The City Council voted to bailout (restructure) a part of the Carmel Redevelopment Commission’s debt and people on both sides are annoyed. So what did we really do?
What we didn’t do was refinance their debt. Only the CRC could do that. Let me use a mortgage example to explain.
The CRC owes millions in debt (their mortgage), and their payments are more than their income. So all last year, they tried to find a way to refinance some of those debts to a lower rate so they could both make the payments and have operating money. However, their credit was bad and their income was pledged. Banks would not float any more bonds at a low enough rate to make a difference. The danger was if they defaulted next year, it would trigger a tax on all of our homes, the dreaded Special Benefits Tax.
Plan B: ask the City Council for help. This would be like a homeowner who couldn‘t refinance his own loan going to a family member and saying, “You take out a loan, in the amount of my debt (mortgage). You can get a low rate because you have good credit and a solid income stream, and I (the CRC) will promise that I’ll give you my income to make the payments!” So you see, this was not a refinance at all, but a whole new loan of $195,000,000 that now we, the taxpayer’s, owe and the CRC doesn’t.
So why would we do it, and was this a wise decision?
Yes, it was wise, if we lowered the rate, saving tax dollars, and yes, it was wise, if we stopped an additional tax on residential real estate, and yes, it was wise, if we stopped the CRC from piling up more debt, but did we stop them from piling up more debt? Both Carmel Redevelopment Commissioners Jeff Worrell and Bill Hammer said they’d do it again.
To prevent them from doing it again, we were forced to pass a law requiring the CRC to come to the Council for any new borrowing. The Mayor publicly supported these changes and so the Council voted. When that vote was done, saving the CRC from default, averting the CRC’s tax on our homes and any possible tarring and feathering, the spin began again.
What is the spin? It’s “don’t blame us,” “look at the beautiful Palladium,” “City Center is lovely,” “look at what we did,” “don’t look at the debt” and “the end justifies the means.”
Did I hear a “thank you?” No, Jeff Worrell and Ron Carter said they were threatened, that we said sharp things about the CRC and that we blamed then unfairly. Well, someone is to blame for borrowing more than they could pay for and their signatures are on those pesky loans.