Council OKs Loan to SRC, Pending Review

(posted 6.10.09)

The Speedway Town Council passed a resolution to loan the redevelopment commission $100,000, pending legal review from the town attorney, with the option to reaffirm the vote at a special session on Thursday.

Redevelopment Commission Executive Director Scott Harris told the council at its June 8 meeting that the loan is an "unplanned" expense, necessary to carry out negotiations with Resource Real Estate to purchase International Village. The refundable deposit will be placed in escrow until July 20. The SRC will decide at that time whether or not to pursue the purchase agreement. The deposit becomes non-refundable if the commission continues purchase discussions. The commission will spend $40,000 of its remaining $58,000 balance to cover appraisals, title search and environmental surveys.

Harris gave an overview of the property's history and crime problems. The commission's public charette supported elimination of the apartments. He said it has a 36% occupancy rate.

He concluded the timing was not great since tax increment financing money has not been distributed due to the delay in property taxes. He contends the SRC needs to act now or it could miss an opportunity to redevelop this critical piece of property in Area 2. He also said it would not alter the timing to redevelop Main Street, but plans have been devised to shift the $62 million bonding capacity from Area 1 to Area 2.

During public comments, Jo Ellen Dotlich raised a legal issue on loaning money to a redevelopment commission. "I understand how important it is for the redevelopment commission to obtain this property for the future of Speedway Redevelopment Area 2, but I also believe the integrity of this council should be upheld and not put into jeopardy because of this redevelopment." Dotlich did not oppose the redevelopment of IV, but the legal steps the council is using to lend money. Dotlich cited Indiana Code 36-7-14-24, which states a loan cannot be over $50,000, nor can it be used for real property acquisition. Dotlich told council the Indiana State Board of Accounts' position was that the loan would violate the law.

Dotlich's concern caused Barnes and Thornburg Attorney Kim Blanchet to review the code during the meeting. She requested more time, but her preliminary finding suggested the council could proceed since the SRC does not levy taxes.

Clerk-Treasurer Sharon Zishka noted the examiners at the State Board of Accounts are accountants, not attorneys.

Councilor Gary Raikes said the town has lent over $50,000 to the SRC during its organizational days and was reimbursed. He did not think this loan would be a problem, based on past experience.

Jeff Shelley, Christie Manion, James Hornaday, and Lisa Edington gave comments supporting the SRC's action. Manion said she and her husband would be willing to pay higher taxes if it means eliminating IV. She contends it will improve the town.

International Village is the sixth biggest property tax payer in Speedway, paying $339,150 a year in property taxes. The property will become exempt from taxes if the SRC buys it. Speedway's apartment complexes pay almost $2.5 million in property taxes.

Harris said the commission is sending out Request for Proposals for a private developer to buy and redevelop International Village. The commission is also preparing to be in the income rental business until the complex can be sold.

The council did not discuss the loss of property taxes as the SRC continues to buy property. The commission's most recent purchase of 1045 Main Street will remove about $25,600 a year from the tax rolls. Harris told the council there is as much interest in 1045 Main Street as in other areas on Main Street.

The council passed another resolution to replenish the general fund by borrowing $100,000 from the Cumulative Capital Development fund. The CCD fund has about $558,000.

The late tax distributions are hurting all local units. The council had to borrow $700,000 from the Wastewater fund at the April 27 council meeting to continue town operations. The loan needs to be repaid by December 31. The council also relied on the CCD fund last year to support its financial obligations.