Accounting firm says a second independent report isn’t necessary for TIF projections


Clerk-Treasurer Diana Cordray made headlines with her public report demanding an audit to determine the risk of a Special Benefits Tax being put in place if the city couldn’t pay back its debt. Much of the focus of the report in the media was about an “offensive comment” that was accidentally left into a chart, which many city leaders said significantly hurt the credibility of the report. Mike Shaver, a consultant for Wabash Scientific, helped create the report and has issued an apology about the “joke” being left in, but that hasn’t stopped the debate.

Now, Loren Matthes of Umbaugh & Associates is sending her comments out to the Carmel City Council and the media to express her concerns with Cordray and Shaver’s report.

In an e-mail sent from Matthes to Mayor Jim Brainard — a public record that was forward to Current — she outlines her disappointment that she believes many people have misunderstood the situation.

Matthes sent the following: 

I hope you don’t mind me sharing some thoughts. I don’t think it is helpful for this to be portrayed as just a “joke” by the media as it is a serious matter.

Facts: The truth of the matter is this is about envious politicians who have been trying to undermine the Mayor’s projects and do not appreciate the sophisticated financings. They have tried to manufacture a phony fiscal crisis to scare taxpayers into fearing inability to pay debt or a looming tax increase, when, in reality, Carmel is one of the wealthiest cities in the country with a tax base of $6.5 billion. The City has a magnificent performing arts center and wonderful amenities, which attract new residents and businesses as evidenced by a growing and prosperous community with a “AA+” bond credit rating and recipient of national recognition and awards.

All of these major public projects have been funded from growth in property taxes from new commercial developments,without a tax increase on Carmel taxpayers to pay for it, and no shortfall is currently anticipated. The annual commercial revenues have already reached $21 million per year, with more development currently under construction, which will exceed the annual debt payments, plus reserve funds.

Taxpayers in Carmel already enjoy one of the lowest tax rates in the State. If there were an unexpected shortfall in the commercial revenues, a tax levy would not have much impact on the taxpayers. If there were a $1 million annual shortfall, the City tax rate would be less than 2 cents ($0.015). On a median-priced home in Carmel, this additional tax rate would increase their taxes $2.00 per year (less than 17 cents per month).

If such a shortfall were really to occur, the City would not even have to levy a tax because the City has other available funds to fill a gap. The Clerk-Treasurer and Council President (and their consultant) should be aware of these facts, having just approved the City’s 2015 budget. Mr. Seidensticker’s “joke” is a sad reflection on his Council leadership, but does not reflect the financial reality in Carmel.


And then in a subsequent e-mail from Matthes, forwarded to Current by staff in the Mayor’s Office, further outlined her issues with Cordray’s request for another “independent audit” to determine if there’s enough tax increment finance (TIF) revenue to avoid the Special Benefits Tax.


Umbaugh IS an INDEPENDENT accounting firm hired by the CRC to prepare and provide independent TIF estimates required for TIF bond financings.  We are a certified independent “Municipal Advisor” registered with the SEC and we are a certified public accounting firm.  Our analyses meet all the CPA rules with respect to “independence”.

With all reports, there is some data that comes from the client.  If we were preparing a City financial audit, we would still have to use the City’s financial records to prepare the audit.  With TIF feasibility analyses, the development assumptions come directly from a developer, a company or a representative who provides the information that is needed about the new developments (square footage, use/type of buildings, timing, etc.).  For Carmel TIF reports, we utilize property tax records from the Hamilton County Auditor along with development information from the developers, City building permit information, and development information provided by Department of Community Services.  We do not follow any growth assumptions directed by the Mayor or any other City officials or the Redevelopment Commission.

Umbaugh has prepared thousands of TIF feasibilities since the late 1980’s, and has an impeccable reputation with clients, rating agencies and the national bond market, including bond underwriters, banks and investors.

Mike Shaver, owner of Wabash Scientific, is not “independent” in his current advisory role to the Clerk-Treasurer. Furthermore, it would not be considered an “independent” analysis if he or anyone were to take Umbaugh’s analysis and simply apply different assumptions directed by the Clerk-Treasurer or members of the City Council.  Furthermore, Wabash Scientific is not a certified public accountant or a registered Municipal Advisor, and has little or no understanding of the rules about independence or audits.  He has no history of preparing independent TIF feasibility reports that are accepted by the bond market and rating agencies.

There is no reason for the City to have a second independent TIF Report from another firm, and, in fact, it would be confusing to the bond rating analysts, bond market, let alone Carmel taxpayers.  If the City were to desire two independent reports (then they probably should get a third), it should be from another independent CPA firm.  London Witte Group and Coonrod CPA firms would admit that they would not be considered “independent” with respect to the City/CRC finances because they understand “independence” rules.  The Clerk-Treasurer and Wabash Scientific and certain Council members do not understand these important distinctions.  Apparently, the media does not understand these distinctions either.

The enclosed document that proposes that there is a need for a third party audit of the Umbaugh report makes no sense.  Umbaugh’s report clearly states its purpose, which is to estimate TIF and coverage of outstanding debt obligations.  The Umbaugh TIF Report clearly discloses the risks of TIF shortfalls and the future development assumptions (and devotes a whole Appendix to the Risks).  It does not purport to be an audit of the total CRC finances.  In fact, it is the State Board of Accounts who is responsible for auditing City and CRC finances.  London Witte Group helps the CRC with their financial cash flow and reporting.  Umbaugh does not.

The Clerk-Treasurer’s Memo attempts to portray some confusion or contradiction between the statements in the bond documents and the TIF Reports.  The distinctions between the two have been discussed many times in publicly televised City Council meetings and Council Committee meetings in 2005, 2011, 2012, 2013, and 2014 (when the PAC Bonds were issued, and with the subsequent refinancings.)  The Bonds were marketed with a Special Benefits Tax as the security (this is not unique to Carmel financings, and is quite common with TIF financings in Indiana and other states).  Because the TIF and other CRC revenues are not pledged to the Bonds, the CRC and the Council entered into the Revenue Deposit Agreement, which was intended to clarify the priority of the TIF Revenue and other CRC revenues (as needed) to be used to pay the CRC bond obligations to avoid the Special Benefits Tax.  A flow chart was even prepared in connection with the last Revenue Deposit Agreement Amendment in 2014.


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