CIB Likely to Accept $27 Million Loan from State, Will Give the Money to the Pacers

The Gang That Can't Shoot Straight, i.e. the Capital Improvement Board, met again this afternoon. The big news out of the meeting was that the CIB likely is changing its mind and will accept the $27 million loan from the state, which loan is to be doled out in $9 million yearly increments. The Indianapolis Business Journal reports:

The Indianapolis Capital Improvement board likely will accept a state loan providing $27 million over three years to help shore up its fragile financial situation.

Members of the not-for-profit that operates the city’s professional sports venues and the Indianapolis Convention Center will vote next month on whether to accept the assistance, or risk losing the initial $9 million installment this year.

“We ought to go ahead and borrow it,” CIB Treasurer Ann Lathrop told the board Monday afternoon.

Lathrop last month hinted that the organization’s bleak financial situation had improved to the point that it may not need the initial $9 million, which would save the CIB from paying 5.25 percent in interest charges.

The not-for-profit is on target in 2010 to turn a $47 million budget deficit into a surplus—additional money that could be used in negotiations with the Indiana Pacers over Conseco Fieldhouse operating costs.

The CIB expects to improve its finances by making $26 million in cuts this year. It also is poised to collect roughly $11 million more in annual revenue, and it avoided payment on $25.5 million in debt-service reserve payments.

Yet, it’s still unclear whether the CIB, which operates the city’s professional sports venues, as well as the Indianapolis Convention Center, will absorb $15 million next year in Conseco Fieldhouse operating costs.

A provision that allows the Pacers to renegotiate their lease after 10 years could trigger the additional cost, in order to keep the team in the city. An agreement has yet to be reached, although CIB officials continue to negotiate with the team, CIB Vice President Pat Early said.

“We’ve done nothing to deal with Conseco Fieldhouse yet,” he said. “One way or another, that may require money we don’t have in the budget. We still haven’t resolved all the open issues.”

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Let's summarize. The CIB wants to borrow $9 million every year, for the next three years, at an interest rate of 5.25%, and will likely give that money, plus $6 million more of taxpayer money, to the billionaire Simons, the owners of the Pacers, for a total of $15 million per year. This is all so the CIB, i.e. the taxpayers, can pick up all the operating costs on Conseco Fieldhouse, even though the Pacers, and not the taxpayers, get ALL the revenue on events that take place in the building.

Oh, and have I mentioned that there is no "right to renegotiate" the deal after ten years as indicated in the IBJ article? The right is a "right to terminate" which only occurs if the franchise is 1) losing money; 2) is going to be sold; and 3) is going to be relocated to another city. Even if those three conditions are present, the penalties for the Pacers to exercise that right are enormous, and the first year would likely run something in the neighborhood of $165 million. It is only near the end of the 20 year contract that the penalties fall enough that the Pacers could realistically threaten to terminate.

The article notes that the CIB continues to "negotiate" with the Pacers, which "negotiations" apparently have been going on for more than a year. I'm not sure why the CIB should negotiate with the Pacers at all given they have no leverage to force a renegotiation of the contract. Nonetheless, any time the CIB says it is "negotiating," one thing is for certain: taxpayers need to grab hold of their wallet because the CIB plans to give away the taxpayers' money.