Indy Tax Dollars

A major (colonel?) disappointment

It is still early but we see no signs that the new city administration has any intention of reviewing and/or changing public fiscal policies which we believe have made a very significant contribution to the city's monetary woes.

Pardon our cynicism, but we have not bought into the hype of the late legislative session concerning its efforts to relieve the property tax situation.  It is not coincidental that the effective date of the sales tax increase was months and years ahead of the time for property tax to decrease - permanently - maybe, making it even more important to look at all phases of the tax problems.

(Public opinion continues to be skewed by media treatment.  A recent headline said, "Sales tax increase helps cut government spending."  It covered a column out of one of our institutions of higher learning.  And led to the following thought.  A local radio talk-show host uses the word academia which he pronounces "aca-day-mia."  We really don't care about that, but couldn't help wondering whether "macadamia" might be more appropriate!)

Having at least hinted during his campaign that the money, time and effort devoted to the feel-good, pot-of-gold fantasy of an Indianapolis Super Bowl was not on his agenda, Mayor Ballard has now reversed course and is in full pursuit.  There's still been no explanation of the fact that only 3 NFL cities - in a league with 32 teams - are bidding on this alleged financial bonanza.

We have seen no public indication that he intends to make any changes in the policies of abatements, TIF districts or other subsidies of property developers which divert public funds away from legitimate municipal expenditures.  Nor has he shown any interest in trying to return property eliminated from the tax rolls to the tax base.

In fact, one specific situation exists which apparently still suffers from the desire to control, and geographically direct, economic activity.  Market Square Arena (MSA) was built 34 years ago.  Presumably the land was acquired by the city at least one year prior to construction.  Those two blocks have now been off the property tax assessment rolls for 35 years.  The building itself was demolished 7 years ago in 2001, and, of course, was never taxable. 

We had hoped that one of the first things the new mayor might do would be to give orders:  "Let the economy work.  Find a financially qualified buyer. Sell the property.  Put it back on the tax rolls!"  Seemed pretty simple to us.  Instead, efforts continue to direct the use of the property maintain priority over the simple sale, and the property remains a drain on, rather than a source of, revenue.

The situation gives us little hope that any important effort will be made to review, and possibly alter, public policies which have been in practice for so long and with such dire results to the legitimate operational funds of the municipality.

Teeny Tiny Trivia

The headline on the article was: "Daniels' ad: It's OK to differ."  That was on Friday, March 28.  The Gov's campaign ad was referring to people agreeing with or differing from his policies, positions and proposals.  We remind our readers that, on Sunday, March 23, he was quoted as saying that the president of a major, state-wide business organization had his "...head where the moon don't shine..." for remarking that the late, un-lamented session of the legislature had not been good for business.  Is this change of heart about the right to differ granted to all comers, or is the business community still excluded?  What about it, Gov?

****

Speaking about what's good for business, the paper of the 28th also carried a front page headline as follows:  "The numbers are out" with a sub-head of, "82% of businesses see increases."   Reference is to new assessment figures.  The new figures may - or may not - be totally correct.  We don't pretend to know.  But we do know that there are still millions of dollars worth of real estate in the heart of the city - currently being used by for-profit corporations - which is not on the assessment rolls at all.  Considering abatements, TIF districts and municipal "investments," the question expands to equal treatment just within the business community itself.  (Can't get the paper to cover that part of the equation!)

****  ****

A front page headline on this morning's paper (3/29/08) tells us, "That 1 percent can add up."  Reference is to the onset of the sales tax increase coming next Tuesday.  We find it really strange that the new 1% can "add up" while the 1 or 2% tax we've paid to eat out all these years has been written off by the paper as too insignificant to worry about.  The article gives examples of the impact on various types of purchases, including a steak dinner at an up-scale restaurant.  A footnote - in very small type - tells us that for this dinner, as of Tuesday, the total sales tax will be 9 percent, including the "local restaurant tax."  This is a euphemism for the Food and Beverage Tax which, under the new set-up, will constitute more than 22 percent of the diner's tax bill.  The revenue from that tax, at a 1% rate, was supposedly dedicated to covering the cost of construction of the RCA Dome.  It must have been insignificant.  Two decades of income from the tax have been spent and we still owe the entire principal amount on the Dome Debt!

****  ****  ****

Continued from above - - We've heard that the $75 million still owed on the about-to-disappear-dome has been incorporated into and is now a part of the debt for the new stadium.  Does this mean that in another 25 years we'll still owe $1 billion plus $75 million when they have the ground-breaking ceremony for the much-needed new $1.5 billion stadium?

Humpty Dumpty

Today we received a glossy, full-color mailing piece from our state senator.  This is a triumphant proclamation apparently intended to make us happy with what the legislature just did for (to?) the taxpayers.

Part of the text from the senator reads as follows:

"Constitutional Guarantee:  Historically, whenever we've raised other taxes to reduce property taxes, the reductions were temporary.  Property taxes returned to previous levels, while other increased taxes remained.  To prevent this 'creep' in the future, our plan includes an amendment to Indiana's Constitution making the 1-2-3 caps permanent."

Readers who have been with us for the past few weeks or months will remember that we have raised a particular question several times - with still no answer.  The question is, "How does a percentage of a variable figure constitute a permanent cap?"  Our senator has been told of that question by email.  We presume he has not had time to read our email.  At any rate, he has never responded.

A recent column in the Indianapolis Business Journal (IBJ) was headlined "Trending will rot out property tax deal."  The last paragraph of the column says, "An inadequate trending approach has been left as a part of our property tax assessment procedures.  If assessments are not appropriate, the entire system is corrupt.  That's how the Legislature left it.  Are we expected to live with it?"

The author of that paragraph evidently does not like "trending" as a system of assessment, but whether or not he agrees with our question, he is pointing out that assessments will change in the future - by one system or another.

When the tax is limited only to a percentage of the assessment and the assessment does change, the tax will change.  THE SYSTEM DOES NOT PRODUCE A PERMANENT CAP.   

Perhaps we are dealing with Humpty Dumpty here.  In the book "Through the Looking Glass" Humpty says, "When I use a word...it means just what I choose it to mean -- neither more nor less."  When a legislator - or governor - calls it a cap, that makes it a cap!  And yes, we apparently are expected to live with it.

But we have a suggestion.  If the senator really wants to talk about something permanent, he probably ought to be thinking about the increase in the sales tax which goes into effect in a few days.  Now THAT will be permanent!

A public servant???

We have reference to an article in the Sunday paper (Behind Closed Doors) which carries a quote from the governor of the state of Indiana.  If the quote is accurate, the governor owes an apology to the gentleman to whom he has made reference, to the organization the gentleman represents, and to all citizens of the state.

The President of the Indiana Chamber of Commerce, Mr, Kevin Brinegar, had stated the position of that organization regarding the classification amendment the governor has insisted be a part of the so-called property tax reform legislation.  The governor knew of the Chamber's position before the legislature even convened.

Following adjournment of the session, Mr. Brinegar offered the opinion that this had not been a good session for business.  Whereupon the governor of the state of Indiana commented, "I think he's got his head where the moon don't shine."  (Maybe it's a mis-quote, so we won't comment on the grammar.)

Individuals and organizations are entitled to express opinions about the actions of political leaders.  They ought to be able to do so without crude, personal attacks by the governor of the state, the highest public official - and alleged public "servant" - of the state.

The arrogance involved, particularly when one considers the probable political support given by chamber members, is almost unbelievable.  Almost.  Except that it is a reminder of the attitude of the governor's Stadium Building Authority when it tried to force a thriving business out of town to make room for a few parking spaces for the Colts.

We repeat - the governor owes Mr. Brinegar an apology.  We would further suggest that the Board of Directors  of the Chamber direct a letter to the governor demanding an apology to the entire membership of the Chamber.

Are we finally ready, once and for all, to throw the term public "servant" on the junk heap?

April Fool!!

If it happened more frequently, one might wonder whether citizens of Indianapolis and Indiana were being taken for fools intentionally - and successfully.

A member of the Capital Improvement Board (CIB) projected that the city would "...make $1.39 million annually from the Colts move."  That guesswork was announced 24 years ago, appearing in the local daily paper on April 1, 1984.  We'll never know whether the date was coincidental or intentional.  But the "guesstimate" was certainly a huge - and very expensive - joke on the taxpayers.

The governor has just signed HB1001, alleged to be widespread, permanent property tax relief for all Indiana taxpayers.  We found it intriguing that, of some 600 pages of material which include a wide variety of "protections" for the taxpayer, the first phase to take effect will be a 16% increase in the state sales tax.  (Don't want our spenders to worry about funds, do we?)  And guess what!  The increase in the sales tax becomes effective on April 1, 2008. 

We have asked before and we will ask again.  If one considers a "cap" to be a permanent, inflexible limit on something, how does one reach that point by calling a percentage of a variable figure a "cap?"  Assessments can change every year, and the individual taxpayers who think this legislation will give them permanent relief from property tax increases are living in a dream world.  With or without professional assessors - if and when we get them - politicians will play games with assessments.

Our efforts to get a copy off the Internet of Senate Joint Resolution 1 - the constitutional amendment which will place the alleged "caps" in the state constitution - have been unsuccessful so far.  Having not seen it, we are curious about the wording of the proposed approach.  The publicly stated effort would "cap" residential property (that lived in by the owner?) at 1%, rental and farm property at 2%, and all other - business - at 3% of the assessed value.

We suppose they have covered this, but we do wonder about definitions.  If a man owns ten single family residences from which he derives his total income, are those properties "rental" or "business?"  Is a ten-story apartment building "rental" or "business" property?  If a suburban area homestead contains, as a sideline, a profit-making horse boarding stable while the owner goes downtown to work every day, is that a "business?"  Why is a "farm" producing corn and soy beans for sale on the local market not a "business?"

The effect on business generally has disastrous possibilities.  There are few "red flags" more significant to a business looking to relocate than the fact that the governmental unit involved can hang a legally sanctioned higher price tag on it than on surrounding properties.  And if the residential property owner (read, voter) will have to eye the assessment program carefully, just think what the potential is for game-playing with commercial buildings and industrial plants.

We are seriously concerned that the whole situation might be an intentional scam.  The sales tax increase will be in effect and will stand, no matter what.  In self defense the business community may find itself paired with the spenders and the likes of the Indiana State Teachers Association (ISTA) in an effort to defeat or to change the proposed constitutional amendment.  (An amendment must pass, in identical form, two separately elected legislatures.)  The ISTA already has pretty effectively neutered the referendum provisions originally offered, and it is against "caps" because it wants no limits, no how, no way, on  revenues to which it is "entitled."

We fear that HB1001 could turn out to be the most successful - and most damaging - April Fool trick ever pulled off in the state of Indiana.

Quick answer!

Well, it may not have been the answer we hoped for, but it has not taken long to be forthcoming.  Some of us had been concerned about whether the fiscal giveaway policies used so widely by the three previous mayors of Indianapolis would be continued.  Would the Pacers, the Colts and various real estate developers be allowed to continue to avoid and ignore the tax burdens assumed by ordinary citizens?

Apparently those policies will not only be continued but will, in fact, be expanded!

According to this morning's paper, the new city administration already has a lobbyist at the Statehouse arranging for the NCAA to join in the rape of the taxpayer, using the same type of arrogant favoritism which will be granted to the NFL should this city have the misfortune to be "awarded the honor" of hosting a Super Bowl.

Neither organization will be required to pay the taxes which would normally apply.  We do wonder how this extended generosity will work out in the long run.  These local taxes were increased specifically for the purpose of funding the billion dollar plus debt to which we have been committed.  The Colts and the "Final Four" were supposed to be the big money makers for the city.  Now we're telling them they don't even have to pay the very taxes providing their outrageously expensive playpen!

We have no detail on the breadth of the proposed exemption.  Will it be only for NCAA staff?  Will it include participating teams and school staffs?  How about the band?  What about cheerleaders?

We're going to be told, of course, not to worry because everything will even out in the end.  And besides, everyone is going to have a great time.

Baloney!  To put it bluntly, the city is once more submitting to blackmail, and our preferable response would have been to to give the NCAA the telephone number for Mayflower, and offer to help them get loaded.

But just in case we're wrong and these occasions of municipal generosity really will work, we make the following suggestion.  There is an organization entitled the American Society of Association Executives (ASAE).  As the name indicates, these are people representing organizations and associations of all type and sizes from all over the country.  And they are the people who have the responsibility of determining meeting locations.

Our convention center people should make every effort to get the ASAE annual convention here.  Then on a face to face basis, all these folks could be made aware that taxes and expenses are all negotiable here, depending on the purposes of each organization.  Should there be an athlete or two on a board or committee, they might qualify under the "Indianapolis sports welfare meeting clause" for all kinds of freebies!  We may lose money on individual meetings, but the volume will be marvelous!

Question.  Mr, Mayor, how do you anticipate these types of fiscal policies will help fund the real needs of the city?  Is this the change you think we voted for?

Numbers, Mr. Mayor

We do seem to have a tendency to be a "numbers freak."  All sorts of numbers stick in our mind, for a great variety of reasons.  Or maybe for no reason at all.  Maybe it is this preoccupation with numbers that has, in recent days, led us to focus on the digits "2-0-1-2."  What makes that number special?

Well, of course, "2012" is the year by which Indianapolis must host a Super Bowl.  So we are told.  If we miss this "opportunity," people from New Zealand to Nigeria to Tajikistan - to say nothing of those in Miami, Seattle and Keokuk - will know that we are a city of dolts, unable to appreciate the marvelous, wondrous things our beneficiaries at the National Football League are so generously willing to hand us.  (Or to stuff down our throats!)

But, much as it would hurt to have our Tajikistani friends think so ill of us, we do believe it would be appropriate to ask a question or two now.  What the hell's the rush?  Why 2012?  Is the future of the event in danger?  Is it likely that we'll miss out altogether?  (We can think of a worse fate!)  Almost daily news stories tell us that the city itself, as well as individual residents and business people, is facing some very hard fiscal decisions in coming months and years.  It is extremely difficult to believe that stirring a multi-million dollar spree into the mix - for the primary benefit of the NFL owners - would be a wise decision.

There seems to be no limit on the projections of monetary and PR value to the city in hosting this drastically over-hyped happening.  Washington Street will be turned into a river of gold!  Flowing both east and west toward the City-County Building and the Statehouse!  Forever!  One columnist tells us a Super Bowl will "...ensure the flow of billions of dollars into the local economy over many years."  Sounds like he ought to be writing copy for some high pressure, used car sales lot!

But those are the big numbers.  Let's relate to a very small one.  There are thirty two teams in the NFL.  How many cities are bidding on the 2012 Super Bowl?  THREE!  What goes on here, folks?  Here's an event which allows the city to become the center of planetary attention, while simultaneously amassing the wealth of Midas, and only three are indicating any interest in such a total bonanza!

Frankly, we think it looks like a scam in which the NFL owners' arrogance will, again, be repaid with extraordinary riches, local "movers and shakers" will pat themselves on the back for a great show, and the taxpayers will once again look up at a new mountain of debt added to current problems.

For whatever it's worth, Mr. Mayor, we don't think this is what the voters had in mind last NOvember.

Off point trivia...

...or maybe not.  While it snowed this morning, we sat in the clubhouse at the golf course we frequent and watched an unbelievable television show unfold on ESPN.

It was the Congressional hearing on the alleged use of performance-enhancing drugs by professional baseball players.  Two gentlemen were testifying.  One was a club trainer, the admitted "shooter" of the drugs, and the other was a "shootee" who was denying everything.

At this point we put in a disclaimer.  We don't follow professional baseball, we have no idea who might be telling the truth, and, to quote Mr. Gable/Butler, "Frankly my dear, I don't give a damn."

What particularly intrigued us was the fact that, amid a few minor happenings going on in the world - a war, economic problems like GM downsizing by thousands of employees, a forth-coming national election, energy shortages and high gas prices, and even global warming - here was a full-scale investigation being carried out by a formal committee of our dedicated legislators of a "did too - did not" argument as to whether a baseball player used drugs.

Our initial reaction was, "Who the h... cares?"  But then we had two thoughts about the situation.  The first was on the complete waste of time and money on such unimportant trivia by our national legislative body.

If organized baseball cannot handle the problem, and it seems to have pretty well demonstrated that it cannot - or will not - and the situation really does constitute a national disaster, then let's just pass a law disbanding that sport, and move on to matters of lesser import, like immigration for instance.

But the second thought was that this, at least partially, tells us how far the professional sports mania has invaded our national culture.  And it gives some insight as to why municipalities all over the country are willing to submit to blackmail by team franchises to the tune of millions of dollars.  Isn't it time for us to "get a life" and realize that we're talking about a game?  And, incidentally, it's a game in which many of the performers are paid, courtesy of the taxpayers, much more than some of the "excessive CEO salaries" about which we see protests in the "Letters to the Editor."

Since the taxpayer is already so deeply involved financially with these teams, maybe it is appropriate for Congress to step in.  But we'd prefer to "cut our losses" and not waste any more public funds than current commitments.

Otherwise we foresee a situation where town councils will be over-seeing Little League games and investigating whether the winning home run was actually hit by a kid who was three weeks over the age limit!

Another example

Big front-page article in this week's Indianapolis Business Journal (IBJ) about the financial operations of the Center Township Trustee.  Covered a lot of ground.  What we found most interesting was ground not covered.

We understand that the article is not specifically about the property tax problem.  But it does, in passing, mention a factor which we believe to be a significant contributor to that problem.  And, as usual, it continues the enduring policy of the media, the business leadership and politicians - specifically including the governor and state legislators - of ignoring that factor as a basic part of the problem as it exists in Indianapolis.

The article points out, without reference to the relationship to the problem, that the trustee's office owns some $10 million worth of real estate.  In a separate story in the same issue, there is very casual reference to the fact that, "Several key parcels have been on the trustee's books - and off the tax rolls - for decades."  (Our emphasis.)

That's "decades" - plural.  Something more than twenty years?

Some time ago a scan we made of the Center Township Assessor's plat books indicated that as much as ten percent of the land in the Mile Square was not being taxed while being used by for-profit businesses.  We're sure that figure has increased in the interim.  And we did not include the property referred to in the current story.

Do we really know the basic dimensions of the problem here?  Why is it so difficult to consider that part of the burden exists because of the combined impact of elimination of property from the rolls, plus the excessive use of abatements, outright subsidies and TIF districts?  Particularly when the property receiving such favorable treatment is likely the most valuable real estate in the state of Indiana!

We have strong doubts that the framers of the state constitution meant anything other than that ALL property, similar in type and usage, should be taxed equally.  We think they might have the same questions we do.  And we continue to dispute whether a quick fix by a short-session legislature is the correct approach to a problem "decades" in the making.

The political answer, as might be expected, will be to save the homeowner (voter) by shifting the tax to business.  The alleged "cap" - which, as offered is not a cap at all - will be three times the residential cap for business.  For all business.

We would ask why should a restaurant in Broad Ripple, for instance, - already paying and collecting taxes to benefit its competitors downtown - now have its property tax increased when those same competitors are availing themselves of the public policies which contribute to the problem to begin with?

"Rosy" revenues...

...of which we were speaking in our last post.

Some of our readers may already have seen the item we're about to discuss.  It appeared on the "Field of Schemes" blog, a link for which is shown next to this material.

Field of Schemes does a magnificent job of covering the national plague of public subsidy for sports franchises.  We sincerely thank the author for that effort.

But, back to the dollar sign.  As in cities over the country, the taxpayers in Indianapolis have been drowned in a sea of mis-information about the revenue value of a sports team to the city.  (See our last post about a football game bringing in billions of dollars.)

Many economists have for years made the point that, to a major extent, revenues pertaining to a sports operation actually represent a change in local spending habits rather than any appreciable increase in economic activity.  These economists usually have had a difficult time obtaining substantial media coverage of their views, and the media, which sells mucho advertising space related to these sports, keep it that way.  It is highly unlikely that you would see the following information in the local daily.

The Seattle Sonics - of the NBA Sonics - apparently are in a legal battle trying to get out of a lease.  We will be forever grateful to Field of Schemes for digging out the following language from a brief filed by the Sonics organization.

"The financial issue is simple, and the city's analysts agree, there will be no net economic loss if the Sonics leave Seattle.  Entertainment dollars not spent on the Sonics will be spent on Seattle's many other sports and entertainment options.  Seattleites will not reduce their entertainment budget simply because the Sonics leave."

One might expect such a radical statement from an irate taxpayer, but to have it come from the franchise itself is truly astounding.  The team itself has filed a legal document proclaiming that its presence has no economic impact on the city.

The statement simply expresses a concept commonly referred to as the "substitution" factor.  The individual's entertainment budget is "elective" and is fairly certain to be spent on something else if the team is not there.  In fact, we would hazard a guess that, if public subsidy was eliminated and the ticket price increased to cover the real cost of presenting the entertainment, that "election" to spend elsewhere might kick in rather quickly.

If the name "Pacers" were to be inserted in the document in place of the "Sonics" the statement would apply to Indianapolis.  Considering the lease arrangement under which the Pacers keep all revenues generated at the Fieldhouse, city government would benefit by henceforth obtaining all the non-basketball revenues it is now giving away.