Local Government – Page 72

Let’s Make a Deal

Most taxpayers want their government to be run in a businesslike fashion—to operate efficiently and to be careful stewards of tax dollars. But most of us also understand that government isn’t a business.

So when is it prudent or acceptable for government to invest our tax dollars in for-profit ventures? When do such deals make economic development sense?

I vividly remember the early days of the Hudnut Administration, when downtown Indianapolis was a pretty forlorn place. Businesses were leery of locating in the urban center, and banks and other financial institutions routinely refused to make loans for those few who were willing to do so. The ability of the City to step up, to guarantee those loans and provide infrastructure and other accommodations was crucial to reversing urban decline. The point was to demonstrate to the private market that downtown enterprises could be viable. The trick—and it could be very tricky indeed—was to generate sufficient business activity to allow market forces to take over, without artificially depressing that market, or inadvertently subsidizing some businesses to the detriment of others.

Today, downtown Indianapolis is flourishing. Those early, strategic investments have paid substantial dividends. Municipal loans have largely been repaid, and more importantly, the central city’s tax base has grown substantially.

There are probably cases where public investment in the urban center is still necessary, but many of us who participated in that early redevelopment process are scratching our heads over the Ballard Administration’s proposal to put $98 million dollars (up from an originally announced $86 million) into North of South, a hotel and apartment complex being developed by Buckingham Properties.

The Administration justifies this use of taxpayer dollars (at a time when libraries and public transportation are starving for funds) by pointing out that private lenders all rejected the project as too risky. It doesn’t seem to have occurred to them that those lenders may have had sound business reasons for coming to that conclusion.

Indianapolis has recently added over 1000 downtown hotel rooms; furthermore, hotel bookings in central Indiana declined by 5% during 2010. Why—in the face of excess capacity —would lenders risk financing a hotel project right now? And why should taxpayers subsidize a hotel that will compete with hotels in which we’ve previously invested?

Local blogger Paul Ogden recently posed a fair question: Why is it too risky to borrow $6 million to buy and install new parking meters, but not too risky to issue $98 million in bonds for a project private lenders wouldn’t support?

Ogden also noted that the project’s lobbyist is Tom John, who just stepped down as Marion County Republican Chairman.

Councilor Ryan Vaughn cast the deciding vote on the ACS parking contract despite being ACS’ lobbyist. More recently, Robert Vane resigned as the Mayor’s Press Secretary and won a no-bid consulting contract with the Capital Improvement Board.

It all looks a bit too cozy.

When there is an appearance of impropriety, taxpayers can be forgiven for questioning questionable deals.

Management versus Leadership

Mayor Ballard’s much-debated 50-year contract with ACS to manage Indianapolis’ parking infrastructure squeaked through the City-County Council, thanks to the deciding vote cast by Council President Ryan Vaughn, who refused to recuse himself even though his law firm represents ACS.

As a national commentator wrote to Bill Hudnut after that vote, the fact that Indianapolis gave an insider a sweetheart deal is less distressing than the fact that this transaction was yet another piece of a longer-term trend. “When you were Mayor, it seemed to me that the community leadership was really committed to downtown and the City, to the point where they even invested their own cash to make it happen, such as the corporations that helped fund Circle Centre Mall. Today, it’s pretty much a portion of the community elite using government simply to pull money out of the City. I’m not sensing that there’s the same commitment to the City and its future as there once was.”

My husband and I both served in the Hudnut Administration (we met there), and we can still recall the energy and excitement of being part of a team that was working to create a new Indianapolis. We were partners with local business and civic leaders who were equally invested in that future.

A local civic leader I admire believes there is an important distinction between leadership and management: as he notes, cities must operate in a businesslike fashion, but they aren’t simply businesses requiring managers. Leaders understand that a city is the sum of the human values that make it up, the values that give cities their character, their “soul.”

For those who believe that there is no such thing as a city soul, or an identifiable civic culture, who think that this is all soft-headed romanticism, Neal Peirce has news for you: Civic culture drives economic development and fiscal health.

“We know the old and familiar way—grant tax subsidies or other special favors to nail down new office or factory prospects. Local tax bases take a hit and all taxpayers end up subsidizing the favored businesses. But to draw both investment and talented individuals—demonstrably the base of strong economies in today’s globalizing world—cities might focus more intensely on the qualities that most prominently build residents’ attachments to their communities.”

Peirce cites a key finding from three years of Gallup polling: what drives attachment to a community is not “the usual suspects” like jobs, the economy or even public safety. While these things are important, “soft” quality of life factors—social offerings, openness, aesthetics and education (especially the presence of colleges and universities) drive attachment.

Communities scoring well in these categories also have higher rates of economic growth. The theory is that when people feel more attached to their communities, they spend time and money there, are more productive, and tend to be more entrepreneurial.

Such communities develop when people elect leaders concerned with the greater good, rather than managers interested in cutting deals with favored insiders.

Mother, May I?

Every so often, residents of Indiana’s cities and towns are forcibly reminded that we don’t have the right to govern ourselves—that we are not, to use the legal terminology, a “home rule” state. Instead, Indiana municipalities are creatures of state law, and absolutely subject to the whims, ideologies, policy preferences and egos of state lawmakers. We may vote for a mayor and City-County Council, but those holding such offices must go hat in hand to the state for permission to do anything not specifically authorized by state statute.

Repeated efforts over the years to make Indiana a home-rule state have failed, and thanks to the recent vote putting tax caps into the constitution, the situation will only get worse. Those who control the purse-strings control policy.

The most recent evidence of our local impotence is the legislative response to Indianapolis’ request to hold a referendum on mass transit. After years of studies and debate, a broad, bipartisan coalition of Indianapolis’ business, political and civic leaders has rolled out a plan to upgrade our inadequate transit system. That plan requires revenue not available from current taxes, and the local committee proposed to put the question to those of us who live within the area to be served; we would vote on whether to tax ourselves to provide better service.

The immediate legislative reaction was insufferably paternalistic: “we don’t think the time is right to allow you to decide this for yourselves.”

There are two issues here. First, improving transportation is critical to the economic health of central Indiana. Over the years, Indianapolis and central Indiana have generated more jobs, and attracted more residents, than other sections of the state. That good performance has been largely due to an attractive quality of life. Our transportation deficit threatens that quality of life, and the inability of workers to get to their places of employment conveniently and inexpensively threatens our ability to attract new employers and our continued economic health. This is hardly news; city leaders have spent years debating what sort of system we need. It is past time to fish or cut bait.

The second issue is our right to decide matters of local importance for ourselves.

It is ironic that the same state legislators and officeholders who complain bitterly when Indiana has to comply with regulations, programs and unfunded mandates from Washington see nothing wrong with telling local governments what they can and cannot do.

When a measure is proposed that concerns Indianapolis and central Indiana, that measure should be decided by the residents of Indianapolis and central Indiana. There is an argument to be made that an improved transit system, by generating economic growth, would also improve state tax revenues, but the benefits of the proposed system would basically be limited to those who live in central Indiana. We are also the ones who would bear the costs.

We may make a good decision or a poor one, but it is a decision that should be ours to make.

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Sanity And Taxes

A couple of weeks ago, fifty-five assorted residents of Indianapolis boarded a chartered bus and headed to Washington, D.C. for the Jon Stewart/Stephen Colbert “Rally for Sanity.” It was a pretty diverse group—college students and retirees, black and white, varying religions and political parties—but we all wanted to demonstrate that the cable shouters, insult-throwers and nasty political ads dominating the airwaves don’t represent most Americans.

There were plenty of clever signs on display, but two more serious ones summed up what I think was the “message” of the Rally. One said “Turn Your Caps-Lock Off!” And the other read, “I pay taxes because I’m an adult and that’s the way it works.”

Ah, taxes. We have just emerged from an election season that was high on heat and low on light. Candidates of both parties were on my television—with their “caps-locks” on—promising to deliver services and balance budgets while cutting—or at least not raising—taxes. (On those rare occasions when a reporter challenged a candidate to identify what cuts he would make to accomplish this miracle, the lack of response was revealing.)

Here in Indiana, voters overwhelmingly agreed to place property tax caps in the state constitution, despite the fact that the negative consequences of the statutory caps are already being felt. The political golden rule—“He who has the gold, rules”—has shifted spending authority to the state, and made it much more difficult for local governments to deliver even basic services.

Mayors are desperate. They have fewer resources with which to meet the demands of citizens who want their public services improved, but who don’t want to pay for them.

Some—like Mayor Ballard—resort to gimmicks like the proposed contract with ACS to take over the city’s parking meters for fifty years. In return for giving away significant future revenues, the city will get some up-front money; more important, it will contract away its responsibility for deciding whether and when to raise parking fees.

Stripped of all the fancy rhetoric, this is best understood as a deal to outsource the taxing power. That is what the state did with the Toll Road. Recognizing that the legislature lacked the political will to raise tolls, the Daniels Administration “sold” the right to do so. That is also what motivated the sale of the Water Company to Citizens Gas; ratepayers essentially will be “taxed” in order to recover the up-front payment that is being used to pave streets and repair sidewalks.

Citizens, as a public trust, may prove to be a more prudent operator than the city. The parking proposal has no obvious merits and many obvious drawbacks. But good deals or bad, this is not the way adults make decisions. Eventually, services must be paid for. That doesn’t mean we cannot deliberate over the proper type of tax, or who should pay it, or how high it needs to be. But games cost more than taxes in the long run.

Adults know that.

Park It

Mayor Ballard’s proposal to privatize the city’s parking continues to spark bipartisan concern. Last week, the Sunday Star ran a “point-counterpoint” between Deputy Mayor Michael Huber, the proposal’s architect, and Aaron Renn, a respected urban affairs expert who has criticized it. Star editor Dennis Ryerson noted that many open questions should be answered before the City-County Council makes a final decision.

What are those questions?

Why would any city turn over an important part of its infrastructure to any private company for fifty years? Even if the deal were less one-sided fiscally, decisions about where to place meters, how to price them, what lengths of time to allow and so on have an enormous impact on local businesses and residential neighborhoods. They are decisions requiring flexibility in the face of changing circumstances; they are most definitely not decisions that should be held hostage to contracting provisions aimed at protecting a vendor’s profits.

Why would we enter into a contract that will add significantly to the costs of downtown development? Indianapolis has worked hard to encourage construction of hotels, retail establishments and residential units in our urban core. Often, that construction interrupts adjacent parking. Now, the city can choose to ignore that loss of parking revenue, or to charge the developer, based upon the City’s best interests. This contract requires that ACS be paid whenever such interruptions occur. It has been estimated that such a provision would have added over two million dollars to the cost of the current legs of the Cultural Trail.

Why ACS? Much has been written about the problems with Chicago’s parking privatization, but far less about ACS’ track record in places like Washington, D.C., where an audit documented mismanagement, overcharging, over-counting of meters, and the issuance of bogus tickets (ACS gets all the revenue for tickets). Washington lost $8,823,447 in revenue and experienced a twenty-fold increase in complaints from the public. And it wasn’t just D.C. Police officers in Edmonton, Canada, were tried for accepting bribes from ACS, and a few years ago, the company’s CEO and CFO stepped down after admitting to $51 million in stock fraud. Why enter into such a disadvantageous deal for so long a term with a company having so troubling a track record?

One of the problems with privatization in general, as we learned during the Goldsmith administration, is that it leads to speculation about cronyism and political back-scratching. In this case, the Mayor’s personal advisor is a registered lobbyist for ACS through Barnes and Thornburg, the same law firm that employs the President of the City-County Council. Whatever the facts of the situation, those relationships raise an appearance of impropriety.

Finally, why not simply retain control of our infrastructure, and issue revenue bonds for the necessary improvements? Interest rates are at a historic low, making it an excellent time to do so. If this administration simply can’t manage parking, create a Municipal Parking Authority, as Councilor Jackie Nytes has suggested.

However we proceed, we should park this proposal. Permanently.

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