Tuesday, October 20, 2009

City to Consider Privatizing Convention Center & Stadium Operations; The $elling of the $ity Continues

Today, the Indianapolis Business Journal reported that the administration of Indianapolis Mayor Greg Ballard is considering privatizing the operation of the convention center and professional sports stadiums:
This afternoon, the city’s Office of Enterprise Development released a Request for Information and Qualifications in conjunction with the Capital Improvement Board, soliciting proposals for private-sector operation and management of Lucas Oil Stadium and the Indiana Convention Center.

The CIB, which manages the city’s professional sports facilities and the convention center, has struggled much of the past year to close a projected $47 million deficit for 2010. Last week, it said its financial situation has been improving, but still needs much work.

According to the RFI, Indianapolis hopes to identify efficiencies and cost savings for each facility; build relationships with strategic partners; maximize their usage; evaluate potential economies of scale; and enter into a multi-year agreement with one or more respondents for their operation.

The city’s deadline for responses is Tuesday, Nov. 24, at 4 p.m. After that, it anticipates issuing a formal request for proposals on Dec. 7, with an anticipated due date a month later.

The RFI requires respondents to provide specifics about how their proposals to operate the three venues would affect major city events, such as Indianapolis Colts games, national swimming competitions, the Circle City Classic, events sponsored by Indiana Black Expo, NCAA events, events of the Indiana High School Athletic Association and various marching band events.

It also notes that any respondent will be required to coordinate its plans with the Indianapolis Convention and Visitors Association in order to attract and retain significant public events and ensure the facilities are utilized at their full capacities.

The RFI does not formally seek proposals for management of Conseco Fieldhouse, noting that stadium “is subject to an operating agreement that does not expire in the near term.”

But it leaves the door open for privatizing Conseco Fieldhouse’s management, if the Indiana Pacers consent. The RFI continues: “The City believes there is every possibility that the current operator of Conseco Fieldhouse will cooperate in identifying opportunities to achieve efficiencies, enhance performance and create benefits for the well being of the larger community.”

Whatever proposals the city receives, the RFI is careful to note that it cannot interfere with or jeopardize the tax-exempt status of bonds issued to underwrite construction of the three facilities.

Unless they’re retired early, the Indiana Convention Center’s bonds reach maturity in June 2021; Conseco Fieldhouse’s reach maturity in 2027; and bonds for Lucas Oil Stadium and the convention center’s expansion reach maturity in 2041.

Personally, I cringe at the privatization proposal. Even though we have given away all the revenue on Conseco Fieldhouse and most of it on Lucas Oil Stadium, let us not forget that those sports stadiums and the Convention Center are still public buildings, owned by the taxpayers. Putting a private company in charge of running those public buildings is to risk losing even more control over their operation.

Further, this is Indianapolis, home of Hoosier pay-to-play politics. You know what is going to happen. A big political contributor is going to end up with a long-term contract to run the facilities. Along the way the company will have to hire a politically-connected law firm to do the paperwork and naturally "consultants" will also have to be hired to attend numerous meetings over the contract, of course at taxpayer expense. For just such an example, refer to my blog post about how the then President of the Bond Bank, John Dillon, was hired to be a consultant to the Bond Bank on the convention center project and pulled in over $354,000 on a part-time contract.

Then you have the problem that the CIB has given away so much revenue on the Conseco and Lucas Oil Stadium contracts, that it would not be profitable for a private company to take over running those buildings. Thus, the contractor will also have to receive a big, fat taxpayer as part of the contract. Of course, this will be sold to the public as a "savings" over how much it costs the CIB to run the buildings. Then after a few years, we'll find that there has been no savings at all that the privatization contract costs taxpayers even more while making some politically-connected folks very wealthy.

Privatization, which is about instilling free market competition into the delivery of services, is a terrific idea. Where privatization goes awry is when it becomes a form of patronage and contractors receive lengthy contracts that replace market competition, and the benefits that go along with it, with a government-sanctioned monopoly. That is undoubtedly the road the City would be going down should it carry forward with this privatization idea.

1 comment:

Citizen Kane said...

These RFI's and RFP's are basically just invitations to people to steal money from the taxpayers to enhance their profits.

The only way privatization works is for government to rid itself of services it should not be delivering. There is no way for a business to profit from privatization unless there has been gross governmental mismanagement of a particular service. In other words, attempts at privatization are evidence of incompetence or evidence of legalized thievery. Since thievery is already occurring with the CIB and ICVA, this is a attempt to reward friends and punish enemies. Nothing new to see here.