Real Estate Developer Tied To Daniels And Ballard Indicted For Defrauding State

Indicted Real Estate Developer John Bales

John Bales is a young, high-flying Indianapolis real estate developer with strong political ties to the administrations of Gov. Mitch Daniels and Mayor Greg Ballard. Today, he and his business associate, William Spencer, find themselves on the wrong side of the law facing a federal indictment for defrauding the State of Indiana over a transaction involving a sweetheart lease deal for real estate in Elkhart, Indiana jointly owned by Indianapolis attorney Paul Page and former Marion Co. Prosecutor Carl Brizzi. Page also faces charges for defrauding a federally-insured institution from whom he borrowed money to finance the development of the Elkhart real estate into office space for the Indiana Department of Child Services. The IBJ's Cory Schouten explains the charges brought by the U.S. Attorney for the Northern District of Indiana:

A grand jury in South Bend has returned a 14-count criminal indictment against Indianapolis real estate broker John M. Bales and two associates over a state lease deal in Elkhart first revealed as part of an IBJ investigation.

The complaint alleges Bales, his partner and general counsel William E. Spencer, and Indianapolis developer and attorney Paul J. Page defrauded the state and an unnamed bank.

The charges, brought by the U.S. Attorney for the Northern District of Indiana, include eight counts of wire fraud, three counts of mail fraud, one count of bank fraud, and one count of conspiracy to defraud. Page was also charged with one count of making false statements to influence the actions of a bank . . .

According to the indictment, Page bought the office building without putting up any cash through a company called L&BAB LLC, then leased it to the state's Department of Child Services. Page put up $361,000 in cash for the property, which had been wired from Bales' account under an entity called BAB Equity.

"Page promised to repay BAB Equity and to give it 25 percent of the profits when the Elkhart building was resold, even though Bales and Spencer could not have any sort of ownership interest in the building and even though Venture told the state that it would only be compensated through commissions," U.S. Attorney David Capp said in a statement.

The indictment alleges that Page also borrowed $531,000 from a bank without disclosing he wasn't investing his own money.

As Schouten's story explains, under an exclusive real estate brokerage agreement Bales' Venture Real Estate entered into with the State of Indiana, the company and its partners and employees were barred from having an ownership interest in the real estate the firm assisted the state in leasing. According to the indictment, Venture was paid by the state an $88,400 commission on the lease of the Elkhart property. The firm also collected a $28,875 brokerage fee and $22,700 development fee in violation of its agreement with the state. "Page promised to repay BAB Equity and to give it 25 percent of the profits when the Elkhart building was resold, even though Bales and Spencer could not have any sort of ownership interest in the building and even though Venture told the state that it would only be compensated through commissions," U.S. Attorney David Capp said in a statement. Bales has earned to date nearly $2 million in commissions paid by the state under the terms of the exclusive real estate brokerage agreement the Daniels administration inked with him according to the indictment.

You may recall that early on in the administration of Mayor Greg Ballard, Barnes & Thornburg's Bob Grand negotiated on behalf of Bales a controversial no-bid, exclusive real estate brokerage agreement with Bales' Venture Real Estate firm that allowed Bales to market city-owned real estate. This blog also exclusively reported that City-County Council President Ryan Vaughn, an attorney/lobbyist employed by Barnes & Thornburg, had been registered to lobby the Daniels administration on behalf of Bales' Venture Real Estate, along with other attorneys at Barnes & Thornburg, including Bob Grand and Joe Loftus, both of whom are paid by taxpayers to advise Mayor Greg Ballard. The information on Vaughn's work for Bales was scrubbed from the state's lobbying website after it was disclosed here.

Vaughn, who represents a council district that includes Broad Ripple, has been a leading proponent of a parking garage deal pushed by the Ballard administration that gives the politically-connected real estate developer, Ersal Ozdemir of Keystone Construction, $6.3 million in city funds to develop a parking garage that turns out to be more of a commercial retail development for Ozdemir's exclusive personal benefit. Keystone Construction and Bales' Venture Real Estate have worked together in other taxpayer-funded projects, including a BMV branch on South Madison Avenue in Indianapolis. The two companies also submitted a joint bid to manage the assets owned by the CIB.

Under the terms of the Broad Ripple parking garage deal, the city did not require Ozdemir to invest a single dollar of his own money in the deal despite the fact that he will own it entirely and get all of the revenues from it. It's a theft of public funds, pure and simple. There is no public benefit to this deal at all. Your money has been given to reward a fat cat contributor of Ballard's. The Ballard administration simply rewarded Ozdemir's Keystone Construction with a $6.3 million gift with your tax dollars in consideration for the tens of thousands of dollars he stuffed into Ballard's campaign re-election account. Ozdemir also hired Ballard's former Chief of Staff, Paul Okeson, who helped broker the corrupt deal. Okeson was actually sitting on the CIB's board while his company submitted a joint bid with Bales' Venture Real Estate to manage the CIB's assets. When will a grand jury be convened to investigate these crooked real estate transactions in Indianapolis that are being used to bilk taxpayers here?

Vaughn's Redistricting Plan Threatens Ballard's Relationship With Democratic-Controlled Council

Mayor Greg Ballard's approval of a plan by outgoing City-County Council President Ryan Vaughn to redraw precinct boundaries and the council's 25 single-member districts based on the 2010 census data threatens to spoil his relationship with the Democratic-controlled council before the new council is seated. Democrats are upset Vaughn spent $225,000 of the council's budget on a contract with Carmel attorney David Brooks to redraw precinct and council district boundaries. By state law, Ballard is responsible for redrawing the precinct maps. State law also requires the council districts to be redrawn based on the 2010 census during the calendar year 2012.

In an unusual move, Ballard delegated the precinct redistricting responsibility to Vaughn, who included the work in Brooks' contract to redraw the 25 council districts. Apparently Vaughn took it upon himself to enter into the contract with Brooks without discussing the matter with the full council. Naturally, Democrats are upset because they believe the newly-elected council, not the lame duck council, should be allowed to draw the district boundaries next year as provided by law. They also believed city employees could have been tasked to redraw the precinct boundaries without incurring any additional costs to taxpayers. It also appears the council redistricting work could have been done for a fraction of the cost Vaughn paid the Republican-connected Brooks to perform the work.

Laying that aside, Vaughn seems determined to move forward with his redistricting plans. He plans to introduce an ordinance approving the new maps at the council's December 5 meeting. He is also conducting three public hearings over the next ten days. Vaughn insists the maps are geographically compact, of similar population size and follow the new precincts map being simultaneously proposed. He also insists the proposed map is "politically competitive" and "designed to reflect the community with which it serves."

I took a quick review of the proposed 25 council districts. I found about 10 of the districts drawn to favor the Democrats, 9 of the districts drawn to favor the Republicans and just 6 of the districts that could be described as truly competitive. It also appears that about 9 of the 25 districts are majority-minority districts. As for the precinct maps, I can't discern what the new boundaries are because there is no street map overlay furnished with the map that has been distributed. The Democrats would have a tough sell convincing a court the council districts have been drawn to disadvantage minorities or the Democratic Party. They also seem to be relatively compact, although they probably could be slightly improved upon. It seems the Democrats' strongest argument is that Vaughn circumvented the law by drawing the district maps in the calendar year before the year set by statute. Whether a court would set aside the map if approved by the outgoing council and signed by Mayor Ballard is hard to predict. The Democrats have hinted they may take the matter to court if Republicans proceed as planned.

Ten years ago, the Republican-controlled council and then-Mayor Bart Peterson were unable to reach a compromise on a new map. The issue wound up in the Indiana Supreme Court, which drew the current council district map. At the moment, things appear headed towards the same train wreck that occurred then unless Mayor Ballard can reach some compromise with the Democrats. Council Democrats appear too angered with Vaughn to hope for any compromise between them. Mayor Ballard is going to have to decide if he wants to begin his new term battling with the Democratic-controlled council over this issue.

Citizen Complains To Vaughn About Lack Of Public Input Into Board Appointees

Community activist Clarke Kahlo sent the letter below to City-County Council President Ryan Vaughn that is spot on in its criticism of his and fellow councilors' refusal to allow members of the public to offer comment at public hearings on council appointees in light of the testimony in the ongoing public corruption trial of former City-County Councilor Lincoln Plowman, who boasted to an undercover FBI agent how he controlled zoning boards through his power of appointment as a leader of the council. Incredibly, Vaughn blamed the public for acting inappropriately at public hearings by sharing their opinions on potential appointees as a reason for denying the public comment:

Dear Mr. Vaughn,

When I contacted Lincoln Plowman by email late in 2009 to inquire about what specific attributes he felt that appointee Alan Retherford brought to the BZA, I received no response.  His non-response signaled that councilors don’t necessarily want to hear from citizens, in advance of committee appointment meetings, about their picks.

As you know, at the July 25^th meeting of the Metropolitan Development Committee, chairperson McHenry refused to allow me (and others present) to comment about the BZA appointment process. Councilor McHenry later defended her prohibition in part by saying that no one had contacted her with concerns prior to the meeting.  Such a rationale is completely disingenuous, in my opinion, because in the present environment, too many councilors don’t want to hear from citizens and too often are rude and rebuff them for their efforts, especially when the input is interpreted to be “negative” or contrary to the prescribed political pick.

A good bit of water has passed under the bridge in the short time since my December, 2009 inquiry to former councilor Plowman.  By unwritten mutual agreement with the council, Mr. Retherford stepped down in March of this year after 20 years of board tenure (and following a contentious and acrimonious re-appointment process lasting about 7 months).  And Mr. Plowman has resigned in disgrace from his council seat and his police department post following his indictment on extortion bribery charges following a sting on a zoning issue. The last several days (September 7-9) of reporting/blogging by Advance Indiana and Had Enough Indy on the Plowman trial in federal court have cast new and needed light on the illicit and seamy underside of zoning and alcohol manipulation by some powerful ex-councilors and their puppet appointees.

At the August 25^th council meeting, you made derogatory general comments about a few (likely including me) in the community who have supposedly improperly assailed well-intended BZA and alcohol board volunteers (appointees), using that fiction as a reason for not allowing public comments.    (To the extent that the Council’s adopted rule provides total discretion to chairs who would use it to condone secrecy and political chicanery over the public interest and accountability, that rule should be discarded as a vestige of Indianapolis’ archaic political modus. 

You also went so far as to allude to “potentially criminal acts” by certain public.  It’s absurd, and insulting, for you to imply criminality by any member of the public simply for demanding accountability and proper performance from board appointees.  As the evidence to date in the Plowman case strongly suggests, if any criminality is present in the board appointment process, it’s been perpetrated, not by any concerned or vocal public, but by a corrupt councilor and his corrupt appointees to the BZA and Alcohol Board.  These people, in my experience, too often ignore the statutory criteria for determinations and simply vote the way they are instructed by their appointers.  Jennifer Ping even made this point expressly in her comments at the 12-6-10 alcohol board hearing in the 5215 College application (which application you supported). 

Instead of publicly attacking neighborhood advocates who merely seek the equal protection of our enacted laws, (and to have their voices heard), you and your committee chairs/members should be encouraging participation and listening to what is said. You’ll never be able to evaluate the merits of their case if you deny them a hearing.  It might well be that they can alert the council to problems in the making or prevent an incompetent or a scoundrel from becoming entrenched.  As Justice Brandeis once said, “Sunlight is the best disinfectant”.

Sincerely,

Clarke Kahlo

What's Ryan Vaughn Hiding?

Ryan Vaughn

As a Republican councilor in the minority four years ago, Ryan Vaughn led the charge against the ethically-challenged Monroe Gray, the City-County Council President under the Democratic-led council. Who knew then that Vaughn would auction his seat off on the council for a job at a law firm that exercises total control over the administration of Greg Ballard, become the council's president and then run the most unethical council since the enactment of UniGov?

At Monday night's council meeting, Vaughn announced that the council will no longer permit public comment on council appointees because he claimed people who voluntarily served on city boards and commissions were becoming difficult to find because of scrutiny they were receiving from some community activists. Vaughn seems to have forgotten the promise Republicans made four years ago to end the practice of appointing lobbyists and city contractors to boards and commissions because of their conflict of interest. Over the last four years, Mayor Ballard and council Republicans have refused to appoint anyone to any board or commission that might exercise independent judgment; hence, appointees are largely lobbyists and city contractors. Should he wonder why some members of the public might want to offer public comment on appointees? After all, they are hardly people sacrificing for the public good when their volunteer work leads to personal financial reward to them, their employers and their clients. Of course, no one understands this better than Vaughn since no person in the history of the City-County Council has profited as much as he has from his service on the council.

Early on in his council career, Vaughn watered down the City's ethics ordinance to the point of legalizing all of the self-dealing transactions in which he has engaged in as a member and leader of the council so he can insist with a straight face that his actions don't violate any laws, even if his actions are grossly unethical. He watered down the city's lobbying law so much that most people lobbying city hall don't even bother to  register because they know there are no serious penalties for violating it and, even if there were penalties, there is nobody empowered with any authority to enforce the law. Barely a few dozen people have registered to lobby since the enactment of the ordinance Vaughn authored. No reporting by lobbyists' activities is available online.

Vaughn is also withholding the latest ethics forms all city councilors were required to file annually by February 1. The council's website still shows statements filed for the calendar year 2009. Yes, it appears Vaughn has a lot to hide. As for those who would violate the city's ethics law, the board is populated with insiders chosen to protect ethics violators from any consequences for ethical transgressions. 

Broad Ripple Parking Deal Partner Paid By City To Prepare Parking Study

A company that is part of a partnership that was awarded $6.35 million in taxpayer dollars by Mayor Greg Ballard to develop a $15 million parking/retail structure for Broad Ripple Village was hired by the City of Indianapolis' Bond Bank in 2007 to prepare a parking study. The findings of a study prepared by Walker Parking Consultants actually undermines the arguments the Ballard administration presented earlier this week in explaining why taxpayers would be funding 42% of the privately-developed project. In announcing the deal, Mayor Ballard, City-County Council President Ryan Vaughn and Village board member Tom Healy touted the deal:

"Broad Ripple Village has long needed a garage of this magnitude to alleviate parking issues and allow for implementation of a residential parking permit system on neighborhood streets," said Mayor Ballard. "Visitors to the Broad Ripple area will have a safe, secure, well-lit area to park their cars, while residents and their guests will more easily be able to find on-street parking near their homes."

"The City of Indianapolis received several proposals for this project and found this proposal offered the best solution to address the Broad Ripple Village's needs for daily and monthly parking," said Council President Vaughn. "We have worked with the Broad Ripple Village Association and other partners over several years to arrive at a plan that offers great retail space that will be an additional amenity for the community."

"This high-performance mixed-use structure will transform an eyesore into an asset and stimulate much-needed infrastructure improvements," said Broad Ripple Village Association Board Member Tom Healy. "We look forward to working with the developers and the City to create a dynamic Village gateway."

Walker's 2007 study actually criticized the proposed site of the parking/retail structure in recommending the construction of a parking garage to address parking issues in Broad Ripple Village. Surprisingly, the study found that there was no shortage of parking in the Village. What it found was that within a relatively small portion of the Village at some peak times demand for parking forced visitors to walk less than ideal distances to their destination after finding a suitable parking space. Pat Andrews succinctly summarizes that finding at her blog, "Had Enough Indy?":

PARKING SUPPLY - the study concluded that of the 40 blocks of Broad Ripple Village, parking was adequate for almost all areas, at most times of the day, night, and week, in 2007 and as projected into the future. There were 16 blocks that were shown to exceed 85% capacity at 11 pm on weekends. A particular 6 block area was calculated to have a deficit of 132 parking spaces at 11 pm on weekends (adequate at all other times) and projected to have a deficit of 180 parking spaces at 11 pm on weekends in the future.

The Walker study suggested a parking structure in the area of the proposed site to address the shortage of parking spaces during the peak period of demand for the heart of the entertainment area within the Village. Walker preferred a parking garage be built behind the Vogue, although it acknowledged the site chosen for this week's announcement at the corner of College and Broad Ripple Avenues as an alternative site. The report explains why it preferred a parking garage of approximately the same size as being proposed today at the site behind the Vogue nightclub:

Site A is an odd-shaped corner parcel that once served as an active gas station. This site is currently blocked off and not used as for any particular purpose. The location is less than ideal for parking, as patrons would have to cross College Avenue to reach the main entertainment area of Broad Ripple, and the odd shape does not provide the most efficient area to layout a parking. We estimate 102 spaces could fit on the site based on 400 square feet per space. The site measurement and assumptions are shown in Figure 7. Because this site does not provide sufficient space, and is most likely not the best use for this prime location, we do not recommend developing permanent parking on this site.

Site B is located in the parking lot behind the Vogue nightclub and west of Carrollton Avenue. The dimensions of the potential parking structure are 125’ x 216’. Based on 360 square feet per space, we estimate 75 spaces per level could be added on this site. The site measurement and assumptions are shown in Figure 8. The site would displace about 95 existing spaces. A four level parking structure with 300 spaces would effectively add about 205 spaces due to the displacement of existing surface spaces. The structure would have a height of about 48 feet for elevator and stair towers.

That's not all that is troubling. The study suggested a parking garage of this size would cost approximately $4.5 million excluding land acquisition and demolition costs as opposed to the $15 million structure being proposed today. Andrews summarizes:

COST OF CONSTRUCTION - the study noted the rising cost of concrete and cost of construction of parking garages over the previous 4 years, rising about 17% over that time span. They concluded that it would cost $4.5 million to construct a 4 story, 300 space, parking garage. They note that additional spaces would cost $21,878 per space. Using that figure, a 350 space garage would come to $5.6 million - not including acquisition of land or demolition costs.

Pat Andrews' research also uncovered the fact that the owner of one of the lots being used for the project is owned by an entity known as "6286, LLC." The agent for this entity is listed as J. Todd Morris, who coincidentally is listed as the "Parking Manager" for Newport Parking, one of the partners in the city-awarded deal headed by Keystone Construction, which is owned by a large Ballard campaign contributor, Ersal Ozdemir, who employs Ballard's former chief of staff, Paul Okeson.

What is particularly bothersome is the City's refusal to produce to the public the construction and operational costs each bidder was required to submit in response to the City's Request for Qualifications for the project. "My request was denied with the citation of an Indiana State statute that trade secrets may be held from public disclosure laws," Andrews writes. "I will, of course, take this up with the Indiana Public Access Counselor's office later this morning," she adds. The public must demand this information. It's total bullshit for the Ballard administration to withhold this information when it expects taxpayers to finance 42% of these private developers' project. What's really sad is that it takes bloggers to request this information because the media in this town could give a damn less. They can only repeat verbatim the talking points of the self-serving proponents of this deal and editorialize in favor of it.

I also heard nothing in the media to suggest there were any competing proposals considered by the City. Is this like so many of the bidding opportunities in this state and city where the word leaks out on the street well in advance who has the inside track on the bid so nobody else wastes their time submitting proposals? It's all about Pay To Play. I'm telling you that there is no better place in America to do business if you are a crook. Our politicians are all for sale, and there is absolutely nobody but the foxes guarding the hen house. To hell with Chicago. C'mon down to Indy where the red carpet is rolled out for every sleazebag willing to stuff the politicians' pockets with money. 

UPDATE: WRTV's Kara Kenney had a good report during the 6:00 p.m. newscast Friday night examining the deal from the standpoint of taxpayers, which included interviews with Democratic council candidate Zach Adamson and me. Kenney hit on the Walker study's findings, the gift of more than $6 million to the private developers without any financial return to taxpayers and the mayor's ties to the lead developer, Ersal Ozdemir of Keystone Construction. She pointed out Ozdemir had contributed more than $25,000 to Ballard's campaign committee and hired the mayor's former chief of staff, Paul Okeson, in a top position with his firm. I'll provide a link to the story when it's made available on WRTV's website.

 

Here is the text of Kenney's story on WRTV. The video can be viewed here.

 

A $15 million plan for a mixed-use parking garage in Broad Ripple raised questions among some community members who said private interests were being put before the public.

Taxpayers will be expected to foot the bill for $6.35 million of the project at the southwest corner of Broad Ripple and College avenues, but won't they share in any of the parking revenues generated from the garage, 6News' Kara Kenney reported.

Gary Welsh, an attorney and political blogger, said that taxpayers should get a cut of the million-dollar investment.

"The city's not going to get any return on that investment in terms of a share of the proceeds and has no ownership," Welsh said. "The city should have used that money to own and operate its own parking garage and return those benefits back to the public at large."

Zach Adamson, a candidate for city-county council, agreed.

"I do think if the taxpayers are footing the bill we should get at least a portion of those revenues to benefit the taxpayers," Adamson said.

6News found a 2007 study by Walker Parking Consultants that called the site "less than ideal for parking, as patrons would have to cross College Avenue to reach the main entertainment area of Broad Ripple."

The Walker study suggested a parking lot behind the Vogue nightclub and west of Carrollton as a better option.

Records show Keystone Group LLC, the developer selected to build the garage, donated at least $28,000 to Mayor Greg Ballardin 2008.

"It doesn't pass the smell test when you have someone who has given that much money to the mayor," Welsh said.

6News also learned Paul Okeson, Ballard's former chief of staff, is the vice president of business development for Keystone.

The city chose Keystone Group LLC, Walker Parking Consultants, Keystone Construction Corp., Newpoint Parking and RATIO Architects as the winning bid out of seven proposals.

Ballard was out of town on Friday, so 6News' Kara Kenney met with spokesman Marc Lotter, who said money and connections had nothing to do with the winning bid.

"Absolutely not," Lotter said. "They were evaluated by a community group. Of the seven proposals, you look at this one and it required the least amount of public dollars and did not require a tax abatement."

Lotter explained that a public-private partnership is in the best interest of taxpayers because private companies will assume the risk for the new parking garage.

"This is a project that's been talked about in Broad Ripple for more than 30 years and has not been able to get off the ground because of the financial burden," Lotter said.

Lotter also said the new parking garage will contain retail, which means it needs to be near foot traffic.

"It's my understanding the (Walker) study in 2007 was looking at a parking garage only," Lotter said.

Even though the city won't share in the revenues generated from the garage, Lotter explained the city will maintain oversight over the parking rates charged to drivers.

The $6.35 million provided by the city will come from proceeds as part of the city's privatization of parking meters by ACS Parking, which must be used to fund infrastructure projects in the downtown, Mass Avenue and Broad Ripple areas.

Adamson works downtown and said he hopes the Broad Ripple parking garage and ACS deal are not a trend.

"I hope when they do parking structures downtown, we don't find ourselves in a similar deal," Adamson said. "That's my fear: we're seeing this pattern start to evolve."

A public hearing will be held July 19 at 7 p.m. at the Indianapolis Art Center, 820 East 67th Street.

Construction on the new parking garage is scheduled to begin in the fall and wrap in 2012.

 

 

Don't Be Fooled By Goldsmith's Views On Privatization

Star State House reporter Mary Beth Schneider expressed her shock on a Twitter post this afternoon concerning former Indianapolis Mayor Steve Goldsmith's "conversion" on privatization. "Former Indy Mayor Goldsmith, now dep mayor of NYC, said it's time to get rid of costly private contracts and have city workers do more. WOW," she wrote.  "Goldsmith was Mr. Privatization in Indy, so pretty bizarre to see this conversion." Presumably, Schneider's comments were made in regards to Goldsmith's recent announcement the City of New York would bring back some IT work inside that it had outsourced to private contractors. As Crain's New York reported:

The Bloomberg administration, in something of an about-face, will reduce spending on outside contractors and reassign some work to city employees.


Deputy Mayor Stephen Goldsmith announced Thursday—first in a Daily News op-ed and later in a press briefing—that a “project management office” would be expanded to oversee outsourced information technology projects. The city office will essentially replace a larger, more expensive layer of supervision that private contractors had been providing.

“I think the eventual savings will be in the hundreds of millions of dollars,” Mr. Goldsmith told reporters at City Hall. No formal estimate of the savings has been calculated, but “there are some folks we're paying contractors' [higher] rates to that we could easily get done on our side.”

In many cases, a city employee qualified to oversee a complex, technical project does not exist and will have to be hired. The administration also plans to train city workers to work on the kinds of projects that in recent years have been outsourced. The training will not be outsourced, according to Jason Post, a spokesman for Mayor Michael Bloomberg.

The deputy mayor, who joined the administration for the mayor's third term, said the change promises not just to save money but to reduce fraud. “Whenever you have a vendor, you have to have a high-quality city employee supervising the vendor,” Mr. Goldsmith said. “This level has caused us not only to pay more, but has caused us to lose too much control.”

The key to this change of heart at least on Goldsmith's part lies in reducing fraud, as well as costs. Last year, city subcontractors on a project known as CityTime to automate payroll and timekeeping for city employees were accused of stealing at least $80 million from the city. "What began as a $68 million effort will end up costing more than $700 million," Crain's reported. But even as Goldsmith was making this announcement, his boss was on the radio defending the city's practice of outsourcing much of the city's services. As the New York Daily News reported:

Perhaps Mayor Bloomberg didn't get the memo. Literally.


On his Friday radio show, he was asked about a new shift in city policy that had been in the newspaper for two days running - and didn't seem to know it had happened.

It's a shift on something that had been a sore point for Bloomberg's critics - outside contractors paid six-figure salaries for tech projects that blow deadlines and budgets, like the scandal-ridden CityTime system.

The mayor has long defended his administration's contracting policies, even though municipal unions and Controller John Liu say city workers could do the job for less.

So it was news last week when one of Bloomberg's deputy mayors, Stephen Goldsmith, agreed with critics and said New York will save tens of millions of dollars by bringing the work in-house.

On the radio, WOR-AM host John Gambling tossed Bloomberg a softball about it. But instead of explaining the new company line on insourcing, the mayor defended outsourcing.

"People say, 'Oh, you're spending too much money on outsiders.' If you didn't do that one contract outside, you'd have to have those people permanently on your staff," the mayor said.

"The consultants, they say, 'Oh, they charge a lot more.' Well, because that's the business," he continued. "They don't work all the time, so they have to get paid more. And sometimes they have expertise you don't have in-house."

If the Bloomberg administration has a new message on contracts, why did Bloomberg himself go off-message?

You would be mistaken, however, to think Goldsmith is turning away from privatization, even if his boss hasn't. He's now working on a new public-private partnership for which city service? You knew it. Parking meters. Here's what the Daily News is reporting on that front:

Now, Mayor Bloomberg is eying a "public-private" partnership for parking meters.


On Monday, the city's Economic Development Corp. got 12 from financial firms seeking to advise Bloomberg on the best way of "unlocking value in existing assets to save money and improve service delivery," says mayoral spokesman Jason Post.

High on the list of such assets are parking meters, along with city-owned garages.

The mayor and his aides say they have no intention of doing what Chicago did a few years ago - getting a big upfront payment to plug an immediate deficit by giving away city parking revenues for 75 years.

City Hall is already using more meters, higher rates and bigger fines to squeeze record payments from motorists.

The Daily News story notes the controversy that has plagued past privatization efforts pertaining to New York's parking meter assets. Back in the 1980s during the administration of Ed Koch, several city officials were caught up in a bribery scandal involving the awarding of a contract with a private company to provide hand-held computers for parking enforcement officers. "By the time the Parking Violations Bureau scandal was over, Stanley Friedman, Koch's close ally and head of the Bronx Democratic Party, was in jail, along with his sidekick, Bronx Borough President Stanley Simon, and a handful of others," the Daily News noted. "Queens Borough President Donald Manes committed suicide before he could be indicted, and their chief prosecutor, Rudy Giuliani, became a hero." Koch's successor, David Dinkins, similarly had a scandal involving parking meters. His administration was forced to cancel a contract it had entered into with Lockheed after an investigation revealed the company had colluded with other bidders and a city hall staffer had solicited a job during the bidding process. The Daily News doesn't fail to pick up on Goldsmith's ties to ACS, which was recently awarded the 50-year parking meter lease deal with the City of Indianapolis.

Deputy Mayor Stephen Goldsmith became a Republican Party star for privatizing government services when he was mayor of Indianapolis.


From 2001 to 2005, Goldsmith was senior vice president of Dallas-based Affiliated Computer Services Inc. Last year, his old firm landed a 50-year contract from Indianapolis to manage all parking meters for that city.

Under the contract, Affiliated even gets the money from tickets written by Indianapolis police. The contract barely passed the Indianapolis City Council by a 15-14 vote.

Given New York's checkered history with parking meters, we need to watch this process very carefully.

At least someone in the media in New York is keeping an eye on Goldsmith and his ties to ACS. The Indianapolis news media turned a blind eye to the ties a whole cast of key players in Indianapolis' parking meter deal had to ACS. Goldsmith, a former ACS executive, has admitted he has advised Ballard on a regular basis in an unpaid role since Ballard became mayor in 2008. Although he has represented interests lobbying the city for business as well, he never registered as a lobbyist. His former deputy mayor, Joe Loftus, is engaged to lobby the City of Indianapolis on behalf of ACS. One of the attorneys Loftus supervises at Barnes & Thornburg is City-County Council President Ryan Vaughn, who twisted arms of his fellow councilors to ram the 50-year deal through the council despite his obvious conflict of interest. Mayor Ballard's Deputy Mayor for economic development, Michael Huber, formerly worked for Skipp Stitt, another ACS executive who worked in Goldsmith's administration, prior to his work for Ballard. Of course they all insist their ties to ACS had nothing to do with the awarding of the lucrative 50-year lease to the company.

Another Ballard Tax Increase Takes Effect Today

Mayor Greg Ballard's plan to make more than a billion dollars for one of City-County Council President Ryan Vaughn's clients moves a step closer today. ACS, the politically-connected firm that Ballard awarded a 50-year lease for the City's parking meter business, begins collecting higher parking fees and charging for extended hours of use today. Persons parking at metered spaces downtown and in Broad Ripple will be charged to park an additional 5 hours during the week as hours are extended from 7:00 a.m. to 9:00 p.m at the rate of $1.00 an hour. Additionally, the City will charge them to park those same hours on Saturdays for the first time in city history. The rates will jump to $1.50 an hour beginning in January, 2011, double the current rate.

The Star's Jon Murray misleads the papers readers on a bit of bait-and-switch ACS and the Ballard administration engaged in when it sold the City on the deal. Individual meters mounted on the existing poles were to be replaced by multi-space pay boxes; however, when ACS began switching out the meters, it instead installed electronic meters on the existing meter poles, not even bothering to replace the rusty old poles. The Star, which endorsed the corrupt 50-year deal, tries to explain it away:

Beginning in late spring or early summer, ParkIndy will install multispace pay boxes to replace about two-thirds of the meters.


ParkIndy has drawn criticism for leaving rusty meter poles and bases and replacing only the heads. Lou Gerig, a spokesman for ParkIndy, said that as pay boxes go in, leftover meter parts that are in good condition will be used to replace older hardware on remaining individual-space meters.

The multi-space pay boxes were the cornerstone of what councilors were sold when they approved the deal last year. ACS is installing the electronic meters on the poles for now, which are actually used meters that were removed from another city where they were previously used. By installing the older technology now, ACS is getting immediate access to revenues it will generate from the 50-year lease that includes the higher rates and extended hours. ACS will use those revenues to finance the cost of installing the more costly multi-space boxes over time for most but not all spaces. ACS plans to use newer poles already purchased by the city to put on the remaining parking spaces where it intends to use its used electronic meters. In other words, ACS and the Ballard administration flat out lied about how much money ACS would invest up front to install new parking meter technology.

There are many signs that ACS has used insiders with ties to the company to expand its business operations in state and local government in Indiana. ACS played a key role in the botched privatization of FSSA's welfare services that cost taxpayers more than a half billion dollars. The administration of Gov. Mitch Daniels blamed the entire mess on IBM when it terminated IBM's contract but kept in place ACS. IBM partnered with ACS in order to win the contract originally because then-FSSA Secretary Mitch Roob, a former executive with ACS, initiated the privatization effort. Gov. Daniels then named another former consultant for ACS, Michael Gargano, to run the agency, who is married to another former ACS executive, Ann Lathrop.

ACS has long used the law firm of Barnes & Thornburg as its hired gun lobbyist to win government business in Indiana. The firm lobbies both state and city officials on behalf of ACS. Its chief lobbyist at the firm, Joe Loftus, is also paid as a key adviser to Mayor Greg Ballard. Lobbying records also showed City-County Council President Ryan Vaughn lobbied the state on behalf of ACS as a lobbyist for the firm; however, when this blog reported on his registered status as a lobbyist for ACS, Vaughn claimed a paralegal at his law firm registered him with the state in error. Vaughn also twisted arms of councilors to ram the deal through the council and voted in support of the 50-year parking meter lease despite his obvious conflict of interest.

Ballard Tapping Disaster-Area Bond Program To Finance North Of South Deal

We've told you before just how crazy a public subsidy to the tune of $140 million for the North of South redevelopment project for the southside of Indianapolis' downtown is, but it gets even crazier. It turns out the Ballard administration is tapping a bond program intended for disaster areas to float up to $98 million in bonds for the project. Who knew that part of downtown was a disaster area? The Bond Buyer explains:

Indianapolis will head to market next week with $98 million of debt that taps the Midwestern disaster-area bond program to finance a new corporate campus for Eli Lilly and Co. — a project officials say will transform the city’s central downtown business district . . .

The bonds carry a repayment pledge of revenue from the city’s sprawling and lucrative downtown tax-increment financing district. The borrowing will also feature a moral obligation pledge from the triple-A rated city.


Indianapolis will loan most of the proceeds of next week’s bond issue to the developer, Buckingham Cos., which is expected to refinance with a traditional mortgage in 10 years when the city calls the bonds.

Officials said the bond issue is necessary because traditional private-bank financing remains difficult to obtain at an economical rate.

It’s the latest in a series of complex financings undertaken by Mayor Greg Ballard and will tap the city’s allocation of qualified midwestern disaster area bonds. It also includes a small taxable piece.


The 2008 federal Midwestern disaster area bond program allows an issuer to structure bonds for qualified projects as tax-exempt that would otherwise have to forgo the tax benefit because they benefit a for-profit company.

“This really is a more economic way to incentivize the project in today’s climate,” said Deron Kintner, executive director of the Indianapolis Local Public Improvement Bond Bank. “All we’ve done here is rather than the city incentivize the project with very, very large upfront subsidies, we are providing access to capital markets at our borrowing rates.”

The Bond Buyer notes the critics complaint "the city is assuming too much risk with the financing and a city-held mortgage." "Moody’s Investors Service assigned an Aa2 rating to the debt, two notches off the city’s triple-A rating, due to the non-essentiality of the project and the risk of non-appropriation," the trade magazine reports. The Bond Buyer also gives a run down of the finance team for the deal:

JPMorgan is senior manager on the deal. Co-managers are Cabrera Capital Markets, City Securities, Hillard Lyons, Northeast Securities, PNC Capital Markets, and Siebert Brandford Shank & Co.


Crowe Horwath LLP is financial adviser and Barnes & Thornburg LLP is bond counsel.

JPMorgan is playing a similar role in the Ballard administration's 50-year privatization deal for the city's parking meter assets. City Securities hired former Bond Bank head for Ballard Kevin Taylor and is being rewarded with more business just like it was when the firm hired Mayor Peterson's former Bond Bank head John Dillon, Jr. Of course, Crowe Horwath's Ann Lathrop, another Goldsmith and ACS alum, gets a spot as financial adviser on the deal, while Barnes & Thornburg (Grand, Loftus and Vaughn) get to serve as bond counsel. Naturally, CCC President Ryan Vaughn didn't recuse himself from voting on the "disaster-area program" despite the fact his law firm is making money off the deal. He's just an employee, you see, whose compensation isn't tied to his job performance as your City-County Council President.

Just out of curiosity I wondered what the Midwestern Disaster Area Bond Program was. As a Midwesterner, I thought I would know if a disastrous event like Hurricane Katrina had hit the region. Yeah, there were the floods a couple of years ago, but those didn't affect downtown Indianapolis. There was that spring storm that damaged the Regions Bank building that weather observers couldn't agree on whether it was a tornado or straight-line winds. Spina, an Iowa bond lawyer, explains what the program is about:

Midwestern Disaster Area bonds were authorized by Congress on October 3, 2008 in the Heartland Disaster Tax Relief Act of 2008. There was an original $2,615,995,000 of Midwestern Disaster Area Bond capacity in Iowa. This financing is limited to 78 counties in Iowa. This financing is also available in certain counties in Wisconsin, Illinois, Indiana, Missouri, Nebraska and Arkansas. A similar program was adopted following Hurricane Ike for parts of Texas and Louisiana. These Bonds follow similar, but not identical, authorization of tax-exempt bonds in the New York Liberty Zone following 9/11 and in the Gulf Opportunity Zone following Hurricane Katrina.


Proceeds of these bonds are used for (1) qualified residential rental property (some income restrictions apply), (2) nonresidential real property (cost of acquisition, construction, reconstruction, and renovation) and (3) utility property.

Requirements for use of Midwestern Disaster Area Bonds are those that are generally applicable to tax-exempt bond financing. In addition, these bonds require a determination relating to the disasters. This requirement will be discussed in the following section.

There has been very little use of Midwestern Disaster Area bonds. In 2009, only two Borrowers obtained financing in Iowa. Projects are now lining up for financing . . .

In the Heartland Disaster Tax Relief Act of 2008, Congress imposed the following specific requirement:


“[except that in determining whether a bond is a qualified Midwestern disaster area bond--paragraph (2)(A)(i) shall be applied by only treating costs as qualified project costs if -- in the case of a project involving a private business use (as defined in section 141(b)(6)), either the person using the property suffered a loss in a trade or business attributable to the severe storms, tornados, or flooding giving rise to any Presidential declaration described in subsection (b)(1)(A) or is a person designated for purposes of this section by the Governor of the State in which the project is located as a person carrying on a trade or business replacing a trade or business with respect to which another person suffered such a loss, and in the case of a project relating to public utility property, the project involves repair or reconstruction of public utility property damaged by such severe storms, tornados, or flooding…]"

and “such bond is designated for purposes of this section (on the basis of providing assistance to areas in the order in which such assistance is most needed).”

"These bonds require a determination related to the disasters," Spina writes. I'm really curious how Indianapolis is tying the eligibility of this project to a disaster. Is it possible some disaster struck this part of downtown of which I'm not aware? Anyone have a clue? Was it Lincoln Plowman's ill-fated attempt to get a zoning variance for a high-end strip club in the area in exchange for a $5,000 cash payment he allegedly accepted from an undercover FBI agent that resulted in his indictment on extortion and solicitation charges? That was one hell of a storm. If this bond program can be tapped for this purpose, then Congress needs to immediately move to repeal this absurd program. And people wonder how the public finance sector bankrupted this country and placed us at the mercy of the Communist Chinese.

Ballard Administration Breaking Many Laws To Force Through Tadd Miller Project

By hook or crook, the administration of Mayor Greg Ballard is determined to make a sweetheart deal it entered into with political insider Tadd Miller to convert the former Bank One Operations Center adjacent to the former site of Market Square Arena into a mixed use development reach fruition. The nature of this agreement since it was rammed through the Metropolitan Development Commission 18 months ago with little public comment has been changed so dramatically, raising so many red flags, and which is being carried out in a manner devoid of any public accountability that nothing short of an independent investigation is needed to ensure taxpayers' interests are protected. "They invented the smell test exactly for things like this, and it doesn’t pass,” Pat Andrews, a Democratic candidate for at-large City-County Council told the IBJ's Cory Schouten in the business newspaper's current edition. And that's an understatement.

As originally proposed, the MDC approved in June, 2009 a deal whereby the City agreed to purchase the 1600-space parking garage operated and owned by a subsidiary of Smoot Construction, a politically-connected firm that made millions off sweetheart contracts awarded during the administration of former Mayor Steve Goldsmith, for a purchase price of $18.5 million, nearly double its assessed value. The City in turn agreed to turn over control of the abandoned Ops Center property for development to a yet-to-be determined group of investors headed up by Tadd Miller, who had no prior experience leading a real estate development project of this size. Miller had been a business partner of Kosene & Kosene, another firm with close ties to former Mayor Goldsmith, that was struggling financially on a number of its real estate development projects. In consideration for title to the Ops Center property, a subsidized lease agreement for 600 spaces in the garage and a 10-year tax abatement, Miller's investment group would agree to immediately invest $30 million in a mixed use apartment and retail development on the site from an anticipated loan from Regions Bank.

Ballard administration officials insisted Miller's investment group would have to close on a development agreement within three months and commence construction on the project within 9 months at the time the deal was approved. But as we've since learned, nothing transpired as the Metropolitan Development Commission and the public were told at the time of the project's approval, and to this day no project agreement has been entered into between the city and the developer. Anticipating the deal's approval, Smoot had long since stopped making mortgage payments and property taxes it owed on the garage and Ops Center. Fearing a foreclosure on the garage by Smoot's mortgage holder, PNC Bank, the City went ahead and took possession of both the Ops Center and the garage and, unbelievably, paid $369,500 in delinquent property taxes owed by Smoot, an unprecedented move. The property is now off the tax rolls and generating no tax revenues to the public; however, Smoot continues to operate the garage and retain all of its revenues. And even though Miller's promised financing with Regions Bank fell through, the City allowed title to the Ops Center property to be transferred to Miller's Milhaus Development, which is planning to develop the project known as The Residence with the Gene B. Glick Co.

It gets better. With Regions Bank refusing to loan Miller's group money for the investment, the City's Bond Bank is now stepping in to provide the financing the investors require for the project. "When Regions backed out of the deal, the Indianapolis Bond Bank stepped in," the IBJ's Schouten reported. "The Bond Bank is trying to sell 'participation rights' in a garage loan that offers only the revenue from the garage as collateral, but turmoil in the municipal bond markets has made it a tough sell, [Darin] Kintner said." "The loan would still be to Milhaus and be secured by the city’s payments." Remarkably, if the deal fails to go through, ownership of the property will revert back to Smoot, but Smoot will not be required to reimburse the City for the back taxes it paid on behalf of the politically-connected firm on the garage property. Smoot also owes $259,600 in back taxes on the Ops Center property, but the City says the developer will be required to pay those back taxes; however, if the deal isn't closed by May, the property is scheduled to be sold at a tax sale, in which case Smoot will be on the hook for the tax liability.

Deputy Mayor Mike Huber defended the deal to the IBJ's Schouten, in part, by noting the reduced price the City wound up paying for the garage over the original sales price--$13.6 million. The developer obtained the Ops Center property for only $1.4 million according to the sales disclosure forms, but Schouten says the developer is actually getting the property at no cost. There was a reason for the lower value for the garage though. The city discovered another wrinkle during its due diligence period: The owner of Chase Tower, Australia’s Macquarie Office Trust, had the right to use up to 800 spaces in the 1,600-space garage," Schouten reported, a fact not previously disclosed to the City. Smoot renegotiated with Macquarie, reducing the number of spaces potentially set aside for Chase Tower to 200," he noted. "Meanwhile, the city argued the tied-up spaces reduced the value of the garage and negotiated the lower purchase price," Kitner told Schouten. He added, “It’s been a moving deal for three years." Indeed, Schouten notes the city has not even agreed on the final purchase price of the garage despite the fact it has paid off the back taxes on it.

Pat Andrews wonders how the deal can even be legal since the original resolution approved by the MDC conditioned the deal upon the execution and negotiation of a project agreement with the developer. Nonetheless, the City went ahead with the purchase of the garage and paid off Smoot's back taxes. Schouten noted no project agreement had yet been consummated as of last week. City officials say not to worry because they have no intention of making any payments on the garage property until the project is finalized. Schouten points out that city officials had originally planned to close the gravel parking lots on the site of the old MSA, thereby increasing demand for extra parking in the garage. The city has since decided to pave over the parking lot and continue using it. Lest we forget the city over-valued the garage using an appraisal based on its expected value based on its future use, an appraisal method not permitted under state law.

Bruce Donaldson, an attorney with Barnes & Thornburg who is representing the City in the deal, scoffs at any concern for the subsequent changes and its impact on the validity of the original deal approved by the MDC. Schouten notes the original resolution imposed a July, 2009 deadline to complete the agreement and was premised on Miller obtaining a loan from Regions. “As long as we stay within the financial parameters, it doesn’t matter who the lender is,” Donaldson said. In other words, it makes no difference that the deal being carried out by the Ballard administration worked out nothing like what was presented to the MDC when it was originally approved. Purdue University's Larry DeBoer told Schouten he had never seen another deal quite like this one. “It just sounds like a clever way to subsidize development,” he said. “Maybe they didn’t think the usual tools were available. It looks like someone has been working overtime to get it done.”

Meanwhile, Tadd Miller, who stands to make lots of money off the deal heavily subsidized by taxpayers, tells Schouten he has no concerns. “My price is settled,” Miller said. “I’m trying to stay out of the middle.” Yeah, that's precisely the problem. The same can't be said of the taxpayers who are footing the bill so he and his partners can be enriched. Given Barnes & Thornburg is giving a green light to the project as the City's attorney, you can bet there will be no council oversight or investigation into these matters as long as their boy Ryan Vaughn, a friend of Miller's, is presiding over the City-County Council.

On a final note, former Mayor Steve Goldsmith has been rumored to have played a key role in making this deal happen before he joined the administration of New York Mayor Michael Bloomberg as a deputy mayor. The Indianapolis Times Blog recently observed an upcoming fundraising event he is participating in  on behalf of Ballard at the J.W. Marriott that is being organized by another Goldsmith crony, Mike Wells, that is directed at city contractors:

From: Mike Wells [mailto:MWells@REIRealEstate.com]

Sent: Friday, February 04, 2011 11:09 AM
To: Mike Wells
Subject: Fundraising Event for Mayor Ballard, Thursday, March 10th, JW Marriott

Steve Goldsmith, Cathy Langham and I are hosting a fundraising event for Mayor Ballard. We believe the Mayor has worked tirelessly to move the City forward and we want to show our support by helping raise at least $250,000 at a special event to be held at the JW Marriott. We asking you to participate in this event by raising or contributing $5,000 for the event.

Steve Goldsmith will be the special guest for the event and he will be hosting a roundtable prior to the event for a limited number of supporters. We would envision that architects, engineers and financial advisors may have an interest in hearing Steve speak on public policy issues and his new role in New York. This roundtable will be from 4:30 to 5:15. A VIP reception will be held from 5:00 to 6:00 for all contributors raising or contributing $2,500 or more and the main reception will be held from 5:30 - 7:30 with a short program around 6:15.

Our plan is to get the invitations out by February 14th, so time is of the essence. If you are willing to serve as host of this event, please let me know by February 10th, so you can be listed on the invititation. If I do not hear from you, I will follow up with a call next week; thanks for your consideration. Mike

Michael W. Wells
President
REI Investments, Inc.
11711 North Pennsylvania Street
Suite 200 ]
Carmel, IN 46032

Blogger Terry Burns asked, "I wonder if [Mayor Bloomberg] likes his new Deputy Mayor being part of Greg Ballard's pay-to-play program? " Indeed. Ballard's administration has essentially been directed behind the scenes by former Goldsmith cronies for their personal benefit, including former Deputy Mayor Joe Loftus of Barnes & Thornburg, who many complain has too great of a role in telling officials of the administration what to do. Hardly any one has been appointed to any position of significance within Ballard's administration without Loftus' or Bob Grand's approval. Both Ballard and Goldsmith have admitted Goldsmith's role in advising the administration, although he has no official role. Goldsmith also never registered to lobby with the city even though he has been rumored to have assisted parties with business before the city.

Lobbyists Thumb Nose At Indianapolis' Toothless Lobbying Law

After a little more than a year in effect, lobbyists before Indianapolis' City-County Government have decided there is no reason to bother complying with the registration and reporting requirements of the law because the Ballard administration has hinted it will do nothing to enforce the law. While 76 individuals registered to lobby last year according to the city's website, only 23 people (not counting the person registered by the first name "A" and last name "B") bothered to register this year, and that includes 7 attorneys with the law firm of Barnes & Thornburg, representing 30% of the total number of registered lobbyists. Perhaps it's no coincidence that the law firm's proxy that serves as the President of our City-County Council, Ryan Vaughn, is a high paid lobbyist for the firm who authored the lobbying ordinance. Lobbyists for Buckingham Properties, which won approval of a $98 million taxpayer loan and $40 million in public subsidies for its downtown real estate project North of South, did not bother to register to lobby this year despite their intense lobbying activities to win support for the project in recent months. They're probably paying for drinks on the house at Nicky Blaines tonight as they celebrate how easy it is to convince 16 councilors to stuff your taxpayer dollars in their pockets based on a pack of lies while the community endures the worst economic crisis since the Great Depression and budgets for basic city services are being slashed.

Making the lobbying law further useless, the Ballard administration is not posting the reports filed by lobbyists last year. "The report requires disclosure of total payments received for each engagement, as well as a description of, and the costs associated with any item of entertainment, food, drink, honoraria, travel expenses, or registration fees given or provided to a city or county official, appointee, or employee," according to the instructions to lobbyists on the city's website. "Between January 1st and 15th of each year, a registered lobbyist, who is primarily employed and receives payment, or who contracts for financial consideration, exceeding $1,000 in any calendar year, shall file an annual report with the Department of Code Enforcement regarding lobbying activity for the prior year," the website instructs lobbyists on their annual reporting requirements.

Yep, the word is out. Ignore the law. There will be no consequences. Even worse, the Indianapolis news media could care less whether the lobbyists comply with the law. The City of Chicago has more transparency than the City of Indianapolis. That's how bad it is. I'm telling you that if you want to conduct business in a city where the politicians are easily bought and bought cheap, and you have no fear of being prosecuted for your crimes, Indianapolis is the place in America to come. Don't mess with Chicago where there is a federal prosecutor looking over your shoulder, and there are two big newspapers competing with one another to dig for corruption constantly. Come to Indianapolis and be as corrupt as your heart desires. You will soon be designated a good civic leader, get plum appointments to boards and commissions, receive community awards and even accolades from a news media that is on the side of the people defrauding the taxpayers. Hell, the politicians in Indianapolis even like the drug dealers. Name another city in America where it gets that good for the morally corrupt at heart.

Why Is Indianapolis Investing In A Risky Business?

Sheila Kennedy has a spot on column in today's Star questioning the Ballard administration's decision to finance a risky downtown hotel, mixed use business project known as North of South. Kennedy, who once served as corporation counsel in the administration of former Mayor William Hudnut, notes once upon a time there was a real need to provide incentives to get businesses to locate downtown because businesses were fleeing the inner cities. Today, that's no longer true as downtown Indianapolis is flourishing relative to many other parts of the city. The Ballard administration says a public investment was needed because private lenders wouldn't loan money for the project--probably because the City just added 1,000 new hotel rooms with the J.W. Marriott project that included a $65 million public investment and hotel bookings are down due to the downturn in the economy.

There are probably cases where public investment in the urban center is still necessary, but many of us who participated in that early redevelopment process are scratching our heads over the Ballard administration's proposal to put $98 million (up from an originally announced $86 million) into North of South, a hotel and apartment complex being developed by Buckingham Properties.


The administration justifies this use of taxpayer dollars (at a time when libraries and public transportation are starving for funds) by pointing out that private lenders all rejected the project as too risky. It doesn't seem to have occurred to them that those lenders may have had sound business reasons for coming to that conclusion.

Indianapolis recently has added more than 1,000 Downtown hotel rooms; furthermore, hotel bookings in Central Indiana declined by 5 percent during 2010. Why would lenders risk financing a hotel project now?

Kennedy then observes questions fellow blogger Paul Ogden recently raised that may explain why the Ballard admnistration was so anxious to put so much public money at risk at a time when it is slashing budgets for basic city services and decided the city had to turn over the city's parking meter assets to ACS because it couldn't afford to invest $6 million in new parking meters.

Blogger Paul Ogden recently posed a fair question: Why is it too risky to borrow $6 million to buy and install new parking meters, but not too risky to issue $98 million in bonds for a project private lenders wouldn't support?


Ogden also noted that the project's lobbyist is Tom John, who just stepped down as Marion County Republican chairman.

Council president Ryan Vaughn cast the deciding vote on the ACS parking contract despite being ACS' lobbyist. More recently, Robert Vane resigned as a deputy mayor and won a no-bid consulting contract with the Capital Improvement Board.

It all looks a bit too cozy.

When there is an appearance of impropriety, taxpayers can be forgiven for questioning questionable deals.

Yep, that about sums it up.

Tully Still Stuck On Stupid

Nobody will ever accuse Star political columnist Matt Tully of being a friend of the taxpayers. Whether it's raising income taxes 65%, levying double digit rate increases on utility users by pretending to sell a public utility to fund short-term public infrastructure improvements ratepayers will be paying off for 30 years or doubling parking meter rates and giving away hundreds of millions of dollars in potential tax revenues to a politically-connected company with a bad track record, Tully will conclude is just makes sense. Here's Tully's musings on the City's decision to turn over control of our parking meter assets to ACS for the next 50 years:

After listening to the final round of debate, I walked out of the meeting thinking the council had made the right decision.


Here are five reasons why:

1. First, look at what the deal tackles -- the city's massive backlog of unfunded infrastructure projects. As I wrote about the sale of the water and sewer utilities this year, the profit from which also will go to infrastructure, fixing roads, sidewalks, alleys and bridges is as crucial an issue as there is in this city. It's also a fundamental responsibility of local government.

Hold on, Matt, you used the excuse of increasing utility rates by double digits to fund those infrastructure projects already. Are you telling us that there is a backlog of infrastructure projects in Downtown or Broad Ripple? Because that's the only place the paltry sum raised from this deal will be used to fund.

2. Indiana has entered the era of property tax caps. I didn't vote for the caps, but most Hoosiers did. And whatever your view, the reality is clear. Local governments will have fewer property tax dollars to fund everything from pothole repairs to libraries. "We have to start getting as creative as possible with the assets we have," said Michael Huber, deputy mayor and Greg Ballard's point man on parking meters.


This deal will raise up to $620 million over the next 50 years. Without these types of moves, the city would be in for a long period of painful budget cuts. And here's a warning for the anti-spending crowd: There simply isn't much fat left in the city budget.

The opponents of the deal, Matt, proved the funds are sitting out there in TIF funds, which are property tax revenues, to be spent to upgrade our system with the latest and greatest in technology without giving up control to ACS. Furthermore, by keeping control, the City would reap at least $300 million above that $620 million you cite, which I believe is a fantasy figure made up by Huber and ACS to sell the deal, that will be returned to the City after ACS gets its hands on the parking meter assets.

3. Ballard's team listened to concerns about the deal. The plan now includes a series of termination provisions and indexes rate increases after 2012 to inflation. Penalties for the city removing meters were eased.

Huh? Are you that stupid, Matt? The termination fees ensure the City won't terminate the damn lease because it is so cost-prohibitive. The City would have to pay ACS more than it got from it simply to unwind the deal after the first 10 years. You call that listening to the public's concerns? Were they listening to the public's concerns when they waited until after approval of the Citizens Energy deal to tell us they were paying $29 million to Veolia to break up that privatization agreement, which is coming directly out of the taxpayers' pocket, a contract we were told before the fact couldn't be broken?

4. Council Democrats spent the meeting picking at the plan, and that's fine. They argued the city should upgrade the meters in-house, and that's fine. But most of the Democrats have been on the council for many years. And until Ballard came along, they ignored the antiquated meter system and the paltry revenue it produced.


At least Ballard had a plan and was willing to spend political capital to address the issue. It's easy to attack a person who offers an idea. Coming up with the idea is the challenge.

Sorry, Matt, but this isn't a Democrat versus Republican issue you make it out to be. I'm a life-long Republican. Paul Ogden is a life-long Republican. Aaron Renn is an urban planner with no political axe to grind. MCANA is a nonpartisan, neighborhood organization. We all reached the same conclusion. You blame Democrats for not forwarding a plan before now to modernize the meters? Sorry, Matt, but Mayor Ballard won the election in 2007 and the Republicans control the council. Instead of running the system into the ground so it would not generate sufficient revenues, why didn't they do anything to improve the system short of giving control of it to Ryan Vaughn's client? And if you're going to tell your readers they should all pony up double the amount they will need to pay to park to come downtown, at least have the decency to tell them you get to park for free. UPDATE: As a close observer reminded, the Peterson administration conducted a demonstration project in 2006 that showed the City could boost parking meter revenues by at least 15% simply be installing the smart meter technology. Why did Ballard's administration ignore their findings in concluding the asset had to be leased out?

 5. Nearly everyone agrees a meter update is needed. Rates haven't increased since the latter days of Elvis Presley. Extended hours for enforcement also will encourage turnover of parking spaces, which helps businesses.

Other cities have meters with wonderful new technology. Ours, however, are on the verge of becoming museum pieces. The private contractor will be charged with spending millions to upgrade the system and then managing it.

This change is necessary. And although valid questions were raised along the way, the mayor's plan makes sense.

Yes, other cities have implemented this technology without giving up control to a private company for the next two generations. And as a political reporter at the State House who has witnessed first hand the mess ACS and its partner IBM made of the state's welfare privatization you have not one issue with giving the company control of our parking meter assets? Did you read the D.C. audit? Do you study state lobbying records? Do you have a clue? Or is your head so far up Ryan Vaughn's ass you can't see anything wrong with him strong arming his fellow councilors to vote for a deal that will make hundreds of millions of dollars for his client, or have any concerns that the Mayor's personal paid adviser, Joe Loftus, is a lobbyist for ACS? Where do these journalists earn their degrees these days? For God's sake, bring back Dick Cady. This is insanity. And then they whine about people dropping their subscriptions to the Star. If this is as good as you can produce, then your newspaper deserves to go out of business. For good.

Council Of Barnes & Thornburg Gives ACS Control Of Parking Meter Assets

Defying common sense and good politics, a Republican-controlled council beholden to Barnes & Thornburg approved the controversial lease of Indianapolis' parking meter assets for 50 years to ACS. CCC President Ryan Vaughn (R-Barnes & Thornburg) strong armed Republicans into supporting the measure. Only Christine Scales voted against it. Democrat Paul Bateman, who has been under investigation for the misappropriation of more than a million dollars from the Russell Foundation, was the only Democrat to vote for the measure, allowing it to pass by a 15-14 vote. Libertarian Ed Coleman voted against the proposal citing overwhelming opposition to the measure by constituents who contacted him.

A public opinion poll taken recently in Marion County shows the public overwhelming opposes the deal by a margin of 70% to 20%. That includes black and white voters alike, as well as younger and older voters. Opposition runs high even among the most Republican townships of Perry, Decatur and Franklin Townships where 70% to 71% of the voters oppose the privatization of the City's parking meter assets. Democrats and independents overwhelmingly opposed the deal according to the poll and even Republicans disfavored the plan by a wide margin. Republicans ignored their own political interests in order to enrich Vaughn's big client. The company stands to make hundreds of millions of dollars from the contract, and the City will give up a similar amount of revenues over the life of the contract.

Those of us fighting for the taxpayers will demand a federal investigation into the awarding of this contract. There are appearances that the Marion County taxpayers have been deprived of the honest services of their elected politicians in order to personally enrich ACS and the law firm of Barnes & Thornburg. There will be consequences for this vote tonight. The opponents of this deal will not fade away.

UPDATE: WRTV's Norm Cox gets top honors for best coverage of tonight's vote by taking a close look at Vaughn's conflict of interest. Click here to read his story. Here is some of what Cox reported tonight, which included on point comments from fellow blogger Paul Ogden:

Critics had questioned the ethics of City-County Council President Ryan Vaughn, a Republican, who works at the law firm of Barnes & Thornburg, which ACS is paying to lobby for the deal, 6News' Norman Cox reported.


Vaughn defended his impartiality, saying because he isn't a partner in the firm and will make no money directly from the deal, there is no conflict of interest.

"I'm not going to benefit from it," he said. "No one close to my family's going to benefit from it and I'm not an owner of any business, and so there is no conflict of interest."

But blogger and lawyer Paul Ogden, a major critic of the parking deal, said there is no way Vaughn's position is not a conflict of interest.

"The question is, is his job on the line if he doesn't support ACS? And I would argue it is," he said. "The fact is, ACS gives millions of dollars to Barnes & Thornburg … and should he not support them, he could very well lose his position."

But Vaughn said the connection is being blown out of proportion.

"The council ethics rules clearly articulate between what constitutes an appearance of conflict and what constitutes an actual conflict," he said. "I've been very open for folks who have that concern about where I work and who they represent. I've never hidden that fact. "

Vaughn also faces accusations that he's using strong-arm tactics to push the deal through council.

Republican Councilor Christine Scales said Vaughn removed her from the important Public Safety Committee because she opposes the deal.

"The news that I was removed from the Public Safety Committee came about two hours after I notified council leadership that I was going to be voting no on the parking meter proposal," Scales said. "I felt it was retribution, and it came swiftly."

Vaughn denied that and said he removed Scales so he could replace her with a new councilor, Aaron Freeman, who has a background in public safety.

As for ACS itself, some are asking questions about its ability to run the meter system, given its partnership with IBM in the failed state welfare modernization plan.

ACS is back working with the state again and officials with the Family and Social Services Administration said they blame the welfare fiasco on IBM, not ACS.

Star Finally Faces Vaughn's Conflict Of Interest In Parking Meter Lease Deal

Perhaps shamed into do so by the blogs, the Indianapolis Star for the first time in an actual news story acknowledges there may be a conflict of interest in City-County Council President Ryan Vaughn pushing for the passage of a 50-year lease deal with ACS, his law firm's client, for the City's parking meter assets. A story appears in today's Star, the same day the full City-County Council takes up a vote on the controversial day. Jon Murray writes:

ACS is a powerful player in government contracting and already plays a role in Indiana's welfare-services modernization. And the mayor's office and ACS have shared a lobbyist at Indianapolis law firm Barnes & Thornburg. Council President Ryan Vaughn works at the firm as an associate but does not perform any work for ACS, he says.


Such connections make some critics uncomfortable, even if ACS, the law firm and the mayor's staff insist that the lobbyist, Joe Loftus, didn't participate in parking-meter negotiations.

Vaughn, who has faced pressure to recuse himself, plans to vote in favor because he views the deal as important for his Broad Ripple district.

He acknowledges an appearance of a conflict of interest.

"But it's one that I've gone to great lengths to explain," he said.

He doesn't view his firm's association with ACS as violating the council's ethics rules. Those require recusal if a council member or a business in which he or she has an interest would directly benefit by more than $1,000.

The story omits reference to the item the Star stuck in its "Behind Closed Doors" column yesterday recounting Vaughn's removal of Republican Councilor Christine Scales from the Public Safety Committee last week after she sent an e-mail to her fellow Republican councilors urging the tabling of the controversial parking meter deal. Scales told me and Murray she believed Vaughn's actions were taken, in part, due to her opposition to the parking meter lease deal.

Star Makes Light Of Vaughn's Strong-Arming To Win Approval Of ACS Parking Meter Lease Deal For His Law Firm's Client

My how things have changed. Once upon a time the news media could be counted on to ferret out corruption of our politicians. Nowadays, they're in bed with them. The best case and point has been the Indianapolis Star's treatment of City-County Councilor Ryan Vaughn's active involvement in ramming through the Republican-controlled council a 50-year lease of the City's parking meter assets for the benefit of his law firm's client, ACS. This blog first broke the news that state lobbying records revealed Vaughn himself had been registered to lobby on behalf of the politically-connected company. After being questioned by other folks in the news media about it, Vaughn explained it was a simple error made by a paralegal at his law firm and assured the public he had never lobbied for ACS. Vaughn was hired to work as a full-time lobbyist for Barnes & Thornburg after Republicans took control of the council by Joe Loftus, who, along with the firm's managing partner, Bob Grand, handpicked most of the senior staff who went to work for Greg Ballard after his upset election in 2007, including Deputy Mayor Mike Huber, who is spearheading the ACS parking meter lease deal for Ballard.  The Star's executive editor, Dennis Ryerson, has dismissed any talk of their being anything nefarious with the deal as simply "noise" by a few in the blogosphere and apparently can find no ethics experts who think there is something a tad bit jaded about Vaughn participating in a decision that so obviously benefits his law firm's client. His newspaper is even downplaying Vaughn's heavy-handed tactics to win council approval of the deal.

Earlier last week, city beat reporter Jon Murray wrote a story about the tough sell the Ballard administration was enountering on the 50-year lease agreement with ACS, even after a bunch of window-dressing changes made to the agreement to make it appear more palpable. Murray specifically mentions an e-mail Christine Scales, who narrowly won her council seat against her Democratic opponent in 2007, sent to her fellow councilors urging them to table the controversial ACS deal.

At least one Democrat, Paul Bateman, said he plans to support it, but all GOP members may not fall in line behind Mayor Greg Ballard's controversial plan . . .

"I feel pretty good about (its chances)," said council President Ryan Vaughn, noting that significant changes announced by Ballard last month have addressed many council members' concerns . . .

One Republican, Christine Scales, sent an e-mail Tuesday urging her caucus's leaders to table the proposal, citing several concerns and saying the city hasn't fully considered alternatives.

By the time the Rules & Public Policy Committee took up the vote on the controversial parking meter deal later that day, word had leaked out Scales had been removed from her favorite committee assignment, the Public Safety Committee. I called Scales and she confirmed she had been removed from the committee. She said Councilor Mike McQuillen, who somehow ekes out a living trading political campaign buttons and is a stooge on the council for Vaughn, had informed her of the decision. When she wasn't satisfied with his explanation for the decision, she spoke directly to Vaughn, who admitted there had been some "communication issues" in the past that led to his decision to remove her from the committee. Scales made it clear to me she believed her e-mail urging the council to table the parking meter lease deal led to Vaughn's decision, although she conceded Vaughn had also expressed concern she was not being a team player on the Public Safety budget earlier. Scales was the only Republican councilor who asked tough questions of Public Safety Director Frank Straub during his budget hearing, including why he had spent money on redecorating his offices. Despite her reservations about Straub's spending priorities, she still voted for the budget in the end.

During my conversation with Scales, she also mentioned Vaughn had said he intended to split up the public safety committee's subject matter into two separate committees and there may be further reassignments after the first of the year. In today's "Behind Closed Doors" column, Murray includes an item discussing Scales' removal from the Public Safety Committee that downplays any role her opposition to the ACS deal had with Vaughn's decision:

Indianapolis City-County Council leaders shuffled committee assignments for some members last week, but one change stood out.


Christine Scales, a member of the Republican majority who has bucked her party on some key votes, didn't take the loss of her seat on the Public Safety and Criminal Justice Committee quietly. She received a new assignment to the Parks and Recreation Committee.

"If I don't fall in line with them, I get punished," Scales told us. "They know I'm passionate about public safety."

However, a couple of days later -- and after we asked council President Ryan Vaughn about the change -- Scales got back to us and said she now is promised a return to the public safety committee when the next round of assignments is made in January. By then, the council may consider splitting the committee into two, creating more spots.

Vaughn denied that Scales' voting history was the reason for the committee reassignment.


But she's gone against the party on some big votes, including twice on proposals involving the Capital Improvement Board, which oversees the city's sports and convention facilities. Those measures -- an increase in the county hotel tax last year and this year's CIB's budget, which included the second of three $10 million payments to the Indiana Pacers -- still passed 15-14 without her support.

Vaughn instead attributed the committee change to poor communication by Scales about her intentions on some recent issues and to other considerations, including figuring out assignments for new council members.

Her replacement on the public safety committee is Republican Aaron Freeman, who has experience as a former prosecutor and reserve officer.

Scales acknowledged she hadn't always communicated effectively about some issues, including concerns she had about next year's public safety budget, though she ended up supporting that budget in the committee's vote.

Scales says she still plans to vote against a proposed 50-year lease of the city's parking meters, which is on the council's agenda for Monday, unless changes are made.

Murray's item in the "Behind Close Doors" column makes no mention of Vaughn's conflict of interest pertaining to ACS. During his earlier reporting on my discovery state records had shown Vaughn was a registered lobbyist for ACS, Murray's account of what Vaughn had dismissed as "error" was trivialized by placement in the "Behind Closed Doors" column in a similar fashion. Whenever Ryerson has his reporters stick a news item in this column instead of a regular news report, it's his way of saying it's really not news, but to avoid the appearance of some we are ignoring real news we'll stick it in this column to provide a basis for saying the newspaper covered it when it is later criticized for failing to report something of significant news value.

As the item notes, Vaughn replaced Scales on the committee with Aaron Freeman, which comes as no surprise. Freeman, who was appointed to the council, is one of Vaughn's buddies from the corrupt Marion Co. Prosecutor's Office of Carl Brizzi where Vaughn was Brizzi's favorite pretty boy. The very first meeting following Scales' removal from the committee was to hear the IMPD report on the handling of the fatal DUI case of Officer David Bisard. Freeman, not surprisingly, had plenty of nice things to say about Straub's and the department's handling of the report, which obviously whitewashed Straub's and Ciesielski's indifference to the serious matter at hand because they were more consumed at the time trying to restore their public image and had instructed two high-ranking members of IMPD, Darryl Pierce and Ron Hicks, to return to IMPD headquarters from the Bisard "crime scene" to discuss the more important matter of restoring the public image of the Chief and Straub. Pierce and Hicks were later demoted. Ciesielski and Hicks pat themselves on the back for trying to restore public confidence in the much-maligned police department.

Outrage: ACS Consultant Named New Head Of FSSA

If you thought the stench of political corruption in the Daniels and Ballard administrations couldn't get worse, it just did. Unbelievably, Gov. Mitch Daniels, who is on a trade mission to Japan and China, has announced Michael Gargano, a former paid consultant for ACS, is the new Secretary of the Family and Social Services Administration. Until now, he has been the chief of staff to Anne Murphy, who took over for Mitch Roob, another former ACS executive before he joined the Daniels administration. Gargano became chief of staff after Murphy took charge of the agency. It was Roob's decision to enter into a controversial privatization agreement with IBM and its partner, ACS, for FSSA's welfare services. After the privatization failed so badly, Gov. Daniels terminated the contract after Roob had left the agency to run IEDC and Murphy had taken over the agency. The state and IBM have traded lawsuits against each other, and some estimates calculate the state's losses on that deal as high as $500 million. The state oddly decided to retain ACS as the lead contractor for welfare services despite its role in the failed privatization effort.

Adding to the controversy was the Daniels' administration's insistence that Barnes & Thornburg represent the state in that lawsuit, notwithstanding the fact that the firm has served as ACS's paid lobbyist in the State of Indiana in matters before the Daniels' administration and the Indiana General Assembly, as well as the City of Indianapolis. An engagement agreement signed by the law firm with the state detailed the conflicts of interest anticipated by the firm's representation of the state because of its representation of ACS.

I first reported on Gargano's gigantic conflict of interest on October 15 after Murphy announced she was leaving her position. I noted Gargano's role as the owner of the Watertown Group, which at that time still had an active website on the Internet that boasted of its role as a consultant for a number of state agencies, including FSSA, as well as his role as a consultant for ACS. Shortly after I posted that bit of information, the link to the firm's website went dead. Gargano's appointment takes effect on November 15 according to the press release issued by the Governor's office. The Governor's press release conveniently omits the fact that Gargano once worked as a consultant to ACS.

Gargano is married to Ann Lathrop, the president of the CIB and a former ACS executive, who succeeded Barnes & Thornburg's Bob Grand in that role. Prior to that, she served as the CIB's treasurer. She was appointed to the CIB at the recommendation of Grand. Grand's service on that board raised serious conflict of interest concerns because he and his law firm had represented Simon family interests, including the Indiana Pacers. The CIB just recently under Lathrop's leadership agreed to give a $33.5 million additional subsidy to the Pacers, which use Conseco Fieldhouse rent-free under a lease arrangement that makes the team responsible for the operating and maintenance expenses of the facility, but allows the team to pocket all revenues it generates from both game and non-game events.

CCC President Ryan Vaughn triggered controversy when this blog disclosed he was a registered lobbyist for ACS but was participating in the Ballard administration's controversial 50-year privatization agreement for the city's parking meter assets with ACS. Vaughn insisted the state lobbying reports were filed in error by a paralegal of his firm and should not have indicated he was a registered lobbyist for ACS. Vaughn's boss at Barnes & Thornburg, Joe Loftus, who is a paid personal adviser to Mayor Greg Ballard at the same time he is registered to lobby for ACS, insists he has not participated in any discussions concerning the parking meter lease on behalf of his client. I just earlier reported on Vaughn removing Councilor Christine Scales from the Public Safety Committee after she told him and her fellow councilors she could not support the ACS parking meter lease deal Vaughn is pressing members of his caucus to support.

My question is how much more of this crap do we have to tolerate before a federal prosecutor or the Marion County Prosecutor, who are supposed to be representing the public's interest, steps in and starts an investigation into these tangled webs of conflicts that are raping the taxpayers of this state and city. Enough is enough already. Where is the outrage? Where is the news media? Absolutely unbelievable.