Ballard Administration Breaking Many Laws To Force Through Tadd Miller Project

By hook or crook, the administration of Mayor Greg Ballard is determined to make a sweetheart deal it entered into with political insider Tadd Miller to convert the former Bank One Operations Center adjacent to the former site of Market Square Arena into a mixed use development reach fruition. The nature of this agreement since it was rammed through the Metropolitan Development Commission 18 months ago with little public comment has been changed so dramatically, raising so many red flags, and which is being carried out in a manner devoid of any public accountability that nothing short of an independent investigation is needed to ensure taxpayers' interests are protected. "They invented the smell test exactly for things like this, and it doesn’t pass,” Pat Andrews, a Democratic candidate for at-large City-County Council told the IBJ's Cory Schouten in the business newspaper's current edition. And that's an understatement.

As originally proposed, the MDC approved in June, 2009 a deal whereby the City agreed to purchase the 1600-space parking garage operated and owned by a subsidiary of Smoot Construction, a politically-connected firm that made millions off sweetheart contracts awarded during the administration of former Mayor Steve Goldsmith, for a purchase price of $18.5 million, nearly double its assessed value. The City in turn agreed to turn over control of the abandoned Ops Center property for development to a yet-to-be determined group of investors headed up by Tadd Miller, who had no prior experience leading a real estate development project of this size. Miller had been a business partner of Kosene & Kosene, another firm with close ties to former Mayor Goldsmith, that was struggling financially on a number of its real estate development projects. In consideration for title to the Ops Center property, a subsidized lease agreement for 600 spaces in the garage and a 10-year tax abatement, Miller's investment group would agree to immediately invest $30 million in a mixed use apartment and retail development on the site from an anticipated loan from Regions Bank.

Ballard administration officials insisted Miller's investment group would have to close on a development agreement within three months and commence construction on the project within 9 months at the time the deal was approved. But as we've since learned, nothing transpired as the Metropolitan Development Commission and the public were told at the time of the project's approval, and to this day no project agreement has been entered into between the city and the developer. Anticipating the deal's approval, Smoot had long since stopped making mortgage payments and property taxes it owed on the garage and Ops Center. Fearing a foreclosure on the garage by Smoot's mortgage holder, PNC Bank, the City went ahead and took possession of both the Ops Center and the garage and, unbelievably, paid $369,500 in delinquent property taxes owed by Smoot, an unprecedented move. The property is now off the tax rolls and generating no tax revenues to the public; however, Smoot continues to operate the garage and retain all of its revenues. And even though Miller's promised financing with Regions Bank fell through, the City allowed title to the Ops Center property to be transferred to Miller's Milhaus Development, which is planning to develop the project known as The Residence with the Gene B. Glick Co.

It gets better. With Regions Bank refusing to loan Miller's group money for the investment, the City's Bond Bank is now stepping in to provide the financing the investors require for the project. "When Regions backed out of the deal, the Indianapolis Bond Bank stepped in," the IBJ's Schouten reported. "The Bond Bank is trying to sell 'participation rights' in a garage loan that offers only the revenue from the garage as collateral, but turmoil in the municipal bond markets has made it a tough sell, [Darin] Kintner said." "The loan would still be to Milhaus and be secured by the city’s payments." Remarkably, if the deal fails to go through, ownership of the property will revert back to Smoot, but Smoot will not be required to reimburse the City for the back taxes it paid on behalf of the politically-connected firm on the garage property. Smoot also owes $259,600 in back taxes on the Ops Center property, but the City says the developer will be required to pay those back taxes; however, if the deal isn't closed by May, the property is scheduled to be sold at a tax sale, in which case Smoot will be on the hook for the tax liability.

Deputy Mayor Mike Huber defended the deal to the IBJ's Schouten, in part, by noting the reduced price the City wound up paying for the garage over the original sales price--$13.6 million. The developer obtained the Ops Center property for only $1.4 million according to the sales disclosure forms, but Schouten says the developer is actually getting the property at no cost. There was a reason for the lower value for the garage though. The city discovered another wrinkle during its due diligence period: The owner of Chase Tower, Australia’s Macquarie Office Trust, had the right to use up to 800 spaces in the 1,600-space garage," Schouten reported, a fact not previously disclosed to the City. Smoot renegotiated with Macquarie, reducing the number of spaces potentially set aside for Chase Tower to 200," he noted. "Meanwhile, the city argued the tied-up spaces reduced the value of the garage and negotiated the lower purchase price," Kitner told Schouten. He added, “It’s been a moving deal for three years." Indeed, Schouten notes the city has not even agreed on the final purchase price of the garage despite the fact it has paid off the back taxes on it.

Pat Andrews wonders how the deal can even be legal since the original resolution approved by the MDC conditioned the deal upon the execution and negotiation of a project agreement with the developer. Nonetheless, the City went ahead with the purchase of the garage and paid off Smoot's back taxes. Schouten noted no project agreement had yet been consummated as of last week. City officials say not to worry because they have no intention of making any payments on the garage property until the project is finalized. Schouten points out that city officials had originally planned to close the gravel parking lots on the site of the old MSA, thereby increasing demand for extra parking in the garage. The city has since decided to pave over the parking lot and continue using it. Lest we forget the city over-valued the garage using an appraisal based on its expected value based on its future use, an appraisal method not permitted under state law.

Bruce Donaldson, an attorney with Barnes & Thornburg who is representing the City in the deal, scoffs at any concern for the subsequent changes and its impact on the validity of the original deal approved by the MDC. Schouten notes the original resolution imposed a July, 2009 deadline to complete the agreement and was premised on Miller obtaining a loan from Regions. “As long as we stay within the financial parameters, it doesn’t matter who the lender is,” Donaldson said. In other words, it makes no difference that the deal being carried out by the Ballard administration worked out nothing like what was presented to the MDC when it was originally approved. Purdue University's Larry DeBoer told Schouten he had never seen another deal quite like this one. “It just sounds like a clever way to subsidize development,” he said. “Maybe they didn’t think the usual tools were available. It looks like someone has been working overtime to get it done.”

Meanwhile, Tadd Miller, who stands to make lots of money off the deal heavily subsidized by taxpayers, tells Schouten he has no concerns. “My price is settled,” Miller said. “I’m trying to stay out of the middle.” Yeah, that's precisely the problem. The same can't be said of the taxpayers who are footing the bill so he and his partners can be enriched. Given Barnes & Thornburg is giving a green light to the project as the City's attorney, you can bet there will be no council oversight or investigation into these matters as long as their boy Ryan Vaughn, a friend of Miller's, is presiding over the City-County Council.

On a final note, former Mayor Steve Goldsmith has been rumored to have played a key role in making this deal happen before he joined the administration of New York Mayor Michael Bloomberg as a deputy mayor. The Indianapolis Times Blog recently observed an upcoming fundraising event he is participating in  on behalf of Ballard at the J.W. Marriott that is being organized by another Goldsmith crony, Mike Wells, that is directed at city contractors:

From: Mike Wells []

Sent: Friday, February 04, 2011 11:09 AM
To: Mike Wells
Subject: Fundraising Event for Mayor Ballard, Thursday, March 10th, JW Marriott

Steve Goldsmith, Cathy Langham and I are hosting a fundraising event for Mayor Ballard. We believe the Mayor has worked tirelessly to move the City forward and we want to show our support by helping raise at least $250,000 at a special event to be held at the JW Marriott. We asking you to participate in this event by raising or contributing $5,000 for the event.

Steve Goldsmith will be the special guest for the event and he will be hosting a roundtable prior to the event for a limited number of supporters. We would envision that architects, engineers and financial advisors may have an interest in hearing Steve speak on public policy issues and his new role in New York. This roundtable will be from 4:30 to 5:15. A VIP reception will be held from 5:00 to 6:00 for all contributors raising or contributing $2,500 or more and the main reception will be held from 5:30 - 7:30 with a short program around 6:15.

Our plan is to get the invitations out by February 14th, so time is of the essence. If you are willing to serve as host of this event, please let me know by February 10th, so you can be listed on the invititation. If I do not hear from you, I will follow up with a call next week; thanks for your consideration. Mike

Michael W. Wells
REI Investments, Inc.
11711 North Pennsylvania Street
Suite 200 ]
Carmel, IN 46032
Blogger Terry Burns asked, "I wonder if [Mayor Bloomberg] likes his new Deputy Mayor being part of Greg Ballard's pay-to-play program? " Indeed. Ballard's administration has essentially been directed behind the scenes by former Goldsmith cronies for their personal benefit, including former Deputy Mayor Joe Loftus of Barnes & Thornburg, who many complain has too great of a role in telling officials of the administration what to do. Hardly any one has been appointed to any position of significance within Ballard's administration without Loftus' or Bob Grand's approval. Both Ballard and Goldsmith have admitted Goldsmith's role in advising the administration, although he has no official role. Goldsmith also never registered to lobby with the city even though he has been rumored to have assisted parties with business before the city.