Latest council-mayor spat could threaten Indy’s credit rating

Last year, the City-County Council rejected Mayor Greg Ballard’s plan to build a criminal justice center, complaining that the administration put the proposal together behind closed doors.

This month, a council committee voted to tow five BlueIndy cars, saying Ballard had committed $6 million to the electric car sharing service without the council’s approval.

And now, council members are trying to pull $6.8 million back from a city reserve fund, saying Ballard moved it there unilaterally, at the expense of city police.

The drama between the lame duck Ballard administration and the City-County Council seems stuck on repeat.

And taxpayers, by and large, have been left scratching their heads.

The latest flashpoint over police money was a move by the mayor to shore up the city’s finances in the wake of dire warnings from credit rating agencies.

Administration officials say they had the authority to take action. Council members feel like they once again caught the mayor’s hand in the city cookie jar — this time transferring dollars the council had set aside for police equipment and facilities.

And unlike past spats over electric cars and the criminal justice center, there’s real concern the latest flare-up could harm the city’s bond rating.

First, a bit of history: During negotiations over the 2014 budget, the administration and council leaders struck a deal to lend the Indianapolis Metropolitan Police Department $6.8 million to cover an operating deficit. The lender was the city’s fiscal stability fund — a pot of $80 million set aside to show credit rating agencies that the city had a healthy reserve in case of emergencies.

Both sides agree the plan has always been to pay it back as money becomes available. This spring, discussions began on how to do just that.

But in June 2015, bond rating giant Moody’s revised the city’s outlook to negative — a stepping stone to an outright downgrade — citing the city’s failure to either raise revenue or cut spending in order to “offset the use of reserves for operations.” That followed a series of similar criticisms from Fitch and Standard and Poor’s, the latter of which downgraded the city’s bond rating to AA following the 2014 budget deal.

Facing heightened pressure, the administration paid off the loan without the council’s approval, then came back in July with a proposal to replace the money in IMPD’s budget with other funds.

A sensible compromise, the administration believed:

“We said look, you pay back the loan, you still get IMPD what it needs and you satisfy the rating agencies,” said Jason Dudich, the mayor’s chief of staff.

The council saw it differently.

At an hours-long Public Safety and Criminal Justice Committee meeting earlier this month, committee members lambasted the plan, venting months of pent-up frustration over what they perceive as the administration circumventing the council whenever it suits its needs. They see it is a direct assault on the balance of powers — a usurping of the council’s authority as the city’s fiscal and law-making body.

In protest, the committee rejected the administration’s plan, and instead voted to return the $6.8 million to IMPD. The full council will consider the revised proposal in August.

“I don’t understand it,” said Republican Councilman Aaron Freeman. “It frustrates me. I don’t think we’re following the law. And I’ve been frustrated for 7 months.”

Like other recent spats, the council has accused the administration of acting illegally; the administration disagrees. Ballard’s attorneys hold that the law establishing the fiscal stability fund gives the city controller, Matt Kimmick, the authority to transfer money into it once a year. Council attorney Fred Biesecker says Kimmick needs council approval to do so, as with other transfers.

The law itself is silent on council approval, saying only that the controller annually “make a determination of the amount ... that can be transferred into the fiscal stability fund to restore the amount of transfers made in preceding years.”

Regardless, the episode highlights a broader problem — why can’t Indianapolis’ leaders just talk these things through beforehand?

Both sides say they try. And both sides say the other is often unreceptive — or changes their tune midway through.

In the administration’s memory, the plan was always to use part of a recent public safety income tax hike to repay some of the loan. After funding 115 new police officers and allocating $3.5 million to the Indianapolis Fire Department, the city still had around $5 million to spend.

So when the council rejected that idea earlier this year and voted to spend $4.7 million on police cars and firing range repairs instead, the administration came up with a new plan: Pay the $4.7 million out of a separate capital projects fund, and repay the loan using whatever IMPD had leftover.

But what seemed like a good compromise to the administration, looked to the council like a blatant disregard of their wishes, even if the outcome was ostensibly the same — new equipment for IMPD.

To Freeman and others, the tax was raised for police officers and equipment, period — not to repay an interfund loan.

“To me, this discussion begins and ends with priorities,” Freeman said at the committee hearing. “We raised taxes to put more men and women on the street, and to do that you have to give them uniforms and guns and cars. This is a matter of priorities and it infuriates me that we are put in this position.”

Others question whether an $80 million stability fund is really needed.

“What’s the big difference between $71 million and $80 million or $65 million? We still have a huge balance in the fiscal stability fund,” said Councilman Frank Mascari, a Democrat.

“The money’s there to be spent,” he added. “That’s why we’re going to do this.”

To Ballard, the importance of the city’s bond rating was the priority; and the urgency imposed by the ratings agencies trumped working through the plan with the council first. Kimmick estimates a downgrade would mean $1.75 to $3.5 million in additional interest costs on a $100 million bond.

“They (council members) focused on the fact that they wanted to black eye the mayor and say you didn’t do what we told you to do,” Dudich said. “ ‘Once again the executive branch is not listening to the legislative branch.’ We are — but rating agencies don’t call the legislative branch.”

Call Star reporter Brian Eason at (317) 444-6129. Follow him on Twitter: @brianeason.