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Trojan horse?

Questions about the Regional Cities award

By Jim Sack

Fort Wayne Reader

2016-01-22


This may be the biggest project that amounted to nothing in the history of Fort Wayne, or it may be the catalyst to our future. Who knows? It is certainly a pig in a poke.

I write of the Regional Cities award of a whopping $42 million to help fund more than a hundred projects in northeastern Indiana.

Those projects range from building a waterfront in Fort Wayne to extending trails throughout the region with a little something for nearly every community from Ligonier to Decatur. Give credit to the gracious John Sampson for all the work he did to win this award!

But, the $42 million is a symbolic gesture if you consider combined projects want $1.4 billion, before overruns.

More troubling, the award comes with a new agency controlled from Indianapolis that will have the powers to bond and to tax, with a new staff with benefits, junkets and retirement packages.

Two years ago, state economic development leaders asked local economic development groups to organize themselves into regions in order to apply for two pots of $42 million dollars. Seven regions around the state were formed, applications were hastily submitted and Sampsonís proposal for our region was a winner!

Among the projects in Fort Wayne are a refurb of the Embassy and the Clyde Theaters, an $16 million artist colony, Riverfront work, $12.3 million in upgrades on Saint Francisí downtown campus, a $38 million Center for Leadership at IPFW and much more.

Letís consider the artist colony. Whether it is worthy of public support is one question, but let us just consider the funding formula.

The three pillars of support comprise the award, public money and private money. Oft mentioned is a formula of 60% private money, 30% from public sources and 20% from the award. The colonists would have to scrounge $9.6 million from businesses and foundations and $4.8 million from public sources in order to receive $2.4 million from the award.

You, the public, through taxes, the Legacy or some other government fund, would be eyed for $4.8 million.

The artist colony is just one of 100 proposals. At a 20% payout rate per project the $42 will be gone quickly. But, one community leaders suggested that 20% was just a reference point, that some projects might receive higher payouts while others might never qualify for (or need) a portion of the award, or the colony might need more from taxes if businesses smell a dubious business plan.

In other words, the formula is undetermined.

What is true is that each project group will come to the Regional Cities board to push their case as the best project, since the lighting of the sun. Some project backers are the biggest of area fat cats, meaning their clout and past contributions to political candidates will matter.

And, donít expect businesses to pick up funding deficiencies when public coffers are available.

That brings us to the powers to bond and tax. We asked one of the leaders of the local economic development cabal if this award is a Trojan Horse for new taxes. He diverted his eyes. To bond means to borrow on the financial markets with interest and fees. While 2016 offers historically low interest rates, the bond has to be 1) guaranteed, and 2) paid back. Does that mean higher sales or local income taxes?

But, on the positive side, bonding would build out everything very quickly creating momentum and enthusiasm, jobs and buzz.

Some members of City Council are skeptical, some confused. One newbie on council, Jason Arp, has compared the plan to the rise of the authoritarian state with armed storm troopers digging in the cracks of your sofa for quarters, which is, just perhaps a bit dramatic. President Russ Jehl, however, has raised his eyebrow too, signaling plenty of questions to come before any commitments are signed.

Let the questions flow. Is the $42 million award worth the $1.4 obligation? Do we need another clan of employees in state government dictating new taxes? Who will decide how deeply they can dig into your couch? Who will oversee borrowing and spending? Whose priorities prevail? Which projects are catalytic and transformational? What safe guards are in place to protect us from the cronyism of Cityscape Flats and the lopsided contract for the ballpark? How will contracts protect the public should the artist colony flounder? Is there clawback? Those are but a few of the questions you should ask.

The projectís paramount goals are to increase wages and create jobs, similarly to the tax abatement system where taxes on businesses are forgiven in exchange for new jobs at higher wages. That hasnít much worked, instead that program has turned into corporate welfare where taxes are cut, the companyís bottom line improves, but few, if any, new jobs are created; and, as statistics show, wages in this area have been stagnate for decades.

The Henry Administrationís management of the abatement system has been generous to businesses, coddled them when they didnít even come close to keeping their side of the bargain, and is now bitching because council had the audacity to tighten up the rules surrounding the giveaway. Eric Doden at Greater Fort Wayne, the quasi-governmental economic development group, is even more demanding, riding circuit to browbeat councilmen on behalf of his buddies. Expect them to fleece you when their friendís projects overrun budgets.

Maybe Regional Cities is a great idea, but thatís impossible to ascertain from what we currently know.

There will be a gala at 6pm on the 21st of January in the Grand Wayne to celebrate the award. Suits and heels will prance about the stage with flags and sparklers to rev up support. Give Mr. Sampson a round of deserved applause for finding the money, but listen closely to the hype and try to separate wheat from chaff. Then call a councilman to discuss whether this is a watershed moment or a Trojan Horse.

All we can ascertain at his point is it is certainly a pig in a poke.

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