IBJ Reports North of South Deal Even Worse for Taxpayers Than Previously Thought

If you read anything this weekend, it should be Cory Schouten's article in the Indianapolis Business Journal on how the North of South (No-So) deal was even worse for taxpayers than what was presented to the council.  Here is a snippet:

The $156 million North of South project is a complicated, risky and potentially transformative bet on downtown.

Artist's Rendering of North of South Project

It’s also a no-brainer of a deal, at least for Buckingham Cos., the developer, and Eli Lilly and Co., which owns the 15 acres of surface parking lots set to be developed along South Street east of Delaware Street.

That’s because taxpayers—acting as the project’s bankers—are shouldering most of the risk in the no-bid deal, while the potential for a tangible profit rests squarely in private hands, a review of documents and interviews with people familiar with the project show.

Buckingham stands to cash in every step of the way, earning fees for all three of its divisions—development, construction and property management. And Lilly gains a new amenity for its corporate campus while cashing out of a 20-year-old arrangement with the city that required the company to make periodic payments on infrastructure bonds.
...
Several developers who spoke with IBJ on condition of anonymity and are generally supportive of public-private deals said the North of South arrangement upends the traditional risk-reward calculation for land development. They say any developer would have jumped at the deal the privately held Buckingham achieved.

“All the developer has is upside!” one said. “The taxpayer has all the risk.”

While it was difficult for Schouten to find development consultants to give anything but anonymous comments about the deal, he found one in Massachusetts who was willing to comment on the record::

The payments between the city and Lilly seem murky to Christopher Steele, an economic development and site-selection consultant and president of Massachusetts-based CWS Consulting Group.

Steele applauds local governments that find creative ways to partner with developers after “sober reflection” to attain “broader public goals.”

But Steele, who reviewed the documents at IBJ’s request, described the agreements as “poorly negotiated.” He can’t quite understand how, if a company doesn’t pay enough property taxes to cover the bonds for its own infrastructure improvements, the city could wind up in arrears.

“There are very good and effective ways of structuring incentive and tax programs to build a strong and mutually reinforcing situation between company and community,” Steele said. “This is not one of them.”

He described the commitment that Lilly reinvest the proceeds in the North of South project as “trying to make a very bad deal better.”

To read the rest of the lengthy article, click here.  Again, I have to ask where is the Indianapolis Star in covering this story.  Hardly a negative word was uttered by the Star about the project, and as I recall local political columnist Matthew Tully opined that the project "makes sense."  I guess it does...for Buckingham and Lilly's.

Political blogger Gary Welsh of Advance Indiana is quoted in the story and on his blog has an excellent take on the deal. 

No-So is is yet another pay-to-play project where taxpayers get the shaft in favor of politically-connected developers and local businesses.  When we elected them in 2007, I expected our Republican Mayor and Republican-majority council to put taxpayers first.  Obviously that hasn't happened.