Monday, June 18, 2012

City's Latest Hairbrained Privatization Idea: City Proposes 30 Year Contract to Run City-County Building

Indianapolis City-County Building
Just when I thought the ACS parking meter deal, where we give away 70% of the revenue for the next 50 years because we didn't want the "risk" of spending $8 million to upgrade the meters ourselves, was the worst deal in the City's history, along comes another hairbrained idea - privatizing  the Indianapolis City-County Building with a 30 year maintenance contract or even selling the City-County Building and leasing it back.  The idea is to mortgage the building to create up front cash that which can be spent by the Ballard administration.  Gary Welsh of Advance Indiana provides some interesting details:


It's now apparent that there is no city asset that is so sacred as to not be within the grasp of Mayor Greg Ballard's political cronies to turn into a profit center. The IBJ's Kathleen McLaughlin has a story in today's edition discussing the Ballard administration's plan to privatize the City-County Building, which is currently owned by a municipal corporation, the Indianapolis-Marion County Building Authority, and leased to city-county government for $4.85 million annually, or about $7.29 per square foot, which includes unlimited utilities. The Authority floated bonds to construct the original 28-story building in 1959 for $32 million.
According to a Request for Information put out by the City, the administration thinks it would be better for it to exercise its option to assume ownership of the building at the end of its current 10-year lease with the Authority and then privatize it rather than continuing to make low lease payments to the Authority. The administration is hoping to shift cost of future repairs to the building to a third party without increasing the city's overall costs. Anyone with common sense knows that it's impossible to turn control of the building over to a private entity, expect that private entity to make necessary repairs to a 50-year old building and lease it back to the city for no more than the paltry $7.29 per square foot the City is now paying the Authority to use the space. The City is even anticipating an upfront payment from a private real estate manager as part of the deal to spend on infrastructure improvements. Apparently the City wants us to believe it is possible to have your cake and eat it too.
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Anyone with common sense knows that it's impossible to turn control of the building over to a private entity, expect that private entity to make necessary repairs to a 50-year old building and lease it back to the city for no more than the paltry $7.29 per square foot the City is now paying the Authority to use the space. The City is even anticipating an upfront payment from a private real estate manager as part of the deal to spend on infrastructure improvements. Apparently the City wants us to believe it is possible to have your cake and eat it too.  
McLaughlin's story quotes the current chairwoman of the Authority, Abbe Hohman, as saying the Authority believes it has "offered to the city over a very long period economically attractive lease rate at the same time maintaining the building to the highest standards." The Authority also manages 19 other public facilities, including the Marion Co. Jail. Illustrative of what a great deal the city gets from its lease with the Authority is the fact that its annual lease expenses for CCB are less than half what the City is paying to lease downtown commercial space for the Marion Co. prosecutor's office and the public defender. Of course, those were sweetheart deals brokered by and for the benefit of John Bales, who has since been indicted by the federal government for corruption involving the leasing of office space for the Department of Child Services in Elkhart. 
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Welsh's entire aricle is worth a read.

I am most offended by the 30 year contract idea.  The problem is that many municipal officials are all too willing to mortgage the future in order to get a pile of cash they can play with.   Privatization has to be about the private sector competing to provide the public better services.  When you sell off a city asset or enter into a long term contract involving that city asset, that's not privatization, it's monopolization.  And it is bad for consumers.

One final note.  Will the proposal including naming rights for the building? I can see it now...the Barnes & Thornburg City-County Building.

10 comments:

Downtown Indy said...

Why does the city not own the building outright and not pay rent to anybody?

I had no idea any such thing was going on.

Paul K. Ogden said...
This comment has been removed by the author.
Paul K. Ogden said...

DI, I don't know, but that's the setup they have with several gov't buildings.

Pete Boggs said...

Somewhere our state universities have facilities management education, a good conduit for expense tweaking with interns, etc. It's just an idea.

Jeff Cox said...

DI,
The Building Authority is a municipal corporation of the city and county. The idea is to have a separate, single entity owning and managing the building for all the agencies who have offices there. So the building is still publicly owned. Not uncommon and not a stupid idea by any means. The idea of privatizing it, though, is definitely a stupid idea.

Downtown Indy said...

A 30 year deal would really screw us if, say, in 10 years a decision is made to build a new, larger city county facility.

I suppose then we'd be on the hookk to pay some ridiculous termination fee to 'someone'.

artfuggins said...

I thought Barnes and Thornburg already owned the CC Building.

Pete Boggs said...

The idea across the country, if we're to remain a republic & "leverage" technology, should be to reduce the size of government & therefore the buildings in which it's "housed" at the pleasure of the people.

Citizen Kane said...

Some people laughingly suggested that this would be the next big thing - around the time of the parking meter deal; then we stopped laughing when we realized that it would happen - it was only a matter of time.

Stupid is what stupid does!

Ellen said...

"As more and more government functions get privatized, states become pay-to-play paradises, in which both political contributions and contracts for friends and relatives become a quid pro quo for getting government business."