Indy Tax Dollars

"PINCHING PENNIES"

That's the descriptive phrase used in this morning's headline referring to the financing of the operation of the convention center expansion - and the stadium.

If the matter were less serious, this approach might have the makings of a comedy skit.  An individual purchases a luxurious residence, then finds there is no money to heat it in the winter.  The bumbling idiot - or sly con man? - then concocts a plan selling the neighbors on paying the utility bills, basing the scam on the idea that the value of their properties will fall if they don't maintain his mansion properly.

First, of course, we would question the use of the term here simply on the fact of volume.  Surely the expenditure of a billion dollars on the two projects, particularly without provision of operating funds, rises above the connotation of "penny" pinching.

The shortage of such funds for the two buildings is not a case of poverty.  It is a case of stupidity, or at least a lack of "due diligence" - possibly at a criminal level.

The key to the whole problem may lie in a sentence in the very last paragraph of the (57 column inches) story.  It quotes the mayor's chief of staff as follows:  "From the beginning, it's been said that this was not about the Colts stadium, it was about expanding the convention center." 

He is perfectly correct.  That lie is, in fact, what has been said.

Aided and abetted by a media which accepted press releases as gospel, the whole project was actually dedicated to increasing revenues for the professional football franchise while hiding behind the screen of "needed convention space."

Then, in the four years since the agreements were signed, no visible efforts were made to provide operating funds for the stadium until construction was virtually complete.  Now, suddenly, with convention center expansion well under way, we are handed the same problem for that structure.  A pattern here?

We're reminded of the stories that abounded years ago about school corporations spending most of the proceeds of a bond issue on a gymnasium, then coming back to the taxpayer for funds to build the "needed classrooms" - the basis for the original sales pitch.

We won't argue some economic value for a well-run convention center.  But it is lunacy to continue to hand public funds to a board with the financial record of the Capital Improvement Board (CIB).

The CIB has failed completely to negotiate leases for publicly owned properties which have any semblance of reason or fairness to the taxpayers supporting them.  The CIB apparently is incapable of recognizing the simple fact that larger, more complex buildings will require increased operating costs.  And, while the CIB has talked at great length about the importance of convention business, it has miserably failed to anticipate the operation, and appropriate financing, of that function.

No, Mr. Editor.  A "penny pincher' is one who lives very carefully within prescribed limitations of income.  It is not one who has blown through every last penny made available - many on questionable items - and then whines about a lack of wherewithal.

 

 

Are there limits?

We begin with our congratulations and very best wishes to City-County Councilor Christine Scales.  (Unfortunately we do not live in her district.)  She was the lone Republican vote against the latest gouge of the taxpayer for the benefit or our sports millionaires, despite seemingly heavy political pressure to support this fiscal irresponsibility.

Not only did she vote against it.  She wrote an excellent rejoinder - appearing currently - to an editorial in the Indianapolis Business Journal stating very good reasons why every member of the Council should have done the same.

Completely coincidentally, today's issue (Aug. 30) of the daily paper has an extensive story about the city's budget problems, with specific reference to the effect on the public park system.

The provision of appropriate public space for the rest and recreation of the city's residents, at minimum or no direct expense to them, is a traditional function of local government.

Once again Indianapolis "leaders" - political and civic - have demonstrated a stunning willingness to disregard reason and even morality.  While seeking ways to cut expenditure on our parks, they simultaneously force through yet another tax increase to subsidize citizens and businesses capable of happily spending hundreds or even thousands of dollars on a single afternoon's entertainment.  (Well, truthfully, "stunning" is an over-reaction, considering frequent past policy decisions!)

Again, we congratulate and thank Ms. Scales.  And we wonder whether those who voted for this latest giveaway sleep well.  Just how far are they willing to go?  Maybe there should be a poll of taxpaying park users to give them some direction and spinal support.

Old and new

Here's an old quote from the morning daily dated May 18, 1997.  It references financing for what is now Conseco Fieldhouse, and the quote is from the Pacers' owner.  We'll present the final paragraphs at some length, but without our comment.  (Yours are invited.)

"For instance, Simon said he doesn't like the idea of asking for other local business to chip in for the arena.

"'I don't think it's right for an entrepreneur to ask another entrepreneur for a gift,' he said.

"He is not as uncomfortable about asking the public for help.

"'I believe if anyone sits down with the numbers, they'll see how much they'll get back,' he said.  So the taxpayers will not be out in the end, and to me they'll be benefiting.  Any good deal is a deal that's good for everybody.

"'I'm very clear about that. If this is not a good deal for everybody, we don't want to do it." 

On a more recent subject, an article in the IBJ of September 15, 2008, was headed, "City reviews TIF districts."  We were told that an increase of $2.6 billion in assessed valuation in the 38 TIF districts has taken place.  The rest of the paragraph revealed that this is meaningless to general city government revenues because any such increases can only be used for the specific TIF district.

We were also informed that in at least one case, the revenue was not being used at all, but simply piling up in a bank account to the tune of $3.4 million dollars.

We don't remember seeing any follow-up on the story, Mr. Mayor.  What's new???

New and off-point.

Yesterday's paper carried a front page story about Rep. Carson's position on the health care legislation in Congress.  One sentence in a sidebar called "About the 7th district," struck our eye.  "Bankruptcies: 2,440 bankruptcies were caused primarily by health costs last year, the most of any of the state's nine districts." 

Is someone really keeping that detailed account of such things?  2,440 out of how many, total?  What other causes were found?  Anybody have a mortgage they never should have had to begin with?

New - and really off point.

We really could not help wondering why a high school football team's loss record should have been a front page "news" story yesterday.  Of course, it could have been more mean-spirited.  They could have researched it a little further and named the captain of each team.  That would have made the embarrassment even more personal.  We doubt that even a "slow news day" justifies this effort.

"Hardball:"

Large type.  Front Page.  Above the fold.  That's part of the headline on this morning's paper.  The next words - same size type - were "Kenley vs. IU, Purdue."  It seems our neighboring senator from Noblesville doesn't like the tuition increases and has made up his mind to do something about that problem.

(In the interest of disclosure - We have three grandchildren enrolled at Purdue.  The families would certainly welcome lower costs at that institution,  But...)

The senator has apparently taken it upon himself to strong-arm these two universities on a very personal basis.  His threat is to withhold approval for construction projects unless they reconsider their latest fee increases.  We found one paragraph of the article most interesting.  It reads as follows:  "Most of the projects are privately funded, but state law requires that all university building projects be approved by the Budget Committee.  As chairman of the committee, Kenley sets its agenda.  That gives him control of whether the projects are considered." 

Since we could find no reference in the story to the position of any other member of the Budget Committee, we assume this is strictly a "Kenley Crusade."  His plea for parent/taxpayer relief is most certainly welcome.  But a question does arise in one's mind.

Just where was the senator's "hardball" approach when it came to financing the incompetent spendthrifts at the Capital Improvement Board?  Why was he one of the first in line to help work out the plan to throw more public dollars into that black hole - including an increase in state revenues diverted thereto?  Why was there no demand from the senator that reductions be made there before any such plan was implemented?  Why was there no insistence on investigation and/or reorganization of that board?

Makes one wonder about the comparative influence of Colts tickets as compared to those from Purdue or IU.

A reminder

While the current idiotic antics are carried on downtown gouging the taxpayer again for the benefit of professional sports, there is some room for good news.  This is true, of course, only if we can get those downtown folks to do something sensible and logical.

In reviewing our clippings file, we found some interesting references to the Market Square Arena (MSA) site.  The "groundbreaking" for MSA took place on October 20, 1971.  If we assume that all the land acquisition and necessary paperwork took place that year, then we see that the property has now been off the property tax assessment rolls for 38 years!  The building was ultimately closed on October 24, 1999, and was demolished on July 8, 2001.

Despite years of budgetary problems, up to and including the present, caused in part by unreasonably flat property tax revenues, the politicians and business people running (Oops!  Almost made a typo there - wrote "ruining" instead of "running.") the city have been unable to find a way to get this property back on the tax rolls in 8 years.  Some of the clippings we found concerning development proposals dated back to Dec., 2006, Apr., 2007 and Nov. 2008.

All efforts appeared to have failed because of one or both of two factors.  The proposals did not match what our leaders thought should be on the site, and/or, the wrong people made the proposals.  (We certainly can't have "outsiders" using their own property without the approval of those "leaders.")

We continue to insist there is an easy, honest way out.  Let economics make the decision.  Put the property up for open bidding.  Deny the politicians the right to approve the property usage determined by a buyer.  Let that buyer decide what is the best and most profitable use of his/her purchase.

Mr. Mayor, take the money, give the developer your blessing, and get the property back on the tax rolls.  How difficult can that really be?

Disappointing

Not really unexpected, but still disappointing to us.  We refer to the lead editorial in today's Indianapolis Business Journal, in which the author expressed disappointment in the action of the City-County Council with its (partial) bailout of the CIB.

Our problem is that the author's disappointment had little to do with the admitted fact that the action is only a temporary band-aid.  Nor was there any reference to the foolishness involved in, without any question whatsoever, handing ever increasing numbers of tax dollars to an incompetent governmental agency which has committed to further public debt of more than a billion dollars while concurrently operating at a deficit for ten years itself.

The editor was disappointed that the vote of approval for this latest tax increase came down to a political party line decision.  What else could have been expected?

For years we have had politicians trying to determine who can spend the most taxpayer money on questionable downtown projects while blaming the politicians of the other party for the ensuing tax increases.  All with the constant approval of the media, and all to the detriment of the individual taxpayers of the city.

The editor also saw fit to throw in the "pacifier" that it is all justified anyway because the hotel tax is one local folks won't have to pay.  Unwillingness to pay for one's "wants" - to say nothing of "needs" - particularly when involving funds coerced from "visitors" seems to us a sorry indication of lack of civic character.

Is disappointment in a party line vote, with little or no reference to the highly controversial matter of the subject under consideration, a useful approach to the problem?  Does the paper not have available a single investigative reporter capable of following orders to find out how we got here before we throw more tax dollars into the pit?

Why must another tax increase, of any kind, always be the preferable (only?) alternative to just asking some questions?

Today's slice of baloney...

...comes in the form of an editorial.  We get a very broad hint that downtown Indianapolis will almost certainly implode unless more tax dollars are crammed down the throat of an innocent, eager-to-please, but clueless, CIB.

The hotel association chimes in with the proposition that all will be well if the CIB is handed the dough and uses it to market conventions.  Do these people truly believe the CIB would use the money that wisely?  Do they really think conventions and the convention center are the core of the CIB financial problems?  What policies and procedures in place for decades would make them think so?

The crux of the situation concerns the subsidy of two professional sports franchises, and the outrageous lengths to which the CIB has gone to provide those subsidies.  Add to this the CIB's fiscal irresponsibility in handing out tax dollars to local non-profit organizations while operating at a deficit itself over a ten year period.

The folks at the paper are also interested in how, or whether, the city's budget is going to be balanced.  But they've never bothered to try to find out how we could have years of "investment" of public and private funds totaling $4 billion downtown while the city's property tax base remained flat.

Interestingly enough, yesterday's edition of the same paper carried a lengthy article about problems in our neighbor city to the north.  It seems Carmel has a disturbing interlocking of interests where much the same people approve expenditures of public funds and then become the user or distributor of the same funds - and apparently believe the taxpayer has no right to information about the situation.

We'd have to guess those folks learned by looking in our direction.  The same practices have been in use here for years.  We may not have invented the concept of "smoke-and-mirrors," but we sure know how to use it.  Even though it appears to have pretty much escaped the attention of the folks at the paper.

"Lifeline" indeed

This morning's serving of baloney is headlined "Lifeline for CIB could be lost in political waters."

The story continues with the usual dis-information that the future of the convention center is at stake, and unless we reward decades of fiscal incompetence with additional tax dollars, the city is certain to lose the convention business which is the salvation of downtown.  Politicians are said to be on a hot spot as to supporting a proposed tax increase.

Does anyone else think it strange that, if in fact the convention business is so significant, the CIB spent three times as much on a football stadium as they are spending on the convention center?  Is there no relevance to the fact that the CIB, having erected this extraordinary sports palace, virtually pays the football team to use it?

If convention business is important to the city - and we believe it is - why was not the center itself the number one priority so that revenues therefrom could be protected and used to help finance the debt being incurred?  The CIB is most assuredly not getting meaningful revenues from the football team.

Political "dangers" for office holders arise from the awakening of the taxpayer to a demand to dig ever deeper into the private pocket to support a for-profit entertainment business owned and operated by already very, very wealthy people.  All while questions as to the source of the problems are never asked.

We also dislike the suggestion that a "hotel tax" is OK because it only hits visitors to the city.  Part of our national crisis is the result of governmental expenditures which are OK because they are financed by "someone else."

We're not in the market for a new car.  But the idea of somebody wanting to stimulate the economy by volunteering to give us two or three thousand bucks of your money to buy golf clubs, balls and shoes hits the spot!  Not!

As far as we are concerned, buying us golf clubs, buying someone else a car, and unquestioningly bailing out years of failed public fiscal policies are equally not the responsibility of the taxpayer.

The only politicians in danger are those who continue to insist the opposite.

Very interesting

Our last post, A double dip?, drew a comment from a reader which we found intriguing.  He pointed out to us that as recently as July 24, 2009 - last Friday - the Indiana Tax Court issued a decision related to property tax exemptions.  (Thanks, Miles!)

See:  http://www.in.gov/judiciary/opinions/pdf/07240902.tgf.pdf

We'll try to cover it from our point of view without over-simplifying.  A for-profit corporation, Oaken Bucket, claimed exemption for part of a building which it leased to a church for religious activities.  The Tax Court reversed an earlier decision which had denied the exemption.

The 15-page decision gives many citations, none of which we checked, but all of which we assume are relevant and accurate.  It does appear that much of the court's thought was based on the proposition that the decision under appeal had not been properly supported with factual information.  Based on the citations shown, it apparently has been previously decided - something of which we were not aware - that unity of ownership, occupancy and use need not be a prerequisite for such exemption.

Page 13 of the decision provides the following wording:  "However, the intent of the legislature is not to force a single charitable entity to achieve a unity of ownership, occupancy and use, but to ensure that the particular arrangement is not driven by a profit motive."

This case, it seemed to us, became significantly based upon the fact that the owner had sacrificed some profit by granting a lower rental price per square foot than other space in the same building, thereby indicating a "charitable ownership."  We found no indication that the lower price was equal to the cost of operation and that there was, in fact, absence of all profit to the owner.

Finally, the court says, "Consequently, Oaken Bucket's charitable purpose was manifested through its charging of below market rent...."

We know nothing of legalistic rules governing an appeals court as to what it can and cannot consider.  In our simplistic (but hopefully logical?) approach, it does seem some other questions might have been asked.

One - Just how much profit may accrue to the owner, and who decides what the "tipping point" is?

Two - How much is this exemption worth in dollars, and how significantly does this offset the lower rental charge (and the charitable issue?).

Three - Does the owner write off the "loss" from lower rental rates on his tax returns?

All-in-all, we tend to think this is the sort of subjective complexity which strengthens the argument of those who say it is time to give serious consideration to complete elimination of the property tax.

A double dip?

We were positively intrigued by a single sentence in an article in the Indianapolis Business Journal (IBJ) which hit our mail box yesterday.  The story itself concerns possibilities for redevelopment of a building which has served as a minimum security jail for some years.

The property is privately owned but has been operated by Marion County Community Corrections, which is vacating its lease next April.  The lease requires payment through 2015, and it is "...unclear how much the city will owe on the lease...."

But the sentence which grabbed our attention is as follows:  "The building most recently was appraised for tax purposes at about $500,000, but because of its municipal tenant, it hasn't generated tax revenues."  (We assume the term "building" actually includes land and improvements.)

We admit to having been "out of the loop" for a few years, but we certainly were not aware that having a governmental tenant gave a private owner of property exemption from taxes thereon.

The situation brought to mind the circumstances of the prime office building at One North Capitol Avenue.  It used to be (still is?) loaded with state government tenants, at least partly because of its proximity to the Statehouse and weatherproof access thereto.  Has that building been given a pass on property taxes because of its tenants?

If these are now the rules, this has to be a world class "double dip."  The owner gets the revenue from the taxpayer, but does not pay taxes because the revenue comes from the taxpayer!  And if the municipal  governmental tenant pulls out, the city apparently is stuck with the balance of the lease!!

Something wrong somewhere!!!