The Bailout; the shock that shook the city of Carmel to its core!
To be sure we had numerous small tremors that should have served as a warning before the City was shaken to the core.
*Please note this is the longest and most important thread on this website!*
The first strong indications anything was wrong came in the spring of 2012 immediately after the start of the Mayors 4th term in office.
By the summer of 2012 things were coming to a head and by August it began to be apparent that things were not as they had been portrayed.
This was how it all began…
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In the beginning, everyone called it a refinance, indeed HJ Umbaugh seemed to believe the request would have been heard and moved rapidly to approval. The scope of the problem, however, was just beginning to take shape.
An error was claimed to be part of the reason for the shortfall, so what did we do?
Always blame the clerk!
Was the energy center $500,000 mistake really a mistake? Since that time the energy center has been a sore spot in multiple audits of the CRC and City.
In time problems were coming from all directions.
The second shoe drops…
So to summarize the TIF was unexpectedly down by 10% from $16.4M to $14.8M which leads to a $17M shortfall over the life of the TIF.
Isn’t that Special.
Sadly there was more bad news, it got worse…
As the carnage became evident Mayor Brainard still had to sit quietly and listen to the experts.
He should have been a better listener.
In retrospect so should the City Council. We did the right thing but we enabled the debt abuser.
Past behavior is the best predictor of future actions. We should have known better than to allow him another chance.
Frost Brown Todd had some pretty sobering observations.
Mayor Jim Brainard tried to deflect criticism. The bailout overlapped the annual budget process. So true to form Mayor Brainard made an excuse and claimed the problem was the ‘cost’ of the West Carmel annexation. Mayor Brainard has only taken responsibity one time I am aware of and that occasion was the cost overruns on the Performing Arts Center.
In this clip Councilor Schleif lays out the real issue.
Not to be fazed by the truth Mayor Brainard continues to say things he knew were inaccurate at the time he stated them.
Below the Mayors State of the City speech in October of 2012 his financial numbers are completely inaccurate. Umbaugh stated on 9/20/12 at Special City Council meeting TIF was DOWN 10% for new year. From $16.4 million to $14.8 million.
Listen to the Mayor pitch the Special Benefits Tax! Note how he claims reserves required by lenders are “money in the bank”.
He fails to acknowledges a shortfall of $2.2 million in actual planned TIF. His numbers are Revenue $18.1 million and payments will be $17 million. Curious how he was so far off when the meeting had occurred less than 1 month earlier and received a fair amount of discussion.
Similarly he asked to Spend the Rainy Day Fund just 12 days later. Why spend the Rainy Day Fund? Road repaving!
https://www.youtube.com/watch?v=1xa-DZvDVNo
The questions were coming from all directions. Even the students at Carmel High School got into the act.
In a feeble attempt to explain the bailout he tried to snow a High School student by use of distraction.
Sadly not all were as soft a touch as a High School Journalism student so the Mayor had some explaining to do.
The matter came to a head as the city was still shaking.
As if the mess wasn’t bad enough we had Ron Carter give his two cents. His explanation was incredulous.
Ron has not learned when you are stuck in a hole you need to quit digging, so he continues with his diatribe.
So how did the CRC story end? In 2013 the results of the CRC Audit of 2012 were in and revealed the following discrepancies.
Redevelopment commission for Carmel in turmoil
Carmel Mayor Jim Brainard will wait until next year to seek a new director for the city’s beleaguered redevelopment commission, the once-big-spending agency now facing a tight budget, staff exodus and brow-raising audit.
“This is a good chance to step back and re-evaluate how the [Carmel Redevelopment Commission] works and who we need in those positions,” said Brainard, the mastermind behind Carmel’s aggressive push to rebuild downtown.
For more than a decade, the CRC fueled that transformation—borrowing $240 million to support projects like City Center, the Arts & Design District and the Center for the Performing Arts.
BrainardRevenue from the city’s tax-increment financing districts paid the bills. Until last year, when expenses threatened to outpace revenue. The City Council agreed in late 2012 to refinance $184 million in CRC debt to keep it in the black, and members have kept a tight grip on the checkbook ever since. (Entire story attached at link)
https://www.ibj.com/articles/44389-redevelopment-commission-for-carmel-in-turmoil
You would think that would be the last word on bailouts but the issue arose again in late 2018 after Bruce Kimball made an erroneous comment on Facebook when the specter of a future Bailout was raised by Strong Towns founder Chuck Marohn one of the worlds top Urbanists.
Part of the fallout from the 2012 Carmel Bailout Version 1.0
The CRC took on more than $40 million in debt in 2010 courtesy of Oppenheimer in the form of certificates of participation. Oppenheimer’s debt obligation carried an interest rate of 7.75% to 9.25%. The prepayment penalty on the Oppenheimer debt was a whopping $16.2 million.
Interestingly, Leo Dierckman is Managing Director, for Oppenheimer Investment Management LLC. and was serving as President of the Carmel Plan Commission at the time that debt was taken out.
