Corporate Welfare – Fort Wayne Style
Posted by John B. Kalb - 2/28/08 @ 1:38 am - Filed Under City Council, Featured
For retail business, including pubs, bars and restaurants, the false conception that “new” jobs are being created falls flat. Most, if not all, of these jobs end up to be “transfers” not “new”.
- And when a project like Harrison Square is using property tax abatements as incentives toward the transfer of retail establishments from “existing” to the “new” area, it gets even stranger –
Jefferson Pointe is a successful retail entity that is generating about $2 million per year in property tax revenue – but it’s through the TIF funding process. Since it and Harrison Square are now linked in an extended Economic Development Area, the payments toward debt retirement at HS will be coming largely through this TIF fund. So the property taxes being paid by successful retail properties at Jefferson Pointe are being used to build a facility so that it can compete with them for the retail customer’s dollars. In addition, these successful commercial entities and all other property taxpayers in the city will be paying higher taxes to replace those that are being abated on the new retail space. What a double crock!!!
If the new downtown ballpark and The Harrison condo/retail facility is so marginal that it needs property
tax abatement to be a success, why in heaven’s name are we involved with this project?
So, to summarize:
- The application for abatement from Barry Real Estate did not mention any other benefit for granting this than the 125 sub-minimum wage average jobs it would create – even though the Community Development supporters indicated that there were some other benefits to this action.
- The new ballpark will cost taxpayers about $50 million (including debt service costs) to be paid over a 30 year span.
- Our existing Memorial Stadium, which has been completely paid for using the income from theAllen County Food & Beverage tax , is on the books of the county at over $10 million. After the spring of 2009 (or whenever the new stadium is ready for the Wizards) memorial Stadium will be torn down and be replaced with an asphalt parking lot at an estimated cost of $2 million.
- The new parking garage on Harrison Street will have parking spaces for about 500 less vehicles than existed before the demolition. Does anyone really think that you will be able to park in this garage for free when you attend a ballgame at the new stadium? In reality, the parking garage is being built so that Lincoln Life has a place for their employees to park during the daytime, since the HS development will take all their existing parking lots.
- The owners of the new hotel, which will double the number of rooms available in our downtown (reducing the number that will be used in our existing motels), have been guarantied a 16% profit for 20 years!!! What a deal!
- Our Grand Wayne Center, presently supported by taxes which are 65% of it’s yearly budget, will be supplying through this tax income a yearly stipend of $1 million per year to the project. Real smart – a facility that is tax supported transferring tax income to a project that is totally supported by taxes - plus, promising the hotel owners a 16 % profit for 20 years. What a great investment opportunity!
- Now our Common Council has gone on record to issue tax abatement to the condo/retail facility to be known as The Harrison. I truly believe a much more truthful name would be “The Grand Fort Wayne Boondoggle”.
- Get ready- next will be the tax abatement for the new hotel, to more certainly insure that the 16% profit will be easier for them to reach – but if they don’t – it’s covered by the city anyway – so who cares?
- The tax abatements that will, per our redevelopment department, reduce costs for the condo owners give the Harrison owners an unfair advantage over the rest of Fort Wayne’s builders who are now competing against a tax-subsidy financed competitor. Again, we treat outsiders so much better than our existing businesses – no wonder we can’t keep jobs in our town!
- All of this possible because a far-sighted successful developed was able to finance, design and build the Jefferson Pointe shopping center without using 95 % of the TIF funds generated by their development for infrastructure needs within it! So, since they were able to make money without reliance on large amounts of public funds, our Common Council has voted to use these TIF funds to build a facility that will compete with some of their leases. We sure treat existing citizens and businesses very uncaringly.
I’m sorry guys, you still cannot get something for nothing – in this case, the rest of the property taxpayers are footing the bill for a developer who operates in Atlanta, GA, the owner of a new downtown hotel, also owned by out-of-town people, and the residents who can afford to live in the condos (including our mayor who is the highest paid mayor in Indiana!)
And then our mayor says we have to give up services to help him balance the city budget! Why do you think a majority of Fort Wayne citizens are angry? Maybe because of the above detailed actions??
Photo by Rachel Blakeman
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26 Responses to “Corporate Welfare – Fort Wayne Style”
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John,
It is time to let it go.
Actually this post is a good illustration of what I like to call “Economic Re-arrangement.”
We are subsidizing a few favored businesses and we are shuffling low paying jobs from one part of the city to another.
It is bad fiscal policy and it should stop.
I have talked to several local “conservatives” recently and they almost all are against this process; interestingly enough, four Republican members of City Council voted in favor of another tax abatement that does not meet the cities criteria for granting a tax abatement…
Why do we have criteria for granting tax abatements if we are going to keep ignoring them?
Mike Sylvester
John, Are you against Harrison Square? I didnt realize that. I hope that you load up this blog with lots of anti-Harrison Square stuff. It would be very interesting to find out exactly where you stand on this project.
Who says Sam doesn’t have a sense of humor?
:)
Kevin - Let go of what? If you think that I will “let go” of my feelings about some of the very unwise decisions by our Fort Wayne government, then you are very wrong! In five years I will probably be saying, “I told you so”- just like the downtown Hilton(bankrupt),the original Midtowne Crossing(bankrupt), Microstandard(bankrupt), Burlington Air Freight(left town after our give-aways to them ran out),and then recently, another air freight company that went belly-up leaving us with a large debt to pay. Can you list any recent positive things that have occured in our city because of governmental interference(oh, I meant redevelopment). And don’t give me GM Truck and Bus - this was an Allen County , not Fort Wayne, coup. Southtown Center is still a big question mark - without the large tax-supported Public Safety facility, it will last until the public give-aways run out and then they will all be gone - Menards, Wallmart and our famous McDees(the property tax rebate is gone in 10 years and then so is the fast food place) John B. Kalb
John,
In five years you will be saying, “I guess I was wrong after all”…..or actually, you won’t.
No matter HOW successful it is, you will find SOMETHING to complain about.
Harrison Square is a reality- you need to let it go.
John, If you wont let go of Harrison Square, my gosh could you please let go of Microstandard which happened when I was 12 years old. Get over it. Not everything is a sure thing, some times you have to take some risks if you want some reward. You will be eating serious crow in less than 5 years. I will buy you a beer to wash it down.
Do you two (Sam and Kevin) have anything to suggest here pro-Harrison square besides telling him he needs to bend over farther. Refresh my memory. What is HS supposed to do again?
Although I tend to like the Robert Enders idea that the city should stay out of the entertainment business I’ll give you some potential pro HS links to build on… I like the atmosphere of Downtown Indy. I also like the idea of creating good jobs that will keep my friends and customers from moving away. What do you got?
This is now an official boonBLOGle.
Relocate IPFW to downtown. Your downtown problem is fixed. Guaranteed. Year round. Forever.
Mike,
You raise a good question. Let’s look at this WITHOUT getting too technical.
My thought is the finance package for Harrison Square is pretty unique. We use a TIF to pay for the project overall.
True, this DOES cause a slight increase for the rest of the taxpayers in Fort Wayne. However- how much tax revenue was that area generating BEFORE? Frankly, not a lot.
There is a little pain to get started here, I do not argue that. But I believe that 10 years down the road people will universally agree that Harrison Square had a postive impact and did what it was suppose to do- be a catalyst for other development.
The problem here is I cannot produce PROOF of that. Of course, John Kalb cannot prove it won’t.
The City feels that incentives are necessary to attract and keep even low wage jobs.
The City feels that incentives are needed to draw people to one of the fundamental planks of Harrison Square, that being the codominiums.
Basically, the City is as much as admitted that they feel that H.S. has nothing to offer on it’s own merits. I guess if you’re ugly, stupid and have no personality, you might as well just prostitute yourself.
And before anybody says I don’t care about F.W. because I just compared our precious little baby to a broken-down old whore, let me correct you. The city is acting as the pimp here, and as such they are showing that they really think H.S. really has no value.
Here is a good question to ask:
Define what success will be for Harrison Square
Kevin - Success at West Jefferson,Harrison,Butler and Ewing would be that the condos & the retail happens with Hardball Capital leaving the Wizards at Memorial Stadium(upgraded as outlined using the $14 million in the Allen County Food & Beverage fund) and White & company cancelling their plans for an unnecessary new hotel downtown. The parking garage would be unnecessary since the phase 2 & 3 condos and retail would have underground parking where the “Big Hole” is at present. All three phases of both condos and retail are full, with all condos being much more affordable - like $125,000 to $140,000 - a group of superstores, including groceries, hardware, pharmacies, et al are in place and doing well.
But, this is not possible, since our wise city government put all their eggs in the “new-baseball-stadium” basket and did not approach anyone else for interest in what we really need.
John B. Kalb
Kevin,
To me, success will be when the City quits tacking on new subsidies to the project, and it doesn’t fold.
I’d say that it has been given enough of a boost from the taxpayers that it should be able to stand on it’s own now. Obviously, the City does not agree with this assessment.
There you have it, a simple answer for a simple question. Now it’s your (or Sam’s) turn.
What will define H.S. as a failure? Specifically, is there any upper limit to the amount of subsidization it receives where you would say it’s just not worth it?
John,
Thanks, that is what I thought. NO MATTER what you will NEVER admit that it is a success or that it works.
At least you are reasonable. :)
Phil,
You raise a valid question, although I do not think that anything unreasonable has been done at this point in time.
The City rarely refuses tax abatements for new development.
I look at cities like Indy and think how great they are. Remember how Matt Kelty touted the success they had because Dick Lugar had made such wonderful plans? Of course, it was all subsidized by the city (though Matt never mentioned that).
I think failure would be defined as the catalyst NOT working. The problem with that, I readily admit, is that we will simply not know for 10 years or so if it REALLY worked.
In my eyes, the financial investment is worth the risk.
That may not fully answer your question, but it is the best that I can do.
Oh and John,
I cannot believe you are still calling the hotel “unneccesary”.
I know of a group that had an event at the Grand Wayne in 2006 that COULD NOT find enough rooms downtown for their guests and had to hire buses to transport folks to outlying hotels.
Clarion bought the Holiday Inn BECAUSE of Harrison Square. And they see the need for THREE downtown hotels.
But do not let facts get in your way.
Kevin,
I think you gave a fair answer to my question, and I think you are right that we will not know the full effect of this for years to come.
What really bothers me about H.S., and other publicly funded economic development projects here, is the apparent lack of open and fair discussion by so many people from both sides. And yes, I am well aware that I have fallen into this trap myself at times.
If somebody proposes public funding, they are often automatically called a liar and a traitor to the American capitalist way of life. And if somebody questions or opposes this funding, they are said to be against the development of Fort Wayne.
We’ve come to expect this at the national level where Republicans try to redefine torture so they can say they don’t torture, and the Democrats try to deny that many of them voted for the war in Iraq, and therefore absolve themselves of responsibility for it. But when it happens at the local level, it somehow seems more personal.
Although we have differences of political ideology on some issues, I’d like to close by complimenting you on your style of debate. First, you can be a shrewd and nasty S.O.B. when you are attacking people who hold or are running for office. While that might seem like a slam, it is not. If both sides of every issue had sombody who has worked as hard and dug into the details as you often do, a lot of the B.S. would be cut out from both sides of the argument - and the gneral public would benefit as a result. In my opinion, if a candidate can not defend themselves against such attacks, then they are not qualified to hold office.
But in spite of you viscous capabilities (here’s the compliment), I think you do a remarkable job at differentiating between ordinary people who are just interested in politics and the actual political operatives when the two types come together in mixed forums such as the blogs. I think you do a lot to help keep the discussion civil (unless they have a big R next to their name!), and I’m sure that is appreciated by many people besides myself.
I am cross posting this cuz it is easier:
Yall are also forgetting that not only has the boondoggle now received a tax abatement but once the thing is built they are probably going to get a Professional Sports Development Zone (PSDZ) from the County for the Stadium and in turn all of the surrounding businesses which would cap off any Sales Taxes generated, back into the specific property and the surrounding area. There will be no tax revenue technically generated from the Harrison Square Stadiums or condos for people of Allen County or Fort Wayne to use to set off the general fund. In essence, all those restaurants, shoppes, and such even though they charge the Food and Beverage Tax the rest of the County wont see the income dispersal so the Memorial Coliseum will loose revenue (which it gets from the 2 FBTs and the current PSDZ now) because of HS even more so.
This whole project is just one government write off of tax dollars and scratching of insiders “back pockets”. Which is why they are going to have to raise all the levies yet again, and again, and oh wait they will probably have to add on yet another Food and Beverage Tax to supplement the money lost when the Wizards move Downtown so the MC can stay open.
Phil,
thanks for the compliments!
You wrote something interesting to me-
“What really bothers me about H.S., and other publicly funded economic development projects here, is the apparent lack of open and fair discussion by so many people from both sides.”
In the case of Harrison Square, public discussion would have been very difficult for a very good reason- If the public KNEW what was going to happen, the property prices would have risen to the point the project would not have been possible.
The second part of this problem lies in the fact that this is NOT an ala carte project. Several have said that they are not opposed to Harrison Square- but they just don’t think we need a ballpark downtown.
They voice their ideas- a year-around waterpark, an ice-skating rink, etc. Great. Find a developer willing to put up the money.
In the case of Harrison Square, Hardball came forward and said, we will spend “x”, IF you do “y”. In this case, “y” meant building a ballpark downtown.
Yes, there is a lot of public money going into this project. Do I think it is the absolute BEST deal? NO. But here are developers, with money in hand, willing to spend it in downtown Fort Wayne. That is something we don’t often see. I do think that we need to do SOMETHING downtown (we have done study after study after study for years)with no action. I believe this catalyst project will induce additional investment. I believe Harrison Square will work.
On a slightly different note-I am amazed at how some keep saying “we don’t need another hotel in Fort Wayne. Hotel occupancy is only 45% in this city.” Yet this morning I see THREE more hotels are coming to Fort Wayne. How can that be? What are they thinking? Unless maybe….just maybe some local bloggers DO NOT understand the hotel business.
Oh, and the part of me being an SOB….yeah, I know….I am trying to tone it down now that I am retired though! :)
Kevin - You are day-dreaming again -
“In the case of Harrison Square, Hardball came forward and said,……” is bunk! Check the dates of how this came down:
On the Fort wayne City web site on Monday, July 31, 2007: “Last October (that would be October of 2006) mayor Graham Richards announced a call for action to begin several downtown projects recommended by the Blue Print Plus process. One of the recommendations was to further evaluate a downtown mixed-use stadium complex” Now this was in October of 2006! Hardball Capital was formed in early 2007 with the specified purpose to purchase the Wizards, which were being offered for sale at that time. On that same day when the above quote was written, July 31, 2007, the same web site posted an article with the title, ” The Baseball Plus Committee recommends city move forward with plans for downtown mixed-use development” and a sentence in that article read, “City leaders will meet with the new owners of the Fort Wayne Wizards, Hardball Capital, to gauge their interest on the possibility of a downtown mixed-use complex”
So who was pushing this? IT WAS NOT AN OFFER FROM HARDBALL that started this whole thing - it was pushed from this end. The problem was that King Richard and his crew had already made up Fort Wayne’s mind that what we were going to do was a downtown mixed-use baseball complex!
Of course, Hardball said, “Sure, we would love to take the Fort Wayne public’s tax money, since it’s sure easier that competing in the private world to make a buck” And NO OTHER ENTITY HAD AN OPPORTUNITY TO COMPETE with Hardball.
Kevin - please visit Hardball Capital’s web site, where you can read one of the reasons they were interested in owning the Wizards, to wit:
“Minor league baseball yields gross margins in the 60 to 70 percent range. Much of the operating costs of a team are subsidized by Major League Baseball. The big leagues draw attention to the minors and pay for player’s salaries, benefits and per diem when traveling. Much of the equipment is paid for by MLB. And the biggest cost - the ballpark- is often held by city or county governments and leased by the team.”
Fort Wayne did them a couple better than the above stated - We are building them a brand-new stadium AND have signed an agreement to PAY THEM to manage it for us at a nice profit - THEY GET ALL THE CONCESSION PROFITS and we get to kick in
$230,000 per year into a stadium maintenance fund plus any income from Hardball as manager based on any overage from what appears to be an unattainable 275,000 yearly attendance at Wizards games at $1.00 per head - also going into this maintenance fund.
And you try to say that Hardball came to us with the only offer - you are correct we asked ONLY THEM!
Your other comment about why the public could not know about the project because it would have run up the costs of the property so that the project would not have been possible - is probably correct. But with that said and agreed to, why was it necessary to close all the deals, except the one with Lincoln, BEFORE 1)Our Plan Commission OKed the purchase, 2)Our Redevelopment Commission approved the plan, and 3) Our Common Council approved the plan??? (I have provided the details on this previously - but can again, if desired) The ONLY reason that I can come up with is that Redevelopment and King Richard wanted no door open when this got to those three groups - a fait accompli.
John B. Kalb
Kevin and all: In the first paragraph, errors on dates on my 9:21 comment tonight - Should have been July 31, 2006 (not 2007) and October of 2005 (not 2006) and then again in that same paragraph July 31, 2006 (not 2007) Sorry - at 72 time just moves too fast - either that or I am having too much fun -yeh. John B. Kalb
I’m appreciative of this blog and the information shared.
Why are Fort Wayne citizens allowing this to happen? Indianapolis citizens and taxpayers are not pleased with the outcome of Hardball capital in Indianapolis.
The History of the South Bend Silver Hawks minor baseball league franchise should teach Fort Wayne a lesson about this no win investment. Joe Kernan
owns the South Bend minor league baseball franshise.
How is it South Bend’s Joe Kernan controller 1980-84, elected mayor of South Bend 1987 till 1996 and became our Governor in 2003 due to O’Bannon’s heart attack. Kernan lost the race in 2005 to Mitch Daniels. South Bend’s baseball stadium is
paid by the South Bend taxpayer’s. Mr. Joe Kernan
owns the franchise. This baseball investment
is not bringing any money to South Bend or the taxpayers. They want it sold.
Fort Wayne thinks they have a money making venture
in downtown baseball. TIme will tell.
I actually disagree with the one part of the H.S. analysis where Kevin Knuth and john b. kalb agree. Announcing the details ahead of time will only cause the prices to go up in a seller’s market, not in a buyer’s market.
The first reason H.S. should have been a buyer’s market is because there were no other potential buyers for the property. If a business is offered a substantially above market rate for their property, and if there is no one else making a competing offer, they would usually be eager to sell.
The second reason it should have been a seller’s market is because there were other options for the City to consider. Look at that area just to the West of H.S. That is the land bounded by Jefferson (on the North), Ewing (E), Baker (S), & Fairfield (W). That looks like mostly a bunch of run down houses. I’ll bet that land could have been purchased for a lot less per sq. ft. than the businesses were. At least considering this option would have given the City some significant bargaining leverage. They could have told the businesses on the east end of the current H.S. location (including the overpriced Bill’s Palace) that if they didn’t accept a reasonable offer, then there would be no offer.
The reason it actually was a seller’s market is because the City appeared desperate, saying “We want THAT land, and we want it NOW.” Buying from a position of desperation is never a good angle. On a related note, I suspect that this might be why some of the bids for H.S. work are now coming in above estimate. The City has sent the message “We will bid H.S. - and damn the costs.” The City is now committed, so every bidder knows that they can overcharge and get away with it.
Another major error that the City committed in their approach to H.S. was acting as a bully towards, rather than a collaborator with, existing businesses in the area. Instead of forcing out Subway, Bill’s Palace and Belmont, they should have offered them all prime locations in H.S.’s new retail space. Instead of removing these businesses from the project, they would have been incorporating them as partners. I’ll bet with this approach, they all would have considered reasonable offers to alleviate their temporary suffering.
_____________________________________
Here is how the City should have approached the H.S. deal.
1) Ask every property owner (business and residential) in the greater downtown area to submit a bid price for selling their property, including any moving costs. By including a larger area, the city doesn’t appear as desperate. As a result, property owners would be more likely to submit reasonable offers.
2) Explain that if no bid is submitted, then the City may attempt to eminent domain at currently assessed value. This encourages everyone to quickly submit a bid.
3) Explain that any displaced business or resident will be offered comparable accommodations in the new H.S. Again, by incorporating rather than displacing them, this would encourage bids to be more reasonable.
4) Once the target area is selected, you ask the owners to sign a short term purchase option with the City. The option part is necessary so that the City doesn’t appear desperate as it finalizes the deal. To be fair, a small financial concession could be offered if the City failed to execute the option.
5) All bids for the project are bided out. This needs to be done before the City has actually committed millions of dollars so it does not appear desperate. The bidders, knowing that too many inflated bids might actually cancel the project, would be encouraged to submit reasonable bids.
6) Once the full details of the “proposed” H.S. project are worked out, they are then submitted to the Council and open for full and fair scrutiny by the public.
________________________________
Here is how the city actually did the H.S. deal:
1) Chose a specific area, for reasons that are still probably not fully known to the public.
2) Pushed many existing businesses out. Ironically, these were the same type of businesses that they claim to want to attract to H.S.
3) Forced some landowners to sell against their will.
4) Paid what many people consider to be overpriced amounts for some of these properties.
5) Did not reveal the full details of the project until after the deal was approved. The tax abatement for Subway and for the condos should have been revealed before the vote.
6) Told any questioning or dissenting member of the public that “I’m sure you’d really support this project if you just understood all the details.
7) Told that same public “We can’t reveal the details to you until after it’s been approved.
_______________________________________
Every public official who supported this project, as it actually went down, failed miserably. They simply did not want to make the effort to legitimize the project. Instead they chose to dictate their will to both property owners and the public at large.
Whoops - Third paragraph should have started as
“The second reason it should have been a BUYER’S market is…”
We now have parts of HB 1001 passed. It still needs a few tweaks from our state elected House and Senate.
Let the public and locals in a community ballot vote on public funds spent by government development in excess of $5-7 million dollar range.
Yes, Mitch our Govenor will make sure the job of our elected hear public taxpayer’s voice…The State Of Indiana needs tax reform now.
The poor souls that represent us have to get together again March 14th, 2008. Oh they might have to go into overtime.
Yes Mr. Marx
“Every public official who supported this project, as it actually went down, failed miserably. They simply did not want to make the effort to legitimize the project. Instead they chose to dictate their will to both property owners and the public at large.”