CHICAGO -- When Stephen Goldsmith is sworn in as mayor of Indianapolis on Jan. 1, he will have to perform a balancing act between a full agenda of big-ticket bond-financed projects and his promise to reduce the size of city government.
Mr. Goldsmith, who was Marion County prosecutor from 1979 to 1990, defeated state Sen. Louis Mahern, D-Indianapolis, in the Nov. 4 election.
Mr. Goldsmith will inherit some of the projects, such as a downtown mall development and a new United Airlines maintenance facility, from fellow Republican William Hudnut, who declined to run for re-election this year after 15 years at the helm.
But Mr. Goldsmith also has some financing ideas of his own, which he outlined in a recent interview with The Bond Buyer.
Among these ideas is a new form of tax increment financing, the issuance of college-saver bonds, and the sale of city assets.
Mr. Goldsmith said one of his first priorities upon taking office will be to persuade the Indiana General Assembly to allow the creation of tax increment financing districts that would substitute income tax revenues for property tax revenues in order to provide revenue streams for debt service on bonds that would be issued to make improvements within the districts.
He explained such a district would be used to lure an office complex the U.S. Department of Defense is considering building in Indianapolis. The project could employ as many as 10,000 people. Bonds would be issued to build the complex, and then the incremental increase in local income tax collections derived from the new jobs would be used to pay off the debt.
The advantage of using incremental income tax revenues over property tax revenues is that many of the people expected to work at the complex would live outside Indianapolis and their incomes would be supporting the bonds, he said.
The mayor-elect also said the supports a proposal made in June by the Indianapolis Chamber of Commerce to invest $1.1 billion in the city's infrastructure during the next 10 years.
If the City-County Council approves an infrastructure plan next year, Mr. Goldsmith said he would consider using zero coupon college-saver bonds to fund a part of the improvements. The bonds would be made available to Indianapolis residents to save for future tuition payments.
Mr. Goldsmith said the college-saver bonds would allow the city to structure an issue in such a way that the bonds would not mature until an equal amount of the city's approximately $497 million of outstanding general obligation and lease-backed debt had been retired.
Indianapolis's GO debt is rated triple-A by Moody's Investors Service and Fitch Investors Service. It is rated AA-plus by Standard & Poor's Corp.
A Meeting of the Minds
The chamber's infrastructure proposal also meshes with Mr. Goldsmith's desire to privatize government, including the sale of city assets. He said that by possibly selling the City-County Building, Indianapolis International Airport, and other assets such as golf courses, Indianapolis could raise up to $500 million to fund capital improvements.
"Secondly, and perhaps more importantly, privatization can increase the efficiency of government and reduce expenditures," he said.
Mr. Goldsmith said he would create a task force after taking office to study what government services could be privatized in an effort to reduce spending. Indianapolis's budget for fiscal 1992, which ends Dec. 31, is $482.4 million.
The mayor-elect's faith that the private sector is more efficient than government also extends to financing of economic development projects.
"I'm comfortable with our current debt, but I think we need to be cautious. I think [bond-financed incentives] are appropriate when there is a reasonable rate of return," Mr. Goldsmith said.
"But, generally, the market is a better referee of economic incentives than is government. A free-market approach should generally restrict government from accumulating too much capital to devote for private purposes," he explained.
Before the end of the year, the city plans to issue up to $140 million of revenue bonds backed by a local income tax to assist United Airlines in building a $1 billion maintenance facility at Indianapolis International Airport.
In a final development agreement signed with United on Nov. 21, the city, state, and Hendricks County agreed to provide an incentives package totaling $291 million to the airline, all but $15.5 million of it to be financed by bond issues. Indianapolis was selected by United over three other finalists as the site for the maintenance facility.
The mayor-elect took some heat during the election campaign when he did not immediately endorse the tentative agreement worked out by state and local government leaders and United officials, saying he first wanted to study the details of Indianapolis's portion of the financing.
He now says he is satisfied with the city's role, but adds "I don't know if the price would have been the same. It is substantial."
Indianapolis also has pledged its moral obligation to $230 million of tax increment financing bonds issued in 1988 to assist in the construction of the Circle Center retail mall on three and a half blocks of the downtown.
Mr. Goldsmith said he is cautiously optimistic about the propects for that project, which is scheduled to be completed in 1994, despite the sagging retail market.
"It made a lot more sense in 1988 than it did in 1990," he said. "But a strong downtown is important to the city."
Both the Circle Centre mall and the United maintenance facility were strongly endorsed by Mayor Hudnut, who cited the two projects as major accomplishments of his administration in a written retrospective of his tenure as mayor distributed by his press office.
Mr. Goldsmith said he would like to be known as the mayor who began to reduce the size of government and its "interference" in people's lives.
"My goal is to make government absolutely as small as possible and set an example for other governments," he explained.