Monday, September 19, 2011

That Supposed $55 Million Impact of a Lost Pacers Season

WRTV reports on the supposed devastating impact the loss of a Pacers season would have on the City's economy:
INDIANAPOLIS -- An NBA season lost to the ongoing lockout could cost Indianapolis more than $55 million, one report found.

The Pacers are expected to start training camp Oct. 3, but a highly anticipated negotiating session between NBA management and the league's players association blew up last week with no progress on the big stumbling block, the salary cap, 6News' Norman Cox reported.

The Hunden Report, a consultant study that was the basis of the deal that kept the Pacers here last year, found that eliminating Pacers games would deal a large blow to the city, including operators and workers in downtown's hospitality industry.

"We have over 40 home games a year and we always get a great crowd from the Pacers' games, so it certainly isn't going to help our business," said Keith O'Reilly, who owns a pub a block from Conseco Fieldhouse.

Conseco Fieldhouse
The Capital Improvement Board, which operates Conseco, will soon present its budget to the City-County Council, including the third of the three, $10 million subsidy payments to the Pacers.

The CIB said those will still be made, even if no games are being played.

"The mayor was very clear. It's about the building, not the team. The payments are made so that the building can continue to be operated," said CIB spokesman Robert Vane. "So the fact that there's not an NBA game being played doesn't mean there aren't other activities, and the CIB would still have to pay for operation of the building."
Almost every study of professional sports suggest that the economic impact is minimal at best.  When the CIB wanted to try to justify giving the Pacers tens of millions more of our tax dollars, did the Board go to a university economist who might give them news they didn't want to hear?  No, they went to Hunden Strategic Partners, a pro-hospitality group, headed by Robert Hunden, a former economic development official for the City of Indianapolis under Mayor Stephen Goldsmith and previously worked for the Bond Bank.   Hunden also worked on the original deal for Conseco Fieldhouse.

Let's look a bit at Hunden's funny math.  If the Pacers are locked out at all season, that means 45 home games (including four preseason) are lost.  The Pacers average 13,538 fans per game, so let's use a total of 609,210 fans who won't be coming downtown to Pacers games. 

Supposedly those 609,210 fans generate $55 million in economic activity in downtown Indianapolis. That would be $90.28 for each fan.  That $90.28 does not include the cost of the ticket, parking at the Fieldhouse or game concessions, 100% of which money goes to the Pacers.  Rather that $90.28 is economic activity that is supposedly created in the downtown area by spending at downtown bars, hotels and restaurants. It is also includes a number of part-time, seasonal jobs created at the stadium, jobs that pay just above minimum wage.

How many people actually spend $90.28 each for a meal at a restaurant or drinks after a game?  How many get a hotel room for the game?  You can bet not many.  Hunden Strategic Partners was using funny math to come up with a pro-Pacers subsidy study.  Of course, we taxpayers had to pay Hunden $30,000 for the study that suggested taxpayers should pay the Pacers more.

Any economist will tell you that with the Pacers you're just moving discretionary spending from one part of the metropolitan area to another.  You are not actually creating new spending.  If the Pacers don't have a season, fans are going to spend that money on other activities such as taking the family out to a restaurant or the movies.   The money doesn't disappear as suggested by Hunden, the CIB, and our illustrious mayor.

As part of the Conseco Fieldhouse deal struck in 1999, the Pacers were given free rent in the building built by with Indianapolis taxpayer dollars.  In exchange for operating the building, the Pacers were given 100% of the profits from the facility, including from all non-Pacer events held at the building.  Last year, we found out that deal was not good enough.  The Pacers wanted the CIB, i.e the taxpayers to pay to run the building while the team continued to get 100% of the profits on the facility. Of course, the CIB said "okay" and put the taxpayers on the hook for $33.5 million over the next three years.

Now we find out that even though the Pacers may not have a season and the supposed $55 million economic impact may not happen. Yet the Mayor and the CIB still want the taxpayers to be on the hook for the annual $10 million payment to the Pacers to run Conseco Fieldhouse.  Of course, the Pacers, and not the taxpayers, will continue to get all revenue off the building, with or without a season.  After all, that is the Indianapolis way.


Robert said...

This is outrageous, but then, so is the deal the city made with the Colts when Lucas Oil Stadium was built.

When deals like these are made, assuming the teams concerned do actually play, sure: a number of downtown businesses make money, and of course those business do generate a few jobs. Still, we're not talking thousands of jobs, but perhaps a few hundred at the very most and that's probably a generous estimate.

In the meantime, the ordinary citizens of Indy (not to mention citizens in the so-called "donut counties" in the Colts' case) are on the hook for hundreds of millions of dollars, and receive no economic benefit whatsoever from those expenditures. The good citizens of Indy and surrounding counties don't even get the meager privilege of having a say in what the buildings they paid for (and will be paying for for years to come) are named.

In other words, the citizens, including even the poorest, are out of pocket for one reason and one only: to help make already obscenely rich men even richer.

Only in America.

Downtown Indy said...

I cannot figure out why Herb Simon needs his $10 million if he's not paying player salaries.

But then, I can't figure out why he needs it even when he IS.

Indy Rob said...

I think the average attendance may be overstated, but the $10 million amounts to a subsidy of about $17 per seat per fan per game. In other words, for every 1000 fans attending a game, the city is spending about 17,000 dollars so that they have a nice field house to watch basketball.
$17 dollars would pay for a dinner and a beer at a lot of downtown restaurants. Maybe Indianapolis should have a free dinner and beer night to get people to come downtown for the economic impact.

Mike Kole said...

Ranks right up there with "Jobs saved or created" in the BS Dept.

Paul K. Ogden said...

Indy Rob, the attendance figures were taken from what the NBA published.

Paul K. Ogden said...


Exactly. I especially love the debate over "job committments" It's like bragging about who can lie the biggest about jobs that MAY come to the City.

M Theory said...

I'd rather invest in my my home or my neighborhood. It's very satisfying to hire LOCAL home improvement contractors.

I'm upping resale values on my street PLUS helping local guys put bread on the table.

It's tangible and real.