debt is,” he said. Citing a recent study, he noted, “Municipal debt is increasing far faster than the federal government’s is.”

Making things worse, bond issues are so complex that it’s hard for the public to make sense of them. Local governments find ways to keep debt off balance sheets so they can boast of balanced budgets while owing hundreds of millions.

Although the commissions are subject to Open Door and Access to Public Records law, they aren’t always forthcoming about finances. In Carmel, Clerk-Treasurer Diana Cordray resigned her role as fiscal officer for the commission in June because of “increasing difficulty with the lack of transparency of the CRC.” With important financial decisions subject to legislative branch review, the commissions would be more accountable.

Carmel’s Redevelopment Commission has yet to take a position on the Kenley bill, according to executive director Les Olds. South Bend commission member and City Councilor David Varner said he understands Kenley’s concern and supports the bill. Greg Leatherman, executive director of Fort Wayne’s Redevelopment Commission, said his commissioners had no problem with the bill as long as it doesn’t tie their hands.
   
Leatherman said the city council there already approves its budgets and debt and had final say on the debt issued to fund the public portion of Harrison Square, a controversial downtown revitalization project whose cornerstone was a $30 million baseball park.
    
It is essential that elected officials make these tough calls. Commissions have no business spending money like drunken sailors when other government entities, not to mention citizens, must watch their pennies responsibly.

Andrea Neal is a teacher at St. Richard’s Episcopal School in Indianapolis and adjunct scholar with the Indiana Policy Review Foundation. Contact her at aneal@inpolicy.org.



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