I have posted before on the controversies involving the Carmel Redevelopment Commission .
Today’s Indy Star has a long and somewhat jaw-dropping article that describes in detail the creative financing that Carmel’s mayor (Jim Brainard) and the Carmel Redevelopment Commission used both to fuel the construction boom in the Downtown Carmel TIF district, but also to drive the Redevelopment Commission to the brink of default.
In short, in order to avoid the oversight and opposition of the Carmel City Council, the Redevelopment Commission not only bonded for the capital construction of the Center for the Performing Arts and other infrastructure in the downtown TIF, but also devised a creative method to finance upgrades to the center, and even more stunningly, the operations of the center and a separate staff for the Redevelopment Commission.
Typically, Redevelopment Commissions use the staff of their parent city or county, because TIF funding can’t be used to hire staff. Monroe County’s Redevelopment Commission, for example, uses the services of one of the Monroe County attorneys. However, in the case of the Carmel Redevelopment Commission, they and the mayor didn’t want the scrutiny that would come from having city staff supporting the commission. They developed a financing method called “installment purchase contracts” that would basically allow developers to take out public debt (often at a very high rate of interest) and then have the Redevelopment Commission contract with the developers for the purchase of the improvements (seemingly a variant of the more common lease-purchase arrangement). Revenue from this arrangement was then used to fund the operations of the Redevelopment Commission. In essence, this was borrowing on assets to fund operations — an inherently unsustainable activity (sort of like taking out a home equity loan to pay your electric bill).
The mayor and the Redevelopment Commission’s defense, however, is spirited as well: the mayor had a strong vision for downtown Carmel that required significant redevelopment, and that ultimately resulted in very positive national recognition for livability of the city.
Ultimately the resolution will involve some sort of refinancing of the debts of the Redevelopment Commission by the City of Carmel. The major point of negotiation will be about how much control over the RDC’s operations and activities the city (and the council) will demand.
The whole article is here, and is very much worth reading: