The Carmel City Council is moving toward a $183 million debt refinancing that will free up cash for further downtown development, but not without conflict over a past move by the Carmel Redevelopment Commission.
The council finance committee heard details Thursday night about the Carmel Redevelopment Commission’s refinancing proposal, which would free up $8.8 million for future projects and keep the CRC from operating in the red. The CRC controls revenue from Carmel's tax-increment-financing districts for economic development.
The redevelopment commission has about $267 million in debt, and since providing a $5.5 million subsidy to the Center for the Performing Arts last fall for operations, it’s in danger of running out of TIF revenue to cover its payments.
So the CRC is looking to bundle several of its high-interest and variable-rate debt instruments into two bond issues, which would have the city’s backing. The debt includes installment-purchase contracts, loans, lines of credit and land-purchase contracts. Financial adviser Loren Matthes, principal at Indianapolis-based H.J. Umbaugh & Associates, likened the deal to paying off credit-card debt through a consolidation loan. The refinancing would cover about $183 million of CRC debt.
Council President Rick Sharp said the council will try to reach a decision in time to take advantage of current, low interest rates, but he and finance committee Chairwoman Luci Snyder balked at a part of the deal that would bill the city $500,000 a year for a $5.5 million heating and cooling project undertaken by the CRC
“The council’s being back-doored to pay for a capital improvement we were never consulted on,” Sharp said. “It’s a little difficult to swallow.”
Because of the refinancing, the redevelopment commission must cut its own operating expenses, from about $3 million this year to $1.1 million. State law prohibits using TIF revenue for operating expenses, so the CRC will have to cover its payroll and other bills with other sources. The CRC is proposing billing the city for expenses related to the energy center, which provides heating and cooling to the performing arts center and municipal buildings.
Redevelopment commission member Carolyn Anker said the CRC had made a mistake in not billing the city for its share of energy-related costs, but would like to catch up starting in 2015.
“That’s not one of the costs I will accept,” Snyder said. “I won’t do it.” The council was assured when the CRC decided to build the energy center and retrofit municipal buildings at a cost of $5.5 million that the project wouldn’t cost the city anything, she said.
If the council declines to make the energy-related payments, the redevelopment commission would have to cut its costs further, Snyder said. The Carmel Redevelopment Commission’s level of operations is unusual in Indiana, she said. The CRC’s six-employee payroll costs $462,505, documents submitted to the finance committee show.
The CRC also spends $197,500 on marketing and events, pays about $84,500 to rent offices in the Evan Lurie building in the Carmel Arts and Design District, and spends more than $220,000 on legal and accounting services.