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Mayor seeking broader control: Indianapolis Works proposal gives Peterson more authority over suburban budgets

January 3, 2005

Some parts of local government are financed by the city. Others are the bailiwick of the county or the townships.

For years, the split didn't much matter. Today, it means everything.

While they held sway during the first three decades of Unigov, Republicans could iron out financial wrinkles behind closed doors. But the 1999 election of Mayor Bart Peterson, a Democrat, provoked a turf war. It escalated in 2003, when Democrats won their first-ever City-County Council majority.

Now Democrats dominate inside Indianapolis' old city limits. But Republicans have held their ground in the suburbs, retaining most county offices. The increasingly intense tussles invariably boil down to the same problem:

Money.

Specifically, there's not enough to go around. So Peterson is trying to gain more control over the limited dollars available.

The city's unfunded obligation to pay $470 million for police and fire pensions puts Peterson behind the eight ball. And each year, come budget negotiations, the situation worsens when Marion County's fiscal problems become clear.

Amid the fanfare about police and fire mergers, few paid attention to the solution Peterson proposed in his Unigov overhaul "Indianapolis Works." The mayor wants to establish an Office of Finance and Management, to be directed by the city controller. It would absorb most of the functions of the county auditor.

Peterson says the move would save taxpayers $910,000 a year. But for the mayor, increased budget authority would be the far greater reward. He's already working behind the scenes to spread as much of the pension obligation as possible.

"It definitely creates a strong mayor system," said City-County Councilor Jackie Nytes, a Democrat who chairs the Administration and Finance Committee. "There's no doubt about it. And that's not all bad."

Until 1977, Indianapolis never established a sustainable funding source for its public safety pensions. Cops and firefighters hired after that year contribute to a fully funded system. But the city must pay its elder retirees out of its operating budget for public safety. In 2004, it paid $43 million. In 2005, it will pay $53 million.

When Peterson announced Indianapolis Works in August, it included a provision to create a public pension authority that would manage the obligation. State government has repeatedly provided bailout payments for the pensions over the years. Peterson's new authority would seek additional relief.

More controversial, though, was the idea Peterson floated to shift some of the pension burden to suburban property taxes. In the face of political pressure, Peterson tabled that idea, setting the stage for his Dec. 15 press conference, where he boasted about Indianapolis Works' property-tax benefit to every Marion County homeowner.

But if the mayor is dropping the idea of spreading property taxes to underwrite the pensions, how will they be paid? City Controller Barbara Lawrence said the plan is to rely on more help from the state, plus $100 million in new bonds. Indianapolis will also begin devoting most of its share of the county option income tax, about $44 million in 2005, to its pension obligation, paying for the operations of merged police and fire departments from other revenue sources.

"We have this conflict between ongoing public safety operations and pension obligations," Lawrence said. "The fact of the matter is that we still feel that it's a fair thing to do in terms of allocating those costs."

Yet when COIT and general obligation bonds are supporting the pensions, it strikes some as disingenuous to imply that suburban taxpayers aren't carrying a share of the load.

"It's a shell game. That's basically all it is," said Marion County Assessor Joan Romeril, a Republican. "By taking out the bonds, everybody is going to be paying for it."

But Lawrence said the mayor has been forthright about his plans.

"Whether it's an increased reliance on COIT or the pension bonds, we've always tried to frame this as a property-tax issue," she said.

One of Peterson's often-cited reasons for Indianapolis Works is his contention that "the buck stops nowhere" for county government spending. His plan would put Marion County finances, excluding those for the judicial system and the public prosecutor, under the city's authority. Peterson would also establish a countywide Department of Administration and Equal Opportunity to handle personnel issues.

Marion County Auditor Marty Womacks, a Republican, was receptive to the idea.

"I always believe if there's a way to do something better for the taxpayers, we should never turn our back on it," she said. "It's worth a try if some folks think it might work. But I'm a little bit skeptical."

Womacks has a number of concerns. Since the plan would cut her staff from 34 to 11, she wonders whether enough people would be available to handle the functions the auditor had left.

And no matter whether the auditor or the city controller handles county budgets, there's no getting around the fact that most county offices are led by elected officials. They're just as unlikely to genuflect before the new OFM as they are before the auditor.

"I don't see how putting it under the city is going to change the fact that we have multiple officials responsible for their own budgets," she said. "I don't see anyone having authority over those folks. I think that's been pretty obvious over the past few budgeting sessions."

Romeril's opinion confirmed Womack's suspicion.

"I'm elected, just like [Peterson] is, to run my office. The voters have trusted me with that authority. That could be taken away from me," she said. "I can just see getting on the wrong side of the mayor, regardless of who's in office, getting on bad terms. I can just see having our hands tied to the point of not being able to function."

That's exactly why more central planning is necessary, Nytes said. Lack of a comprehensive view is what's led to local government's daunting financial problems in the first place.

"Everyone who is elected feels they have a mandate from the electorate to carry out a certain set of priorities. How do you decide between one set of priorities and another when the electorate elected both of them?" she asked. "If we want to move to a system with some real coordination in setting direction and having some real clear progress, something has to give."
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