Widely Reported Incentives of $8 Million could exceed $18 Million

It has been widely publicized that the incentive package offered by the City of Evansville is only $8 Million but a further examination of the best description of the plan yields a much higher conclusion when all things are considered.

Direct Up Front Assistance: We will confirm that the $8 Million as reported is exactly what is stated in the January 4th minutes of the Evansville Redevelopment Commission. There are however several other forms of direct assistance on a delayed basis along with strategic uncertainties that are left out of the tabulation of costs.

Tax Abatement: A full 10 year tax abatement is approved for the project. The way that works the taxes for the property are phased in linearly over a ten year period where the first year you pay ZERO and the last year you pay the full amount. Assuming that the property will be assessed at the advertised construction price of $32 Million and using the 3% cap for commercial property the annual taxes on the building would be $960,000. Over 10 years the taxes would be $9.6 Million. With a 10 year phase in period the total taxes abated will amount to half of the total or $4.8 Million.

Direct Aid plus Tax Abatement = $12.8 Million

Here are the uncertainties that may raise the cost to the City of Evansville even more:

1. Demolition: Demolition was not included in the list of obligations of the developer. If the City of Evansville ultimately pays for the demolition of the parking garage and the hotel that will ad according to Mr. John Kish about $1.5 Million.

2. Bridge to the Centre: There is no requirement for the developer to install a bridge to the Centre and Arena as the layout on the Woodruff proposal showed. If the City of Evansville ultimately pays for the bridges the cost could be as high as $3 Million according to other estimates.

3. Executive Inn lot Improvements: The lot that will be beneath the footprint of the old Executive Inn will need some improving. Will it be a park or a loading area for the Arena or maybe handicapped parking? Whatever it is it is going to cost some money so lets conservatively estimate that $1 Million will need to be spent to make it whatever it is made into.

Grand total of Direct Incentives, Tax Abatements, and Uncertainties = $18.1 Million

Now which budget will that be applied to? The Arena? General Fund? We can’t wait to see which shell this pebble is under.

Demolition:

Indiana Tobacco Prevention and Cessation has been the source of funding for Smokefree Communities of Vanderburgh County for nearly 10 years.

To summarize, the state budget for the new biennium starting July 1, 2011:

** abolishes ITPC and gives all of the agency’s assets to Indiana State Department of Health; and
** appropriates $8,057,031 per year for tobacco prevention and cessation programs, down from the $10.8 million per year that was appropriated in the last budget for the current biennium that ends June 30th.

Thanks again for everyone’s considerable efforts to SAVE ITPC (and the funding they provided to 64 local community partners and 28 jobs just in Southwestern Indiana) during the final 10 days of session since the proposal was added to the budget bill.

For coalition members, I’m sure many of you have questions about what happens now–I think we all are wondering about that. I would hope and would anticipate that the the opportunity will present itself sometime before too long to hear from ISDH how this transition will be implemented. I’m certain that the ITPC staff will keep us apprised of relevant details as they learn them also. Please be patient as I’m sure they are awaiting more clarity and illumination of the answers to many questions. Feel free to call me if you have questions. I hope to have more information to you by our next coalition meeting scheduled for May 19 at 3:30 p.m. in the Browning Room of Central Library.

Oh, and guess what– say “hi” to your newest partners in tobacco prevention here in Indiana– Indiana’s two horse-racing gambling venues — Hoosier Park Racing and Casino and Indiana Downs.

Not only does the new Indiana budget abolish ITPC and cut tobacco control funding from $10.8million/year to $8million/year, but also the new state budget approved by the Indiana legislature takes the first $3million/yr from the gross adjusted receipts from slot machine wagering at Indiana two horse-racing gambling facilities — Hoosier Park and Indiana Downs [$1.5 million/yr from each of them respectively] — and requires that turned over to the State Treasurer to be deposited into the MSA fund for the purposes of the state’s tobacco use prevention and cessation program.

The Campaign for Tobacco Free Kids sent out the following email to the regional office after the announcement.

Friday evening, the legislature abolished the Indiana Tobacco Prevention and Cessation program and moved the agency’s responsibility and budget to the Indiana State Department of Health. The nationally respected program will close its doors in June of this year.

IS IT TRUE that the City County Observer has grown to a level that we actually planned to achieve in the first week of May last year in our 2011 planning exercise?…that among other things like timely daily posts, connecting local to national events, expanding our server capacity, and attracting guest writers, one of our traffic goals was to grow our pageview rates to an annualized rate of 1,000,000 (yep that’s a million) pageviews during the first week of May?…that we have achieved that this week with a day and a half to go?…that we wish to thank all of our readers for their continued interest in our quest to promote good public policy by exposing bad public policy?…that we would appreciate it if you would friend us on Facebook at your earliest convenience?

IT IS TRUE that Evansville City Councilman John Friend who makes his living as a CPA recommended to the “powers that be” including Mayor Weinzapfel that the Woodruff Hospitality Group be required to post a performance bond and have financial statements scrutinized for both key personnel and the business?…that Councilman Friend also recommended that these documents be obtained for inspection and references gathered from the financial community?…that the Kunkel Group needs to be thoroughly and professionally “vetted” in the same manner that Browning and Woodruff SHOULD HAVE BEEN?…that the people of Vanderburgh County (Centre) and the City of Evansville (Arena) already have $200 Million invested in the MLK Entertainment complex?…that the public investments cannot and should not be expected to wait and see if the Kunkel Group can get financing and perform?…that the next company to take this project on whether Kunkel, White Hospitality, or another that emerges through a new bidding process needs to be financially secure enough to perform and post a bond to prove it?…that the tolerance for AMATEUR HOUR at the Civic Center is now over?…that it is time to hire FINANCIAL PROFESSIONALS to vet this project and stop the good old boy shuck and jive routine that has surrounded this hotel project since 2007 when a smiling confident Mayor Weinzapfel announced that HE had found a developer to do this project with no public participation?

IS IT TRUE that Local #136 Plumbing and Steam Fitters Union leadership took Democratic Mayoral candidate, Rick Davis to lunch yesterday?….that we know this luncheon gathering must had been extremely interesting?

IS IT TRUE that it has been 48 hours this morning since the City County Observer offered a $500 bounty on anyone that Jonathan Weaver would come forward to back up his on camera assertions of being ELECTION SIGN THIEVES?…that Mr. Weaver has not yet accepted our challenge nor has he come forward to claim the bounty?…that he has exactly 120 hours to accept our challenge or it will no longer be available?…that we do not understand why Mr. Weaver has not come forward?…that a candidate for office is expected to be both honest and charitable?…that IF Mr. Weaver was honest in his allegations of theft that the City County Observer has given him the perfect opportunity to be charitable as a result of his honesty?…that we are waiting?

IS IT TRUE that it has now been 1,465 days since the announcement was made on May 14, 2007 that the McCurdy Hotel was to be refurbished into luxury apartments?…that it has now been 1,319 days since the Evansville Redevelopment Commission at the request of Mayor Weinzapfel approved the spending of $603,000 to purchase the parking lot?…that City Centre Properties and Scott Kosene the developers of the McCurdy project are both listed as contributors to the Weinzapfel for Mayor committee for 2010?

IS IT TRUE that there are now 544 days remaining in the two years that the EPA had given the City of Evansville to present an acceptable solution to the Combined Sewer Overflow problem?…..that this plan is an expensive and complex endeavor that needs immediate attention to avoid the embarrassment and expense of another round of fines?

IS IT TRUE that the CCO classic rock song of the week is DREAM WEAVER?

Construction Costs that Exceed Valuations forcing Cities into the Shadow Banking Business

Excerpts from the study on the recent phenomena of cities wanting hotels enough to sell bonds to finance them.

“As most communities desire the economic impact of group events and the spending of the visitors they attract, many are providing public subsidies to projects that are not feasible on a purely private basis.”

“The recently approved project in Huntsville, Alabama is an example of a tertiary market in which city leaders chose to engage a private developer to construct a $40-million, 300-suite Embassy Suites Hotel adjacent to the convention center. The city offered to provide attached parking for the hotel, related infrastructure development, a favorable land lease and access to meeting space in the convention center to attract a hotel developer.”

“Since 1994, the only hotel projects of 700 rooms or more outside of the gaming and resort industries that have been privately financed are in New York City, where high occupancy and room rates can support new development. All other developments have required some form of public support, either through public financing and ownership or a public/private partnership.”

The excerpt above is bold because it underscores that the assertion and expectation that a private developer like Browning would do a hotel in Evansville without incentives was an incredibly naive expectation.

“Given that many event planners operate on multiple-year planning horizons, the full effect of a headquarters hotel on convention center activity might not be realized until several years following the hotel’s opening.”

Public Involvement in Hotel Financing

Kunkel to take over project under same terms as approved for Woodruff

In a move that was first reported by the City County Observer yesterday, the City of Evansville has finally come clean with the announcement that The Kunkel Group will assume the contract that the Evansville Redevelopment Commission has with Woodruff Hospitality. Under the original agreement the City of Evansville offered Woodruff Hospitality an incentive package worth at least $12.8 Million to construct a 220 room hotel on the site of the old Executive Inn parking garage.

The actual contract between Woodruff and the ERC has not been released to the public but the framework for an eventual agreement was approved in the January 4, 2011 meeting of the ERC. The following link is to the minutes of the ERC meeting in which the terms of the agreement were disclosed.

ERC 01-04-2011 Hotel Deal Approved

A supplier that doesn’t deliver can be as dangerous as a customer that can’t pay

Entrepreneur magazine published a very good article on the importance of “vetting” suppliers and what some companies are doing to decrease the probability that they will be left holding the bag when some supplier doesn’t come through. As the Downtown Hotel is once again having to consider a passing of the baton to yet a third developer, the “vetting” process is of importance to the governance of the City of Evansville as they endeavor to finish off the MLK Entertainment Complex. Here are some excerpts from the article:

“Really smart business owners are just as careful about vetting their suppliers. A vendor who fails to deliver the goods or services you need to satisfy your own clients can be just as detrimental to your business as a customer who fails to pay you.”

“Yet during its first several years of operation, Englewood suffered through as many as a half-dozen instances annually in which subcontractors failed to perform. In one case, Taylor recalls, an electrical subcontractor went out of business mid-project, forcing Englewood to pay $25,000 to the subcontractor’s supply house for materials Englewood had already purchased from the electrician. It also had to spend an extra $20,000 to bring in the next-lowest-bidding electrician to finish the work.”

“before issuing a contract to a subcontractor, Englewood typically asks it for a recent bank statement showing, among other things, the size of the subcontractor’s credit line. It asks for references from other general contractors for whom the subcontractor has done work, and for documentation of its bonding capacity. It asks about the subcontractor’s “experience modification rate”–a metric that measures its annual insurance claims relative to its insurance premiums”

“If you’ve been lax in vetting your vendors, take time soon to figure out which are most critical to your organization and how you’d recover if they were suddenly unable to meet your needs.”

The City County Observer is very interested in the process used by the City of Evansville to qualify all vendors buy particularly we are interested in the downtown convention hotel project. Have an members of the ERC, the City Council, or other advisors ever brought up the subject of “vetting”? Assuming they have what were the recommendations?

IS IT TRUE that if the City of Evansville enters into another agreement that is not vetted and bonded that it will be the third strike?…that the citizens of this city deserve and pay for much more competence than we are getting?

Link to full story:

http://www.entrepreneur.com/management/operations/article205782.html

Take That: May 6, 2011

In Response to “Low Voter Turnout Loses Elections: Excuses from Last Night”

“We need a LOT more reporting on the Pigeon Creek Piranah. Sounds dangerous, but grilled with butter could be delicious.” Beerguy

“I have to admit I have been seriously sadden by the loss of PBR from the Peephole” Curt

“I like Curt John-he never pretends to be anything but what he is, unapologetic and candidly himself. Wrong or right-not everyone walks on water.” Bootsie

“My cereal boxes come with federally mandated specifics, yet our politicians only divulge vague generalities of “change”, with slightly different flare” Eville Taxpayer

“When I got to the polls, that Oglesby dude and Troy were duking it out, and there was such a crowd gathered ’round laying down bets that, being very anti-gambling and non-violent, I turned around and ran back home.” Soon2B

In Response to: IS IT TRUE April 6, 2011

“The Weinzapfel Steamroller,” may, thankfully and finally, be “in the ditch,” but the ruts, destruction debt and embarrassment, it caused, will last a generation.” Bubbageek

“Just wait to see what it really cost us for the John. Also expect someone to get rich off the new hotel project and it won’t be the people of Evansville!!!!” rk812

In Response to: IS IT TRUE Part 2 May 4, 2011

“Are you listening, Mr. Owen???? Please show yourself the nearest door and exit – QUICKLY. I’m just thinking if I were the chairman of a committee whose mayoral candidate just lost – in a painful thumping – it might be time to find a NEW chairman – maybe one who can win elections. (Oh yeah, and I define “win” as actually WORKING for it, as Davis did, not with lies, manipulations, or calling in favors from Indianapolis.) Just my thoughts. So glad Evansville is waking up.” Democrat

“VICTORY” Firethedemcentralcommittee

EPD Activity Report May 5 2011

IS IT TRUE that it has been 24 hours this morning since the City County Observer offered a $500 bounty on anyone that Jonathan Weaver would come forward to back up his on camera assertions of being ELECTION SIGN THIEVES?…that Mr. Weaver has not yet accepted our challenge nor has he come forward to claim the bounty?…that he has exactly 144 hours to accept our challenge or it will no longer be available?…that we do not understand why Mr. Weaver has not come forward?…that a candidate for office is expected to be both honest and charitable?...that IF Mr. Weaver was honest in his allegations of theft that the City County Observer has given him the perfect opportunity to be charitable as a result of his honesty?…that we are waiting?

IS IT TRUE that there are once again rumblings that the Downtown Convention Hotel financing is in jeopardy?…that this should be no surprise since the valuation to cost ratio is out of sync by at least 50%?…in a tight lending market, in a city that has declining convention revenue and a shrinking population that the pro forma of any business plan will be run through a gauntlet of possible worst case scenarios?…that just because Woodruff Hospitality is being tested that is does not make this a bad idea?…that sometimes values just don’t align and that the CCO applauds Woodruff for their efforts?…that we also hope that Woodruff pulls a rabbit out of a hat and makes this happen?

IS IT TRUE that Woodruff was offered an incentive package by the City of Evansville that has a value of between $10 Million and $15 Million depending on performance over time?…that White Hospitality, the only other bidder with national brand backing for the Convention Hotel received an incentive package of over $20 Million from the City of Fort Wayne and was reportedly asking for a similar package from Evansville?…that going with Woodruff was a roll of the dice but a worthwhile one for the City of Evansville to get local people involved and to save money?…that IF this does not work out that it is time for the City of Evansville to get a company in here that has a long track record of success in the hospitality business?…that a track record, posting a bond, and getting the approval of a vetting committee of people who understand finance and have the courage to speak their piece will be required?…that even if the City of Evansville has to pony up a better incentive package that Woodruff agreed to that a Downtown Convention Hotel is a mandatory piece of the MLK Entertainment Complex?

IS IT TRUE that the hotel incentive package costs are NOT in the Arena Budget?…that lost revenues to the Centre that have resulted from the chaotic management of the Arena/Hotel project are not in the Arena budget?…that not a dime is allocated for either the demolition or modernization of Roberts Stadium in the arena budget?…that Mr. Kish may pull the Arena itself in for $95 Million but that remains to be seen?…that the soft costs plus hard costs of the isolated world of the arena walls may not exceed the $127.5 Million that was budgeted and adopted as a NOT TO EXCEED number by the Evansville City Council?…that remains to be seen?…that it is safe to say at this point in time that THE ARENA COSTED EVANSVILLE MORE THAN THE ARENA COSTED TO BUILD?…that the oversights, unwelcome surprises, and unintended consequences whether they came about as a result of intentional misrepresentation or old fashioned ineptness are well on their way to adding between $25 Million and $50 Million to the cost of the isolated world within the arena walls?…that life and construction projects to not happen in a vacuum?…that a comment on the CCO yesterday by a supporter of the current administration said “thinking good thoughts will not make good things happen”?…that Curt (posters screen name) should have told his idol this before this whole “think good thought” lack of big picture planning process on MLK was ever started?

IS IT TRUE that at next Monday’s Evansville City Council meeting that there will be an opportunity for our elected leaders to ask questions of John Kish the Evansville Arena project manager?…that many of those questions will be revolving around inconsistencies between previously reported budget line items and numbers on the most recent budget spreadsheet?…that the packets for next Monday’s meeting will be handed out as usual at 4 o’clock on Friday afternoon (today)?…that there will be some very hard but not impossible questions posed to Mr. Kish about some BIG TICKET discrepancies in his budget?…that two examples follow?

IS IT TRUE that on November 20,2009 that the Evansville Courier and Press reported that the total contract for Hunt Construction, the construction project manager was for $5.8 Million including a $500,000 performance bonus that they have not yet earned?…that the final arena construction costs are now expected to exceed $95 Million so Hunt Construction will most likely not earn the $500,000 bonus?…that given that probability that the budget today SHOULD reflect a TOTAL PAYMENT to Hunt Construction of $5,300,000?…that in the John Kish issued spreadsheet titled “Evansville Arena Summary” and dated January 31, 2011, that the line item labeled Hunt Construction Group shows a total of $7,120,000?…that this is only a $1,880,000 increase over the expected value based on published contractual numbers?

IS IT TRUE that the same Courier and Press article stated that Populous (then HOK) would be paid for architectural services an amount NOT TO EXCEED 10% of the Arena Construction Costs?…that number based on a $95 Million construction cost should be budgeted right at $9.5 Million based on current information?…that it has been recently reported that Mr. Kish has stated that Populous will be paid $11,300,000?…that is a number that EXCEEDS their reported $9,500,000 NOT TO EXCEED number by $1.8 Million?

IS IT TRUE that just these two discrepancies amount to $3,680,000 of dollars that the citizens of Evansville have not expected to be spending at all based on previously published numbers attributed to contracts for professional services associated with the Evansville Arena?…that these discrepancies and other smaller ones need to be in the City Council packet and on the docket for Monday night?…that it is remotely possible that the figures reported by the Courier and Press were not correct?…that we would assign a very low probability that the CP reported this wrong because they would have had to pull numbers from the sky to have done so?…that the CP would have had no reason to have done such a thing?

IS IT TRUE that the Evansville Redevelopment Commission would have to approve any change orders that amount to $3.68 Million for these increases to be authorized to go into the budget?…that there is no public record of the ERC approving increases in the amount of $3.68 Million to Hunt and Populous?…that there are not public records available reflecting that the ERC was ever even asked?…then that the question for Mr. Kish is “who granted you the authority to increase these line items by $3.68 Million”?…that another question for Mr. Kish is “WHEN and IF you were granted the authority to increase these line items by $3.68 Million, was this done in an open door meeting or was this another backroom decision”?…that another question for Mr. Kish is “is there any way under Indiana codes that allows an increase of $3.68 Million to be authorized in a non public meeting”?…that we think such things are subject to “Sunshine Laws” but are open to opposing interpretation by learned counsel?

IS IT TRUE that these two bills have not been fully paid yet so correcting them RIGHT NOW can save the people of Evansville $3.68 Million of additional debt that they can ill afford in the first place?