The Carmel city council’s finance committee will manage a review of the factors and decisions that led to Hotel Carmichael’s cost totaling 46 percent more than originally budgeted.
The boutique hotel – a public private partnership between the city and developer Pedcor – was projected to cost approximately $40 million when the city council approved it in 2017. But in late January, the city issued a press release stating the cost will be closer to $58 million. Some members of the city council said they learned of the increase only a day or two before the public did.
The council voted 9-0 on March 2 to approve a resolution outlining the process for an internally-managed review. The decision came after several Carmel residents asked for it to be handled externally during the public comment portion of the council meeting.
Carmel resident Ed Shaughnessy said he believes an internal review will lead to “continued suspicion the council or Carmel Redevelopment Commission or city administration is not transparent.”
“It’s hard to comprehend how this (increase) can happen and not arouse significant discussion within the CRC members and this council,” he said. “Obviously there is a lack of communication somewhere. I don’t know if that starts in the mayor’s office or with (the CRC director) but somebody knew something at some point before it was made known to the council, and that is shameful.”
Councilor Sue Finkam, a sponsor of the resolution, said the CRC and city are already subject to an annual financial audit by the Indiana State Board of Accounts. She proposed that the city’s finance committee – which she chairs – take a closer look at the CRC actions that resulted in the project costing $18.5 million more than originally estimated.
“The finance committee’s purpose is to review ordinances, resolutions and projects involving finance and governance,” Finkam said. “Given the main questions the public has are around project finances and the supporting statutory authority, this seems like a best, first step.”
The resolution authorizes the finance committee to authorize spending up to $30,000 to use consultants – including an external attorney – to help with the review. Any amount beyond that must be approved by the city council. The CRC will be financially responsible for making available its consultants, including from Coury Hospitality and project manager Shiel Sexton.
Following the review, the city clerk’s office will compile a summary report to be released publicly. Items of concern may be further reviewed by consultants once the committee’s investigation is complete.
“Regardless of the outcome of this review, I believe that it’s in the best interest of the CRC and city council to determine a better way in which to collaborate regarding communication, financial management and project leadership,” Finkam said. “Following the conclusion of this review, I will work with legal counsel to draft a proposed interlocal agreement for a better working relationship between the CRC and the council. To this end, together, we can create a mechanism for better insight into CRC actions by all council members and the public.”
Councilor Tim Hannon, who first proposed an external review of the matter at a council meeting in early February, described the resolution as a “nice blend” of internal and external measures but proposed an amendment to form a special committee comprised of the entire city council to conduct the review.
Hannon is not a member of the finance committee, and while he is allowed to participate in the meetings he does not have a vote. Voting members are Finkam and councilors Jeff Worrell, Bruce Kimball and Miles Nelson. Finkam, Worrell and Kimball cast votes in favor of the hotel in 2017. Nelson, the council’s lone Democrat, took office this year.
Nelson and councilor Tony Green – who did not vote in favor of the hotel in 2017 – supported Hannon’s amendment, but it did not receive enough votes to pass.
Councilor Adam Aasen said he could not support the amendment because it would set a “bad precedent.”
“I think we’re proclaiming a lack of faith in our finance committee to lead this process, and that’s not a message we should send,” he said.
Finkam suggested the review be held at public meetings on March 18 and 25 and April 1 at City Hall. She requested that the meetings be video recorded and streamed online, which is not typically done for committee meetings.