Arp: The IEDC Chickens Have Roosted
by JASON ARP
Nearly 10 years ago, I published an article in The Indiana Policy Review(Backgrounder: Regional Cities Plans, Jan. 1, 2016) describing some of the issues related to the State of Indiana’s plan to institute a Regional Development Authority (RDA) to fund what were deemed to be multi-county economic development projects. The concerns expressed in that article focused upon the massive increase in government-funded economic development activity that would be incentivized by state injections of capital.
The RDA legislation that year created the mechanism for the Indiana Economic Development Corporation (IEDC) to transform itself from an organization that held conferences and advertised the state’s pro-business bona fides to companies all over the globe to a “sovereign wealth fund” of sorts, using taxpayer money to place bets on development projects within the state. This metamorphosis of IEDC from a donor-funded not-for-profit to a state-funded incubator created enticements for donors to give to the still existing not-for-profit while expecting many times their contribution in contracts funded by the state’s taxpayer-funded IEDC entity —two entities with two boards and two missions, sharing the same name.
Think of it as a bank’s lobbying or not-for-profit entity. The ABC Bankcorp may have an ABC Bankcorp Foundation that has the ability to have a political-action committee or a charitable foundation or whatever. The difference here is that if there were direct evidence of contributions to the foundation being rewarded with no-bid contracts, there may be some explaining to do.
Many of the well-known economic development projects in our city (City-Scape Flats, Skyline Tower, the Landing, Electric Works) have received some portion of their funding from IEDC, often as part of a regional cities grant. What makes the journey into state-sponsored economic development in the Fort Wayne area so interesting is the deep historic ties to origination of IEDC and its transformation.
The first CEO of IEDC was Patricia Miller, co-founder of the famous woman’s accessory company Vera Bradley. Miller was followed by Mickey Maurer of National Bank of Indianapolis and Indiana Business Journal fame. Under these early terms, the IEDC maintained its role as being mostly a more convoluted commerce department.
That all changed with the hiring of Eric Doden as the IEDC’s CEO in 2013. It was then that the infrastructure was developed to allow IEDC to begin directly funding projects. Doden went on to become the CEO of Greater Fort Wayne Inc. in 2015, where he lobbied Allen County and Fort Wayne politicians to apply for grants for projects in which he was directly involved. IEDC’s budget in 2015 was roughly $40 million per year. By 2022, that figure had ballooned to $650 million a year. The IEDC contributions were often matched by local and federal funds, driving the sum expected on economic-development projects as high as $1.5 billion a year.
The public was sold by regional-development authorities on the ideas of Richard Florida, a professor of the “urban studies” sub-sector of economic geography and public policy at Carnegie Mellon University in Pittsburg. The idea was that mid-sized cities could revitalize economic growth simply by building subsidized buildings in the urban core — “built it and they will come.” This rhetoric was hugely popular with local developers and city redevelopment commissioners.
Humorously, Professor Florida had abandoned the idea as early as 2017, describing the effort as a failure and waste of critical resources for struggling cities, as detailed in his book, “The New Urban Crises: Gentrification, Housing Bubbles, Growing Inequality, and What We Can Do about It.” Yet, IEDC, Greater Fort Wayne and local governments plowed ahead, sinking billions into downtown office, retail and apartment buildings. (More on this in our 2017 presentation to the American Principles Project https://inpolicy.org/2017/11/credit-mobilier-redux-a-speech-by-jason-arp/)
By 2019, the city of Fort Wayne had accumulated enough eco-devo data that detailed “Return on Investment” analysis could be constructed using tax-rolls and proformas. This report can be reviewed in the Winter 2019 issue of The Indiana Policy Review,under the title “Eco-Devo Promises; Let’s Unwrap Them.” What we found was after all the investment in economic development activity in downtown Fort Wayne, there was literally nothing to show for it. The tax base actually shrank in the 10-year study period, and what had been created in taxes was being used indefinitely in the financing of projects, so nothing was available for city services. While this study was limited to Fort Wayne, we can imagine the results were the same throughout the state. In fact, Professor Florida says more or less that this is what he found to be the case in all midwestern states.
All this is to say that it should come as no surprise that we now find that the IEDC was a massive statewide pay-to-play scam, with political officials treated with world-wide luxury travel and gifts so that well-connected developers could find their way to billions in state-funded projects. The data long ago showed that the spending spree did not actually enhance or grow economic activity, so of course grift was the only answer.
Jason Arp, for nine years a trader in mortgaged-backed securities for Bank of America, represented the 4th District on the Fort Wayne City Council for eight years, serving as Council President and as a member of the Redevelopment Commission dealing with IEDC matters.
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