Mayoral candidates differ on approach to downtown incentives

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Joe Hogsett

Through nearly two terms in office, Indianapolis Mayor Joe Hogsett has leveraged hundreds of millions in public dollars to support private-sector projects across downtown, but the outcome of November’s election could affect how the city approaches incentives for future developments.

While Hogsett believes a broad use of incentives like tax-increment-financing bonds is often a necessity to bridge funding gaps—particularly to spur creation of low-income housing—his Republican opponent, Jefferson Shreve, favors a more moderated use of the city’s incentive toolbox.

Shreve told IBJ that projects at what he calls “Main and Main,” essentially the core of downtown, shouldn’t receive incentives to include affordable housing. He also said the Hogsett administration has supported projects that have taken too long to come to fruition or didn’t need incentives at all.

Jefferson Shreve

And Shreve argues that Hogsett has overused tax-increment financing, which captures new tax revenue generated by projects to pay for improvements related to that project or within a designated district. TIFs are widely used by local governments across the state.

It’s a characterization Hogsett dismisses. “Indianapolis and this administration has been fiscally responsible for the downtown TIF as we take on a once-in-a-generation, transformational economic development pipeline,” Hogsett said.

But Shreve said he would use tax-increment financing to focus on projects that would struggle to compete without the incentives, particularly office-to-apartment conversions, which are often cost-prohibitive for developers, as well as major downtown initiatives like a Circle Centre Mall revamp and sizable infill projects.

An IBJ analysis of public data found that, since 2016, when Hogsett became mayor, the city has spent nearly $450 million to support at least 25 development deals within what’s called the Regional Center, a 6-1/2-square-mile area generally bordered by 16th Street on the north, interstates 65/70 to the east, I-70 to the south and just past the White River on the west. The Regional Center also includes a narrow strip a couple of blocks wide on either side of Meridian Street up to 30th Street.

Private developers and investors put $1.55 billion into those projects.

The city’s $450 million figure doesn’t include numerous planning initiatives, beautification or specific infrastructure improvements—which amount to an additional $200 million. Nor does it include the roughly $700 million the city plans to spend on an Indiana Convention Center expansion and connected Signia by Hilton project, which it plans to construct and own.

But the figure does include the city’s portion of a $400 million overhaul of Gainbridge Fieldhouse. That public-private project, which improves an arena owned by the city’s Capital Improvement Board and managed by Pacers Sports & Entertainment, included $275 million from state and local tax revenue and a $25 million city contribution.

Also included in the IBJ analysis are nearly a dozen apartment projects, a pair of transit developments, a handful of hotels and a few office spaces. Between their developers and the city, the projects total $2 billion.

But those figures could be dwarfed in the coming years, given that downtown is expected to see at least $9 billion in private investment over the next five to 10 years across more than 30 projects. That includes Indiana University Health’s $4.29 billion hospital complex at 16th Street and Capitol Avenue.

A difference of opinion

Hogsett told IBJ he plans to take an “aggressive” approach with incentives to keep those developments on track—and to woo others.

“We will remain aggressive while at the same time [staying] fiscally responsible in terms of our incentives,” he said.

Shreve, however, said he has qualms about how Hogsett has used public money to support numerous downtown projects that he argues didn’t need it or have taken too long to materialize. That includes the InterContinental Hotel project, which received funding in 2018 but has yet to be completed, and the use of bonds for projects like Block 20, an apartment complex near Massachusetts Avenue.

Shreve said the city has made missteps in other projects, such as giving Kite Realty Group Trust “too long” to secure funding for a $510 million Pan Am Plaza project before the company ultimately pulled out.

“I think if we’re going to strike a deal with a developer, they need to be held accountable to perform and deliver within tighter time frames,” Shreve said.

The city announced in 2018 that it had selected Kite to build two hotels at Pan Am Plaza and develop the city-funded convention center expansion. In 2020, in the midst of the pandemic, the city announced it had reached a deal with Kite to delay the projects by up to two years, until late 2022—a move intended to give downtown’s hospitality industry time to recover from the drop in visitors and Kite time to find financing for the first hotel, which it said then would cost $300 million.

The deal did not include city subsidies or incentives for the hotel project. Officials also said they would delay construction on the second hotel. But by this spring, it was clear Kite couldn’t obtain financing for what was planned as an 814-room Signia by Hilton for the southwest corner of the plaza. So the Hogsett administration decided to save the project by taking on the full financing for the hotel, which it would then own. It kept Kite on as project manager.

Hogsett’s team called the move “a bold step that will ensure Indianapolis remains competitive at a national level” for major convention, tourism and sports events.

But Shreve, who as a city-county councilor voted for the project when Kite was to be the developer, objected vehemently to public ownership of the hotel, saying it will put the city in competition with privately owned hotels.

“This is a policy error—for the city to enter into the hotel ownership business in competition with all the private hotel owners and investors in the city,” Shreve said at the time. “It’s flawed policy, and I think that, beyond the one deal, it will have a chilling effect on future private investment in our downtown convention and hotel infrastructure.”

‘We over-TIF a lot’

Shreve also said he is “not in favor of micro-TIFing,” referring to the city’s practice of creating a single-site TIF district that is drawn around a single project and designed to capture new tax revenue from that project to pay for incentives there. That could include infrastructure improvements at the site, for example.

“TIFs are tough, and I think [single-site] TIFs are acutely challenging, so I would scale those back,” Shreve said. “When you get into the [single-site] TIFs … I become increasingly skeptical of the amount of taxable inventory that we’ve removed from the broader landscape of downtown that we have to fund and make work.”

While single-site TIFs do not increase taxes in an area, they do divert a large portion of the taxes that would be paid on gains in property value—typically about 80%—for the repayment of debt. Often cast as a reward for developers investing in a site and making marked improvements to it and the surrounding area, those funds are generally not available for other city-backed projects until the debt has been fully paid and the TIF has expired.

Shreve said he is open to considering public dollars for some projects, but he’d favor turning to cash, the existing downtown TIF or other financing options, rather than relying so much on single-site TIFs.

Since 2016, Indianapolis has deployed the single-site TIF mechanism within the city’s Regional Center at least 16 times, providing more than $200 million in that form of an incentive for investments totaling just under $1.1 billion—about 18% of the total project costs. Many of those designations will not expire until after 2040.

Among the projects to receive that funding are completed developments like the Hyatt Place hotel across from Gainbridge Fieldhouse ($18.5 million in TIF funding), the Ardmore apartments ($7.2 million) and numerous projects still under construction, like the Elanco Animal Health Inc. headquarters ($64 million), the Cole Motor campus ($15.5 million) and the Vanguard apartments at 16 Tech innovation district ($12.5 million).

“I think our TIF strategy has been responsible but also effective,” Hogsett told IBJ.

Doug Noonan

Doug Noonan, a professor of public and environmental policy at the O’Neill School of Public and Environmental Affairs at IUPUI, said he is concerned about the debt load the city has built through single-site TIF districts, noting that it’s “not necessarily a smart way to run government.”

“I would worry that this is a lot of debt to be taking out and that it’s pretty optimistic that [these projects are] going to have such a big” return on investment, he said.

To be sure, only a small portion of most projects are paid for with public dollars—and since Hogsett came to office, it’s all been secured by the developer, meaning the developer must make the bond payments if the tax revenue falls short. But Noonan said cities like Indianapolis—and their leaders—should keep in mind that debt doesn’t expire when a new administration comes in. Rather, it can carry on for decades after. For example, the city of Indianapolis only in 2020 paid off its remaining debt for Circle Centre Mall, which opened in 1995.

“It’s very hard, politically, to hold decision-makers accountable because they are on a shorter time horizon than the debt is,” Noonan said.

“That said, without appropriations that are able to fund big projects, you’re not going to get big projects. And that might be what a city like Indianapolis needs,” he added. “Not a bunch of projects you pay for with pocket change but big projects to make a dent, to make a difference.”

An affordability issue?

To Hogsett, the city is making a difference by creating affordable housing. In exchange for city incentives, his administration requires that developers make 10% of apartment units available to those making 50% of the area median income, or 5% of units to those making 30% of the area median income, at a reduced cost.

Developers can instead pay a lump sum equal to the difference between market rate and the discounted rent over the 25-year life of a bond. Money from those deals goes into the city’s affordable housing fund.

Hogsett has touted the requirements, established in 2019, as a major win for downtown. The rules have created more than 200 affordable units downtown.

But Shreve said while he generally supports the current set-aside requirements established by the city, he doesn’t believe every downtown apartment project should be subsidized—whether or not it has an affordability component.

It all comes down to the project location.

“When you get super-premium locations, those should be at just plain-Jane market rates,” he said, pointing to Circle Tower, which is in foreclosure, as a potential building that could be converted from office to multifamily.

“There are people that will pay that premium price for this condo or rental for these sightlines of Monument Circle and to be at the center of the city,” he said. “And I don’t believe that we need to set aside an affordability component and tax residents of Indianapolis to make that conversion.”

Shreve said he would be open to using incentives to spur conversions of vacant retail and office buildings elsewhere in the Mile Square and downtown.

“We’ve got big swaths of dead retail space and large parking lot areas that are in need of redevelopment and could be suitable for both market-rate and workforce housing,” he said. “I would want to see some affordable-housing component built into that if the developer is going to seek city incentives.”

Shreve said many of the city’s continued challenges with affordability speak to a lack of supply. “The marketplace should be allowed to work, and developers and investors [should get incentives] to create more quality multifamily products because the demand is there,” he said. “If they additionally think they need city incentives to make the deal go forward, I’d consider it under my administration. But I’d want concessions from the developer if they’re going to ask for that.”

What’s next?

Hogsett said that if he wins re-election, one of his biggest priorities will be the continued recovery of downtown post-pandemic and securing more investment in the area. And that’s likely to mean big incentives for major projects.

It’s expected that Indianapolis-based Keystone Group will secure a deal for the Eleven Park project—outside of its existing deal with the state to create a new Professional Sports Development Area—to help with infrastructure for the former Diamond Chain property on the southwest side of downtown. Additionally, the city must still finalize the bond process for the redevelopment of Pan Am Plaza.

It also is likely to make a sizable investment in the redevelopment of Circle Centre Mall, a project expected to be announced by the end of the year.

“The projects in our pipeline … are complex, and they are ambitious,” Hogsett said. “But I am absolutely confident that, in terms of … getting us across the finish line, it is the fiscal health of the city and the strong policies that we’ve implemented that have allowed us to be as ambitious as we have been—and may allow us to be even more ambitious and complex on a go-forward basis.”•

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24 thoughts on “Mayoral candidates differ on approach to downtown incentives

    1. Time for Change. Hogsett has had eight years. Higher violent crime rate, no improvement in the homeless situation and population stagnation. Hogsett must go!

  1. As per usual, Shreve talks out of both sides of his mouth. He criticizes Hogsett’s approach but at the same time acknowledges city incentives, including TIF is necessary. It really sounds like he’s against city support for affordable housing but supports high-end condos for the wealthy, most of whom have already fled to tony north side neighborhoods and Hamilton County.

    And Shreve’s criticism of how long some projects ignores the fact that these are private developments that the City itself is not constructing, and the effects of the pandemic including serious supply chain shortages and inflation. He claim to be some sort of real estate guru (self storage isn’t exactly complex development) but his remarks show ignorance.

    There is a total lack of comparison in this article about Hogsett’s use of incentives with his predecessors. Hogsett has changed the Ballard model of giveaways to requiring the developers to guarantee repayment of bonds. This is barely mentioned. And, the single-use TIFs only burden the tax base of one particular development rather than the remainder of downtown subsidizing a single project.

    1. It is entertaining to read your posts Robert. You clearly went to the Hogsett school of misinformation and lies. Shreve made it clear in the article that there are certain types of developments that are difficult to fund and they should receive incentives. While those that are more readily funded by financing markets should use traditional financing not city backed money. Like in so many other situations Hogsett uses city money without clear fiscal strategy. As for project length…you clearly have not managed a project before….there are ways the city could be actively engaging….but Hogsett is clueless on how to do it. Keep commenting Robert…you are giving clear insight on how you and the Hogsett team use misinformation in an attempt to to influence the election outcome. I wish Hogsett was as good at being a mayor as he is at misrepresenting the facts of how is doing.

    2. That’s hilarious Patricia. You’re clearly a Shreve supporter not a real estate expert. I’ve worked in real estate for thirty years. No developer wants the city to run its show, but just give them the money. Oh, and affordable housing is some of the most difficult developments to fund.

  2. Would hate to see the momentum that´s well underway be interrupted if Hogsett & Co. were to be replaced. It is remarkable
    what is being accomplished just since the Pandemic.

    1. Not sure what is to interrupt. A significant portion of the office space on monument circle is vacant. The construction on the corner of Market and Illinois has blocked access for years. A study from the University of Toronto released in May shows Indianapolis on the bottom of the list of post covid downtown recovery. Joe does not have the answers! It is time for a change!

  3. By gum, yes, elect Shreve…and he’ll force those businesses whose offices sit empty because the staff now works from home to get those lazy bums back in their offices. And speaking of lazy bums, I’m sure Shreve has a great plan for the homeless…maybe he could bus them to other cities, similarly to how his friends Abbot and DeSantis handle the immigrants. Perhaps his old friend ex-Congressman Mike Sodrel could load some of them in his trucks running the mail to and from Chicago…perfect set up, since State Police are restriced in their ability to interfere with any truck hauling US Mail. Or maybe he can rent a bunch of storage units from the folks who bought his business, and put them in storage.
    Oh, and crime. I confess I don’t understand how he intends to reduce crime. How many more police would you need to patrol every block of every neighborhood every day of every week of every month for every year. Because absent that sort of presence, crime won’t go down just because you hire 200 or 300 more officers. Crime has root causes, and you can’t just hope hiring more police will cure root causes. Or cure folks who just have lost the ability to reason and not resort to a gun, the one you carry proudly because the Indiana legislature (Shreve’s other good buddies) say you should…and there’s nothing police can do about it…
    Shreve has no answers. There may not be short term answers to most of this. But I’m confident Shreve doesn’t have them, nor does he have the ability to develop them or hire the folks who do.

    1. Tim S
      About and DeSantis are baring a huge disproportionate amount of the burden from
      from all the illegals and economic migrants with NO assistance from
      the President or his administration. The border is in crisis. A crisis
      created by the DEMS.
      The only reason Biden is reacting now is because Dem mayors are losing their
      collectivist minds. Yet they’re burden is nothing compared to what Texas and
      Florida are experiencing.

      Wanna know what to do about crime? Lock up the criminals. Stop the WOKE
      social justice nonsense.
      Obviously Hogsett doesn’t have any answers to the crime problem in our city.
      He’s to busy pandering to the social justice fools.

    2. BTW Robert F….working in over 100 cities across several states…building projects to help those in need of storage provided Jefferson some great experience in how to get things done and manage projects. As for your background and experience, it is great you actually have some basis in real estate to support your opinons. But last time I checked, your name is not on the ballot. Hogsett has failed on several fronts…he is running for a third term and in 2017…he said two terms is all a mayor needs. In 2017…even Hogsett predicted in 2023 it would be time for a change!

    3. Tim S….really? Do you care about facts? Have you read Jefferson’s plans? It is not just about adding more officers. It is about increasing the investment in mental health. It is about supporting the findings from the “Low Barrier Shelter Task Force”. It is about finding ideas that work. Mayor Hogsett released a plan in 2017 to eliminate homelessness in Indianapolis in 2023 when our homelessness count was approximately 1,600 people. In 2023 our homelessness count is approximatly 1,600 people. Hogsett’s plans have failed. It is time for a change. Shreve will pursue initiatives that compassionatly help homeless people.

      It is interesting how you chose to place so many lies in your statement above. Seems like you and Mayor Joe play from the same playbook….throw up a bunch of lies and hope they will distract from people seeing the truth.

      It is time for change…the people of Indianapolis do not deserve lies or plans that do not work.

    1. Thanks for posting this link. It details all the drivers behind the results of this particular study and all the things city government is doing to help the city recover.

    1. The near westside has immense potential. But the crime issue must be addressed first before investment follows. There are several large apartment complexes that line the west side of White River Parkway but very little retail and restaurants that are walkable to get to.
      There’s a reason for that. Crime!

      Elanco is a very welcome investment. Hopefully it help stimulate further
      economic development in that immediate vicinity.

      The city should really push and offer any and all assistance to I.U.
      and Purdue to expand their presence ( increase student population )
      even beyond Whiteriver Parkway
      between New York street all the way up to 10th Street.
      Let’s push to increase student population to 40,000 by offering incentives
      and assistance by any means necessary.

      Last, the I.U.P.U.I. area is BLAND and BORING. It lacks imagination and aesthetics. Let’s make it more appealing
      and festive to make it more attractive to more students. Make it a place
      where students want to be.

      Last, there is a large contingency of students from India that do not feel
      at home here on the campus and that can’t wait to leave. These students
      are already looking at San Diego, Houston, Boston, and other high tech cities.
      * Why can’t the city, I.U.P.U.I., private sector businesses, and students
      corroborate to create a two to three block international food, retail, and
      service area that is festive, appealing, and fun for these students.
      The potential for attracting and retaining students from India would increase. *

      Let’s be creative and corroborating. There’s immense potential.

    2. Sam B.

      I’m in that area everyday. Vision, corroboration, and backing are badly
      needed for that area.

  4. Let’s all just be honest with one another: During the Ballard administration TIF was used to incentivize downtown residential development. It worked but due to moral obligation backing from the city and the immediate availability of TIF funds the bond rating for Indianapolis went down. In order for the city to have its bond rating recover the Hogsett administration made developers back the TIF bonds for their projects instead of the city using single site TIFs. This made sense but slowed down the use of TIF on projects. The reality is the use of TIF downtown did stimulate residential development, but also had the effect of reducing the rents required to support a project. that reduction is real and, coupled with increases in land values and construction costs, have made it virtually impossible to do major residential development downtown without some type of public/private partnership. TIF seems to be the most effective way to accomplish this. Another reality check: every suburban town surrounding Indy has used TIF to do exactly the same thing with the same results.

    Jefferson Shreve seems to believe he can just stop supporting the use of TIF incentives for downtown projects. That is simply pollyannic. If he, as a developer, believes this to be the case, he is either lying or inept. Neither of these are qualities we should want in a mayor.

    1. Excellent observation SE. Building vanilla garages with a fence around them to store stuff isn’t exactly sophisticated real estate development. I’d say a little of both – half-truths and ineptitude.

    2. He did not say stop….he indicated more cautious use and not just handing them out like candy. Hogsett simply does not understand the long term impact of just giving away them away to all projects. It seems some of the readers are seletively reading and left to their interpretations…then misrepresent the facts. Interesting “Se G.” that you selectively used words from Jefferson to make your point! Jefferson’s success in policitics and in business indicate he is not inept! Hogsett’s failures in leadership over the last eight years (e.g. disasterous riot response, murders over 200 in the city for the last three years and on track for a fourth, terrible leadership on the animal shelter) are factual examples of Hogsett’s failures. He had eight years…he has failed…it is time for a change.

  5. Again Robert…stop with the lies. Shreve’s public safety plan very clearly outlines reasonable gun safety measures. He has taken flack from the NRA for his positions…but has not wavered. Shreve understands and supports the right to gun ownership as outlined in the second amendment…but beleives there are reasonable standards (e.g. permits, age requirements) that can help reduced violence!