Recent financial reports have some concerned that the Carmel Redevelopment Commission is insolvent and the effect that could have on taxpayers, if true.
The CRC recently presented to the Finance Committee of the City Council a report detailing its debts and revenue forecasts for 2012. Among other things, the report shows the CRC making no payments toward principal on some of its debt as well as projecting eight months in which it will have either an operating or non-operating balance of $0, if not both.
The numbers have prompted some to implore the council to implement new restrictions on, or even abolish the CRC and the Carmel City Center Community Development Corporation (4CDC), a nonprofit created at the request of the commission.
“I urge you, the council, to consider the abolishment of the Carmel Redevelopment Commission, and Indiana law allows it, and to cut off all funding to the 4CDC before this financial house of cards collapses and takes the taxpayers of Carmel with it, along with yourselves,” resident Kathy Wallace told the council Monday night.
The report includes the CRC’s estimated 2012 debt service coverage, which shows a revenue-to-debt ratio of 1. According to the report, the CRC projects it will collect more than $21 million in tax revenue in 2012 but will only have $5,929.41 remaining at the end of the year.
Additionally, the report indicates the commission will make no payments toward principal on debts totaling $79.7 million.
“Not having enough money to pay principal on $79.7 million in debt tells every reasonable person that there is a question of insolvency in regards to the Carmel Redevelopment Commission,” said former councilor John Accetturo, who addressed the council Monday night. “In addition to that, they show no payments on $21 million in loans that are due by the end of 2012 by the 4CDC, a corporation they fund and use to make certain payments to wherever they wish, and even back to themselves.”
Commissioner David Bowers confirmed that the CRC will not pay toward principal on the $79.7 million, but added that the CRC is in an interest-only period with these debts. Bowers denied claims made by both Accetturo and Wallace that the CRC is using more than $10 million in loans to fund its operations.
However, when asked by Councilman Eric Seidensticker if the commission had borrowed any money to pay for operations, Bowers said “yes,” but said some of this borrowed money is being used to fund operations at the Center for the Performing Arts.
The Center requested and will receive a $5.5 million subsidy from the commission, through the 4CDC. Because the CRC is prohibited from granting funds directly to the nonprofit organization that controls the arts center, it has been giving money to the 4CDC, which then provides a grant to the Center.
Seidensticker also asked if the CRC has a revenue stream large enough to accommodate its operations, to which Bowers replied “Not in its entirety at this point.” The report shows four months in which the CRC projects to start and end the month with an operating balance of $0. It also projects to receive a $3 million insurance reimbursement for the costs of repairs made to the roof of the Palladium during construction. The reimbursement would account for just under half of the CRC’s total projected revenue to be used for operations, and Bowers said the commission is “absolutely” depending on it.
Asked by Council President Rick Sharp if he was confident the CRC would receive the full amount by or before the month that it is budgeted, Bowers answered “I guess the answer is ‘yes.’”
Accetturo asked for the council to take immediate action to “protect the taxpayers” of Carmel.
“A lack of action, councilors, will not relieve you of the responsibility of the collapse of the Carmel Redevelopment Commission,” he said.
Mayor Jim Brainard responded to the comments by pointing out the benefits of the city’s redevelopment projects, such as increased property values and economic development.
“But there’s been a recession,” he continued. “Things haven’t grown as much the past two or three years as they have in the past, but we’re coming out of that recession. We’ll continue to manage carefully.”
He said he is confident the economic development created by these projects will continue.
“We have a long line of people talking to our Dept. of Community Services and Redevelopment Commission about where they can develop or redevelop in the Old Town and City Center area today.
“Do we need to be careful? Of course we do. We need to manage carefully. Is there a disaster looming? I don’t think so.”
This story will continue to be updated.