The Indianapolis Star reports:
The Indianapolis Airport Authority's massive maintenance facility has lost money for most of the past 10 years, yet it has only conducted one audit to ensure the building's biggest tenant is paying its fair share.
The lack of audits is a sore spot for bondholders who helped finance construction of the $600 million aircraft repair center in the mid-1990s. Bondholders haven't been paid since a bankrupt United Airlines abandoned the facility in 2003, and are still owed $170 million plus interest from the $220 million bond issue.
The airport's biggest tenant today is AAR Corp., an Illinois-based aircraft maintenance firm. The airport signed a 10-year lease with AAR for 10 of the maintenance center's 12 hangar bays in 2004.
The lease includes a profit-sharing arrangement that requires AAR to turn over to the airport a third of its operating profits that exceed 9.25 percent of gross sales at the facility. The lease also allows the airport to audit AAR annually to make sure it's following the profit-sharing arrangement.
Airport and AAR officials say the company's profits have never met the profit-sharing threshold.
Chris Mason, a spokesman for AAR, declined to provide The Star with financial information about the facility, but said the Indianapolis maintenance center is more costly to operate than any of the company's other facilities.
"As such, we have never met the annual threshold for operating profit or as a result owed payments under the provision," he said.
But some bondholders are suspicious of that claim. Scott Connelly, a California investor who owns about 500 bonds, points to AAR's corporate-wide financial statements. Since it began leasing the Indianapolis facility in 2004, the firm's overall revenues have shot up 217 percent, from $652 million to $2.1 billion. The company's financial statements also show that in 2008, its operating margin exceeded 9.25 percent.The article then goes on to discuss the one audit that was done, five years ago and that that audit does not comply with governmental or public accounting standards.
Sound familiar? It's the exact same situation with the CIB and the Pacers. The Pacers claim to be losing money but won't provide the documentation to back up the team's claim. Meanwhile the CIB doesn't demand that the documentation be produced.