Mike Shaver: Still no documentation of Pedcor ‘guarantees’ for Carmel City Center

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Dear Editor:

April 18 marks the dubious celebration of one month since I respectfully addressed the Carmel City Council regarding the continuing, escalating failure of the City Center project. I have yet to receive any of the requested documents. But we seem to have learned at least four things in the interim.

First, there has been no dispute that developer Pedcor has received $40+ million (not including interest) in taxpayer funding for two parking garages. Second, there is no dispute that taxpayers will forced to repay the debt, if Pedcor fails to perform. Third, there is no dispute that Pedcor has failed to build the buildings that Pedcor ‘guaranteed’ they would build. Fourth, there is no dispute that the financial integrity of the Bond now relies entirely on whether the developer continues to make cash payments, and EVEN THEN the CRC’s own decision might have forced the bond into a deficit.

The stories conflict. Pedcor’s documents show that Pedcor ‘guaranteed’ 10 buildings with an investment of $80 to $100 million. However, the Official Statement for the Bond states that Pedcor was only committed to seven buildings and $70 million. The drawing which the CRC/Pedcor circulated to the public actually shows only five buildings. At this time, the only certainty is that ‘guaranteed’ buildings have not been built, and because of that failure, there is insufficient TIF to repay the bonds. No one disputes this.

Both Pedcor and the CRC stated that those ‘guaranteed’ buildings were supposed to begin construction in 2015. Taxpayers have respectfully requested the minutes of any meeting in which enforcement of the ‘developer guarantees’ was discussed, but no such documents have been provided.

The Council and CRC have verbally stated that taxpayers have nothing to worry about, because Pedcor will pay cash to replace the TIF that does not exist (because the buildings do not exist). Taxpayers have yet to see the documents which verify the ‘developer guarantees.’ The Council’s testimony indicates that the fiscal integrity of the bond now relies entirely those ‘developer guarantees.’ But no one has produced the documents that would confirm those words.

Unfortunately, on April 15, both the Council and the CRC blamed the lack of documents on the Clerk-Treasurer, even while the CRC Director also admitted that he was trying to find the documents, but could not. Without being disrespectful to the CRC Director, it is difficult to comprehend how the Clerk-Treasurer might produce CRC documents that the CRC itself cannot find.

In the course of this quest, one new fact has arisen. In the Bond Official Statement, under “Security and Sources of Payment” (page 8), it states that property tax increment from development of the hotel site (which has been given multiple names, depending upon which map is used) was to be dedicated to repayment of those bonds. However, in 2018, the CRC ‘un-committed’ the hotel site as a “Source of Payment” for those bonds. It is unclear how a Bond document can be ignored.

Respectfully, the CRC’s ‘un-commitment’ of the hotel site TIF would appear to pose a significant financial problem for the bond. By some estimates, the total repayment deficit from the hotel site exceeds $4 million. Neither the CRC nor the Council dispute that the hotel site was removed as a “Source of Payment” for the bond, as shown in the Official Statement. Yet no one appears to have addressed the financial shortfall that would result from taking that TIF away.

The IBJ has accurately reported that the cost of the ‘developer guarantees’ are about to skyrocket. The total of TIF and ‘developer guarantees’ will soon exceed $1 million per year to cover the shortfall caused by Pedcor’s delays. Those are big checks to write, and taxpayers deserve to know that those checks are ABSOLUTELY certain to be written on time and in the proper amounts.

The Council’s own words now state that the integrity of that bond now depends upon Pedcor’s willingness (and ability) to pay ‘developer guarantees,’ which makes the ‘developer guarantee’ documents even more important. And somewhere along the line, the CRC appears to have chosen to exacerbate the original financial problem by un-committing certain TIF revenues that were pledged to repay those bonds.

I am including this link to the video of the April 15 Council meeting in order to let the readers, themselves, see the CRC’s and Council’s responses. For convenience, Mr. Mestestsky’s testimony begins at 28:00 and extends through 56:47, with Council interaction. Watch, and decide for yourself.

Respectfully,

Mike Shaver

Carmel