Carmel Clay Parks needs new funding source soon

Carmel Clay Parks & Recreation needs to find a long-term funding solution as “a fiscal cliff” looms, leaders say.

Parks Director Michael Klitzing told IBJ the department over the next 10 years will need $6.5 million per year in capital funding to maintain its current assets, which consist of 22 parks and greenways covering more than 700 acres throughout Carmel.

He said the parks department will also require $11.5 million per year in capital funds to develop new parkland, such as the first phase of the 27-acre Bear Creek Park on Carmel’s northwest side, and answer the public’s call for new parks facilities, like an extension of the White River Greenway.

“So we’re talking about $18 million on average is what we’re going to need [annually] to both sustain the park system we have today and build the new assets,” he said. “What we’re trying to do is make sure that we are getting and identifying a funding program that helps sustain and build upon the park system that is well-regarded by the community.”

The parks department’s proposed $25.5 million total budget for 2025 would be funded by a combination of the department’s earned income ($13.3 million), the city of Carmel’s general fund ($6.6 million), local income tax reserves from Clay Township ($3.5 million) and park impact fee reserves ($1.7 million).

An interlocal agreement that has governed how the department is funded expires Jan. 15, when a 20-year bond is paid off. That will reduce the local income taxes collected by Clay Township.

Under the agreement established in 2002 and twice amended, in 2005 and 2010, Carmel provides funding to the parks department for operating costs, while Clay Township allocates funding for capital costs (in 2025, operating expenses are projected to run $19.6 million, while capital expenses are expected to be $5.9 million).

Twenty years ago, Clay Township got creative in finding funding for its share. Carmel Clay Parks Building Corp. in 2004 issued the $55 million Central Park Bond to pay for construction of Central Park—along the Monon Trail, just north of East 111th Street—which includes the Monon Community Center, a waterpark and a skate park. Clay Township was able to take advantage of the local income tax distribution formula, which at that time favored communities with debt by giving them more income taxes. That funding—a total of $53.4 million from 2007 to 2024—has paid for parks projects.

The Central Park Bond was the last one issued before the state changed the formula, removing debt as a factor in the income tax distribution formula.

This year, Carmel Clay Parks & Recreation received $4 million in local income taxes from Clay Township. With the bond payoff, that funding will decrease by about half next year and disappear by 2027.

Klitzing said the parks department has been able to set aside and save some of its funding from Clay Township, but that cushion will evaporate unless a funding plan is identified.

“Even if we got exactly the dollars that we’re getting today, and they grew a little bit each year, that’s not even enough for the $6.5 million that we know that we need just to sustain the park system,” Klitzing said. “So we have a bigger challenge, but it becomes exponentially larger when one of the current major funding sources is sunsetting.”

Mayor Sue Finkam said she and other leaders are “evaluating all options that are out there. … I think we just have to take a more holistic look at that and figure out what we can do.”

If the interlocal agreement is not amended, it will revert to a previous version in which the city of Carmel is solely responsible for parks funding, a cost that could come at the expense of other priorities for the city, Klitzing said.

Clay Township Trustee Paul Hensel said he and other officials are working on a solution.

“Our funds from the township aren’t as prevalent as they used to be with the stuff we have to take care of, and we’re trying to figure out what that best long-term funding is,” he said.

Evaluating options

But finding a new funding source will involve multiple steps.

First, the Carmel City Council is considering a third amendment to the interlocal agreement between Carmel and Clay Township to provide up to two years to explore options that will keep both Carmel and Clay Township as funding partners, Klitzing said.

The council’s proposed amendment would also require the approval of Finkam, Hensel and the Clay Township Board.

City Councilors Matthew Snyder and Rich Taylor co-sponsored the ordinance that amends the agreement. Taylor, a member of the parks board from 2010 to 2023, said he wants to see a long-term funding model that is sustainable and has the least impact on taxpayers.

“We just have to start really evaluating options and proposing solutions, and we have two years now to get that done,” he said.

Klitzing has proposed two stopgap measures and two long-term options for leaders to consider.

One stopgap would be for Clay Township to continue providing some local income tax attributable to the Central Park Bond after the bond is paid off.

The second proposes that Clay Township impose a special benefits tax for parks on property in the township, giving it the power to issue bonds to finance capital projects. To fully fund the parks department’s capital improvement plan over the next three years, Clay Township would need to impose a special benefits tax rate of $0.0656 or less per $100 of assessed value. That would be up to $328 annually for a home assessed—after credits and deductions—at $500,000.

The tax would also require changes to the interlocal agreement with the city of Carmel, but Klitzing said it is an option.

The two long-term proposals would each involve changing state law, a process that could take years.

One would be to give the park board authority to propose referendums to fund capital projects similar to what is available to school districts. Another would be to make Carmel Clay Parks & Recreation a separate taxing authority with its own borrowing capacity, similar to libraries.

“We have a current mayor, a current trustee and City Council and Township Board that are all very supportive of parks and recreation,” Klitzing said. “They understand the impact that we have on the community. So I’m confident that working with them and also potentially with the state Legislature that we will find the solution to ensure that we remain a world-class park system.”

Long time coming

Carmel’s park system has grown over the past 20 years to include $260 million to $300 million worth of assets. About 300,000 people each year use the Monon Community Center, and more than 100,000 people visit the waterpark. Klitzing attributed the park system’s growth to the Central Park Bond.

“It really put us on a completely different direction and trajectory as far as a park system,” he said. “And it made us from a pretty average suburban park system to help get us to become one of the premier park systems in the country,” one that has won national awards.

Klitzing added that Carmel Clay Parks & Recreation now has an asset-management plan for every major component in the park system; the department knows when each piece was constructed, when it needs maintenance and when it will need to be replaced.

“There’s a lot of investment made over the years in the park system, and first and foremost, and we hear this consistently from the public, is [that] they want us to take care of the assets that we have today,” Klitzing said. “We don’t want to be in a position where, five to 10 years down the road, we haven’t been able to make those capital repairs.”

Taylor said a long-term funding solution for the parks department has been on his mind for years, but the problem was put off until the last minute. He said the solutions “aren’t necessarily easy,” and “nobody was willing to use the political capital needed to get it done.”

“Unfortunately, previous councils and township boards have not addressed this, which I would call a fiscal cliff of funding for Carmel Clay parks,” he said. “And it’s myself, Councilor Snyder’s and the administration’s goal to find a permanent fix for long-term funding.”

Klitzing noted that he has advocated for a funding solution since he became director in 2019 and that the clock has been ticking ever since the Central Park Bond was issued.

“We knew that this challenge was going to come. It’s not a surprise. It’s just having enough bandwidth to be able to choose from the different parties to ensure that we are coming up with a solution,” he said. “If there’s one thing that keeps me up at night with regard to challenges that we have as a park system, this is the top five all collectively in one.”•