Thursday, April 10, 2014

Crack Negotiators for CIB Agree to Give Billionaire Pacers Owner "Only" $160 Million Over Next Ten Years

The same crack "negotiators" who cut the extremely one-sided lease deal for the Regional Operating Center must also work for the Capital Improvement Board.  The geniuses at the CIB announced today that they had preliminarily agreed to a new 10 year deal with the Pacers which will cost taxpayers even more.  The Indianapolis Star reports:
The Pacers will continue to play basketball in Indianapolis for at least a decade under a $160 million deal the team and the city plan to announce Monday morning. 
The agreement locks the team into Bankers Life Fieldhouse for 10 years, with three one-year renewal options, according to documents obtained by The Indianapolis Star. In exchange, the city will provide $160 million to cover operating costs and facility upgrades.
The city's Capital Improvement Board is expected to vote on the deal Monday.
Pacers Owner Herb Simon
Although the deal is touted as a new 10 year deal, in fact there was already another 5 years on the old deal.  So the extension is actually only for 5 years, not 10.

Mayor Ballard, who is preparing to, once again, push for higher taxes on Indianapolis working men and women, this time for public safety, of course praised the giveaway of tax dollars:
The Indiana Pacers and Indiana Fever attract hundreds of thousands of people to Indy on an annual basis," Mayor Greg Ballard said. "Many Downtown workers and businesses rely on those fans for their income. Amenities like professional sports, art and museums make our community a more vibrant and attractive place to live and do business."
Obviously Mayor Ballard has never had an economics class.  If he did he would understand a concept known as "disposable income."  Pacers' games, which are attended almost entirely by local individuals, are not adding new spending to the city. The team is simply moving disposable income from one part of the metro area to another.  It is one of the reason why economists are almost unanimous in their belief that professional sports teams are a poor investment for cities.

 The Indianapolis Business Journal provides details on the deal:
[The deal] breaks down to $3.7 million for direct operating expenses and $7.1 million for "operating reimbursement" payments, according to a CIB board presentation obtained by IBJ. The $7.1 million figure would rise by 3 percent each year over the course of the deal.   
The CIB also would provide $26.5 million for improvements to Bankers Life Fieldhouse's locker rooms, concession stands and video boards, and another $7 million for capital replacement items including new carpet. About half of those improvements would be completed in 2014.
What could be the sleeper in the deal is the provision that kicks in should Pacers owner pass away, a very likely scenario since Herb Simon is 79.  Under the deal the CIB is to provide financing assistance to the heirs of the team should they have trouble getting financing on their own at Simon's death.  The CIB is given 15 months to help the team find financing and would be entitled to a right of first offer in the event of a sale, a provision which means very little. The Star gives more detail on what this section means:
If the team's lenders call its current loans due, or if those loans mature, the Pacers must seek replacement financing that is secured by collateral, likely real estate. The CIB would have time to ask state lawmakers and the City-County Council to help the Pacers obtain such financing. If the team can't obtain such financing and the Pacers' parent company, Pacers Sports & Entertainment, decides to sell the team, the city is entitled to a right of first offer.
It is not clear whether the deal would allow a new owner taking over the team after Simon's death to move the team.  One thing is for certain though - Indianapolis taxpayers will pay dearly to make our billionaire basketball team owner even wealthier.


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