Marion can’t explain how $2.5 million loan was spent

MARION, Ind. (WISH) – Concrete around the former YMCA in Marion is crumbling.

Windows are boarded up. A new electrical system remains shut off. Wires for new lights hang from the ceiling.

Construction work that would have revamped the former YMCA into a hotel and retail shops stopped more than a year ago with little explanation.

City officials also cannot explain why there are very few financial documents detailing how the money from a $2.5 million bond issuance was spent.

Five years after the project began, there’s no clear indication when or if it will be finished.

And the city of Marion has released the developer, Michael Y. An, from repaying any of the debt. According to the city’s development director, “there really never was an expectation for (An) to pay,” Lisa Dominisse wrote in an email to I-Team 8.

Instead, two sources of taxpayer money – both Tax Increment Financing (TIF) and Community Redevelopment Enhancement Districts (CREED) – are being used to repay the debt.

This project represents a growing concern among elected leaders and citizens interviewed by I-Team 8. They’re worried that public money is too often used to help fund private projects through the use of TIF. TIF allows local governments to use a portion of property tax revenues gathered from designated areas to pay for projects. It’s been popular among local leaders for decades as a way to build infrastructure or pay for job creation projects.

TIF projects are often seen as politically safe because they rarely require a vote from elected leaders or consent from taxpayers. It’s usually touted as a job creation tool and helps bolster the stats of elected leaders.

There are more than 600 TIF districts spread out among 81 counties in Indiana, according to the most recent state numbers available from November 2013.

Through our investigation, I-Team 8 discovered that the state of Indiana doesn’t  track specific TIF projects; meaning if they fail, there’s no oversight and no one is held accountable. And usually, that leaves taxpayers on the hook.

The windows are still boarded up at the old YMCA building in Marion. Click here for more pictures.
The windows are still boarded up at the old YMCA building in Marion. Click here for more pictures.

LOAN, FEW RECEIPTS

In 2009, the city of Marion took out the $2.5 million TIF bond – essentially a tax-backed loan – for the purpose of revamping the YMCA. After the bonds were sold, city records obtained by I-Team 8 show the proceeds were given to California developer Michael Y. An.

An’s company, Global Investment Consulting, was supposed to turn the YMCA into a hotel and retail shops with the understanding it would create 80 to 90 jobs and bring in an annual payroll of $1.2 million to $2 million, according to the original contract and bond agreement signed by Marion Mayor Wayne Seybold.

But the receipts detailing how that $2.5 million loan was spent are sparse.

After I-Team 8 filed an open records request asking for all the financial records, the city provided the 200-page original bond agreement along with 16 pages of documents that supposedly account for the $2.5 million. But all of those records come back to An’s companies: Global Investment Consulting or World Enterprises Group.

Before An could get money for the project, he was supposed to submit “distribution requests” in writing to First Farmers Bank and Trust, the trustee the city hired to manage the bonds.

Five distribution requests were included in the reply to I-Team 8’s open records requests. One is for $481,000 for a “construction fee.” The others include expenses like $250,000 for an HVAC system, $95,000 for an elevator and $305,000 on plumbing. But none of the documents explains what vendor did that work, when it was done, or if it was completed.

Noticeably absent are bank statements, receipts, invoices or any details of how the money was taken out of the bank, how often and for what purpose.

I-Team 8 took those concerns to Mayor Seybold, who during a lengthy interview this spring defended the project, An and his administration’s use of TIF.

See The Documents

When asked about the $2.5 million loan and the public concern that it isn’t unclear how the money was spent, Seybold said: “That’s not true. The information that the trustee has given the city is that there was $2.5 million and $2.5 million dollars worth of bills paid out.”

Later, when pressed about whether the city was satisfied with the amount of documentation provided, Seybold said: “No we’re not. We’ve talked to the trustee to find out if there is more to this pile of paper than what they presented to us.”

Seybold also could not provide answers as to why he didn’t know more about the project or why more receipts were not available given that at one time his brother, Chad Seybold, was working for An’s company World Enterprise Group, according to his LinkedIn profile.

“You’d have to talk to him, and to Michael An, and you’d have to talk to the trustee,” Seybold said.

NO REPLY

An has been difficult to reach. Over the course of two and half months, I-Team 8 has made several attempts to reach him through phone calls, voice mails and texts. We even asked those who know him to have him get back with us. He has not.

When An did speak with I-Team 8 briefly in March, he hurried the reporter off the phone saying he was in the hospital and couldn’t talk. Additional attempts to reach him were unsuccessful. Stephen Wilson, the general counsel for First Farmers Bank in Converse refused to provide additional financial documents, stating in an email that they “couldn’t respond to our inquiry” because An didn’t agree to it.

REPAYMENT RESTRUCTURED

“I would say there’s been a lot of disappointment that it just simply stalled.”— Phillip Drake, Marion business owner

During I-Team 8’s interview with Mayor Seybold, he said the city doesn’t put taxpayer money at risk when backing TIF projects.

“The projects are backed simply by the TIF that’s coming into that TIF district or by the company doing it – if it’s a single purpose TIF,” Seybold said.

TIF money was supposed to be used to pay off the debt for the original $2.5 million bond. And the borrower, An, was supposed to repay any debt when TIF revenue wasn’t sufficient, according to the original bond agreement. But two years later in 2011, all of that changed. City records show the city paid $871,210 in debt service on the original $2.5 million bond.

In order to pay off the remaining $2.4 million, the city took out another $5.8 million loan backed by property taxes as part of a massive plan to refinance several bonds – including the YMCA project.

That’s according to records provided by the city’s development director, Lisa Dominisse.

Under the new structure, An is not obligating to pay back any of the $2.5 million loan. Instead, tax revenues from a Community Revitalization Enhancement District (CREeD) and TIF revenues are the only two sources being used for repayment.

The city has until 2021 to pay off that debt. The building has sat vacant for more than five years.

“I would say there’s been a lot of disappointment that it just simply stalled,” said Phillip Drake, who runs the barber shop across the street.

Steve Stewart, a retired Marion police officer, bought the tax warrants on the adjacent parking lot to the YMCA. Those parcels were owned by Michael An, but county records show he didn’t pay property taxes on those and allowed to be sold in a sheriff’s sale.

“It’s sat here empty for so long and nobody has really done anything,” Stewart said.

Construction has stalled at the old YMCA building in Marion. Click here for more photos
Construction has stalled at the old YMCA building in Marion. Click here for more photos.

MARION’S MAYOR IS FOND OF TIF

The city of Marion has approximately 16 TIF districts, according to the Grant County Auditor Roger Bainbridge. That number may vary because the way the state calculates TIF districts often involves counting taxing districts that overlap.

Still, it’s not the number of districts, but the amount of money tied to TIF that makes Marion, which is in Grant County, stand out. Marion has more than $52 million in principal debt, according to records provided by the state’s Department of Local Government Finance. Of that debt, $36 million is supposed to be repaid through TIF revenues.

That heavy reliance on TIF is what helps Grant County outpace more than 75 other Indiana counties that use TIF.

When asked if Marion has relied too much on TIF deals, Seybold said: “No not at all. Marion is a hard sell. A lot of places outside the doughnut (counties of Indianapolis) are hard sells. And if you are not offering incentives, you are just not in the game.”

Seybold said TIF has been a successful job creation tool, adding facilities like the General Motors stamping plant, CVS Pharmacy and the Dollar General distribution facility near the interstate.

But Bainbridge argues that Marion’s heavy use of TIF is forcing the county to hit state-mandated property tax caps – causing the county to lose out on more than $2 million this year in tax revenue that can’t be collected because of the caps.

“The more TIFs you have, the greater the likelihood that you are going to have financial disasters on TIFs that fail,” said Bainbridge, the county auditor.

NEW STATE LAW

A state law will create more oversight with regard to TIFs. Senate Bill 118 was signed into law this spring with little news coverage.

The law, co-authored by Sen. Pete Miller and others, will require elected leaders to approve new TIF districts instead of political appointees on redevelopment commissions. The law also retires older TIF districts and sets new parameters for creating new ones.

For example, it will also require redevelopment commissions to inform the state by July 1 of both completed and proposed TIF projects. By this fall, the state’s Department of Local Government Finance is expected to complete a report making it easier to track TIF projects. Currently, the state has no way to track specific TIF projects, relying solely on local governments to be the stewards of these tax-funded projects.

PROJECT’S FUTURE

“It’s sat here empty for so long and nobody has really done anything.”— Steve Stewart, Retired Marion police officer

An is currently being sued by Erma’s Home Improvement, a former YMCA contractor owned by City Building Commissioner Larry Oradat.

Oradat’s attorney, Evan Hammond, told I-Team 8 An owes Oradat’s company $30,000 for work done on the YMCA.

I-Team 8 has also learned An owes more than $30,000 in back taxes on his other Marion properties. After An failed to pay the back taxes on the YMCA building last fall, it was placed in a sheriff’s sale where no one bought it.

The building was kept out of a commissioner’s sale this spring after roughly $5,000 in back taxes were paid on the building, the county treasurer’s office told I-Team 8.

Seybold claims An has not abandoned the project even though a Boston man has emerged with claims he has a contract with An to buy the building. Dominisse said this week that the city has not seen that contract but believes it has expired.

When asked what guarantees the city had from An that the project would be complete, the mayor said: “We have no guarantees.”

TIF DATABASE

WISH-TV has created a TIF database to see if your county has bond-funded development.

The database shows the TIF related assets in your county and then examines what percent of the total county those assets account for.

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