Earthbound Recreational Vehicles might be struggling to meet its obligations, but it is one of a small number of other projects the city of Marion has directly backed with taxpayer money.
City officials point to the rest — Marion Assisted Living and Rehabilitation Center, the Dollar General Distribution Center and the Dunham’s Distribution Center — as thriving businesses.
However, critics have worried that the city courted risk by enhancing deals to entice banks to loan money. In certain other cases, the city has taken out millions in short-term financing in anticipation of forthcoming development.
In most cases, the city has used incentives that shield public money from direct risk or avoided long-term debt.
The city has engaged in an aggressive economic development push throughout Mayor Wayne Seybold’s three-term administration.
He could not be reached for comment for this story.
City Development Director Darren Reese said the city still is confident in the Earthbound project and noted the other similar projects are “all in good standing.”
For example, the $13 million Marion Assisted Living and Rehabilitation Center opened earlier this year. Like Earthbound, concerns were raised with the city agreeing to use public money — in this case, county option income tax — to back bonds in case the project failed.
The city has other investments with the potential to turn into long-term debt.
In 2010, the Marion Redevelopment Commission took out a $3.5 million bond anticipation note to purchase property — including the former Hobby Lobby building and land near Interstate 69 and Ind. 18 adjacent to Ivy Tech — and fund work on the downtown “pocket park” next to Beatnik’s Cafe.
Bond anticipation notes are essentially short-term loans for upcoming projects. They are repaid through future development.
The redevelopment commission also provided a “back stop” with a $3 million note issued to the Marion Sports Authority, Reese said. This money was used to prepare the site of the proposed sports and entertainment complex.
State statute limits bond anticipation notes to be outstanding for five years. Reese acknowledged this was a “time crunch,” but he was confident future projects would develop to repay the notes.
“We anticipate revenues from deals, primarily adjacent to Ivy Tech,” he said, calling it a “prime” location. He also noted the city is confident Tree of Life Bookstores will soon purchase the former Hobby Lobby Building.
If these projects fail to develop, he said the city has the authority to turn the notes into long-term debt.
Craig Ladwig, editor of the Indiana Policy Review, said he was skeptical of government getting involved in the arena of private transactions. In particular, he said cases where banks were skittish about financing businesses without public involvement are inherently risky propositions for taxpayers.
“Who incurred the risk here? The private investor or the anonymous, unnamed taxpayers?” he said.
Ladwig cautioned that government involvement can “distort” development outcomes. He said this could lead to unintended consequences for taxpayers, but also on elected officials who stake their reputations on creating jobs.
“Once government gets involved all bets are off,” he said. “You don’t know what could have happened (without it). The market has been contorted, so all you can do is hold politicians who profited from reputation and political stature accountable.”