Carmel leaders seek answers on Christkindlmarkt financing

As Carmel’s wildly popular German-themed Christmas festival begins on Saturday, city leaders are taking steps to recoup costs the community incurs each year that often exceed $1 million.

From 2017, when Carmel Christkindlmarkt was launched, through last year, city departments spent an estimated $7.56 million to support logistics of the market, which last year attracted nearly half a million visitors. Mayor Sue Finkam said the city’s cumulative total funding is now up to $8.3 million, including expenses made before this year’s event.

Carmel Christkindlmarkt has never been required to share any sales proceeds with the city or defray the city’s costs in any way.

Over the first six years of the Christkindlmarkt, which was not held in 2020 due to the pandemic, the Carmel Street Department bore the largest expense. The department spent $4.65 million on labor and other expenses to build and remove the market, which includes more than 60 wooden vendor huts at the Carter Green plaza in front of the Palladium performing arts hall, according to figures presented last month by the Carmel City Council.

This year, the Street Department has budgeted $1.1 million for the Christkindlmarkt.

Now, Finkam and members of the Carmel City Council want to understand the festival’s finances, how the annual holiday market can become more self-sustaining, and whether the nonprofit that operates the market can reimburse the city for the services it provides.

They will look to reach that goal via a six-member committee unanimously approved Monday by council members that will examine Carmel Christkindlmarkt Inc. and three other nonprofits with ties to the city.

“The council is very supportive of the Christkindlmarkt, and we want it to be successful,” City Councilor Rich Taylor told IBJ. “It’s a great community asset. We just have to vet and determine the future for how much they can reimburse us from their net operating income and remain sustainable and successful.”

Aside from the Street Department, other departments that have incurred Christkindlmarkt-related costs since 2017 are the city’s marketing department ($1.4 million), the Carmel Redevelopment Commission ($835,000), Carmel Utilities ($268,000), Information and Communications Services ($152,000), the Carmel Police Department ($123,000), Building Operations ($90,000), the Carmel Fire Department ($37,000), the Department of Community Services ($3,000) and Carmel Clay Parks & Recreation ($2,800).

The beginnings

In its few years of existence, Carmel Christkindlmarkt has become a tradition, drawing hundreds of thousands of visitors to Carter Green, which includes public ice skating. Last year, more than 475,000 people attended. This year’s market is scheduled to run through Dec. 24.

Christkindlmarkt is German for “Christ child market.” Christkindlmarkts began in Saxony, Germany, during the Middle Ages. They began popping up in the United States in the 1990s but have proliferated in the past decade; tourism publications and websites often rank Carmel’s market as one of the best.

Carmel Christkindlmarkt was the brainchild of former Mayor Jim Brainard. It was established as a city-owned event that is operated by the three-member board of Carmel Christkindlmarkt Inc., a nonprofit that is considered a subsidiary of the city.

The city spent $5 million to establish the market and ice rink, and the Carmel City Council provided direct funding of $420,000 in 2017 and $125,000 in 2018. Expenses since then have been incorporated into the city’s annual budget.

The ice rink, which is operated by the city, is not controlled by Carmel Christkindlmarkt Inc.

The nonprofit reported nearly $1.2 million in net assets for the fiscal year 2023, according to its most recent 990 tax form submitted to the Internal Revenue Service. The organization also reported $1.6 million in revenue and $1.3 million in expenses. Both figures represented increases over the previous year, when the nonprofit reported $877,000 in revenue and $561,000 in expenses.

The organization’s annual report released in May said 2023 sales (combined total of sales from private vendors and from the market itself) increased to $8.8 million from $5.4 million in 2022, marking a 63% rise and a new record.

The report said the market had a direct economic impact in 2023 of more than $23 million. To gather data, Carmel Christkindlmarkt Inc. partnered with Hamilton County Tourism Inc. and the Indiana Business Research Center at Indiana University’s Kelley School of Business, which specializes in producing economic impact reports for events.

“I think that we all want to see it continue to be successful and to grow and to serve the community, as well as be a source of economic impact in the Hamilton County area,” Christkindlmarkt CEO Maria Adele Rosenfeld said. “And, so, I think there is a commitment for everyone involved to work towards preserving what has been built and continuing to be sure that it is a wonderful experience for generations to come.”

Tense times

Drama has clouded the Christkindl-markt since October, when Finkam announced changes to the organizational structure of the nonprofit that included removing two board members, Brenda Myers and Sven Schumacher. Board Chair Sue McDermott also resigned. Finkam appointed McDermott and Myers to the board in January, and Schumacher had served on the board since 2019.

The new board consists of Chair Maddie Augustus, a registered lobbyist with Indianapolis-based Faegre Drinker; Vice Chair Abhi Reddy, chief of staff and legislative counsel for the Indiana treasurer of state; and Secretary-Treasurer Zac Jackson, who serves as the city of Carmel’s chief financial officer.

On the same day as the board replacements, the new members approved a new operating agreement between Carmel Christkindlmarkt Inc. and the city. Finkam said the new governance framework will better support the event and defray more than $1.5 million the city is expected to incur this year. She did not provide specifics of the agreement.

“The steps we took to establish a new governance framework for the Christkindlmarkt are designed to both support the market’s ongoing success and to defray the significant annual investment made by the city,” Finkam told IBJ. “By using revenue from the event to support the market’s operation, the city of Carmel can reallocate resources previously directed to the market to support public safety and infrastructure needs.”

About 20 residents at a City Council meeting in October questioned whether Finkam had the authority to replace the nonprofit’s board. And they expressed concerns that the focus on costs would harm the market and strip it of its authenticity. However, Carmel Christkindlmarkt Inc. noted in its tax form that the board “is appointed at the sole discretion of the Mayor of Carmel and operates solely for the benefit and to carry out functions of the supported organizations.”

Finkam said last month that “the market was not taken over” as a result of the changes to the board and that the city’s goal is to have a more independent market. However, she said that can’t happen until its financial position and its ability to reimburse city funding are clear.

Also at issue was a trademark filing the city made for the Carmel Christkindlmarkt name and logo. Finkam said last month that “hard lines” were established for city ownership to continue; that intellectual property like logos, ads and operations would be owned by the city; and that competitive information could not be used to start a competing market outside Carmel.

“Yet to our surprise, market leadership came back with a list of cities where they would not compete—Anderson, Carmel and Indianapolis metro areas—thereby allowing market leadership to hold competing events in surrounding areas,” Finkam told council members on Oct. 7. “How in the world does the mayor of Carmel, who has seen $8 million of taxpayer dollars go to support this market, even think about that being an allowable language in a document?”

Rosenfeld, the market leader, declined to comment on the market’s relationship with the city.

Taylor said it is important for the City Council to understand the market’s finances and how Carmel Christkindlmarkt Inc. can help defray expenses the city pays for the event.

“You just have to get the data,” he said. “Here’s how successful the market can be. Here’s how much reserves they need to have. This amount of net operating income each year can go to offset city expenses.”

Finding answers

On Monday, City Council members approved a resolution to create a six-member committee to “evaluate the purpose, governance and tax structure and related fiscal and risk aspects of all nonprofit corporations and community development corporations that are affiliates of the City of Carmel.”

The committee will look at four nonprofit affiliate organizations with ties to the city: Carmel Christkindlmarkt Inc., Promote Carmel Inc., the Carmel Midtown Community Development Corp. and the Carmel City Center Community Development Corp.

Promote Carmel Inc. operated the All Things Carmel store at 110 W. Main St. in Sophia Square for about eight years before the city closed it in August to divert funding to other uses.

The store was owned by the Carmel City Center Community Development Corp., which also provides grants to area arts organizations. The Carmel Midtown Community Development Corp. is a nonprofit that works with the Carmel Redevelopment Commission.

The committee will consist of Finkam and two of her appointees and three members of the City Council.

Members will begin work in February and submit a final report detailing the purpose of the nonprofits, their governance structures and federal tax requirements, potential conflicts of interest, the total cash compensation of their executives, any risks their activities present to the city, city investments made to the organizations, and a current balance sheet of each organization’s assets and liabilities.

“This resolution allows us to present an initial and additional level of accountability and transparency to the important work already underway. I appreciate the opportunity to do that alongside the council,” Finkam told councilors Monday night. “I think it’s important we can have a public conversation about the mission, governance and financials of all of them.”

The resolution’s author, Councilor Jeff Worrell, said the committee is a response to concerns from the community.

“I want to be clear that this is not an effort to investigate or impugn any current or former city official or employee,” he said Monday. “While some may feel concerned about the committee’s findings, my sole agenda is to work diligently within our government framework to support and establish precedents that will help Carmel be the very best city it can be.”•