After seeing a detailed accounting of nearly $249 million in debt issued by the Carmel Redevelopment Commission, a group of city councilors is moving to bring that entity under council control.
Carmel City Councilor Eric Seidensticker on Thursday morning proposed an ordinance that would require the council to sign off on any additional debt. Such an ordinance would be more restrictive than state statutes as interpreted by Indiana Attorney General Greg Zoeller.
Indiana redevelopment commissions need approval from a common council to issue bonds, but Zoeller said in a 2010 opinion that the statutes don’t apply to other forms of debt. The Carmel Redevelopment Commission has issued $140 million in contracts, certificates of participation and installment purchase contracts, all without council approval.
The commission’s debt load is no secret, but the council only recently received a full accounting.
“They’re running so close to the edge,” Seidensticker said. “They don’t have the wherewithal to create a bond or create permanent financing.”
The redevelopment commission received $21 million in tax revenue from the city’s expansive tax-increment-finance, or TIF, districts in 2011. Applying that amount of revenue to all its debt-service obligations this year will leave the commission with $5,929, according to a projection the commission shared with the council.
Carmel Mayor James Brainard, who appoints most of the commission members, has pointed out that the city’s residential tax base is not paying for any of the redevelopment commission’s projects, including the $175 million Center for the Performing Arts.
Rising to its defense at the March 5 council meeting, Brainard noted that the commission's annual operating expenses, budgeted at about $6.6 million this year, do not come out of the city’s general fund, as they do in other cities. He also pointed out that none of the debt horizons are longer than 25 years.
Brainard could not be reached Thursday morning for comment on Seidensticker’s proposal.
Seidensticker thinks he has a good chance of avoiding Brainard’s veto because the ordinance is sponsored by five of the seven councilors. The other four sponsors are Council President Rick Sharp, Luci Snyder, Kevin Rider and Carol Schleif.
Sharp contends that the redevelopment commission could benefit from council oversight because the council might be willing to pledge property-tax revenue to refinance some of the debt. That would free up TIF revenue for future projects.
About $40 million of the debt carries interest rates ranging from 7.75 percent to 9.25 percent, and the commission is making interest-only payments on about $80 million.
“It’s wasting money to avoid bringing these issues to the council,” Sharp said.
Yet, it was the council’s opposition to further financing for the Center for the Performing Arts that pushed Brainard and the redevelopment commission toward more creative financing in the first place.
Sharp is one of the councilors who opposed building a $12 million parking garage, just as the Palladium concert hall was nearing completion. “I believe that’s the beginning of the financial fall,” he said. “We turned down the method of financing.”
City councilors aren't the only ones wary of redevelopment commission activities. Sen. Luke Kenley, R-Noblesville, has sponsored a bill for the past two years that would require city and town councils to sign off on debt issues. This year, Kenley said he's disturbed by the fact that redeveloment commissions, which are not elected, can control large portions of a city's tax base, and he said in some cases they're operating as "shadow governments."
Kenley's bill died in the House.