(Indented is from JG editorial, outdented is our response)
The State Board of Accounts audit detailing the city Redevelopment Commission’s handling of Harrison Square proved to be something of a Rorschach test for those most interested in the project. Supporters found evidence that everything was done properly, while opponents found “proof” that the commission violated state law.
The bottom line: The State Board of Accounts audit made no direct allegations of wrongdoing. Generally, when state audits find practices that conflict with state law, the audit pointedly describes the conflict and lays out action government officials should take to rectify the problem and prevent future violations.
Contrary to the findings in this editorial, we read the SBOA report, pages 4 & 5 as being “direct allegations of wrongdoing”, to wit:
1) “The Redevelopment Commission authorized Redevelopment Department employees or their agents to purchase six (6) commercial and 26 residential properties between October 18, 2006 and May 21, 2007 at amounts exceeding the average appraised or estimated appraised value DURING EXECUTIVE SESSIONS IN 2006. These executive sessions were non-public meetings of the commission for strategic purposes.” Go to page 5 and SBOA says,” Indiana Code 5-14-1.5-6.1(b) states in part,’ Executive sessions may be held ONLY in the following instances:…….(2) For discussion of strategy with respect to any of the following:…… (D) The purchase or lease of real property by the governing body up to the time a contract or option to purchase or lease is executed by the parties.”
Note that this means that it was illegal for the commission to authorize the purchase of the 32 properties in an executive session of the commission because they are not the governing body – that’s Fort Wayne City Council. They also could not legally authorize the purchase at over the average appraised value of any parcel in an EXECUTIVE SESSION.
2) “IC 36-7-14-19(b) atates in part: ‘ The redevelopment commission shall FIRST approve and adopt a list of real property and interests in real property to be acquired and the price to be offered to the owner of each parcel of interest. The price to be offered may not exceed the average of two (2) independent appraisals of fair market value procured by the commission except that appraisals are not required in transactions with other governmental agencies…. The prices indicated on the list may not be exceeded UNLESS SPECIFICALLY AUTHORIZED by the commission or ordered by a court incondemnation proceedings……… appraisals made under this section are for information of the commission and are not open for public inspection”
Note that this entire section was NOT followed by the Redevelopment Commission - No list was prepared with prices to be offered UNTIL AFTER the purchases were completed. Also, since the appraisals were done after-the-fact, the commissioners had no knowledge of the values until after the purchases.
3) “The Redevelopment Commission authorized the purchase of the properties and the purchase prices WHEN they approved the claims for payment lists at their normal monthly meetings. These actions were subsequently ratified by the Redevelopment Commission when they passed Resolution 2007-37 at their June 18, 2007 public meeting.
Note that these “claims for payment” were all voted upon AFTER the payment for the parcels had been made. So all were done illegally.
Harrison Square critics have also taken issue with the city’s using Tax Increment Financing revenues to buy properties outside the TIF district. But the law clearly specifies that TIF money can finance projects “in the allocation area or SERVING the allocation area.”
Again, from the SBOA comments section: “In establishing the purposes for which property tax proceeds allocated to a redevelopment district may be expended, Indiana Code 38-7-14-39(b)(2)(J) states in part: “.. pay expenses incurred by the redevelopment commission for local public improvements that are IN THE ALLOCATION AREA or SERVING THE ALLOCATION AREA.”
Note the present tense of “that are…. serving” – it is not in the future tense! In other words it was intended by the General Assembly to apply to existing service – not any future service. Redevelopment used the TIF fund illegally since not one of the four (4) properties on Jefferson Blvd. or the Bill’s Palace property could have been construed in any way to be “serving” Jefferson Blvd. at the time they were purchased.
The audit says city records show that the City Council did not specifically approve the purchase of real estate as required in city code. The city argued that state law governing redevelopment commissions does not require council approval for such purchases, so the city cannot require council approval. The audit did not challenge the purchases but recommended that “the City should clarify the (local) ordinance to reflect those exceptions.”
Reading Indiana Code 36-7-14-16(b) which states in part:” The redevelopment commission may not proceed with the acquisition of a redevelopment project area until the approving order of the plan commission is issued and approved by the municipal legislative body” In the case of the Amendment II to the Jefferson Illinois Road Economic Development Area, which expanded the area to include all of the Harrison Square properties, the plan commission order was passed on April 23, 2007 and it was approved by city council on April 25, 2007. This directly addresses the contention by Pat Roller that the redevelopment commission does not need city council approval for these purchases – THEY INDEED DO NEED SUCH APPROVAL. To back this up, please refer to a legal opinion of the Indiana Attorney General, his # 2003-8 dated August 27, 2003, which repeats the above declaration from IC 36-7-14-16(b) and also calls out that this provision is “one of the exceptions to the broad powers granted to redevelopment commissions by the General Assembly.” So how can our city attorney and the “hired” (meaning “paid for their work”) bond issuer sign off on this definitely illegal action?
Notably, when state audits find a problem in a government unit’s actions, they gererally say so. Reading other state audits backs up that view.
We would like to have some recent examples of this pointed out to us – we do not see anything to support this claim.
So, in summary, the illegal actions that are being called out by SBOA in regard to Harrison Square include:
A) Authorizing purchase of properties in executive sessions
B) Not following the requirement to “first approve and adopt a list of real property and the price to beoffered for each”
C) Not seeing appraisals of each property before the purchase
D) Illegal use of Jefferson Illinois Road EDA TIF fund to pay for five (5) properties which were not in or serving this EDA-Amendment I area.
E) Not seeking the required approval of City Council BEFORE proceeding with the acquisition of all of the parcels in Harrison Square.
We don’t see the “lack of specific criticism” called out in the last line of the editorial.
So what recourse do we have? Our first action has been to ask the Attorney General’s office to intervene in court to halt all activity on the Harrison Square project. We have not yet received a response. If we do not get action from the AG’s office, we will be asking a judge to rule on this in a civil court.
Stay tuned. John B. Kalb
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