Question: The offer by the city of Indianapolis to guarantee an $86 million loan to finance the North of South project has been criticized as exceptionally risky. Why do you support the guarantee?
Answer: I will vote to support the North of South, or NoSo, redevelopment project after several months of negotiations by councilors and council advisers made it a better deal, as they did with other big transactions such as the parking and water transactions.
When the project was first presented last fall to me and several other councilors by representatives of Lilly, Buckingham Properties, the developer and the Indianapolis Bond Bank, the consolidated city and the council were in the middle of their annual budget ritual.
Adding another layer of complexity to the 2011 budget season were the budgetary woes of the library and IndyGo. The public was (is) demanding that the council find immediate, and I hope final, fiscal solutions for the shortfalls in the library and IndyGo budgets.
So, why would anybody in their right mind suggest that the city become the prime backer through issuing bonds to bring new development to 14 acres of asphalt owned by Lilly near Conseco Fieldhouse and CSX railroad lines in the form of apartments, the arts, an urban Y, green space, and state-of-the-art conference and meeting facilities?
At the initial presentation of the NoSo project, I thought I was attending a focus-group kind of meeting to gauge my opinion of an “off in the future when times get better” project.
I added up the totals of the city’s risk versus the risk to the developer. I said, “You’ve got to be kidding: Why would the city supply over 60 percent of the overall financing to the tune of $86 million, not including another $9 million for infrastructure improvements, for a $155 million project when no bank would finance it?” Is this another “incentive” for economic development like past TIF projects, such as the Conrad and Simon headquarters, when the city gave away the farm—land and tax abatements?
However, the real story is the work by council members and council consultants in renegotiating the financial risks from a worst-case-scenario framework. The changes to the proposal came primarily as a result of hardball negotiations by councilors over terms for the issuance of municipal bonds and the realignment of risks to all the key players—the city (Bond Bank), the developer and Lilly—according to their respective “investments” in the project.
Now the city stands in priority in the unlikely failure of this project. The project is more in line with how a true TIF economic development tool should work, with the bonds being repaid by the project’s revenue, and next the project tax increment expected when the assessed values increase as the result of the redevelopment.
Ultimately, this project has generated discussion and support for an overall TIF district policy to implement which, among many things, establishes guidelines for returning assessed value from the increment to the base.
The concessions made between the bond bank, developer, Buckingham and the council have convinced me it is worth the risk for the city to partner with Indianapolis’ home-grown companies (Lilly and Buckingham) in developing the dormant sector of the Mile Square.
I believe this development will spawn renewed vitality to the older near-south-side neighborhoods and further consideration of establishing a light rail station in NoSo.•
Malone, an attorney, is a Republican at-large member of the City-County Council. Send comments to [email protected].