Carmel taxpayers on hook for $30K to pay city nonprofit’s creditors

Last year, a nonprofit organized to promote the city of Carmel shut down. Now, city taxpayers are likely responsible for tens of thousands of dollars that need to be paid to reimburse the organization’s creditors, according to findings presented Thursday night to a committee reviewing nonprofits connected to the city.

Marilee Springer, a partner at Indianapolis-based law firm Faegre Drinker, examined Promote Carmel Inc. and told members of the Carmel Affiliate Review Committee that the city will need to pay at least $30,000 to satisfy the organization’s remaining creditors.

Promote Carmel managed All Things Carmel, a nonprofit gift shop in Carmel’s Arts & Design District dedicated to selling items promoting the Hamilton County community. The Promote Carmel board of directors closed the store in August after the city decided to divert funding to essential services, such as police, fire and roads.

Promote Carmel, which was founded by former Mayor Jim Brainard in 2020, also ceased operations and disbanded its three-member board of directors. The city officially filed dissolution paperwork with the state on Wednesday.

“My assessment is this organization, essentially without the city support, would be insolvent,” Springer told committee members. “It cannot cover its liabilities. It does not have the assets to cover the liabilities that it needs to appropriately dissolve itself without a grant from the city to be able to cover those liabilities.”

The six-member Carmel Affiliate Review Committee was established last year to “evaluate the purpose, governance and tax structure and related fiscal and risk aspects of all nonprofit corporations and community development corporations that are affiliates of the City of Carmel.”

The committee is examining four nonprofit affiliate organizations with ties to the city: Promote Carmel Inc., Carmel Christkindlmarkt Inc., the Carmel Midtown Community Development Corp. and the Carmel City Center Community Development Corp.

The committee’s members are Mayor Sue Finkam; City Council members Teresa Ayers, Ryan Locke and Shannon Minnaar; former City Council member Tim Hannon; and Joe Wood, who is CEO of Carmel-based InvestEd.

“We started with Promote Carmel and All Things Carmel, which was priority No. 1 because of the concern that our financial consultant had with inventory,” Finkam said.

Taking a look

After Finkam took office, she requested a fiscal and legal review of Promote Carmel. The review concluded:

• Promote Carmel operated at a loss every year since its creation in 2020, and it relied on taxpayer subsidies from the city of Carmel to remain open;
• the operation of the All Things Carmel Store, which opened in 2016, did not represent an essential city function, but it was supported with taxpayer dollars;
• Promote Carmel did not have a path toward fiscal sustainability;
• the All Things Carmel store was occupying valuable space on Main Street that could be used by a commercial business that would add to Carmel’s tax base, and the store was competing with other commercial vendors in the Arts & Design District;
• and the city’s subsidies to Promote Carmel diverted taxpayer funds away from essential services.

Springer’s presentation said the city’s financial consultant noted that Promote Carmel did not have audited financial statements. It said there were insufficient records and financial controls over merchandise inventory, which included failure to record purchases, new consignment items and inventory counts.

Carmel also did not receive required quarterly or year-end reporting from Promote Carmel in 2023 or 2024.

Springer also noted that city staff oversaw the inventory and liquidation process of the All Things Carmel store and determined complete vendor records were not stored or managed electronically, records related consignments were incomplete, and computers, printers and store records were kept at the private home of an employee.

Wood, who said he has managed nonprofits for more than 40 years, said Promote Carmel is an example of how a nonprofit should not operate.

“What we’re looking at here is a completely broken governance structure that didn’t work. Never worked,” Wood said. “And I don’t think we should dance over that. We should learn from it absolutely and keep moving forward from that.”

Over the course of Promote Carmel’s existence, the city provided $1.2 million in subsidies to the nonprofit. Springer presented figures noting that the city’s subsidies to Promote Carmel were $193,000 in 2020; $196,000 in 2021 and 2022; and $430,000 in 2023. The city provided $96,000 in 2024, half of which was paid to satisfy dissolution liabilities.

An additional $116,575 taxpayer subsidy was provided to pay for dissolution liabilities, which included $58,000 in October to break the organization’s lease on the All Things Carmel store, $10,000 as a partial grant repayment, $19,775 in payments to vendors and $28,800 in other costs, such as utilities.

The estimated cost needed to satisfy Promote Carmel’s current known liability to creditors is $30,000, but Carmel Chief Financial Officer Zac Jackson said that amount could rise.

“That also represents kind of what we know today,” Jackson told committee members. “If you would have asked me two or three weeks ago, how much—I mean today I’m saying it’s $30,000—two or three weeks ago, I would have said it’s $25,000. But every couple of weeks, something else pops up. Here’s a new bill.”

Hannon said paying Promote Carmel’s vendors “is the right thing to do,” but he is frustrated that taxpayers are footing the bill.

“This is taxpayer dollars. This is not the city’s largesse bailing out this organization,” he said. “These are taxpayer dollars that are paying these debts.”

‘New responsibilities’

Springer presented excerpts of a letter sent in August by Dan McFeely, formerly a communications and economic development consultant to the city of Carmel, to Promote Carmel’s three-member board of directors. McFeely’s wife, Sue McFeely, was Promote Carmel’s executive director. Dan McFeely also was board president of The Carmel Jazz Festival Inc.

Members of Promote Carmel’s board of directors were Tim Griffin, Lauren Taylor and Rebecca Shelper.

McFeely’s letter, written Aug. 11, 2024, noted the Brainard administration in 2023 asked Promote Carmel to assume new responsibilities.

Those responsibilities, according to McFeely’s letter, were to “assist in financially supporting activities related to the Carmel Sister Cities organization, primarily in the funding of travel expenses to and from Latvia, visiting musicians from [Cortona, Italy] and most all alcohol-related expenses for these visitors and other visitors. Toward the end of 2023, we were also asked to financially assist the Carmel JazzFest event, which lost a substantial amount of money and was unable to pay its bills.”

The inaugural Carmel JazzFest was held in August 2023.

Springer said that Promote Carmel paying for travel and alcohol was “not abnormal.”

“In fact, I would argue, as taxpayer, that’s a good thing, because maybe that’s not an essential,” she said. “The problem here was it was always operating at a loss, and so the subsidy paid for something with taxpayer dollars that wasn’t permitted to be paid for under the city’s budget.”

McFeely also wrote that another new request was for Promote Carmel to finance and work with a local author in writing a Japanese cookbook as part of a sister city project and to finance a history of the Carmel Symphony Orchestra for its 50th anniversary celebration.

McFeely’s letter said that Promote Carmel accepted a $50,000 contribution from a donor in 2022 to build a Chinese peony garden near Carmel Elementary School, but the contribution was instead used to bail out the Carmel JazzFest with a promise to restore the funding the following year for the peony garden. Springer said the funding was not restored.

“In addition, the use of the donor’s restricted charitable grant of $50,000 for the ‘JazzFest bailout,’ followed by continued subsidies from the City of Carmel, resulted in taxpayer funds contributing to the JazzFest bailout without transparency of that payment to the City or the City Council,” Springer wrote in her presentation.

In a text message to IBJ, McFeely said he served as Brainard’s liaison to Promote Carmel Inc. and assisted in overseeing the All Things Carmel Store as part of his role as an independent contractor for the city.

He said the store served as a visitor’s center that provided city-produced items including brochures.

“Our goal was to welcome visitors and answer questions,” McFeely said. “We love our City and enjoyed our time helping visitors discover all that we have to offer. Everything we did at the store and for other purposes related to the promotion of the City was at the direction of Mayor Brainard and his Community Relations and Economic Development office.”

McFeeley said he wasn’t on the JazzFest board for the first two years of its existence but was asked to join “after it accumulated debt in order to help its financial condition.”

Promote Carmel also paid for a number of other expenses that included a $15,468 travel reimbursement for Sue McFeely, $6,855 to Crooked Stick Golf Club for Brainard’s 2023 Christmas party, and $3,323 to the Ritz Charles in Carmel for beer and wine at a reception for Brainard.

“My initial thought in my head is, as a city councilor, I’ll never appropriate money to an affiliate again without a full report and recommendation of other things,” said Locke, who is the Carmel Affiliate Review Committee’s chair. “The concept of what’s too much control and what’s not enough, and where that kind of sweet spot is for independence, I think, is going to be paramount as we move forward.”

The Carmel Affiliate Review Committee will meet April 16 and May 1 and issue a report on the four nonprofit organizations.