City of Bloomington Economic Development Commission Meeting Today

Today, the City of Bloomington Economic Development Commission (EDC) will be meeting at noon (2015-01-23 at 12:00PM) in the Hooker Conference Room in City Hall. There are 3 substantive issues that will be covered in the meeting — issues that might be characterized as the good and the ugly in economic development. Unfortunately I don’t have a lot of time to write about this in much detail before the meeting, but will update the public afterwards.

1. Big-O properties (principal Mary Friedman, Bloomington) is requesting a 3-year tax abatement for a mixed-use project at 338 S Walnut Street. I have written about this project extensively before here (City Tax Abatement Request for Mixed Use Building 338 S Walnut St). They are coming back before the EDC because they are requesting to change the plan a bit — to reduce the amount of retail square footage on the ground floor from 2500sf to 1663sf to make room for bicycle storage (in order to make the bedroom to bicycle storage ratio 1:1). This abatement request will need to be approved by the City Council.

2. Cook Pharmica is requesting a 10-year personal property tax abatement for a significant expansion to their vial and syringe-filling business unit. They are proposing to invest $25M in new equipment, which will result in the creation of 70 new jobs, with $3.2M in new payroll. All wages would (and would be required to) be compliant with the City’s Living Wage Ordinance. The jobs would be created between 2015 and 2020. Cook Pharmica is also investing several million in the building to accommodate this expansion; however, they are only requesting the tax abatement on the personal property improvements (the equipment), not the real estate improvements.

The abatement is requested as a 70% abatement over 10 years. The 70% figure was chosen because Cook Pharmica could alternatively take advantage of an automatic 10-year Urban Enterprise Zone tax abatement, which also results in a net 70% savings on the personal property taxes resulting from their new investment, but distributes the remaining 30% to the Bloomington Urban Enterprise Association, the City’s Redevelopment Commission, and the Indiana Economic Development Corporation. Structuring their request as a 70% abatement on personal property tax instead keeps the 30% as being distributed to the taxing units serving the property (i.e., City of Bloomington, Monroe County, MCCSC, Monroe County Public Library, etc.). This abatement would need to be approved by the City Council.

3. Between 1986 and 2012, the City issued business loans through the Bloomington Investment and Incentive Fund (BIIF). There are 5 outstanding BIIF loans, of which 4 are current. The remaining loan was made to XfiniGen — a company that proposed to build the “next generation lithium batteries for large scale energy storage applications”, and proposed bringing 107 jobs to Bloomington. The company folded, and has left $37,464.07 in principal outstanding. Their last payment was in November 2013. The City is proposing that this remaining debt be written off, as there is little to no chance of collection. The memo in the packet about this situation provides some more detail about the company and the City’s attempts to collect the debt.

The full packet can be found here: Bloomington EDC Packet 2015-01-23

City Tax Abatement Request for Mixed Use Building 338 S Walnut St

I was recently appointed to the City of Bloomington’s Economic Development Commission (EDC), as a County Council nominee, and just received word that we will be considering a tax abatement request for a mixed-use development at 338 S Walnut St downtown. One of the primary roles of the EDC is to evaluate and make recommendations on requests for tax abatements. The EDC is purely advisory; the City Council has the ultimate authority to approve tax abatements in the City of Bloomington.

Monroe County also has an Economic Development Commission, which makes recommendations on tax abatements in the unincorporated part of the county. This will be my first time considering a tax abatement on a project with a residential component; County projects have all been for employment-generating facilities (manufacturing and logistical facilities), at least during the time I’ve served on the Council.

The photo below shows the currently vacant lot currently on 338 S Walnut, along with a bit of the two adjoining properties — 340 S Walnut to the south (owned by the same owners as 338 S Walnut) and the old Costume Delights to the north.

338 S Walnut St
338 S Walnut St

Interestingly, 338 S Walnut St used to be the home of Monroe County Health Department’s Futures Family Planning Clinic; the clinic has since moved into the basement of the Monroe County Health Building. The building has already been demolished, and the lot is currently vacant.

Former County Futures Family Planning Clininc
Former County Futures Family Planning Clinic

The following is an architectural rendering for the planned project provided as part of the tax abatement application. The building is expected to be mixed-use, residential and commercial, and provide a total of 14,400 square feet. It will also include some on-street landscaping.

Renderings - 338 S. Walnut St._Page_3
Renderings – 338 S. Walnut St._Page_3

The owners anticipate investing around $2M in the property, and are asking for a 3-year phase-in of the property taxes associated with the new assessed value. This means that the new assessed value would be 100% abated the first year, 66% the second year, 33% the third year, and subsequent years would be taxed at the full value.

The property currently generates around $4000/year of property tax. At full value, the new project will generated around $40K/year of property tax, so even after the first year of the abatement, the new project will be generating 3 times as much property tax as it is currently.

The following abatement schedule (from the EDC packet) shows the estimated taxes with and without the abatement:

338 S Walnut Proposed Abatement Schedule
338 S Walnut Proposed Abatement Schedule

The EDC meeting to evaluate this application is on November 21, 2014 at noon. I’m not yet sure when this application will appear on the City Council agenda.

Tale of Two Cities: Embezzlement in Bloomington IN and Covington, KY

Just as the story was breaking about the embezzlement of around $800,000 by a City of Bloomington public works employee, the news broke of the guilty plea of the finance director of the City of Covington, Kentucky (the city right next to my home town of Fort Thomas, Kentucky) for embezzling — get this — around $800,000 from the City of Covington. Unlike the alleged perpetrator in the Bloomington case, the Covington ex-official both admitted his crime and expressed significant remorse.

Cincinnati.com just reported today on some of the security and accountability controls that Covington is putting in place in the wake of the scandal (In light of theft, Covington patches things up). Although many of the details of the Bloomington incident have yet to be released. just from the media accounts it appears that the Covington theft was far less sophisticated than the Bloomington one.

Most significantly, in Covington, the same official had complete control of the city’s finances and of the city’s information technology. This control allowed the finance director to create checks in the financial system to fake vendors (and/or himself and relatives) and then cover up his tracks by changing the data in the financial system to make it look like the checks were written to legitimate vendors. From the outside, it is hard to imagine how such a system had been allowed to exist. Separation of duties is essential to maintaining accountability in any financial system.

The use of computer databases adds particular additional managerial burden, since without adequate controls in place, it can be easy both to commit malfeasance and to cover up the evidence. Covington has since created both an internal auditor and a separate information technology manager.

I would like to make one comment about both embezzlement cases, and the justifiable outrage expressed by the public surrounding them. While some of the security controls in place — particularly in the Covington case — seem almost laughably lax (or absent), there will never be one set of processes or officials or board members that will forever be foolproof. There will never be an unpickable lock or an unbreachable vault. There will never be a board or commission that is able to exercise perfect oversight. As long as there is money to be made, there will be smart criminals who will figure out a way around any system of security controls. Financial crime will always be a cat-and-mouse game; sometimes the cat will have the advantage and sometimes the mice.

911 Dispatch Funding in Monroe County

Although it hasn’t been reported on very widely, Monroe County Government and the City of Bloomington are currently collaborating in building a new Unified Dispatch Center for all of Monroe County’s public safety agencies on the second floor of the new Bloomingon Transit Hub. This new dispatch center will replace the antiquated joint dispatch center in the Bloomington Police Station. Besides the new building, a key upgrade will be a new Computer-Aided Dispatch/Records Management System that will greatly increase our ability to respond more quickly and accurately to 911 calls.

Last month, the County Council appropriated $1.8M out of the general fund for its share of the furnishing of the new dispatch center (the City and the County have yet to come up with a final agreement on what constitutes equitable distribution of the costs).  Debates will continue at the County in future months about how much our contribution should be, for what purposes, and how to fund the remaining costs of construction and furnishing.

Ongoing operations of the dispatch center (i.e. dispatch personnel, software maintenance, etc.) will also be funded from several sources, both City and County. The County also has access to a revenue stream that is dedicated to the funding of Public Safety Answering Points (PSAPs), of which the dispatch center is one. This revenue comes from the E911 fees paid by landline, wireless, and prepaid wireless telephone users, and currently generates around $689K annually. However, this doesn’t cover anywhere near the costs of actually operating the dispatch center, which currently employes 25+ dispatchers. Another important policy question to be resolved is whether the other public safety agencies that are dispatched (e.g. fire departments, hospital) should pay anything towards the operation, since the Unified Dispatch Center would be providing services to them.

At last week’s County Council Work Session, I gave a short presentation on (a) the history and current state of the 911 revenue stream and (b) the interlocal agreements between the city and county, in order to give councilors some context for future decision-making on dispatch center operations. Several people have asked me for a copy of my presentation, so I thought I would include it hear.  At some point when I have time I will add some additional explanatory text.

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