The Promise of Jobs: ‘Right Here in River City’

October 22, 2012

 

By David Penticuff

MARION, Ind. — In our 2011 city election, Republican Mayor Wayne Seybold won a third term as he promised more of his brand of pedal-to-the-metal prospecting for companies to relocate in Marion. The Democrat candidate, Lynn Johnson, simply promised to hire many of the thousands of unemployed in Marion to fix up dilapidated buildings. At least her idea, while fantastically impractical, was an honest and transparent waste of tax dollars.

Less obvious is the hunt for economic development in Indiana communities through trips to Asia and luring would-be employers with tax dollars as “incentives.” This sort of salesmanship too often becomes an expensive and unacknowledged farce. In it, a venture is eventually dragged back to Marion with an array of characters in tow. They usually have one thing in common – they can’t get any private financing or they aren’t prepared to put any of their own “skin” in the game. The risk quickly comes to belong to taxpayers.

Recall the musical “The Music Man” in which Harold Hill visits River City, Iowa, and plans to sell band instruments and uniforms to naive townsfolk before skipping out with the money. Marion has felt a lot like River City the past five years.

A new company, Veriana, came to our town in October 2007 after a meeting between the budding company co-founder, R. Ross Cooper, and Seybold in Japan during an Asian trip that including many community leaders in our part of the state as well as  Gov. Mitch Daniels.

Veriana decided to build its world headquarters here in Marion, where a recruited workforce would be employed developing a derivatives exchange for the entertainment industry as well as new wireless technology, a media distribution company, and a two-way targeted advertising firm.

Seybold said the company, a spinoff of a California-based software company called Veramatrix,  would by 2012 have a payroll of $20 million per year. It was to employ well over 200 people earning an average of $41-an-hour.

In exchange, the local government would fork over $4 million in tax increment financing and tax abatements.

For an economically battered community like Marion, there was no second guessing. In one fell swoop, Marion could be restored to its 1960s-union-factory-town wealth again by harboring a high-tech boom in the Midwest. Richard Mourdock, then state treasurer, brought an Indiana flag to the announcement, a gift from Governor Daniels to fly over the world headquarters once it was built.

Veriana — a dream come true, if we dared believe.

“This” as a husband-and-wife Amway partnership I once knew declared in their multi-level sales marketing pitches “will change your economic way of life.”

But it was only a dream. The “come true” part was a load of malarkey — easily identifiable as such as the announcement came a week before Seybold’s 2007 re-election. That is the sort of thing that a newspaper is supposed to wade through and clarify for readers. We at the Chronicle-Tribune did not do a good job of that. We wanted to believe too.

Questioning any government-driven economic development effort can be difficult. For many hometown newspapers, it is worse than criticizing education spending or publishing national security secrets.

“How dare you be less than supportive of our efforts to bring jobs to our community?” is the hammer applied to local newspapers by city officials and sometimes civic leaders. A community newspaper’s success depends on being fiercely independent while actively boosting the community’s advancement and well-being. But local newspapers must do their job exposing the practice of economic development types using a dollar’s worth of public money to chase a dime’s worth of jobs.

Local private investors gave much money to Veriana before it left town about two-years later and, moving south along Interstate-69, approached Muncie’s economic development team about borrowing money. That came to no good end either. Veriana took out a $450,000 loan from the Muncie Industrial Revolving Loan Fund in 2010. It didn’t pay the loan and the company then went about suing Delaware County economic-development organizations, claiming they conspired to lure Veriana into spending money it couldn’t afford.

Meanwhile, Marion Land Development, a created entity that was supposed to develop a whole mini-town around the Veriana complex, stayed active in Grant County long enough to borrow and default on $4 million in loans with local banks. It failed to develop any of the acquired property near I-69 and Ind. 18 in spite of an issue of up to $180 million worth of bonds by the City of Marion meant to spur the interchange’s development through TIF (Tax Increment Financing).

This convoluted story, and others spawned by the search for a golden employer, is still unwinding.

We arrive in such messes because economic development has become both secret and sacred in local Indiana government — for no good public reason. The truth is that accountability and prosperity are compatible. But not according to our Grant County Economic Growth Council.

The local economic-development group, formed as a nonprofit agency in 1984, collects tax dollars directly from citizens — about $300,000 worth every year. No approval from the Grant County Council or any other body is needed. The Growth Council receives .03 percent of County Economic Development Income Tax funds to do what the mayor and city administration also does: hunt down prospective employers.

The Chronicle-Tribune began raising the issue with Growth Council officials about whether an organization that receives tax dollars automatically through the county was really a private organization, as Tim Eckerle, the Council’s executive director, claimed.

In May, we approached the Growth Council leadership and expressed concern about our inability to cover their meetings when so much public money was being funneled to them.

I sought to assure them that our newspaper, which is actually a member of the Growth Council, was not seeking information from them to publish concerning specific employers that the Growth Council might be recruiting. Companies looking to do economic-development deals don’t want the media around, I was told.

We have consistently made clear that we seek only to cover that which would be a matter of discussion and action should the same matters come before any public council or board under the Indiana Open Door Law and the Access to Public Records Act. We agreed that we need not be present at discussions concerning commercial and industrial prospects, litigation and personnel discussions. Such exclusions are included in the Open Door Act.

But Mr. Eckerle said he was opposed to allowing the Chronicle-Tribune to cover Growth Council meetings and its review records related to spending tax dollars. He said that the Growth Council is legally a private organization because it has not been audited by the Indiana State Board of Accounts. At least not recently.

The Chronicle-Tribune checked with the State Board of Accounts and state officials reported the Growth Council was last audited by the state in 2007 — before it began receiving EDIT money directly in 2009. The Growth Council files an annual document called an E-1 form showing the percentages of public versus private money disbursed by the Growth Council. The E-1s consistently showed that public money disbursements amounted to less that half of the total yearly disbursements — in which case the state does no audit.

However, Mr. Eckerle also says the Growth Council puts both its private and public monies in “one pot.” And there is no separate tracking of public and private funding. When asked how they could report such percentages of private-versus-public spending to the state when the money is not kept separate, Mr. Eckerle’s one-word reply was “accountants.”

The executive director said that though the Growth Council does receive an audit waiver, it performs its own audit every year. The Chronicle-Tribune was denied a request for a copy of this internal audit.

We did agree to work together to see if there was some way to reach accommodation on having us provide coverage. The result was a proposal from the Growth Council in which officials would meet with a reporter monthly and discuss matters essentially of their choosing with the newspaper conceding the Growth Council was a private group. We would also have to limit the topics of newspaper coverage in conjunction with the Growth Council.

It actually represented less access than the Chronicle-Tribune has regularly received in working with the group.

Now we are requesting the Office of the Public Access Counselor find that the Grant County Economic Growth Council is subject to the Indiana Open Door Law and the Indiana and the Indiana Access to Public Records Act. It is fundamentally a violation of the spirit and intent of the state law for a local group, spending hundreds of thousands in public dollars each year, to deny the public’s request to know how those dollars are spent.

But we do know from observation on the outside that the group spends money on matters that include the purchase of local properties, awarding of scholarships, entrepreneur programs, out-of-state travel expenses for employees, salaries, contractual hiring and matters clearly not directly concerned with the recruitment of specific employers. They do the sort of things that local city councils, town boards and even redevelopment commissions do with regularity. But those groups act in public.

Meanwhile, politicians and local bureaucrats, with no real business experience, continue to burn money searching through China, Japan, Las Vegas and Chicago looking for projects on which to gamble. For them, it can be a lot more exciting and lucrative career than seeing that the streets get paved, trash picked up and budgets maintained back in Marion and other Hoosier communities.

At this writing, still at issue in Marion is the city-backed $2 million loan that funded the start-up of Earthbound — a luxury travel trailer manufacturer whose owners had undergone bankruptcy before they came to town and worked with Seybold to deliver financing. Taxpayers recently had to make a $155,000 bank payment for that company.

And there is also TriEnda, a plastics manufacturer brought to town by the Grant County Economic Growth Council in 2008. It defaulted on its lease and failed to make rent payments for two months. TriEnda began operations at the former Thomson electronics plant. The operation went idle in 2010 following layoffs. The Portage, Wisc.-based company was purchased last year by Spara Logistics, which is now known as Lexington Logistics, LLC. The landlord, wanting rent, decided to keep manufacturing equipment left in the building. Lexington Logistics is trying to collect $578,400 in damages in court. The city is also considering joining a lawsuit against company founder Curtis Zamec, whose former business partners accuse of making a $6.9 million loan from the company to Zamec’s family.

A Chinese company, YK Furniture, which was recruited by Seybold during one of his multiple trips to Asia, came to Marion. They agreed to move a factory into a former Hobby Lobby along Ind. 9.

The Marion Redevelopment Commission had purchased the building for $1.5 million. In order to pay off the balance, the city set up a special tax increment financing arrangement. Though some work was started, the company only made a $350,000 cash payment before it became clear early this year it would not meet deadlines.

Tree of Life Bookstores, LLC, a local company, announced in March that they planned to buy the building from YK and pay off the remaining $1.2 million owed the city. The final purchase agreement has been held up, however.

And taxpayers have already invested $3 million in site preparation for a sports arena destined, they say, to be home to minor league hockey. After about 18 months of trying, economic-development officials have not been able to sell bonds to finance the nearly $30 million needed for the project.

This all raises many questions about who profits from what, what promises are made and who subsequently breaks them to make hopes for jobs an apparent sham.

Journalists at the local level need to be able to explore and expose such matters. Private organizations that use public money need to open their books to the people who keep them in business.

We elect presidents, governors and now mayors based on their ability to create jobs. But, except when they expand government employment, they can’t create jobs at all. At best they can legally bribe private employers to expand or relocate in a local politician’s bailiwick. At worst, the schemes evolve into cronyism, self-dealing and hidden agendas without the public’s interest at heart.

We journalists need to write more about this.

David Penticuff is editor of the Marion Chronicle-Tribune. He wrote this at the request of The Indiana Policy Review.



Comments...

  • John Accetturo says:

    Mayor Seybold worked against Senator Kenley bills to reign in redevelopment commissions like his and the Carmel Redevelopment Commission. He has denied being against these bills. However after reading this article I understand why he might not like what Kenley had in his bills to increase transparency and add checks and balances.

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