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Improving Transparency at the CRC

Improving Transparency at the CRC. A presentation to the Constitutional Patriots (June 17, 2014). Our Premise is to Present Documents – not to persuade you.

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Improving Transparency at the CRC

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  1. Improving Transparencyat the CRC A presentation to the Constitutional Patriots (June 17, 2014)

  2. Our Premise is to Present Documents – not to persuade you. • Democracy requires many voices to be reconciled through discussion. It is politics that seeks to bend the discussion in some specific direction. • A Public Policy Consultant provides a factual basis for the democratic discussion, and must have faith in the process. • (Some discussions turn out better than others.) • Without transparency, democracy cannot be effective, and certainly cannot survive. • The public must have transparent access to the facts.

  3. Opening Thoughts on TIF • TIF is a useful tool for expanding the local economy, through economic development and redevelopment. • It is valuable in addressing urban blight, re-occupying abandoned industrial buildings, and stimulating new jobs. • Like any tool, it can be misused, sometimes unintentionally. • However, when TIF is used to stimulate the local economy and generate more taxable value, it is almost always successful. • Currently, there is an ongoing discussion about effective public investment, i.e., the Pacers, the Colts, the Palladium, etc. • While those discussions may be valuable, I simply encourage people to consider that TIF was intended as an investment in stimulating taxable economic activity. (Stimulating tax exempt activity was not discussed.) • This doesn’t mean it is wrong. It simply means it wasn’t discussed.

  4. The Role of the Clerk-Treasurer in CRC Transparency: CRC Documents • Problems/concerns re: CRC financial practices were voiced prior to 2012, but only addressed as part of addressing the CRC’s “unsustainable” financial practices. • $185 million in CRC debt was re-financed in December, 2012; • Cl-TrCordray was placed in charge of CRC records & finances. • 100,000 - 200,000 pages of CRC documents were presented; • Many were disorganized & there was no method to determine whether documents had been omitted. • Ms. Cordray scanned all documents and made them accessible on Lazerfiche in the form and organization presented. • All lazerfiche documents provided can be reviewed on the Clerk-Treasurer’s section of the Carmel website.

  5. Everyone should read Ordinance D-2108-12 • Ord. D-2108-12 was part of the 2012 CRC debt re-financing. • “WHEREAS, since 2008, the CRC actively avoided Council oversight of its finances…” • “WHEREAS, since 2008, the CRC committed to over $200 million of obligations representing indebtedness without Council approval…” • WHEREAS IC 36-7-14-3 requires that all of the territory within the corporate boundariesof a municipality constitutes a taxing district for the purpose of levying and collecting special benefits taxes for redevelopment purposes…” • “Any entity that receives grants from the CRC must agree in writing to comply with the Access to Public Records Act, IC 5-14-3-1, et seq…” (applied to 4CDC) • (emphasis added)

  6. Role of the Cl-Tr in Organizing & Managing CRC Finances • The Clerk-Treasurer serves as a “clerk” and a “treasurer.” • Cl-Tr has no authority to make public policy. • Public policy rests with the City Council & Mayor. • CRC financial practices had been cited in SBOA audits for several years. • Cl-Tr has attempted to organize CRC financial records & provide transparent reports; • Revenues (TIF & ‘other’); • Debt & debt payments; • Contracts & other obligations.

  7. CRC has designated 33 ED Areas (TIF) • The Hamilton County Auditor actively manages TIF revenue from 33 ED Areas/Tax Allocation Areas (TIF). • All Auditor records are public. • Auditor shows Gross Tax & Net Tax for each ED Area. • (see Auditor breakdown for 2014) • TIF Revenue is affected by: • Assessed value of property; • Appeals of assessed value affect TIF; • Non-payment/delinquent payment of property taxes; • Legislative actions; • Multiple other factors.

  8. TIF & ‘Other’ CRC Revenues • Vast majority of CRC revenues are TIF; • $20.3 million in 2013; • $22.3 million in 2014; • “Other” revenues cited by CRC staff have not yet been completely explained; • ~$2.5 million ‘other’ cited by CRC staff, but questions remain unanswered; • Cl-Tr is working toward clarification. • Based on historic documents, previously “TIF Projections” were provided, apparently using common ‘inflators’ over time. • Common inflators have not proven historically accurate.

  9. CRC Has ‘Primary’ & ‘Secondary’ Debt Obligations • Two forms of ‘primary’ debt obligations against TIF revenue; • ‘Developer Pass-through’ • Bond Amortization • Bond amortization is backed by SBT. • CRC ‘Secondary’ Obligations have not yet been fully quantified. • CRC ‘Secondary’ obligations have conditions that must be tested to determine whether thresholds have been met. • Increased management cost and responsibility. • Village Financial obligation was discovered for the 1st time in December, 2013. • Keystone/Sophia Square obligation has not yet been fully explained. • (Other ‘Secondary’ CRC obligations may exist.)

  10. TIF Revenue: Primary CRC Obligations • Review of CRC finances indicates 2 forms of ‘Primary Obligations.’ • Debt amortization & “Developer Pass-Through.” • “Developer Pass-Through” was provided to certain developers, on a case-by-case basis, for the developer to build certain public projects, with TIF used as reimbursement. • “Developer Pass-Through” is treated as TIF revenue which is pre-committed and not available for CRC debt amortization.

  11. ED Areas with Developer Pass-Through • The Cl-Tr received the TIF revenue from the County Auditor and ‘sorts’ TIF revenue to manage CRC financial obligations. • 9 ED Areas designated as ‘developer pass-through’ are (with 2013 TIF): • Gramercy ($4.22 in 2013) • Indiana Spine Group/Meridian & Main ($11,581 in 2013) • 116th Street Centre ($30,634 in 2013) • Legacy ($72,869 in 2013) • Merchants Square ($202,519 in 2013, now paid off) • Parkwood East ($833,508 in 2013) • Parkwood Crossing ($1,141,654 in 2013) • Arts District Lofts/Sophia Square ($863,015 in 2013) • Huntington (questions remain on this moniker, but $54,366 in 2013) • 2013 Total ‘Developer Pass-Through’ $3.2 million • 2013 Total Carmel TIF was $20.3 million, leaving $17.1 million for other CRC expenses.

  12. CRC Primary Debt Obligations (Bonds) • In 2012, the CRC re-financed 21 CRC debt obligations • (see pp B-4 through B-5 & B-10 of Official Statement.) • Total of CRC debt re-financed = $196.3 million (p. B-10). • In 2014, additional CRC debt was re-financed. • $58.0 million in bonds for the Performing Arts Center; • (Official Statement, p. 4) • (other bond re-financed apparently not related to CRC) • Additional CRC debt exists but has not been re-financed. • 2012 ($196.3 million) & 2014 bonds ($58 million) are backed by the Special Benefits Tax (SBT). • (Recall SBT provisions of Ord. D-2108-12.) • Bonds are not amortized through ‘flat-payments,’ so amortization must be carefully managed.

  13. Revenue Deposit Agreement (RDA)(amended twice) • In an attempt to provide more direct management of TIF revenues by the CRC, a “Revenue Deposit Agreement” (RDA) was approved in 2012; • TIF revenue from 24 (of the 33) ED Areas was committed to bond payments (see Exhibit A). • TIF revenues in excess of the bond payment for any year are to be deposited to the Allocation Fund (for CRC projects). • TIF revenue from “Parkwood” was committed to a Supplemental Reserve Fund (SRF). • “Parkwood” nomenclature is currently being clarified. • Other technical clarifications of the RDA are currently being discussed. • First Amendment (2013) • Cl-Tr currently requesting technical clarifications. • Second Amendment (2014) • Provides that “savings” from 2014 re-financed debt be deposited to the SRF (see Exhibit E). • Cl-Tr requesting technical clarifications.

  14. Apparent Intent of the RDA is to protect against the SBT • The provision for the Supplemental Reserve Fund (SRF) appears to be intended to provide taxpayer protection against implementation of the SBT. • Cl-Tr is attempting to clarify and quantify the precise financial impact of the SRF and associated SBT risk. • Cl-Tr will consult with Council re: public policy issues. • RDA terms (especially SRF) will be included in Cl-Tr financial reporting, once quantified. • Several areas of potential conflict with developer pass-through and/or “savings” of 2014 bond also being clarified.

  15. Cl-Tr is attempting to develop a CRC Comprehensive Debt Management Schedule • Working with accountants & SBOA to develop a comprehensive schedule of CRC debt amortization covering all outstanding CRC debts (especially TIF obligations), showing annual payments through full debt retirement of each debt issue (~2038). • This effort has not yet included CRC ‘Secondary’ obligations. • Effort will require complete cooperation from the CRC & its staff in order to assure that it is comprehensive. • For reference purposes, in 2013 (first year of Cl-Tr management), debt amortization totaled $16.1 million. • Note: $17.1 million was net of Developer Pass-Through (2013). • Note: debt amortization is not ‘flat payment.’

  16. ‘Secondary’ CRC Debt Obligations • ‘Secondary’ CRC debt obligations have not yet been fully identified nor quantified. • Village Financial obligation discovered December, 2013. • Two “secondary” obligations ($4.5 million & $1.0 million) related to Pedcor development/City Center. • Payment requested for July-Dec 2013 interest ($83,709). • Public testimony on February 17 indicated that CRC had previously stated that this debt was not accruing interest. • Instead, interest was ‘accruing’ but not ‘payable.’ (interest went to increased principle payable beginning 2019.) • Obligation based on calculation of “excess TIF” from City Center development. • (Impact on overall TIF revenue is unclear at this time, but it appears that ~$84,000 in interest will be due bi-annually.)

  17. Keystone/Sophia Square Secondary TIF/CRC Obligation • Keystone/Sophia Square development appears to be governed by 8 separate legal documents. • Developer committed to a ‘guarantee’ of $200,000/year in certain TIF revenues (calculation not yet clear). • In return, CRC committed to pay for maintenance of parking garage (estimated at $320,000 to $350,000/yr.) • Documents indicate that the CRC “assigned” the maintenance cost to the City (have not yet located the ‘assignment’ document), but CRC ‘kept’ the revenue for CRC use. • Not yet clear who owes the maintenance costs. • Neither Developer, nor City, nor CRC have paid secondary obligations for 2103 or 2014. • Dispute/questions ongoing. • Unclear impact on TIF revenues available for debt amortization.

  18. Possible Impact of Secondary CRC Obligations • The number and amounts of ‘secondary’ CRC obligations have not yet been determined. • No apparent previous financial reports included ‘secondary’ obligations. • ‘Secondary’ obligations appear to have a mathematical impact on growth in TIF revenue by committing additional TIF funds to developers as ‘excess TIF’ is created. • (Does Village Financial require $168,000/year in TIF? ) • (Does Sophia Square require $300,000/year in TIF?) • Questions re: how expenses can be ‘assigned’ to taxpayers, while revenues are captured. • Questions re: financial interactions between conditions and TIF availability.

  19. Cl-Tr is working to get a clear understanding of the CRC’s Secondary Obligations… • As stated, new facts have been discovered as research has progressed. • Cl-Tr is to report findings to the SBOA & Council. • Council & Mayor have final decisions regarding the public policies related to CRC finances. • As secondary obligations are clarified, Cl-Tr will work to bring them into the overall CRC Comprehensive Debt Management Schedule.

  20. “Other” CRC Revenue • Cl-Tr requested an itemization of “Other” CRC revenue on February 28. • First response indicated ~$2.5 million in ‘other’ revenue. • Later responses removed $0.56 million & moved it to TIF, while raising other questions. • Questions related to Sophia Square secondary obligations. • May 21 documents from CRC indicate additional refinement of ‘other’ revenue & management. • May 21 CRC report shows $48,000 cash balance, assuming $1.o million in real estate sales for 2014. (awaiting electronic docs) • Cl-Tr has questions pending re: May 21 report. • New CRC Director is working to improve CRC financial management practices.

  21. Final thoughts… • CRC has publicly stated that their financial transactions are ‘extremely complex.’ • ‘Complex’ is not illegal, however, increased complexity = increased management (cost); • D-2108-12 provision re: CRC’s “actively avoided” outside oversight of its finances; • 2013 discovery of debt payments previously stated not to be accruing interest (Village Financial); • ‘assignment’ of Keystone payment obligation to City while CRC keeps TIF revenue presents a public policy question; • Unclear impact of secondary obligations on funds available for CRC projects, as well as repayment of primary obligations; • RDA provisions must be clarified for proper implementation.

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