Tuesday, October 4, 2011

Did the City Pay the Pacers a $10 Million Subsidy Installment Retroactively Contrary to What Was Told to the Public?

Conseco Fieldhouse
Last year the blog Field of Schemes reported on the deal the City struck with the Pacers last summer:
It's a couple of weeks late, but the Indiana Pacers have obtained their boodle: The city of Indianapolis has agreed to pay the Pacers $10 million a year for the next three years (plus $3.5 million for a new ribbon ad board, among other things) to play at Conseco Fieldhouse, the taxpayer-funded arena that the team plays at rent-free and keeps all revenues from. That's less than the full $15 million in annual operating costs — the Pacers' only arena-related expense — that the team owners said they wanted the city to cover, but not a whole heck of a lot less, especially considering that the Pacers' lease isn't actually up yet.
The plan touted by the City back then was to pay the Pacers $10 million annually for the purpose of keeping the team in town for the next three seasons, which seasons would be 2010-2011, 2011-2012, and 2012-2013.  (As I pointed out previously, the threat to move was always bogus considering the hefty penalties in the contract for the Pacers exercising the early termination provision.)  Yet when the issue came up this year in relationship to the possible cancelled season, the discussion was about whether the City needed to pay the third installment of the $30 million subsidy that was being considered in the next budget.  (See WRTV's Norman Cox's recent story on the subject.  The Indianapolis Star also reported it was the third installment.)

How did the Pacers get to the third installment of the annual subsidy in this, the second year of the deal?  I think the City might have paid the Pacers $20 million last year, including $10 million retroactively to cover the 2009-2010 season that was over at the time the deal was announced by the City.  There would be of course no reason to pay the Pacers a subsidy for a year already gone by. 

It's ironic to note too that the Pacers asked for $15 million per year.  Part of the "compromise" was for the City to give the Pacers "only" $10 million annually.  But instead of being spread out over three years, the $30 million is spread out over 2 years, thus making it exactly the $15 million annual subsidy the Pacers had demanded.

If it turns out that $10 million of the subsidy was paid retroactively and we are thus on our third year, the "bridge deal" will end next year, a year earlier than promised.  After the election, expect the Pacers to come hat in hand wanting another multi-million dollar subsidy from the City.


bill levin said...


Gary R. Welsh said...

Paul, Hasn't this been in the context of the CIB's 2012 budget presentation (i.e. payment to be made during next year's budget cycle)?

Paul K. Ogden said...
This comment has been removed by the author.
Paul K. Ogden said...

Gary, I thought about that. However, any way you cut it what is on the table now should be whether to pay the second installment. Last year's debate on the deal concluded with the payment of the first installment which was approved by the council as part of the CIB's budget. That was for the then upcoming 2010-2011season.

This year the issue should be the second installment, for the 2011-2012 season. The only way to get to the 3rd is if one of those payments last year went retroactively for a season that had already passed, which isn't quite what the public was told. Even then I don't know how they did it without the second installment being approved as part of the budget.

Gary R. Welsh said...

No, Paul, you forget the discussion. The first payment last year wasn't specifically appropriated in that budget, but they had the money for it. Remember, Councilor Lutz was asked if the tax increase deal included money for the Pacers and he said it did not. After the CIB got its tax increase, it claimed it had funds available to fund the first year of the bailout within their budget. The second payment is made this year and the third payment is made next year. The first payment was essentially being paid retroactively.

Paul K. Ogden said...

I don't think that was made clear, i.e. the retroactive payment. People were told the Pacers were locked in for the next three seasons. But in fact, they only locked them in for two seasons. And the Pacers ended up getting $30million for 2 years. The City just made it appear like it was a 3 year deal.