Monday, May 10, 2010

CIB Seeks Cover for Pacers $15 Million Giveaway, Commissions Report from Pro-Hospitality Group

The on-line Indianapolis Star reports:

The Capital Improvement Board this afternoon will release a study it commissioned to detail the economic impact the Indiana Pacers have on the city.

The CIB’s release of the study comes as negotiations between the city and the Pacers over who should pay for the $15 million operation of Conseco Fieldhouse have reached a critical stage.

During the first 10 years of the Pacers’ 20-year lease with the city, the NBA franchise has paid for Conseco’s operation expenses.

But now the Pacers are utilizing a window halfway through the lease that allows the team to renegotiate the lease’s terms.

Owner Herb Simon and the Pacers’ top brass have insisted the economics of operating a small-market NBA franchise make it fiscally impossible to also pay to keep the arena running.

They’ve also pointed to more than $200 million in losses since the Simon family bought the team in 1983.

Last month, Pacers President Jim Morris said if a new deal isn't inked with the CIB by June 30, then Simon would have to start searching for other solutions — including relocating the team.

In trying to consider what kind of deal to craft with the Pacers, the CIB hired Hunden Strategic Partners to “examine the relationship between the Pacers and the local
economy” to “shed light on the potential costs and benefits of the scenarios under consideration.”

Results of the study could be used by the CIB to justify picking up the cost of operating Conseco or choosing not to do so.

The CIB meets today at 3 p.m. The board’s president Ann Lathrop and treasurer Paul Okeson will discuss the study’s findings after the meeting.

I'm not sure why the Star continues to overlook that under the Conseco Fieldhouse contract, the Pacers cannot simply pick up and relocate the team. As I've reported here many times, there is no right to renegotiate in the contract. It's a right to terminate and for that provision to apply the team has to be sold and relocated. Plus, the penalty for exercising that early termination provision would be more than $150 million. Only the Indianapolis Business Journal reported that fact, a fact the Star continues to leave out of its stories.

Does anyone realistically believe the report produced by the Hunden Strategic Partners, a pro-hospitality group, will be anything but praise for the economic impact of the Pacers and a warning of dire economic consequences should the Pacers leave? There have been scores of academic studies done that show that professional sports are a poor investment for local government. Instead of considering those reports, the CIB commissioned another report that would confirm what the Board wants to do - dig into the taxpayers pockets for $15 million for to give to the billionaire Simons family.

In an IBJ story over the weekend, it was reported that even though it was not required to, the City amended its agreement with Veolia to make numerous concessions to the company. Advance Indiana reported on the story, which is not in the on-line edition, noting that the concessions include the City taking back $48 million in retiree medical obligations, the reclassification of capital costs that resulted in the City owning Veolia more than $5 million, the City agreeing to increase fixed-fee payments by $1.9 million, compounded each year by an inflation index more favorable to Veolia, and the City taking over the responsibility for pesticide monitoring costs and water conservation program.

IBJ reported that a state regulator was stunned at the one-side Veolia giveaways by the City when it was not contractually obligated to do so. That regulator must not know Indianapolis politics. Corporate giveaways are a way of life in Indianapolis. Neither party appears to be looking out for the taxpayer.


Downtown Indy said...

What we really need is not a rport about 'economic impact' but a disclosure of Pacer finances so we can understand why we should invest another $15M.

If they are unable to turn a profit with free rent and taking the concession revenue, then there's a serious problem that needs fixing.

Just giving them $15M because of a rosy report from Hunden is foolish at best and malfeasance at worst.

I think we'd do as well to simply dump the money into the torches around PanAm Plaza and turn the gas back on.

Rick Wilkerson said...

Thanks for your great reporting on this, Paul. I totally agree with Downtown Indy. Show us the books, Pacers.

I've been a fan of the Pacers since the first ABA season, but I'm also a fan of libraries, roads, water, and other community essentials. If the taxpayers bail out the Pacers while the inner city libraries are closed and we give away the water company, I'll be ready to march in the streets.

Blog Admin said...


What confuses me about this whole CIB thing is that the Pacers keep saying that they weren't profitable even when seats were getting filled. That means that people coming to see the games doesn't even allow them to break even.

What this means is that they are relying on something ELSE to make a profit rather than the actual game. Maybe it's licensing, or investments, I don't know. But when the service you provide and customers pay for doesn't even allow you to break even, you're right. Something is broken.

Downtown Indy said...

It's how you figure it when you say you 'don't make a profit' that is the key.

You can rake in $100M and spend it all on players' and management's salaries, entertaining celebrities, flying first class to NBA meetings and staying in $3000/night hotel suites, schmoozing NBA executives at exclusive clubs, buying Bentleys for retiring players - and bingo, you don't make a profit.

Incidentally, I haven't heard them say much about the money they get from the TV broadcasting rights, tne naming rights that Conseco pays out, or all the advertising revenue from signage and 'official sponsors.'