The Continuing Crisis In Indianapolis

If you found yourself mystified by the IBJ's revelation that local corporate investors in the Circle Centre Mall had agreed to divert their dividends to the CIB to finance construction of Conseco Fieldhouse, the father of the deal which gave us the mall, former Mayor William Hudnut, was equally confused. Ruth Holladay has the scoop on Hudnut's reaction to this news:

"First, the folks that stepped up when I was mayor, pledged some funds, and were given a position as limited partners in the deal, did it in good faith as a gesture of civic leadership. They closed a gap of some $50+ million that opened up when commercial real estate took a downturn in the late Eighties. Without their efforts, the Mall would not have been built.

"Second, since the original deal was made during the Hudnut years, lots of things were changed, renegotiated, refinanced, etc., none of which I know about.

"Persons more familiar with the story, who are still in Indpls., like John Krauss, Mike Higbee, Fred Armstrong, Dave Frick, could probably fill in those details, if you are interested. And of course, (former Mayor Steve) Goldsmith (elected after Hudnut) and his people, like Bob Grand), since they were the ones who effected the changes.

"Third, I don't recollect that the CIB had any involvement at all in the original deal on the Mall, as it was called.

"How they and other capital projects like Lucas Oil Stadium and Conseco Field house, deals done after I was gone, got involved, is a mystery to me.

"Fourth, hindsight is more accurate than foresight, so of course, in these downtimes it is easy to criticize deals that government made once to stimulate economic development, now that we are in a recession. But certainly, originally, all the investors knew there was risk.

I still appreciate their initial investments.

Yeah, old Bob Grand was right at the center of the deal. Now he's fully in charge of the CIB, notwithstanding his paid status as an attorney and advocate for the billionaire Simons, to represent your interests. Thanks a lot, Mayor Ballard.

On that gigantic water rate increase the unelected Indianapolis Water Works Board rammed through tonight without public input, at least one City-County Councilor is speaking out. "No board or commission should have the local authority to raise fees and taxes," said Councilor Ben Hunter. "These decisions should be made by elected officials so taxpayers can hold them accountable for their decisions," he continued. "The Waterworks Board as a courtesy never made communication with the Public Works committee on their request for a rate increase." That's right. This unelected board appointed by the mayor didn't even consult with our elected officials before seeking a tax increase. In other words, it's acting just like the CIB.

Hunter is seeking a delay in the Board's emergency request to raise water rates 20%, on top of another general increase in rates. "There are many issues on the horizon that will affect Marion County taxpayers, including a fee increase in sewer rates to fund work for the CSO (Combined Sewer Overflow) project under a federal consent decree," Hunter said. "We must find efficiencies and work together on these matters and consider the tough economic times taxpayers face in this county."

This is a big scandal waiting to be uncovered by some ambitious reporter in this town, which we may or may not have at the moment. Based on accounts I've heard from numerous Indianapolis residents about over-billing by the Indianapolis Water Company over the past year, some real hanky-panky has been going on in the billing department at the water company. I believe my own homeowners association may of been a victim of over-billing. Anyone who asks questions about spikes in their water bills are told there was a malfunction in the water meter and a suggestion is made to replace it to fix the problem. Attempted class action lawsuits have been dismissed by our local courts. Former Mayor Bart Peterson and CCC President Beurt SerVaas cooked up this over half-billion dollar deal to purchase the water company to protect us against astronomical rate increases and, yet, that is precisely what we're getting. Someone got rich off that deal and now we're paying the price. Is there anyone left in government that acts for the interest of the public and not themselves?

UPDATE: The Star's Brendan O'Shaughnessy provides more insight on why it is the Indianapolis Water Company requires such a large rate increase. It turns out that some bond expert advising the Indianapolis Bond Bank thought it would be a great idea to use a variable rate bond on 58% of the $840 million in debt being carried by the water company to save a little on interest in the short-term. Now those rates have skyrocketed. O'Shaughnessy writes:

Officials from the Department of Waterworks said the more immediate rate increase is necessary because the financial market crisis has caused interest rates on Waterworks' debt to nearly triple. Interest rates on that debt rose from 3.5 percent to 9.5 percent in the past two years, forcing Waterworks to make $20 million more in interest payments in 2008 than in 2007 . . .

Today, nearly 58 percent of the department's $840 million in debt is in variable-rate bonds, meaning that it changes on weekly intervals in response to market conditions. The rates on these bonds were low when they were issued, saving the city money. On the other hand, they carried a greater risk than fixed-rate bonds.

"Apparently, it seemed like a good idea at the time, but it turned out to be a bad idea," said Steele, who joined Waterworks last year.

Kevin Taylor, the Bond Bank's executive director, said variable-rate debt can be enticing, but that as a rule of thumb, it should make up no more than 20 percent of an entity's bonds.

"Fifty-eight percent is very high," said Taylor, who also took over last year. "It's too much uncertainty and interest-rate exposure, and it's playing out right now."

Taylor said he hopes to change the agency's debt mix by the end of March.

O'Shaughnessy's story notes that Jim Steele has helped trim the water company's budget since joining it last year, including $1.5 million in outside consulting. I wish he had shared who Peterson set up for all of that outside consulting work. You can bet they were big contributors. Can you guess which big law firm in town is counsel to the Bond Bank?