Backgrounder: A Special Interest at Work

September 25, 2020

by Jason Arp

What does it mean to be a community leader or a business leader in your town? In the city where I serve on the council it can mean something different than what the casual observer might think. Sadly, it can mean someone who uses the power of government to further their business interests by either extracting cash or tax subsidies or by having the state impose regulations that impede competition and consumer choice. Often both definitions are satisfied. 

Recently we had an opportunity to consider the machinations of the owner of a large automobile dealership in the region as he expanded the portion of his empire in my district. This individual was one of the larger contributors to the mayor’s campaign, as highlighted in a study published in the Fall 2017 Indiana Policy Review. In years past his dealership could be sure to be ​a​warded ample contracts to provide police cruisers and parks-department trucks.

That was as far as we expected the special-interest relationship to go. We were wrong.

As a result of that research, our city council in 2018 overcame a mayoral veto and passed “pay-to-play” legislation that prevented such large campaign donors from also being big vendors to the city. Shortly afterward, however, a lawsuit challenging the action was filed by the real estate developer for the largest car dealership owner in Northeast Indiana. The court ruled in favor of the developer in June 2019, just after an opinion was issued by the Indiana Attorney General  that our legislation was unconstitutional. Perhaps coincidentally, over $30,000 in contributions were made in April and May of that year by the auto dealer and his developer to the mayor’s re-election campaign with $5,000 going to the attorney general’s campaign.

A few days after the court victory, the dealership announced plans to build a 50-acre, $80-million auto mall at the busiest intersection in my district. Nearby residents who would find their single-family neighborhood surrounded by the project contacted me in horror. With little say in the matter, they would find themselves having to drive through a commercial parking lot in order to leave home. Although unaware of the project’s details and having to vote on each aspect of the transaction independently, I was invited to a meeting by the dealer and his developer. The concerns of the neighbors, I learned, were of little matter.

I have the privilege of serving on the Redevelopment Commission as our council’s appointee. There I learned that by using Tax Increment Financing this community leader would be getting $7 million dollars of subsidy for his grand car lot. This was arranged on the questionable value stated by the developer. But extrapolating observable values of similar lots to the size of the new project, a more realistic value would set the subsidy close to one-third of the total project cost.

Remember how it works: A special interest uses the power of government to further their business interests by either extracting cash or tax subsidies or by having the state impose regulations that impede competition and consumer choice.

Indiana state code Title 9, Article 32, contains 18 chapters of regulations pertaining to dealerships, most of them applying to auto dealers. These regulations make opening a new dealership or even moving a dealership to a new location nearly impossible without friends in legislative and administrative positions in government. In this sort of environment, it makes sense to be a large contributor to nearly every legislator in the region in addition to state officials such as the secretary of state. They will make the decisions on whether or not your local business faces unfettered competition or enjoys a near monopoly. The auto-dealer cartel is a big influencer in Indiana politics. (To give you an idea of the scope of that influence, a couple of years ago in a television interview our business leader-auto dealer spoke of his friendship with a former U.S. President.)

In our most recent council meeting, the business leader-auto dealer was among those requesting an investigation into why another large economic development project that he favors had stalled. The necessary resolution passed a committee vote but this week it appeared dead. What happened? 

An amendment was added expanding the scope of the investigation to allow discovery of all special interests involved in the project — including business leader-auto dealers.

Jason Arp, for nine years a trader in mortgaged-backed securities for Bank of America, was reelected last year to his second term representing the 4th District on the Fort Wayne City Council. Arp has served on the Redevelopment Commission, the Community Legacy Investment Committee and as co-chair of the Finance Committee of the Common Council.



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