Thursday, August 23rd, 2012

Carmel, IN Named Best Small City in America to Live In

Money Magazine just named the Indianapolis suburb of Carmel as the top small city in America to live in. Fishers, another Indianapolis suburb, ranked #12.

Any ranking survey, and particularly one done by a magazine, needs to be taken with a grain of salt. However, Carmel and Fishers (along with occasionally Noblesville), frequently show up high in various national rankings. For those interested in suburban living, these places offer a pretty strong combination of good schools, low real estate prices (Indianapolis is basically the cheapest big city housing market in America), low taxes, and fairly high quality of life. With populations of over 75,000 each, these communities also have the scale to efficiently provide quality public services.

I personally think Fishers has long term sustainability issues. It has kept up with very rapid growth admirably, but it has really not done much to secure its long term future, and when it reaches buildout, I expect problems to set in.

Carmel by contrast has invested heavily in building towards a future where greenfield growth is no longer the driver. It has invested in high quality public facilities, some of the best suburban transportation infrastructure in the nation, building new urbanist neighborhoods from scratch, upgrading utilities, improving the environment, etc. Dan McFeely of the Indianapolis Star covers Carmel and wrote a bit about this.

I’ve covered Carmel extensively for years here on the blog, calling it the “next American suburb” and writing about its civic strategy, new urbanist approach, and various criticisms of its leadership.

I think the Carmel story is an interesting one because it shows how a city, albeit an affluent one, in a very conservative state can fundamentally transform itself in a way that that demonstrates results. This includes urbanism standards and infrastructure standards that exceed those of the urban core of Indianapolis, with many of its public services being better as well.

The results most notably show up in incomes. While incomes cratered relative to the US in both Indiana and metro Indianapolis, Carmel’s median household income actually inched up versus the US average despite starting from a higher base.

In short, the strategy has been working, though obviously the national economy has had an effect. And I don’t necessarily support everything they have done. Their $150 million performing arts center, for example, all paid for with public funds, seems expensive for a city of this size, and has saddled the city’s redevelopment commission with debt. But on the whole, things seem to be paying dividends.

This is part of the explanation for why Indianapolis as a region has done well while its urban core lags many other cities. The majority of people prefer suburbs, and Indy’s newer suburbs provide an exceptional value proposition.

Ultimately to be successful, the region will have to fire on all cylinders. This means both urban and suburban, with each neighborhood and town bringing a unique approach and its A game to the table. It’s not an either/or situation. I want to build urban cores up, not tear suburbs down. (Downtown Indianapolis has its own game going. Despite some recent criticisms that I stand behind, downtown Indy has positive momentum in a lot of areas. For example, another 300 tech jobs were just announced yesterday).

I previously highlighted Columbus, Indiana, which has accomplished something similar in a more blue collar environment. So positive stories based on different variations of the same playbook aren’t limited merely to upscale suburbs.

In a state that has long lagged the nation in job and output growth, and where the very large decline in relative incomes has been a huge issue at all levels, you would think that leaders would be streaming in to study these successful models.

Alas, that is not the case. Not only is there little interest in learning from models that are actually working (save perhaps for other Indy suburbs looking to Carmel), there’s actual hostility. It’s as I said in some recent posts: Indiana actively discourages the pursuit of excellence. They’d rather cut down the successful than bring up the failing. State level policy choices are trying to do just that.

Start with school funding. As part of a property tax reform process, the state of Indiana took over 100% of all local school operating funding. However, they also changed the funding formula in a way that stuck well performing metro Indy districts at the bottom of the pile. Out of about 360 school districts statewide, Carmel is fourth from the bottom in per pupil funding from the state. Other regional districts like Fishers and Zionsville are also at the bottom. In effect, the state decided to starve fast growing and well performing suburban districts. Somehow this didn’t make the list of education reforms in that recent Economist article. For a state that claims to want to base its economic future on things like life sciences, this sure seems puzzling.

The state has also sought to impose a one size fits all, least common denominator approach to services. While it didn’t affect Carmel directly since they already built their first class library, the state’s Department of Local Government Finance vetoed plans by the suburbs of Westfield and Greenwood to build new libraries (partially inspired by Carmel), even though the bonding plans survived a petition challenge. The state’s rationale was that the cost per resident was higher than the state average. It’s easy to see that a policy like this acts as a one way downward ratchet.

The state also passed a law that not only capped property taxes as a percentage of assessed value – a measure I support – but also put in place a de facto spending freeze for all cities at current levels through a levy cap.* (This levy cap ignores growth in commercial tax base, so if a town built a 50 million square foot industrial park, it wouldn’t even be able to raise the revenues to provide services to it).

This has left cities increasingly depending on gimmicks to finance anything. And every time a city figures something like that out, the state makes noises about shutting it down. The state has also refused to allow communities to even let their own citizens vote in favor of spending money on things like transit. Indiana has never particularly empowered municipalities, but recent years have seen a strong turn towards disempowerment, with the state’s General Assembly serving as a sort of uber-city council (and now uber-school board too).

I’d be willing to venture that neither Carmel nor Columbus would be able to accomplish what they have if they were starting out on the journey today under the current state legal and political climate.

This is not to say that spending money is a solution to problems. Actually, by national standards, places like Carmel and Columbus don’t spend very much money at all. With some exceptions like that performing arts center, they are actually quite frugal. They understood the concept of long term total cost of ownership, and as a result have kept taxes low by not being penny wise, pound foolish in the short term, while so many other places that thought only about the now have descended into a near death spiral of service cuts, tax increases, and abandonment. That’s the tragedy.

In a rational world, one would think that we’d look at models that are producing population growth, job growth, corporate (including foreign) investment, high quality of services and quality of life, keeping incomes at or above US levels – and mostly importantly all while keeping taxes well below normal (at the bottom of the state in Carmel’s case) even by the standards of Indiana – and say to ourselves: how can we get more of that? Unfortunately, that’s not the case here. (Again, some other Indy suburbs excepted).

Before proposing solutions to Indiana’s long term under-performing economy, I would suggest that the candidates for governor first take a look around the state to examine at the places that are already doing well and have been doing well over the last decade or more. Then ask the question: what are they doing different and right and what do we need to do to get other places doing those things? First among the places to visit would be suburbs like Carmel and industrial cities like Columbus. If you’re ranked #1 in America, you must be doing something right.

* This is complicated, but my understanding is that the total property tax levy cannot grow faster than inflation + population growth. This has had many perverse incentives, including keeping entities like townships from lowering their tax levy even when possible because they’re afraid they’ll never be able to raise it again if needed.

13 Comments
Topics: Public Policy, Talent Attraction
Cities: Indianapolis

13 Responses to “Carmel, IN Named Best Small City in America to Live In”

  1. FBen says:

    Carmel=frugal? That’s a laugh! The Carmel Redevelopment Commission and 4CDC have racked up over $300,000,000.00 in debt implementing the Mayor’s dreams and are insolvent. Some of the debt is unsecured lines of credit at an interest rate of about 9%. These lines of credit were used to pay the CRC’s operating expenses!

    For a small city of 80,000 Carmel’s redevelopment debt is astronomical. Not to mention that it is questionable how much of that money was spent subsidizing various entities and spending money on questionable projects and whims.

    The Carmel City Council is in the process of rescuing the CRC and the 4CDC from themselves and are working to find ways to finance the CRC’s debt. They keep getting thrown curve balls from questionable deals and incompetence as they work to put all of this together.

    At one point things got so ridiculous when it came to the CRC shuffling money around that, since the CRC cannot use TIF proceeds for operating expenses, they gave money to the 4CDC and then the 4CDC gave the money to the Performing Arts Foundation so they could skirt the law. One could easily wonder if that transaction was technically legal. I’m not a lawyer so I wouldn’t know, but it sure doesn’t seem to pass the smell test.

    It was just reported on CarmelChatter.com that Carmel’s redevelopment debt exceeded that of Detroit, Battle Creek, Lansing, and Pontiac combined!

    I’d suggest that you head over to Carmel City Council President’s Facebook page where he’s been laying out the dire situation that Carmel finds itself in from being so, apparently, frugal – https://www.facebook.com/ricksharpforcarmel

    Following suit with using TIF for redevelopment, Indianapolis finds itself in a TIF mess and has been bailing out TIF districts for years – http://www.advanceindiana.blogspot.com/2012/08/indianapolis-has-been-bailing-out-tif.html There’s a well worn pattern across the country with Redevelopment Commissions abusing their power and access to funds via TIF.

    It’s amazing to me that you could write this entry without acknowledging all of the ongoing situations and facts regarding Carmel’s fiscally irresponsible redevelopment.

    I also saw on CarmelChatter.com that, per capita, Carmel spends many many times what NYC spends on all of its arts programs to subsidize one venue. And, in real dollars, they spend more to subsidize one venue that many states spend to support all of their arts organizations. Some perspective is in order.

  2. @FBen, as I said, I would not have built the Palladium. If you subtract out the Palladium debt from the total, I think it’s very reasonable, and much of it is for generational assets like upgraded streets, libraries, sewers, etc.

  3. FBen says:

    Thanks for your comment.

    Subtract the PAC and there is still around $200,000,000.00

    Up to this point there has been no accounting of the CRC’s spending. In fact up to this past year they didn’t even have a handle on their balance sheet. They were essentially working out of a check book. Not until David Bowers came on board via the City Council did they begin to have a handle on the whole picture. Shortly thereafter they became insolvent.

    As I mentioned the CRC’s and the 4CDC’s books have been closed to the public. Not to mention that the public is not allowed any input into any aspect of their projects.

    Now, if the CRC wants to be bailed out they will have to provide all of their financial documentation to the City Council which will then become public. Only then will we understand what the CRC spent their money on. With the recent Finance Committee meeting some documents made their way out into the public. It was amazing how much money is being spent to advertise the Arts and Design District as well as put on various functions and festivals. This is hardly spending on infrastructure.

  4. Chris Barnett says:

    The Indy TIF argument is both incorrect and irrelevant to a discussion about Carmel: the Downtown Indy TIF is bailing out the city’s 2012 and 2013 budget shortfalls with tens of millions of dollars, not the other way around.

    Regarding Carmel: if some or all of the TIF covers a declared “economic development area”, then state law allows a very broad interpretation of what constitutes allowable spending by a redevelopment commission on economic development.

  5. FBen says:

    Here’s the specific blog post that discusses Indianapolis TIF problem:

    http://hadenoughindy.blogspot.com/2012/08/big-time-bailouts-of-indys-tifs.html

    All that was being illustrated by Indianapolis TIF problems was that TIF districts appear to have a pattern of not performing or being used as they were promised when the deal was made.

  6. @FBen, $200M in a city of 80,000 people is $2,500 per capita – a very manageable amount. If that were the mortgage on your house, car, and other capital assets you need personally, I think you’d sleep very well at night.

  7. Bruce says:

    Aaron,

    with the comments above by FBen you hit the nail on the head about the resistance there has been to change. The critics of Carmel’s renaissance want to focus on debt and not the investment and the economic returns. It’s no accident that Carmel continues to have the lowest taxes of any city in the area and Governor Daniels says “Carmel is a city that every knowledgeable Hoosier should be proud of.”

    On your next visit you will be amazed at what is happening. because of Carmel’s reinvestment. Old Town is seeing a new housing construction boom with wait times up to two years. The mixed use projects like Sophia Sq and City Center, their apartments are nearly 100% full. I have spoken with a lot of frustrated empty nesters who would move in a heart beat to the proposed Mid-Town (Walk able and primarily residential) project that will connect the Arts District with City Center when it is started.

    There is a trickle down effect though small. The Town of Fishers is now following Carmel’s lead as they have just asked for proposals for a mixed use building. (Public, Private Partnership and TIF) adjacent to the civic square. Fishers even announced today they plan to use as a tool for economic development the concept of work and play that is a cornerstone of much of Carmel’s redevelopment.

    Carmel’s Mayor continues even with his success to have to drag, pull, and push some on the council to recognize that strip centers are not Carmel’s future. If the City of Lawrence 50 or 60 years ago had a Mayor Brainard, I doubt if they would be talking of the massive layoffs and challenges they faces today. The city of Lawrence is typical of a boom gone bust suburb and is just a shadow of its former self.

    And before the critics attack me, I am a citizen that has been appointed by the Mayor to server on a non profit board that has been involved in the renaissance and dramatic transformation.

  8. FBen says:

    But it’s not. It’s public debt. The total CRC debt is somewhere around $350,000,000.00. For a family of four that would be $17,500.00 not including interest.

    If this is a great idea why aren’t more communities going into debt to this level?

    Obviously the plan is not working or else the CRC would not be insolvent.

  9. FBen says:

    Responding to Bruce’s “public relations statement,” there’s no resistance to change. That is a straw man argument of ridiculous proportions.

    What there is a resistance to regarding the 4CDC and the CRC is lack of transparency, the unwillingness to allow citizen input into projects and fiscal responsibility.

    Transparency, citizen input into what and how projects are built in the community that they live and paytaxes and fiscal responsibility should not be asking too much of the 4CDC and the CRC. However, up to this point it has been.

    Everything listed above in Bruce’s post sounds real good. The fact remains that Carmel’s redevelopment initiative is insolvent and would come to a very bad end if it was not for the City Council financing their debt, i.e. bailing them out.

  10. Bow says:

    Carmel=Disneyland Development.

  11. MH says:

    If my choice was ‘disneyland’ or decay (likes so many other Indiana cities and midwest cities) I will take my chances with ‘disneyland’.

  12. Peter says:

    “If my choice was ‘disneyland’ or decay (likes so many other Indiana cities and midwest cities) I will take my chances with ‘disneyland’.”

    Luckily, those aren’t the choices in the real world.

  13. MH says:

    My take on this article and the one on Columbus is, these are examples of how to do community building right and be forward thinking. Unfortunately too many communities have no clue what this takes and continue to go down the path of decline.

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