Statehouse Considers Tighter Redevelopment Commission Debt Rules

Today's Star has posted a letter to the editor from former Carmel City Councilor, John Accetturo, regarding SB 25, which would provide oversight of Redevelopment Commissions (called the Metropolitan Development Commission here in Indy) when they determine to accumulate debt.  This would apply to TIF districts in particular, I should think.  I do not know of another means available for a Redevelopment Commission to go into debt.  If one of my fantastic readers can clarify, please add a comment.
Here is Mr. Accetturo's letter:

In Indiana, certain boards and commissions can create taxpayer debt without any legislative approval and accountability to the taxpayers. One of these is a city or county redevelopment commission. The majority of the members of these commissions are appointed by the executive and, unlike elected officials, are not accountable to voters.

The power to encumber future generations of Hoosiers with hundreds of millions of dollars of debt is enslaving and potentially destructive. Therefore, checks and balances need to be in place to ensure this authority is used responsibly and in the spirit of the law.

In 2010, an opinion of the Indiana Attorney General upheld the existing statute that provides that power to redevelopment commissions. This opinion has opened the door in several cities for redevelopment commissions to borrow millions without limitation or public scrutiny for projects that are questionably titled “redevelopment.” Default on payments by any redevelopment commission could have a devastating effect on debt rating and borrowing capability for all redevelopment commissions in Indiana.

Existing Indiana law grants too broad powers to local commissions to unilaterally create debt. We need to change the redevelopment commission law to protect taxpayers and development in Indiana. I believe that Senate Bill 25 will do that. It will protect the public interest of Indiana taxpayers from an executive who chooses to avoid the scrutiny and diligence embodied in constitutional checks and balances.

Redevelopment Commissions and other boards serve a purpose in municipal government. However, checks and balances need to be in place over them just like any other part of government.

Here is the digest of SB 025 (emphasis added and digest reformatted by me):

Redevelopment commissions and authorities.  

Provides that a redevelopment commission may not enter into any obligation payable from public funds without first obtaining the approval of the legislative or fiscal body of the unit. Provides an exception if the obligation is for the acquisition of real property and the payments are for three years or less or the purchase price is less than $5,000,000.  

Specifies that the approving ordinance or resolution must include certain items.  

Provides that a redevelopment commission and a department of redevelopment are subject to oversight by the legislative body of the unit, including review by the legislative body of annual budgets.  

Specifies that a redevelopment commission and a department of redevelopment are subject to the same laws, rules, and ordinances of a general nature that apply to all other commissions or departments of the unit.  

Specifies that a redevelopment commission, a department of redevelopment, and a redevelopment authority are subject to audit by the state board of accounts and covered by the public meeting and public records laws.  

Requires a redevelopment commission to provide to the legislative body of the unit at a public meeting all the information supporting the action the redevelopment commission proposes to take regarding the sale, transfer, or other disposition of property.  

Provides that if the amount of excess assessed value determined by the commission is expected to generate more than 200% of the amount of allocated tax proceeds necessary to carry out the commission's plan, the determination of the amount of the excess available to other taxing units must be approved by the legislative body of the unit.

Permits the legislative body of the unit to modify the commission's determination

One item in particular jumps out  to me in this list of improvements to the law, and that is the review of the redevelopment commission's budget by the legislative body.  In Indy those would be the MDC and the City-County Council, respectively.  During the time of the infamous 'interlocal agreement' between the MDC and the CIB that gave the CIB $8 million annually from property taxes gathered in the Consolidated Downtown TIF District, which the CIB in turn gave to the Pacers, the City-Council ducked its responsibility to review that agreement, saying it was not the fiscal body for the CIB or the MDC.  This would make it absolutely clear that the Council does have that responsibility.

SB 025 is certainly worth following through this short session.

Indiana Constitutional Debt Limit - How Do Taxing Units Fair?

I am not going to pretend to understand the mechanisms whereby taxing units get around the debt limit set by the Indiana State Constitution.  All I know is that when they want to, there appears to be a way.

I have put together the information as best I could tease it from the information sent to me by the Indiana Department of Local Government Finance and the individual taxing units.

I obviously previously missed a couple more taxing units, including the City of Lawrence.  I will continue to contact these units for their debt information and include it in the table below as well as in my previous post as I get it.

For the Indianapolis Sanitary Districts, I pulled together any bonds that mentioned sanitary.  (they are included in the City-County-H&H-CIB data in my last blog, but pulled out this time)

For the Indianapolis Redevelopment Commission (MDC), I pulled out any bonds that were being repaid from TIF revenues.  (they are included in the City-County-H&H-CIB data in my last blog, but pulled out this time)
I continue to put City and County and Health & Hospitals and CIB together, as H&H claims debt obviously owed by the CIB and the County claims debt obviously owed by H&H.
 
The debt limit is calculated by the DLGF as follows:  The total Assessed Value of the property that may be taxed by a unit is divided by 3 and that result is multiplied by 0.02 (2%).
 
With all that said, the taxing units that have less debt than allowed under the Indiana Constitution are noted with an asterisk (**).  Those whose debt numbers I still do not have are noted with a question mark (?).



Unit		Debt Limit ($)	Debt Reported ($)
City-County-H&H-CIB		1,330,559,972	2,591,784,331
IMCPL (Library)	**	221,605,951	100,345,000
IndyGo	**	215,120,676	29,890,000
Airport		228,021,302	1,204,805,000
Indy Sanitary (Liquid + Solid)		"subject to other debt limit"	501,391,250
Redevelopment Commission of Indianapolis (MDC)		212,373,890	269,833,765
MSD Decatur Tnsp		7,071,079	159,641,968
Franklin Tnsp Comm School Corp		11,416,011	247,941,361
MSD Lawrence Tnsp		29,675,510	211,025,794
MSD Perry Tnsp		20,627,717	145,727,199
MSD Pike Tnsp		30,686,229	64,185,000
MSD Washington Tnsp		33,007,227	78,714,000
MSD Wayne Tnsp		16,976,955	283,699,131
Beech Grove City Sch Corp		2,571,309	50,110,205
IPS		53,201,116	721,382,739
Speedway City Sch Corp	**	3,844,042	no debt
Center Township	?	29,000,062	not reporting
Decatur Township	**	7,101,987	2,093,938
Franklin Township	**	12,369,947	1,193,525
Lawrence Township	**	32,019,837	2,000,000
Perry Township	**	22,547,734	no debt
Pike Township	**	31,369,419	no debt
Warren Township	**	21,436,824	no debt
Washington Township	**	46,090,982	no debt
Wayne Township	**	26,084,511	152,282
Speedway City Civil Town		3,844,042	74,451,630
Speedway City Public Library	**	3,844,042	205,000
Homecroft Civil Town	**	150,724	no debt
Rocky Ripple Civil Town	**	114,792	no debt
Southport	?	301,696	not reporting
Spring Hill Civil Town	**	71,049	no debt
Lawrence Civil City	?	8,754,888	not reporting
Lawrence City Redevelopment Commission	?	8,754,888	not reporting
Beech Grove Civil City	?	2,746,786	not reporting
Beech Grove Pubil Library	**	2,571,309	1,923,950
Clermont Civil Town	?	336,605	not reporting
Meridian Hills Civil Town	?	1,258,619	not reporting
Warren Park Civil Town	?	274,211	not reporting
Williams Creek Civil Town	?	501,155	not reporting
Wynnedale Civil Town	?	88,673	not reporting

Debt Held By Marion County Taxing Units

I have long been wondering how much debt is held by all of the various taxing units within Marion County.  I now have the information, as provided to me by the Indiana Department of Local Government Finance.  These data were reported to the DLGF and reflect bonds and loans indebting the taxpayers of the various units on December 31, 2010.  There was no mention for Decatur, Center, or Washington Townships and I have, or am attempting to submit, an open records request to each of them. [edited to add: Decatur Township has the debt indicated in the table below; edited to add: Washington Township has no debt] Neither Warren nor Wayne Townships were listed in the DLGF information, but I was able to obtain those numbers today.  I failed to notice that Southport was not included until I began writing this up, and so have not yet made a request for their debt information. [edited to add: I also missed the City of Lawrence and will contact them]

The total debt (minus Southport, Center Township and Lawrence) at the end of 2010 was $6,777,164,786.  That amounts to $7500 per man, woman, and child in our County.

Below is a breakdown of the data by taxing unit.  I combined the City and County with debt for the Capital Improvement Board (CIB) and Health & Hospitals as there were bonds that were attributed to each whose purpose was for another and it would leave a wrong impression to separate them out.  For instance, there were bonds whose purpose was listed as Wishard, but some being the responsibility of the County and other of H&H.  Also, water company bonds are included in that combined category (I found bonds totalling about $818 million that referenced 'water utility' or 'water system'; I'm not sure which bonds and debt will be taken over by Citizens Energy as part of the sale of the water and sewer utilities).

Taxing Unit	Debt Dec 31, 2010
City, County, CIB, H&H	$3,363,009,346
IMCPL (Library)	100,345,000
IndyGo	29,890,000
Airport	1,204,805,000
MSD Decatur Township	159,641,968
Franklin Tnsp Comm School Corp	247,941,361
MSD Lawrence Township	211,025,794
MSD Perry Township	145,727,199
MSD Pike Township	64,185,000
MSD Washington Township	78,714,000
MSD Wayne Township	283,699,131
Beech Grove City School Corp	50,110,205
IPS	721,382,739
Speedway City School Corp	no debt listed
Center Township	not reporting
Decatur Township	2,093,938
Franklin Township	1,193,525
Lawrence Township	2,000,000
Perry Township	no debt listed
Pike Township	no debt listed
Warren Township	no debt
Washington Township	no debt
Wayne Township	152,282
Speedway City Civil Town	74,451,630
Homecroft Civil Town	no debt listed
Rocky Ripple Civil Town	no debt listed
Southport	not reporting
Spring Hill Civil Town	no debt listed
Tri-County Conservancy Dist (serves Heartland Crossing	11,495,000

Health & Hospitals - 2nd Public Notice on the New Wishard Project

On Friday, September 25, the Health & Hospitals Corporation published two public notices in the Indianapolis Star. The first was required by law since they intend to issue bonds secured by property taxes. I mentioned that notice in my 'Um - What Happened to No Property Taxes for New Wishard Project' entry.

The second public notice may not be required by any law and may be H&H's attempt to link the price tag and the project description to the upcoming referendum. To say that the referendum question is poorly written is to be kind; rather it is decidedly propaganda without reference to any facts a discerning voter might want to consider, like price tag and project description.

I will cut and paste the 2nd notice below, so you can read it for yourself.

What I see is an English version of the shorter, first notice, with more detail that I hope the public does take the time to read. What I see as items of interest are briefly put:

1) new Wishard project is described as the acquisition of land, construction of and equipping of a medical complex (two or more buildings related to the dispensing of health care), construction of least one parking garage and/or parking lot, and construction of a power plant.

2) they will finance the project by entering into a lease with the Indianapolis-Marion County Building Authority and BOTH entities will float bonds -- why is not explained. H&H will float General Obligation Bonds secured with property taxes. IMCBA will issue Revenue Bonds secured by the lease payments to be made by H&H. No indication is made as to why both bodies would issue bonds, or indeed, why the IMCBA need be involved at all in this project.

3) the total of all bonds issued by both bodies combined will not exceed $703,040,000 in principle, not exceed 30 years in payback time, not exceed 6.16% interest, and not exceed $830,478,858 in total interest paid over the 30 years. These numbers do not include the Build America Bonds issued by the federal government, estimated elsewhere to be about $120,000,000 in total interest to be paid by those bonds. So, the total payback could be as high as $1,653,518,858. These numbers also do not include any money, such as the $150,000,000 H&H has already saved in cash for this project. There is no indication in the notice of how much of the total bonds shall be issued by H&H and how much by IMCBA.

4) the maximum annual lease to be paid by H&H to IMCBA is $54,807,604 which is estimated would cause a maximum increase in property tax rates of $0.1494 per $100 of assessed value. Not mentioned is that this amount would be outside of the property tax caps now law in Indiana.

5) the current debt plus lease obligations currently held by H&H and repaid by property taxes is $41,730,000. The total of debt plus lease obligations currently held by all taxing units in Marion County combined and repaid by property taxes is $2,160,112,176, or 5.8878% of the total assessed value of Marion County.

Not said in the notice, but easily derived is that the new Wishard project would increase the total debt plus lease obligations currently held by all taxing units in Marion County combined and repaid by property taxes by a third.

6) the notice links the bonds to the approval of the referendum on November 3, 2009.

Following is the public notice itself.

THE HEALTH AND HOSPITAL CORPORATION OF MARION COUNTY, INDIANA NOTICE OF PRELIMINARY DETERMINATION BY THE BOARD OF TRUSTEES OF THE HEALTH AND HOSPITAL CORPORATION OF MARION COUNTY, INDIANA, TO ISSUE GENERAL OBLIGATION BONDS AND TO ENTER INTO A PROPOSED LEASE OR LEASES OF FACILITIES OPERATED OR TO BE OPERATED BY THE HEALTH AND HOSPITAL CORPORATION IN CONNECTION WITH THE WISHARD HOSPITAL PROJECT

Registered voters residing within Marion County, Indiana (the “County”), hereby are given notice that the Board of Trustees (the “Board”) of The Health and Hospital Corporation of Marion County, Indiana (the “Health and Hospital Corporation”), preliminarily has determined, at its meeting held on September 22, 2009: (1) that a need exists for all or any portion of the construction and equipping of a replacement hospital and related facilities for Wishard Health Services currently located at 1001 West Tenth Street (the “Wishard Complex”), together with land acquisition and site development related thereto and all projects and activities related to any of the foregoing, including, but not limited to, all or any portion of the following: (a) acquisition of land and any improvements located thereon and any site development related thereto, (b) renovation and equipping of any such buildings, and the construction and equipping of one or more buildings which will replace the existing hospital and related facilities for the Wishard Complex and provide all or any portion of (i) inpatient services, (ii) diagnostic and treatment, (iii) clinical support, (iv) non-clinical support, (v) offices and education, and (vi) public and building functions, (c) construction and equipping of a new ambulatory care building, (d) construction and equipping of one or more related parking garages and/or surface lots, (e) construction and equipping of a central plant for all of the foregoing facilities, and (f) all projects related to any of the projects or facilities described in clauses (a) through and including (e) (clauses (a) through and including (f), collectively, the “Wishard Hospital project”); and (2) to the extent permitted by law to take all of the necessary steps to finance all or a portion of the costs of all, or as much as is possibly based on the facts and circumstances at the time, of the Wishard Hospital project by: (a) entering into a proposed lease or leases (collectively, the “Lease”) between the Indianapolis-Marion County Building Authority (the “Building Authority”), as lessor, and the Health and Hospital Corporation, as lessee, relating to all or any portion of the Wishard Hospital project operated or to be operated by the Health and Hospital Corporation; and (b) issuing one or more series of general obligation bonds of the Health and Hospital Corporation (the “General Obligation Bonds”). The Building Authority will issue one or more series of revenue bonds, as lessor, secured by and payable from the lease payments under the Lease (the “Revenue Bonds”).

Each series of the General Obligation Bonds and the Revenue Bonds (collectively, the “Bonds”) will have a maximum term of 30 years. The Bonds will be issued in an original aggregate principal amount not to exceed $703,040,000, or such greater amount in the case of the issuance of any bonds, all or any portion of which will be used to refund all or any portion of the Bonds. The proposed term of any Lease entered into in connection with the Revenue Bonds will not exceed 30 years, beginning on the date each such Lease is executed by the Health and Hospital Corporation. Based on an estimated maximum interest rate that will be paid in connection with the Bonds of 6.16% per annum, the total interest cost associated therewith will not exceed $830,478,858 (which amount is net of any funds expected to be received by or on behalf of the Health and Hospital Corporation or the Building Authority from the United States of America as a result of any series of the Bonds being issued as Build America Bonds pursuant to Section 54AA of the Internal Revenue Code of 1986, as amended (the “Code”), as Recovery Zone Economic Development Bonds pursuant to Section 1400U-2 of the Code or as any other type of tax credit bond pursuant to the Code (collectively, the “Tax Credit Bonds”)), not taking into account any funds of the Health and Hospital Corporation or the Building Authority available for capitalized interest.

Including interest costs, the maximum annual lease rental to be paid by the Health and Hospital Corporation under the Lease is $54,807,604 (which amount is net of any funds expected to be received by or on behalf of the Building Authority from the United States of America as a result of any series of the Bonds being issued as Tax Credit Bonds), and the maximum total lease rental over the term of the Lease is $1,478,711,254 (which amount is net of any funds expected to be received by or on behalf of the Building Authority from the United States of America as a result of any series of the Bonds being issued as Tax Credit Bonds), not taking into account any proceeds of the Bonds deposited in a debt service reserve fund for the Bonds. The Health and Hospital Corporation’s: (i) total debt service fund tax levy for 2007 pay 2008 (which is the most recent certified tax levy) is $3,714,897; and (ii) debt service fund tax rate for 2007 pay 2008 (which is the most recent certified tax rate) is $0.0085 per $100 of assessed value. The estimated maximum increase in the debt service fund tax levy for the Health and Hospital Corporation and the estimated maximum increase in the debt service fund tax rate for the Health and Hospital Corporation after the issuance of the Bonds are anticipated to occur in 2036 pay 2037 and will be $54,807,604 and $0.1494 per $100 of assessed value, respectively, as a result of the payment of the debt service on the General Obligation Bonds and the lease rentals under the Lease.

The net assessed value of taxable property within the County, which is coterminous with the jurisdiction of the Health and Hospital Corporation, as shown by the last, complete and final assessment for state and County taxes (which is for 2008 pay 2009), is in the amount of $36,686,229,690 (the “Net Assessed Value”). The aggregate amount of the Health and Hospital Corporation’s debt service payments on bonds and lease rental payments under leases secured by ad valorem property taxes in 2009 is $4,314,980. Such amount divided by the Net Assessed Value is equal to 0.0118%. The projected maximum aggregate amount of the Health and Hospital Corporation’s debt service payments on bonds currently outstanding, together with the General Obligation Bonds, and lease rental payments under leases currently in effect, together with the Lease, which are secured by ad valorem property taxes, is $54,807,604. Such amount divided by the Net Assessed Value is equal to 0.1494%.

The sum of the Health and Hospital Corporation’s currently outstanding long-term debt, together with any bonds secured by leases entered into by the Health and Hospital Corporation and currently in effect, all of which are secured by ad valorem property taxes, is $41,730,000. The sum of the outstanding long-term debt of all other taxing units in the County, as of September 2, 2009, together with any bonds secured by leases entered into by all other taxing units in the County and in effect as of September 2, 2009, all of which are secured by ad valorem property taxes, is estimated to be $2,118,272,176. The aggregate of such amounts is $2,160,002,176. Such amount divided by the Net Assessed Value is equal to 5.8878%.

The proposed payment of debt service on the General Obligation Bonds or lease payments under the Lease must be approved at the special election to be held in the County on November 3, 2009, on the following public question:

“Shall the Health and Hospital Corporation of Marion County, Indiana, issue bonds or enter into a lease to finance safe, efficient and functional facilities for the Wishard Hospital project:
1.to allow Wishard to provide access to care for all residents of Marion County, including people who are seniors, poor, uninsured or vulnerable regardless of their ability to pay; and

2.to allow Wishard to provide specialized care, including to victims suffering from traumatic injuries or severe burns; and

3.to allow Wishard to work with colleges and universities, including Indiana University School of Medicine, Ivy Tech Community College, and the Purdue School of Pharmacy, to teach future doctors, nurses and other healthcare professionals in Indiana?”

Dated this 25th day of September, 2009. THE HEALTH AND HOSPITAL CORPORATION OF MARION COUNTY By: Dan Sellers, Treasurer (S - 9/25/09 - 5543537) - 09/25

Investigation of CIB Practices

Previously I called for a study of the City of Indianapolis' goals for downtown and how to reach them. I now call for an investigation of the money management practices of the Capital Improvement Board over the past twenty-five years. I think it could illuminate how we got to this point in the CIB's financial mess, but it might also bring to light debt management issues that should be questioned more broadly than just the CIB.

Here are some areas I can think of, that should be looked into. You can add your own.

Many are making generalized statements about deficit spending by the CIB since 2000. The documents available online at www.capitalimprovementboard.org show detailed comparative data only since 2001, due to an accounting method change. Much of the public focus on the CIB's financial mess has revolved around the new Colts contract with the City (2005) and the operating expenses for the new Lucas Oil Stadium. There is no doubt all of that should be gone over with a fine toothed comb. But I would add that in the late 1990's, then Mayor Goldsmith renegotiated the contract with the Pacers - guaranteeing them a median league income no less, and built them a new stadium, Conseco Fieldhouse, whereby they could make money beyond what their team alone brought in. How did these additional costs affect subsequent annual 'profit and loss' statements?

Also, have the bonds to build the old Market Square Arena ever been paid off or were they rolled into other bonds? We know that the old Hoosier Dome - turned RCA Dome - is now gone, yet we, the taxpayers are on the hook for $70,000,000 when it originally cost only $55,000,000 to build. Have we done the same thing with the MSA? Why was debt allowed to grow like this?

According to the Conseco Fieldhouse website, it cost $183 million to build. Yet, information provided by the Indianapolis Bond Bank that covered the CIB's bonds, show two outstanding bonds for Conseco Fieldhouse. Still due as of June 30, 2008, was $191 million and $14 million. There is a third bond entitled 'Conseco Fieldhouse Cash Flow Funding' with an outstanding amount of $34 million. What is that? Is it related to the $34 million still owed to the Circle Center Mall investors, or are we looking at an additional $34 million on top of the bonds? Not to leave well enough alone, there is a fourth bond for the Virginia Avenue Garage, built primarily for the Pacers along with Conseco Fieldhouse, and part of the City's contract with the Pacers. At an initial cost of $25 million, the outstanding amount was $5 million last year. All taken together, CIB debt related to the Pacers as of June, 2008, was $244 million for facilities that cost a total of $208 million to build ten years ago. And, it is not clear if the Circle Center Mall investors' $34 million has been accounted for in this tally.

The same document shows two RCA Dome bonds. Again as of June 30, 2008, $45 million and $25 million were still outstanding. Recapping, we have an outstanding debt of $70 million for a building that cost $55 million to erect.

In addition to the Lucas Oil Stadium bonds, which are held by the Indiana Stadium & Convention Center Building Authority, the Indianapolis Bond Bank floated a $74 million bond/loan on behalf of Jim Irsay so he could fulfill his $100 million 'contribution' to the cost of building the LOS. That bond was floated in 2007 and not one dime in principal had been paid by April 1 of this year (2009). Those bonds need to be examined as well.

The Convention Center costs may have had an alternate fate - actual reduction of debt. The best I can find online is that the Convention Center cost $26 million to build in 1984, and the 2001 expansion cost $84 million. As of June 30, 2008, the CIB still owed $21 million and $59 million on two bonds that are labeled 'Convention Center'. So, $80 million owed for a building that cost $110 million to build. One still must ask why only $5 million has been paid off the original cost from 25 years ago.

Those of you who take advantage of the only sports venue that is actually affordable for most of us living in Indianapolis, Victory Field, rest assured that only $5 million was still outstanding on a bond for that facility as of June last year.

Debt in general and debt management needs to be examined in Marion County. But, an investigation of the finances of the CIB could lead the way.

The taxpayers deserve clear answers of how we got to where we are today when it comes to our sports teams. We need to know that the mess can actually be put behind us and is not going to explode in our faces yet again due to long term disregard for the actual costs of operating these facilities, sweetheart contracts to retain professional sports teams in a small market, and irresponsible debt service.