Monday, April 6, 2009

The Myth of the Bad Pacer's Conseco Fieldhouse Deal

While much of the focus has been on the sweetheart Colts deal with Lucas Oil Stadium, what is not well known is the sweet deal the Pacers received with Conseco Fieldhouse, a deal the Pacers now want to revise as not being sweet enough. This letter to the editor written four years ago by local political activist Clarke Kahlo warns of the Capital Improvement Board repeating the same mistake with the Colts that they did with the Pacers. Attached to his letter was a summary of the Pacers deal titled "Fieldhouse Myths and Facts," which details the overly generous deal the Pacers received in 1999 and why the numbers were not what they were represented to be. Kahlo's 2005 letter was written as city officials were considering what would be an even bigger public giveaway with Colts' Lucas Oil Stadium deal.


Letter to the editor--

Publicly-funded private sports venues: public giveaways speciously touted as "a track record of success." Pass the baloney repellent please!

As the legislative discussions continue on funding a replacement football stadium and expanded convention center, a disagreement has arisen between Mayor Peterson and Governor Daniels. The Governor wants some control of the Indianapolis Capital Improvements Board because the state would authorize new taxes to fund the proposed public buildings in downtown Indianapolis. Mayor Peterson wants to retain control of appointments to the CIB. Indianapolis City-County Councilor Steve Talley was quoted in an April 13th Indianapolis Star report (“Council firmly against state control of stadium project”). He pointed to Conseco Fieldhouse as a successful project which, he asserted, justifies continued local control of the CIB. He said “We have a track record of producing good projects”.

In reality, the effect of the Conseco Fieldhouse was such a financial boondoggle for Indianapolis taxpayers in favor of the wealthy Simon family that it represents the proverbial “Exhibit A” of the case for control of the CIB being placed in a higher, hopefully less politically-driven, unit of government than the Indianapolis city administration. A 1999 analysis of the Conseco Fieldhouse deal (attached) prepared by the Indiana Alliance for Democracy reveals the little-known facts about the giveaway agreement between the City and the Simons (who own the Indiana Pacers Sports and Entertainment Corporation). It exposes seven popular myths which were contrived by the Indianapolis mayor’s (then-mayor Stephen Goldsmith) spin machine to foster public acceptance.

Just last summer, chagrined Indianapolis residents witnessed another public giveaway to the wealthy Simon family. Against concerted citizen and taxpayer opposition, the City and the CIB insisted on giving away part of Capitol Commons Plaza (a designated public park located next to the Convention Center) to the Simon Property Group, the world’s largest shopping center owner, to build its new office building-- despite the many available nearby properties available for sale.

Take the Rich Off Welfare by Mark Zepezauer is an eye-opening book published last year. It identifies the appalling subsidy programs written into the U.S. tax code for big business. We recommend it to Mayor Peterson as a needed candidate for his annual One City, One Book reading program with the public library. Another good read which spotlights public giveaways for private sports venues is Public Dollars, Private Stadiums-- The Battle over Building Sports Stadiums. Mayor Peterson should carefully read both books.

The Capital Improvements Board has an alarming track record of political sweetheart deals and public giveaway programs to wealthy private interests. Why would Hoosier citizens and taxpayers want the Indianapolis mayor to retain total control of the CIB? When acquainted with the historical facts about the deplorable state of political accommodation and nest-feathering for wealthy sports owners, most Hoosiers would likely rather have more control of where their tax dollars go so that they aren’t just handed to wealthy private companies under the guise of economic development.

Clarke Kahlo, Board of Directors
Indiana Alliance for Democracy, Indianapolis, IN

Attachment: Fieldhouse Myths and Facts, 1999 update, by Jack Miller and Lou Campagna


Indiana Alliance for Democracy

Fieldhouse Myths & Facts
By Jack Miller & Lou Campagna
Updated 1999

“I don’t think it’s right for an entrepreneur to ask another entrepreneur for a gift”,1 intoned Herb Simon in a 1997 interview explaining his reluctance to ask other businesses to help fund the new fieldhouse. Sadly, his shyness has never extended to Hoosier taxpayers who have been tapped royally to build and maintain the Conseco Fieldhouse (known briefly as the Indiana Fieldhouse during the early financing stage).

The Alliance for Democracy has been closely following the progress of the new Conseco Fieldhouse and we would like to challenge the myths about this so- called Public-Private Partnership (Translation: Public risk and cost-Private gain).

v Myth: The Simons are spending $57 million of their own money on the Fieldhouse.

v Fact: The $57 million comes from: The Simons’ “renting” 1300 parking spaces for luxury suite and club seat owners @$3.5 million for ten years2 (This is the only revenue that isn’t diverted straight to the Simons and amazingly is still considered Simon money toward building costs!)

$20 million from an “expanded ticket tax”3 (That’s a tax on the fans which counts toward the Simons’ share of the building costs!).

The Simons did invest $2 million of their own money to “prime the pump” and get the idea accepted. (NOTE: This $2 million is to “be reimbursed if the project is allowed to go forward”4).

v Myth: Private investors are chipping in $37 million to help taxpayers build the Fieldhouse.

v Fact: The Circle Center Investors will loan $37 million to the CIB to be repaid with interest on or before December 31, 2017.5 If downtown workers don’t rent enough parking spaces to pay back the investors, the taxpayers must. James Snyder, Goldsmith’s special counsel, said, “If we can’t lease the spaces, the City is in trouble.”6

v Myth: The final contracts and lease arrangements were signed in 1997 before construction began.

v Fact: As of the last Freedom Of Information (FOI) reply from the Capital Improvement Board(CIB) on (2/18/99) “The lease documents have not been executed at this time.”7

v Myth: The City will benefit financially from renting the Fieldhouse out for rock concerts, hockey games, and other non-Pacer events, plus share in advertising and broadcasting revenue.

v Fact: All proceeds from any rental of the Conseco Fieldhouse go directly to the “The Pacer Basketball Corporation or a subsidiary of the Pacers” including “signage, advertising, and broadcasting revenue income.”8 This includes a recently announced deal in which “seven elite sponsors agree to 5-10 year deals” at up to $1 million each (annually).9

v Myth: The sale of naming rights for the Fieldhouse will offset some cost to taxpayers.

v Fact: Steve Hilbert has agreed to pay $40 million over 20 years to put his company’s name on our public fieldhouse plus $55 million more to sponsor and all of that $95 million goes to the Simons.10

v Myth: With the taxpayers of Indiana paying $100 million in diverted income and sales taxes for the Fieldhouse, the Pacers will certainly pay the cost of maintenance, utilities, and incidentals.

v Fact: Unless the Pacers turn at least a whopping 18% profit, the City will continue to reimburse them up to $3.45 million a year for these costs.11

v Myth: Having this new sports arena will provide many new jobs and boost the economy in Indianapolis.

v Fact: Mark Rosentraub, PhD., a leading analyst of economic impacts of sports, says sports teams “Produce few jobs, little tax revenue, and negligible positive impact even on their own immediate neighborhood.” Rosentraub concludes that “Sports are relatively ‘small potatoes’ when their importance to a region or city’s economy is considered.”12

Aside from the money they invested in key politicians ($20,000 to Goldsmith13 and $20,000 to O’Bannon14 in 1996 alone), our study of the available news reports, documents acquired through FOI requests, and talks with CIB officials has failed to turn up any evidence that the Simons have invested a dime in this venture. This lends a certain irony to Mayor Goldsmith’s statement that he “wanted to be careful not to overburden the Simons because the point of building a new arena is to keep the team here and stem the Simons losses.”15

The good news is that since the lease remains unsigned, there might still be a way to stem taxpayer losses. This assumes however, that the negotiators have the public interest in mind and so far there’s no indication that they do. In all probability the Simons are holding out for even more “freebies” (If there could possibly be any!) and with the Fieldhouse nearly complete, they hold all the trumps.

The Roman poet Horace said, “Semper avarus eget” (The greedy man is always in need). Twenty centuries later, the greedy man is alive and well in Indianapolis.

1 Kathleen Johnston, “New Arena A Good Investment For Public, Pacers Owner Argues,” Indianapolis Star, May 17, 1997.

2 Kathleen Johnston, “Parking Seen As Key To Arena Finances,” Indianapolis Star, July 22, 1997.

3 Ibid.

4 Gerry Lanosga, “Pacers Willing To Bet $1.4 Million City Will OK Arena,” Indianapolis Star, January 22, 1997.

5 Letter from Pam Lohman, Finance Manager Fieldhouse Project Team, October 4, 1998.

6 Ibid #2

7 Letter from Pam Lohman, Finance Manager Fieldhouse Project Team, February 18, 1998.

8Summary of Significant Indiana Fieldhouse Operating Agreement Provisions from Capital Improvement Board.

9 Sean Horgan, “Pacers announce lineup of major corporate sponsors”, Indianapolis Star, March 24, 1999.

10 Ibid.

11 Kathleen Johnston, “Pacers Lease Contains Financial Guarantees,” Indianapolis Star, November 5, 1997.

12 Mark Rosentraub, Major League Losers, Basic Books 1997. Pg. 239.

13 Mary Beth Schneider, “Gubernatorial race will be costly despite call to curb spending”, Indianapolis Star, July 21, 1996.

14 Mary Beth Schneider,”Governor’s race: big bucks battle”, Indianapolis Star, October 26, 1996.

15Kathleen Johnston, “Pacers Owners To Advance Extra Funds For New Arena,” Indianapolis Star, April 30, 1997.


Downtown Indy said...

I am speechless, astounded, in awe.

Downtown Indy said...

How about a Myth of Lucas Oil Stadium?

Myth: LOS will be utilized 161 event days in 2009

161 event days scheduled


Event calendar for 2009

Downtown Indy said...

Santa Clara Ca compares themselves with Indy:

I know said...

WOW! The facts may still not wake up the politicians that they can only hoodwink the hard working folks in Indiana for so long.

Today's Star reports the fact that the State of Indiana is $87,000,000.00 short in monthly revenue for March and the Senate still proposes to give the CIB $47,000,000.00 from tax income and another $35,000,000.00 annually for the gambling boys and girls.

All the while cut K-12 education to keep thugs and wealthy people healthy and wealthy. It sure helps to teach our next generation about responsibility.

Patriot Paul said...

Great info.
Where were our local media's investigative political reporters. Seems like the spoon fed usual reporters yearning for what's offered to them along with a sound bite is the best we can expect. The Star's involvement as an 'investor' in Circle Ctr.Mall may have a bearing? And let's not forget Jim Shella whose feature news is more preoccupied with clips of stuttering citizens at a Rally instead of real meaty news.

Jon said...

It's too bad that this article won't see the light of day. PatriotPaul is right the local media will act deaf, dumb and blind with respect to any news that doesn't show the Simons as poor, depraved team owners.