Carmel Council likely to approve $11.5M TIF to aid developer
Indianapolis Star (IN), 2014-08-05
Aug. 05 -- CARMEL -- Just days after City Council leaders raised alarm over possible commercial property tax shortfalls, a developer approached them for a new tax break.
But in a departure from the anti-borrowing rhetoric that has dominated the political debate in Carmel of late, the council is likely to approve the $11.5 million tax-increment financing (TIF) loan.
It's not necessarily hypocritical -- councilors say this deal has special appeal, because of built-in protections for residential taxpayers. And the way it's structured may serve as a model of sorts for future redevelopment deals in Carmel .
Michigan -based Edward Rose and Sons is seeking the TIF bond to finance roads and a parking garage at its proposed $80 million development at the corner of Main and Old Meridian streets near U.S. 31 .
The plans call for 422 luxury apartments, a retirement community, and townhomes for sale and rent. There also will be retail space and a spot for a future hotel. In addition to a parking garage, the loan would pay for an extension of Grand Boulevard and some interior roads that normally would have been the developer's responsibility to build.
Here's how a typical TIF deal works: The property taxes are frozen at their pre-development level, ensuring developers continue to contribute to the city's general fund. As the property value increases, those new taxes that the developer would have owed to the city are set aside and used to pay off the construction loans.
Councilor Luci Snyder said that in the past, developers have received all or most of the TIF dollars as their property values have increased. And if the TIF didn't mature as expected, the Carmel Redevelopment Commission would be on the hook to pay off the debt.
But under the Edward Rose deal, the developer will buy the bonds and be forced to cover any tax shortfalls. And, the developer will only keep 75 percent of the new taxes. The rest will go to the CRC, which will help the commission pay off the $486 million it owes in debt through 2037.
"The council has been saying that we would like to have a 75 or 80 percent split," said Snyder, who chairs the city Finance Committee . "We're tired of giving away the store when we've already established that Carmel is a great place to be."
Redevelopment commission director Corrie Meyer stopped short of calling it the model TIF agreement, but stressed the importance of negotiating with developers with an eye on the CRC's future financial needs.
"Is there a model? No," Meyer said. "But, we are constantly trying to structure a joint partnership with our private partners to help facilitate development and increase our opportunities to pay down debt.
"That project is really a win-win," she added. "It's a win for the city; it's a win for the developer."
The Edward Rose request comes as councilors have been steadily ramping up pressure on the Carmel Redevelopment Commission , which they say has a history of recklessness in managing debt. The issue flared up again last month, when the group's financial advisers released a new report projecting the city's TIF revenues for the next two decades.
The report showed a mixed outlook, with plenty for either side to use as ammunition in the debates to come.
On the one hand, TIF revenues alone are projected to fall $43 million short of what's needed to pay off the debt. Add in the group's other revenues, and it would still be $7 million short -- and that doesn't even account for the money the CRC would need to spend on its day-to-day operations.
On the other hand, a TIF reserve fund is expected to grow to $34 million in that time, money that would more than cover the shortfall. Meyer noted that the TIF projections are based on current market conditions. If the sluggish economy improves, tax receipts should, too.
Still, council members remain concerned about the future. And while projects like the Edward Rose deal at least don't add to the city's debt exposure, Council President Eric Seidensticker says they still cost taxpayers money. He questions whether incentives like these are even needed at this stage of the city's development.
"Am I happy about it? No I'm not happy about it," he said, after acknowledging that he expects it to pass when it emerges from committee. "But the project's decent. They continue to make the argument, 'Well, without our project you wouldn't have the increase in (property) value.'
"The other side of that coin is, if we never gave out TIFs, the developers would have to spend the money anyway," he added. "And they would. They would spend the money."
Snyder isn't so sure. While most of Carmel needs no incentives, she said some locations warrant them. The corner of Main Street and Old Meridian, where the project is slated, is one such place.
"This particular location has had years and years and years of infrastructure neglect," she said.
Seidensticker's take? Blight is in the eye of the beholder.
"You go find the same comparable area in the city of Indianapolis ," he said, "and that'll be a thriving community."
Call Star reporter Brian Eason at (317) 444-6129. Follow him on Twitter : @brianeason.
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