Controversial downtown project to get tax abatement

The Indianapolis Metropolitan Development Commission approved a 10-year tax abatement Wednesday afternoon for a controversial
public-private plan to redevelop a vacant downtown office building.

The 7-2 vote came after much consternation
over whether the city would pay too much for a parking garage involved in the $65 million project and get too little in return.

The plan calls for a private developer to acquire the former Bank One operations center, surface parking lots
and an adjacent parking garage from a private owner for $18.5 million, then sell the 1,680-space garage to the city for the
same price.

The developer, Tadd M. Miller, would spend as much as $65 million to convert the former office building
into apartments and develop retail and residential properties on the adjacent surface lots. The building occupies the block
bounded by Washington, East, Market and New Jersey streets. He also would buy back 600 spaces in the
garage over 20 years by repaying $6.6 million in tax abatements for the former operations center and
pitching in additional payments to the city totaling $2 million.

“I still think
it’s totally wrong to pay the price for the parking garage that we’re paying,” commission
President Randy Snyder said before voting against the abatement. “I would contend that it’s
not worth that much.”

City officials say the deal provides a boost to a rundown area
and gives the city control of enough parking to support the future redevelopment of the former Market Square Arena
site—all without any upfront cash, no issuance of bonds, and an automatic tenant for the garage. The developer would
take out a loan to buy the property, and the city would make the payments over 20 years using revenue from the garage.

“This is a long-vacant property,” said Terry Sweeney, the director of real estate for not-for-profit Indianapolis
Downtown Inc. “If it didn’t require a subsidy, this property would have already been developed.”

Nick Weber, deputy mayor for economic and workforce development, said the city relied on two appraisals for the purchase
price.

But some question whether the city, which would take control of the entire property if the deal doesn’t
materialize within 18 months, is taking on too much risk and overpaying. Sales disclosures show the properties most recently
sold in July 2004 for a total of $13.5 million—$3 million for the former operations center and $10.5 million for the
parking garage.

Pat Andrews, vice president of the Marion County Alliance of Neighborhood Associations, opposed
the project from the start. She said her organization supports redevelopment of the property but without city involvement.

“This deal is patently bad,” she said. “This isn’t a good deal.”

In addition,
the cash-strapped Capital Improvement Board would be forced to give up one of its most profitable assets in order for the
redevelopment to move forward.

Appraisals to support the purchase price of the parking garage count on a shift
in parking demand after the city shuts down a CIB-operated nearby gravel parking area  where Market Square Arena once
stood.

The closure of the roughly 1,000-space MSA lots would leave the CIB with another revenue
hole to fill. The five-acre parking area, which is owned by the city but operated by the CIB, raked in
about $730,000 in 2007 and $789,000 in 2008.

Still, neighbors of the blighted property support
a redevelopment.

“There is a safety concern,” said Jayson Boyers, program
director at The Chef’s Academy. “The building has been, and is, an eyesore.”

The private owner selling the garage and office building is an affiliate of Columbus, Ohio-based Smoot
Construction, which had partnered on a failed 2004 plan for two high-rise condo towers on the MSA site. Smoot
bought the properties from Bank One in July 2004, and would realize a roughly 6-percent annual return from its purchase price
if the deal closed with Miller and the city.

A commission member pointed out that there’s no guarantee the
redevelopment of the Bank One operations center will meet the same fate as the failed MSA project.

But Weber argued
that the developer for the MSA site had no public subsidy.

“That’s why it failed,” he said.