As part of the sweeping controversy over a now-defunct proposal for a data center on Valparaiso’s north side, one question that remained after the brouhaha seems to have subsided is whether the city has to pay back the funds from the American Rescue Plan Act that were used for what was initially proposed as a sports and park complex.
City officials say no, a point they emphasized during Monday’s City Council meeting, which stretched almost five hours and drew hundreds of people to City Hall with concerns about the potential data center.
Council President Ellen Kapitan, D-At-large, called the issue a “red flag” during the council meeting, adding it led to a lot of questions, including whether the city would be on the hook for repaying the funds.
“Is this legal?” she asked Patrick Lyp, the city attorney.
“The simple answer is yes,” he said, adding an outside law firm from Indianapolis helped the city work through the details.
If the Redevelopment Commission sells the property, he said, “there would be no prohibition or covenant on the money.” The funds, he added, would return to the RDC.
The tenets of ARPA funding offer exemptions for paybacks of funds under $10 million, as long as they are used for public purposes, Lyp said. There also is no prohibition on the sale or use of the property.
“There’s no obligation that would be tied to ARPA funds,” said Councilman Robert Cotton, D-2nd.
The city received $7,681,979.52, according to an amended resolution for ARPA spending passed by the City Council on July 25, 2022.
That included $4,717,278.92 for land acquisition “for future Park related activities,” according to the resolution, and includes the parcels for the proposed sports complex.
The breakdown on the use of the rest of the funding, according to the resolution, included $1 million for the demolition of the former Whispering Pines facility and two adjacent residential structures on North Calumet Avenue, as well as site remediation, for a then-proposed adult enrichment center; $663,147.68 in premium pay for eligible city employees; $575,000 for several nonprofit agencies; $500,000 for the replacement of sidewalks, walking paths and other infrastructure; $40,000 for consultant fees and reserve funds for future audits, all related to disbursement of the ARPA funds; and $25,000 each to the police and fire departments, for various upgrades.
The brunt of the spending, including the parkland purchase, fell under ARPA’s “Provision of Governmental Services using Revenue Loss Funds,” per the council’s resolution, which is the most flexible of categories for ARPA spending.
In emails to the Post-Tribune before the City Council meeting and Mayor Jon Costas’ statement that the city would no longer pursue the data center proposal because of the public outcry, Lyp and George Douglas, the city’s development director, offered further insight into the transfer of funds before the 248 acres, comprised of four parcels between County Roads 500 North and 400 North east of Indiana 49, was purchased for parkland.
According to the option agreement signed in January between the RDC and the data center developer, Agincourt Investments LLC, the RDC would have sold 180 acres of that property for just over $9 million, almost twice what the RDC paid for the land.
“The Valparaiso Redevelopment purchased the properties in 2022 with available cash funds. The City Council did approve the use of ARPA funds to reimburse the RDC for the full purchase price in August of 2022,” Douglas said in his email.
He added he didn’t believe anything happens to the ARPA funds once they have been used to reimburse the RDC for the land purchase and if the RDC were to sell the property, the commission could use the proceeds for any of its permissible expenditures.
“The ARPA funds were used for an allowed purpose when the City reimbursed the RDC,” Lyp said in his email. “If the land is sold, the proceeds would be paid to the RDC and used by the RDC consistent with Indiana law.”
Jennifer Hora, a political science professor at Valparaiso University who focuses on state and local government, agreed that the ARPA funds come with flexibility but said that flexibility is supposed to come with accountability and responsibility.
She summed up her concerns as “the spirit of the law vs. the letter of the law.”
City officials dropped the plans for the park when, according to then-Mayor Matt Murphy, bids for the project, slated for $30 million, came in $7 million over budget. Costas said in an interview with the Post-Tribune last month that the city was going to invest more in its current parks instead and scuttle the plans for the sports complex.
City officials, Hora said, “threw their hands up” and walked away from the sports complex proposal when it came in over budget and proposed using that land for the data center.
The future of the land purchased with those funds is unknown.
“This is not transparency,” she said. “This is definitely not the spirit of ARPA law.”
alavalley@chicagotribune.com
