The Capital Improvement Board could be forced to give up one of its most profitable assets so the city can pull off a $65-million public-private downtown development deal.
The city has agreed to help a developer revitalize the vacant former Bank One operations center in part by acquiring an adjacent parking garage for $18.5 million. City officials say appraisals to support the purchase price count on a shift in parking demand after the city shuts down a gravel parking area where Market Square Arena once stood.
But the closure of the roughly 1,000-space MSA lots would leave the beleaguered CIB, which already is lobbying for a legislative bailout to cope with a $47-million budget deficit, with another revenue hole to fill.
The five-acre parking area, which is owned by the city but operated by CIB, raked in about $730,000 in 2007 and $789,000 in 2008. For comparison, the CIB-owned 2,400-space Virginia Avenue Parking Garage lost $611,000 in 2007 and $597,000 in 2008, thanks to subsidized spaces for the Indiana Pacers, WellPoint Inc. and various city departments.
The plans call for the city to let expire a variance allowing a gravel parking surface at the MSA site. If the city won't renew the variance beyond August 2010, the CIB would either have to pave the lots or cease the parking operation, said Barney Levengood, the board's executive director.
Levengood said it's too early to tell whether the revenue from the lots will be factored into 2010 budget projections for the CIB, whose fate rests with state lawmakers meeting in special session.
Plans to shut the lots should come as no surprise since all previous bids relating to the redevelopment of the MSA site called for closure, said Robert Vane, communications director for Mayor Greg Ballard.
"None of the plans had gravel surface parking with revenues going to the CIB," Vane said. "The only difference between then and now is that we believe we have been successful in securing development in the area."
Still, losing the revenue would be another blow for the CIB. It recently has been saddled with the $20-million annual expense of operating Lucas Oil Stadium and has agreed to pick up the $15 million cost of operating Conseco Fieldhouse for the Pacers.
The city normally requires downtown parking lots be paved, but officialsexpecting redevelopment in short orderapproved a series of variances for the parking lot since the city imploded Market Square Arena in 2001.
The city approved a three-year extension for the variance in February 2004, expecting the site would be redeveloped before it expired. The lot won a two-year extension in 2007, and the Board of Zoning Appeals granted an 18-month extension April 7.
"Because of the impending development of the site and public ownership, paving the lot could be viewed as an inappropriate taxpayer expense," city planners wrote in an April staff report.
Based on the cost of similar paving projects, putting asphalt on the MSA site likely would cost more than $1 million.
City officials say the plan to convert the former Bank One office building into apartments will provide a boost to a blighted area and give the city control of parking to support the future redevelopment of the Market Square Arena site. The developer, Tadd M. Miller, would take out a loan to buy the entire property for $18.5 million, and the city would make the payments over 20 years using revenue from the garage.
Miller also would buy back 600 spaces in the 1,680-space garage over 20 years by repaying $6.6 million in tax abatements for the former operations center and pitching in additional payments totaling $2 million.
The city's appraisals of the garage use a "prospective value approach" that assumes successful completion of the entire operations center redevelopment and the closure of the MSA parking lots.
If completed as planned, the $65-million redevelopment would create about 52 jobs and generate about $1.1 million per year in additional tax revenue for the city after an initial abatement period.
But the potential hit to the CIB is only one of several hidden costs to taxpayers within the city's latest public-private development effort.
Removing the garage from property tax rolls would eliminate about $380,000 in revenue per year. The city also has agreed to cover the garage tax payments for the second half of 2009 and all of 2010. And if the deal falls through, the city would get title to the entire property, meaning zero property tax revenue.
"It all adds up," said Pat Andrews, vice president of the Marion County Alliance of Neighborhood Associations, who has been doing some of her own math. "Are they looking at $800,000 a year as just extraneous cash to the CIB?"
Andrews has been asking for a complete analysis of the deal's potential cost and risk to taxpayers. She hopes to have answers before a second public hearing on the plans scheduled for July 1.