Carmel City Council directs panel to review Hotel Carmichael cost overruns

The Carmel City Council voted Monday to have one of its subcommittees conduct a review of what led to $18.5 million in cost overruns on the Hotel Carmichael project.

The Carmel Redevelopment Commission announced in late January that its estimated $40 million Hotel Carmichael, which is scheduled to open in May, would actually cost about $58.5 million. Since then, city councilors have fielded public complaints about the commission’s fiscal responsibility and lack of transparency regarding the cost overruns. Those critiques continued Monday night.

“Significant cost overruns on major projects in Carmel are not new,” John Accetturo, a former Carmel city councilor and Carmel Redevelopment Commission member, said during public comment.

Earlier in the day, Accetturo issued a statement calling for the resignation of the entire Carmel Redevelopment Commission and the firing of Henry Mestetsky as it’s executive director.

He said the $52 million in overruns related to Keystone Parkway’s redevelopment, $72 million in overruns related to the Palladium and now $18.5 million related to the Hotel Carmichael is “either incompetency or mismanagement.”

“Mayor Brainaird is correct to say he has the authority to do what he does, but so does a mob boss,” Accetturo said Monday night. “People need to be held responsible.”

In response to the public outcry, the council voted to have its Finance, Utilities and Rules Committee look into how the cost overrun on the hotel occurred and why officials failed to disclose the additional costs until just months before the project’s expected completion. Councilor Sue Finkam leads three other councilors on the committee: Jeff Worrell, Bruce Kimball and Miles Nelson.

“This seems like a best, first step,” Finkam said.

According to the resolution, the finance committee will be in charge of reviewing the budgeting, cost management and funding of the hotel since its approval by the city council in September 2017. The review’s purpose is to determine whether those matters have been, and continue to be, in compliance with all applicable laws and fiscal procedures.

The resolution also affords the finance committee the authority to use city lawyers, third-party lawyers, consultants or any other city employee necessary to conduct its review.

Finkam said she anticipates the committee will hire an independent attorney to attend the three planned public reviews of the project. The resolution allows the finance committee to spend up to $30,000 on independent oversight before the members have to come back to the full city council for additional funds.

The Carmel Redevelopment Commission will be responsible for paying for any consultants the committee hires.

Finkam said the Carmel Redevelopment Commission already undergoes an independent audit each year. She said the city pays $75,000 each year for the State Board of Accounts to provide “the citizens of the State of Indiana with complete confidence in the integrity and financial accountability of state and local government.”

Finkam requested the committee’s meetings on March 18 and 25, as well as the meeting on April 1, be open to the public, broadcast and recorded online. Though they’ll be public meetings, Finkam said she does not plan to allow public comment.

“We’re going to have enough on our plates that to have public comment every time won’t be productive,” she said.

Instead, she encouraged members of the public to send her questions before the meeting so that they might be incorporated over the duration of the review.

Finkam said one potential outcome of the finance committee’s review is a new interlocal agreement between the Carmel Redevelopment Commission and the Carmel City Council—one that increases collaboration and transparency between the separate entities.

The council briefly considered and voted on an amendment proposed by councilor Tim Hannon, who introduced the idea of a double-barrel audit one month ago. Hannon’s proposal would’ve broadened the review to include all nine members of the council.

“The usual and sundry way of doing this is going to the finance committee is the usual way of doing this. I think that it warrants something unusual,” Hannon said.

Councilor Tony Green also supported involving the entire council. He said it would go a long way to restoring the public’s confidence in its government. Not all councilors were in support, though.

“Having a special committee for this review would set a bad precedent,” Councilor Adam Aasen said. “I’m not on the finance committee, but I have complete faith I won’t be cut out of this process.”

Councilors Green, Hannon and Miles Nelson voted for the amendment. The remainder of the nine-person council voted against it.

After the amendment failed, every council member except for Nelson voted in favor of the finance committee’s review. Nelson told IBJ after the meeting that he mistakenly pushed the dissent button, and that he actually supports the finance committee’s review.

Editor’s note: A previous version of this story incorrectly listed how councilor Adam Aasen voted. We apologize for this error.

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8 thoughts on “Carmel City Council directs panel to review Hotel Carmichael cost overruns

  1. Irresponsibility and a callous disregard for public sentiment were voted in by a Carmel City Council bent on covering its mistakes with a veneer of whitewash. As the tailor who sold the emperor his new clothes would say, “Gee, that’s a good look for you.

  2. Needs an autonomous entity not a City affiliate of any kind for a forensic audit. Hotels built to quality standards have a commercial construction cost in 2018 of $463 per SQ FT. This cost per SQ FT assumes unionized labor. The “average” hotel costs $22.2 million to complete.Oct 16, 2018. Therefore average hotel costs for 2019 costs it could increase by around 25% or 5.5 million or say around $30 million. if originally the contractor bid at 38 million due to exclusivity market type then we should say max should be $47.5 million. then the contractor should be held liable if it is a bonded contract as most government work is and then the contractor is at fault. If not , then who added all the change orders to bring it up to that point of over $ 50 million?. I developed the first Marriott in Indianapolis back in 1974 and Marriott was heavily involved in the franchising and costs and had a world of experience in hotel costs.I’d day they would be the first place to turn to for a reliable 3rd party overview and audit.

  3. John M. has it right. While local officials claim unforeseen increases in labor and material expenses are mostly to blame, construction experts elsewhere say the hotel’s inflated costs are far beyond what other projects are experiencing. So perhaps the “luxury” finishes required by Marriott for Autograph hotels are the true reason. Wrong. A simple Google search of existing Autograph hotels in St. Louis and Chicago show pictures of rooms that are not dissimilar to J.W. Marriott room standards. In other words, hardly over-the-top luxe. So it appears the budget-busting costs are really the fault of Jim Brainard who desperately wants a trophy hotel to cap his extreme makeover of the suburb.

  4. Sounds like typical politics to me. Officials and those in power don’t care about the people anymore. I’ll be surprised if anything positive comes out of this.

  5. The Carmel Redevelopment Commission who has oversight of the Hotel Carmichael met for only 5 hours in all of 2019. What does that tell Carmel taxpayers?

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