Tuesday, July 7, 2009

Indianapolis Downtown, Inc. Picks Taxpayers' Wallets While Patting Itself On The Back

Monday’s Indianapolis Star contains a full-page ad from Indianapolis Downtown, Inc. In the ad, IDI declares:

"A great Downtown doesn't just happen. It takes vision. It takes planning. And, most of all, it takes the dedicated support of community leaders. Indianapolis Downtown, Inc. thanks our many corporate stakeholders, investors, members, elected officials and city employees whose ongoing efforts have truly transformed Indianapolis into a world-class City."
IDI then goes on to list its "stakeholders" which include Simon Property Group, the Indianapolis Star (The Star sets up yet another conflict of interest), the City of Indianapolis, Lilly’s and others.

In addition to "stakeholders," the ad lists a long list of "Investors." Noteworthy "Investors "include the Indiana Sports Corporation, the Indianapolis Convention & Visitors Association, the Indianapolis Zoo, IndyGo, Indiana Historical Society, Indiana Repertory Theater, Indianapolis Colts and Keep Indianapolis Beautiful, Inc.

For those of you out of the loop, Indianapolis Downtown, Inc. is the conduit through which the City of Indianapolis channels tax dollars to promote the city. IDI also gains additional dollars by shaking down downtown merchants, trying to get them to join the organization as "stakeholders" or "investors." In return for joining, the IDI gives the merchant the official stamp of approval and supports them on various issues. Needless to say, you are not going to find IDI opposing stakeholders like Anthem, Lilly or Simon on anything, even if what those companies propose to do is harmful to downtown. Likewise, given the millions that IDI receives from the "stakeholder" City of Indianapolis, you are not going to find IDI opposing anything the administration wants no matter how bad it might be for downtown.

What IDI does should sound familiar. In the old gangster movies, you saw mobsters go to owners of businesses and asked to be paid protection money so no harm comes to the business. IDI sells the same protection service for downtown businesses, sans the threat of physical, albeit not necessarily financial, harm. If you have a downtown business, but don't sign up to be an "investor" in IDI, you can bet IDI will not support any project you have regardless of whether it is for the good of downtown.

IDI's biggest offense, however is its waste of taxpayer money, which I have previously reported on. In light of IDI now using taxpayer dollars to promote itself through a full-page newspaper ad, let's though take another look at that 2007 tax return IDI filed.

According to IDI’s 2007 tax return, the non-profit received $1,303,543 from government sources and $728,285 came from “direct public support.” The return showed IDI, which had $7,183,543 stocked away in mutual funds, money market funds and real estate investment funds, made $340,089 on its investments in 2007. The return shows total revenue for 2007 in the amount of $2,717,938.

In 2007, IDI paid a total of $976,955 in salaries and benefits. This includes President Tamara Zahn who raked in $198,284 in 2007. Certainly she is way over $200,000 a year by now.

IDI’s salaries and benefits for its employees consume a phenomenal 36% of the revenue it receives. Compared to the $1,303,543 received from government, IDI’s salaries and benefits consume 75% of those taxpayer dollars.

But that is only the beginning of IDI’s administrative costs. Itemized on the return are such expenses as telephone, conventions, accounting fees, legal fees, insurance, professional fees, advertising and investment fees (investment fees total a remarkable $31,237). These other administrative costs total $704,314. Together with salaries and benefits, the total administrative costs for IDI in 2007 is $1,681,279.

Again, IDI’s income in 2007 was $2,717,938. This means that IDI spends a remarkable 62% of its revenue on administrative costs ($1,681,279/$2,717,938).

Lest one has forgotten, an earlier statistic bears repeating. While IDI gets the majority of its money from the City of Indianapolis, i.e. the taxpayers, IDI has managed to stash away $7,183,543 in investments. Indianapolis Downtown Marketing, Inc., which is solely owned by IDI, has also stashed away $2,592,546 in investments. That's $9,776,089 total. Most of that nearly $10 million dollars originated as taxpayer dollars, money that was not spent by IDI or IDM to promote the City as intended.

Instead of running a slick newspaper ad (which demonstrably was funded chiefly with taxpayer money), IDI would be well advised to act as a better steward of our tax dollars. Better yet, the Mayor’s Office and the Indianapolis City-County Council should simply cease using IDI as a conduit for the expenditure of taxpayer money to promote the City. (There are other organizations - the Indianapolis Convention and Visitors Association and Indianapolis Chamber of Commerce to name two - which already serves the mission IDI claims to be pursuing.) It is clear that most of our tax dollars is simply ending up in the pocket of IDI and never seeing the light of day. Indianapolis taxpayers deserve better than what they are receiving from Indianapolis Downtown, Inc.

10 comments:

Downtown Indy said...

Wouldn't it be great to find out what the ad actually sold for? Was it normal rates or a special (higher) rate?

I have read stories in the Star about other not-for-profits, which were lambasted for their high overhead levels.

Not so for IDI.

That cloud of uncertainty which the Star's 'investing' creates leaves me wondering whether the Star is directly aiding and abetting IDI's operation or the Star has merely trimmed so much from their reporting staff that they can't cover local matters adequately.

Grandpa said...

Time was when the local chamber of commerce promoted the city, using member dues instead of tax dollars.

Baloo said...

With the proposed Carbon Tax that the President is pushing I am wondering what the "Christmas" lights that are on all the Downtown Trees year round will cost us, since we as Tax Payers pay dollars to have IDI put them up, however they use City workers and City Equipment to do it, so are they paying the City to use the workers and Equipment or is the City misusing City Equipment and Workers to do a job for a Private Charity? If that is the case why isn't the City having paid workers and their equipment work for other Charities that do real good for the Tax Payers of Indianapolis?

Downtown Indy said...

What is the carbon tax going to do to print media, which uses large quantities of carbon to make black ink?

Paul K. Ogden said...

Baloo,

Let me be emphatic on this point. A nonprofit corporation is in no way a "charity." IDI is not a "charity" in any sense of the word.

Baloo said...

The Carbon tax deals with what IDI is being charged for the year round "Christmas" lights on the trees downtown.

Paul,
You are correct, I used the wrong term in calling it a charity. They are nonprofit.

The point I was attempting to make is why is it that IDI uses the City's resources when other organizations do not get to use those same resources.

Question isn't there a maximum that a nonprofit can have and if they go beyond that they loose their status, as I am not up to date on nonprofit tax, and requirements.

jabberdoodle said...

I have yet to find a single function performed by IDI that is not a duplication of effort by other agencies - or which are not purchased by IDI and passed on to the City to fulfill terms of its no-bid contracts. This includes hiring off-duty cops to patrol the mile square on bicycles, keep up the city street trees with their twinkle lights, keeping a database of downtown residential and commercial occupancy rates (data they buy from other vendors), and maintaining a website to promote Indianapolis.

What they are best at is promoting themselves, not the City. I say its time to save some money and cut out this middleman. If the businesses want to keep chipping in money, fine by me. But the taxpayers have more important ways to spend the $1.1M a year that IDI now hauls down from the City. And, just a reminder - IDI was also a crime prevention grant awardee this year for another $160,000.

Paul K. Ogden said...

Baloo,

You ask a very good question. I know a lot about tax law, but that's one question I don't know the answer to. I know many of these nonprofits pay themselves extremely well. Not sure if there is any limit on non-profit compensation. My gut says "no." Probably the only question is whether they are serving a purpose for which one can establish a non-profit.

Baloo said...

Paul,
Being a dumb Hoosier as I am, I would tend to believe that nonprofit status would not apply if they are making a profit even in their investments other then those for retirement fund purposes. Now you make me want to google :)

Baloo said...

Paul,
Just from google'ing around I came across information. A nonprofit can have a profit or surplus but that surplus must be used for future programs. Also earnings may not benefit individuals or stake-holders.

Seems that IDI would be in violation, as the City of Indpls is a stake-holder.