Wednesday, June 06, 2007

Harrison Square Welfare

The JG reports that the city will ask the Redevelopment Commission to add a new subsidy for the new Harrison Square hotel that is already heavily subsidized:

City officials plan to ask Grand Wayne Center to contribute $2.5 million over 10 years to help subsidize the almost $50 million hotel that is a part of the larger Harrison Square project.

Keep in mind that the city is already building them a parking garage as well as giving them the property they disgracefully took from Belmont Beverage through the use of eminent domain. But that's not enough.

The thing I don't get is that THEY WERE THE SOLE BIDDER; if they didn't have the money to build the hotel then why didn't they just subtract $2.5 million from the bid? I know, I know, they thought certain money from the state would become available and it didn't - but guess what? That's called RISK and the city shouldn't be on the hook for the hotel developer's poor decisions.

There was another part of the article that caught my eye:
In the initial non-binding contract with the hotel developers, the city agreed to work with Grand Wayne’s board of directors to allow the new hotel to recoup some of the room tax charged to hotel guests. Leatherman said the hotel developers will no longer get a direct rebate of the room tax, but the city hopes to use the $2.5 million as additional incentives for the hotel.

I think the reason they can't get a direct rebate of the room tax is because IT'S AGAINST THE LAW. The following piece of legislation states the tax must be paid to the state.
IC 6-9-9-2 (c) The county fiscal body may adopt an ordinance to require that the tax be reported on forms approved by the county treasurer and that the tax shall be paid monthly to the county treasurer. If such an ordinance is adopted, the tax shall be paid to the county treasurer not more than twenty (20) days after the end of the month the tax is collected. If such an ordinance is not adopted, the tax shall be imposed, paid, and collected in exactly the same manner as the state gross retail tax is imposed, paid, and collected under IC 6-2.5.

IC 6-9-9-3 indicates that this money comes back from the state to the county's capital improvement board and can be used to promote tourism. Hopefully our resident member of the redevelopment commission, Karen Goldner, can help us understand how exactly the Redevelopment Commission fits into this. And, if Karen is so inclined, I think readers would be very interested to hear her opinion on the subsidy in general...


Karen Goldner said...

When the hotel MOU was approved by City Council, it included a rather vaguely defined subsidy from the Grand Wayne Center. This is described by Greg Leatherman in the article you quote, Jeff, and it was discussed at the Council table. As I recall the discussion, at that time the administration said that they were not envisioning a direct cash payment from GWC to the hotel, but that they thought there might be some in-kind type of relationship such as GWC forgiving fees, etc., to the hotel itself. It was one of those "to be determined" items, but Council was very much aware that something with the innkeepers tax would be part of the package.

I believe that what we approved Monday was better - it is using public sector resources (innkeepers tax) to finance public portions of the project (infrastructure). The hotel developer doesn't directly receive any payment. I think that is a more appropriate way of handling it. Although the hotel developer does receive value from the infrastructure built by the City that supports the project, everyone will know that the money is used for construction that is required for the development.

Of course, it's all money into the project regardless of the source, and if you didn't like Harrison Square before you will probably not like it any more now. But this is just a cleaned up version of what was discussed (and approved in concept) by the legislative body a month ago.

Jeff Pruitt said...

Thanks for the input Karen.

Will these be part of the bond financing or come out of a different pool of money?

So I take it that the Redevelopment Commission is the body that receives the innkeepers money back from the state?

Karen Goldner said...

GWC receives the innkeepers tax. The proposal is that they would remit money annually to the Redevelopment Commission, which then remits to the Redevelopment Authority via a lease, and then the Redevelopment Authority is who makes the bond payment to the bondholders.

(The Redevelopment Authority is a separate entity set up to facilitate these types of bond/lease transactions.)