The Indianapolis Metropolitan Development Commission approved a 10-year tax abatement Wednesday afternoon for a controversial public-private plan to redevelop a vacant downtown office building.

The 7-2 vote came after much consternation over whether the city would pay too much for a parking garage involved in the $65 million project and get too little in return.

The plan calls for a private developer to acquire the former Bank One operations center, surface parking lots and an adjacent parking garage from a private owner for $18.5 million, then sell the 1,680-space garage to the city for the same price.

The developer, Tadd M. Miller, would spend as much as $65 million to convert the former office building into apartments and develop retail and residential properties on the adjacent surface lots. The building occupies the block bounded by Washington, East, Market and New Jersey streets. He also would buy back 600 spaces in the garage over 20 years by repaying $6.6 million in tax abatements for the former operations center and pitching in additional payments to the city totaling $2 million.

“I still think it’s totally wrong to pay the price for the parking garage that we’re paying,” commission President Randy Snyder said before voting against the abatement. “I would contend that it’s not worth that much.”

City officials say the deal provides a boost to a rundown area and gives the city control of enough parking to support the future redevelopment of the former Market Square Arena site—all without any upfront cash, no issuance of bonds, and an automatic tenant for the garage. The developer would take out a loan to buy the property, and the city would make the payments over 20 years using revenue from the garage.

“This is a long-vacant property,” said Terry Sweeney, the director of real estate for not-for-profit Indianapolis Downtown Inc. “If it didn’t require a subsidy, this property would have already been developed.”

Nick Weber, deputy mayor for economic and workforce development, said the city relied on two appraisals for the purchase price.

But some question whether the city, which would take control of the entire property if the deal doesn't materialize within 18 months, is taking on too much risk and overpaying. Sales disclosures show the properties most recently sold in July 2004 for a total of $13.5 million—$3 million for the former operations center and $10.5 million for the parking garage.

Pat Andrews, vice president of the Marion County Alliance of Neighborhood Associations, opposed the project from the start. She said her organization supports redevelopment of the property but without city involvement.

“This deal is patently bad,” she said. “This isn’t a good deal.”

In addition, the cash-strapped Capital Improvement Board would be forced to give up one of its most profitable assets in order for the redevelopment to move forward.

Appraisals to support the purchase price of the parking garage count on a shift in parking demand after the city shuts down a CIB-operated nearby gravel parking area  where Market Square Arena once stood.

The closure of the roughly 1,000-space MSA lots would leave the CIB with another revenue hole to fill. The five-acre parking area, which is owned by the city but operated by the CIB, raked in about $730,000 in 2007 and $789,000 in 2008.

Still, neighbors of the blighted property support a redevelopment.

“There is a safety concern,” said Jayson Boyers, program director at The Chef’s Academy. “The building has been, and is, an eyesore.”

The private owner selling the garage and office building is an affiliate of Columbus, Ohio-based Smoot Construction, which had partnered on a failed 2004 plan for two high-rise condo towers on the MSA site. Smoot bought the properties from Bank One in July 2004, and would realize a roughly 6-percent annual return from its purchase price if the deal closed with Miller and the city.

A commission member pointed out that there’s no guarantee the redevelopment of the Bank One operations center will meet the same fate as the failed MSA project.

But Weber argued that the developer for the MSA site had no public subsidy.

“That’s why it failed,” he said.