Carmel ponders plan to leverage debt from special state distribution

Carmel Mayor Jim Brainard would like to use millions of dollars the suburb is set to collect from the state in a special tax distribution to possibly leverage more debt.

During the last session, the Indiana Legislature passed a bill to release more than $500 million in previously withheld Local Option Income Tax revenue to local governments. The law requires that 75 percent of those funds be spent on road and bridge infrastructure or kept in a rainy day fund.

Carmel will receive $15.4 million from the one-time distribution.

Brainard proposed during budget hearings earlier this month that the city transfer the $15.4 million from the rainy day fund to the local road and street fund.

Instead of using the funding immediately or for one larger project, financial advisor Curt Coonrod recommended the city use it over several years for road paving, which Carmel typically budgets about $4 million for annually. Doing so would free up $4 million each year in the motor vehicle highway fund for other work.

Coonrod said because the motor vehicle highway fund shares a tax rate with the general fund, the money could be moved to the general fund and then used for other purposes, such as leveraging more debt.

“By doing it this way, this frees up the cash flow,” Brainard said.

The proposed budget would allocate $4 million in 2017, $4.1 million in 2018, $4.3 million in 2019 and $3 million in 2020 for road paving.

The initial discussion of the plan received a mixed review from the Carmel City Council, which passed an ordinance in July creating a special fund for the $15.4 million and establishing council oversight for any project paid for with that money.

“When projects came up, we would move the money. That gave us control. We like that,” council member Kevin Rider said. “You’re using extra money for a yearly expense. In my opinion, that's bad planning.”

Brainard said the council is required to appropriate the money into funds, so the body does have oversight and control.

“Appropriating and deciding what projects get done is different,” council member Carol Schleif said.

Not all the council members are concerned about sticking to the original plan.

“I see this as strategic,” council member Jeff Worrell said. “I understand that things change, and that's not what we agreed to.”

Brainard said if the state had not withheld money for years, it would have gone to the general fund from the beginning, which is why he would like to find a way to get money back into that fund.

“This is a way around those restrictions,” Brainard said.

Brainard and Coonrod said the plan would give the city more flexibility with its money in the long run, but Rider disputed that claim.

“We’ll lose the flexibility because in the long-term plan we’re looking to borrow against that, so therefore that takes that money out of the equation anyway,” Rider said. “We will have already used that money if we leverage it.”

After about an hour of discussion, Brainard said he doesn’t mind if the council creates a special line item in a fund to specify what it would be spent on.

“I think we’re on the same page,” Brainard said.

“Close,” Rider said.