Wilshaw, Bonds, and Rube Goldberg Devices

I have been thinking more and more about the bond that will be issued to support the Wilshaw Project.

For starters, understand that issuing a bond is essentially no different than taking out a loan, except you're not borrowing from one lender but instead borrowing from hundreds or even thousands of lenders. Each of those lenders is entitled to be repaid.

So, in light of that, here is my understanding of the money flow with respect to the bond. If either reader of this blog know of reasons why this understanding is incorrect, please let me know.

1. The bonds will be issued (i.e. the money will be borrowed) by the Town of Speedway. I have surmised this from the "Notice of Public Hearing of the Speedway Economic Development Commission."

The Bonds will be issued by the Town

2. The Town will then lend the money raised through the issuance of the bond to another entity, the Speedway Municipal Facilities Corporation.

The Town will lend the proceeds of the Bonds to the Speedway Municipal Facilities Building Corporation (the “Corporation”) to finance the construction of a portion of certain economic development facilities, consisting of a two level parking facility, site development work, foundations and related costs (the “Parking Facilities Project”).

As I have stated before, I believe that incurring debt to build a parking facility is short sighted and wrong, but I understand that some in the community disagree with me. We'll agree to disagree over whether publicly financing parking is appropriate.

3. The Speedway Municipal Facilities Corporation will then take the money to finance the construction of a parking garage, the majority (if not the entirety) of which will be for use by Wilshaw.

4. Wilshaw and the Speedway Redevelopment Commission will jointly and severally lease this parking facility from the Speedway Municipal Facilities Corporation.

5. Payments on that lease will be made to the Speedway Municipal Facilities Corporation by Wilshaw and the Redevelopment Commission. The money will come from either TIF money, the Developer, or a special benefits tax levied by the Redevelopment Commission pursuant to IC 36-7-14-27.

The Redevelopment Commission’s lease payments under the Lease will be payable from (a) tax increment revenues generated in the Redevelopment Area (the “TIF Revenues”), (b) payments under the Developer Obligations Agreement and Third Party Guaranty (each as defined in the Economic Development Agreement), and (c) to the extent TIF Revenues and payments under the Developer Obligations Agreement and Third Party Guaranty are ever insufficient to pay lease rentals, from the revenues of a special benefits tax levied by the Redevelopment Commission pursuant to Indiana Code 36-7-14-27.

Presumably, Wilshaw will increase the value of the land upon which it is built so much that the increased value of the land will raise the tax revenues on the land to the point where the debt pays itself. Additionally, Wilshaw has some sort of "Developer Obligations Agreement" that is likely available for viewing at Town Hall from 9-4 M-F (precisely located squarely within the time frame during which I, and most of my neighbors, earn our living) and has not, to my knowledge, been posted online. There is also some mention of a third-party guarantor, the identity of whom is not revealed. Is that the citizenry of Speedway? Vladimir Putin? God only knows. Should neither of those options suffice, the Redevelopment Commission will levy a special tax on the Main St. TIF area.

Schematic Representation of this Financing Deal

I have a variety of thoughts on this scheme, not all of which have been thoroughly sorted out. However, as a first draft:

1. As mentioned above, I believe that spending taxes so that people have a place to park their enormous iron machines (i.e. cars) is a waste of tax money. We don't ask the public to provide us a place to work or sleep. Heck, this nation has had a revolt of late over asking the public to provide us basic medical care, but we don't bat an eye when it comes to spending public money so that people can park their cars? Priorities people. Priorities.

2. Why the rube goldberg device for where the money goes? If we (however wrongly) do decide to publicly finance a parking garage, why all of the misdirection as to where the money goes, comes from, etc? I can't help but think that this is one of those situations where we, the Town of Speedway, shoulder all of the risk while Loftus-Robinson (i.e. Drew Loftus and Kyle Robinson) stand to profit. As they say, if you're sitting around the poker table and can't tell who the sucker is, it's you.

3. The notice mentions a statute but never indicates the import of it. I can't help myself here, as I am a nerd about this kind of stuff. Here is what I think the relevant portion of the cited statute (IC 36-7-14-27) is:

The redevelopment commission, with the prior approval of the legislative body, shall levy each year a special tax on all of the property of the redevelopment taxing district, in such a manner as to meet and pay the principal of the bonds as they mature, together with all accruing interest on the bonds or lease rental payments under section 25.2 of this chapter. The commission shall cause the tax levied to be certified to the proper officers as other tax levies are certified, and to the auditor of the county in which the redevelopment district is located, before the second day of October in each year. The tax shall be estimated and entered on the tax duplicate by the county auditor and shall be collected and enforced by the county treasurer in the same manner as other state and county taxes are estimated, entered, collected, and enforced. The amount of the tax levied to pay bonds or lease rentals payable from the tax levied under this section shall be reduced by any amount available in the allocation fund established under section 39(b)(3) of this chapter or other revenues of the redevelopment commission to the extent such revenues have been set aside in the redevelopment bond fund.

Note that this is a bit opaque. After about a half hour of research attempting to locate the exact locale of the TIF district for Speedway, this is what I was able to come up with:

How much will this cost?Approximately $120 million of infrastructure will be funded by public investment, which will help attract an additional $400 million in private investment in Redevelopment Area One.

How will the public investment be generated?

The Town of Speedway has the financial strength necessary to make the investment through the creation of a Tax Increment Financing (TIF) district, which provides the town with a healthy revenue stream and credit. 

Given that they want to obligate people to repay  over a hundred million dollars, you would think that we could get an easily accessible map or something. The best I could come up with is this, with a map on pg. 5 of 33.

I note that, should this not work out, the other business owners on Main will be on the hook to pay for this parking garage.

Seems like a bad idea to me.

I don't suggest for a moment that our officials on the Redevelopment Commission, Town Council, etc., are in any way acting in bad faith. However, please remember that Loftus-Robinson is a fairly new company that does not have an extensive track record, and Ice Miller has been playing this "get public money for private projects" game for a long time. Please see Lucas Oil Stadium as Exhibit A.

It seems to me that we are allowing ourselves to be lured into quite an obligation that benefits Wilshaw rather handsomely and is rather dubious with respect to its benefits for Speedway. As I've stated before, if we want to publicly fund a garage, we should do it and have the Town of Speedway own it, operate it, and service the debt. Straight forward.

When I hear the words "public/private partnership," I tend to assume that I'm about to be taken to the cleaners. If it's worthy of public money, then it's worthy of public ownership.