Indianapolis throws yet another $160m at Pacers, because that’s what Indianapolis does

I don’t usually post this late at night, but I just got home from coaching a perfectly enjoyable youth baseball game when BLAMMO!

The Pacers will continue to play basketball in Indianapolis for at least another decade under a $160 million deal the team and the city plan to announce Monday morning…

The Capital Improvement Board will subsidize fieldhouse operating costs to the tune of $3.7 million a year. That will cover things such as liability insurance, security and utilities. The CIB also will pay the fieldhouse’s manager $7.1 million a year, with that amount rising 3 percent each year.

In addition, the CIB will provide $26.5 million to the Pacers for upgrades to seating, new paint, and improvements to locker rooms and concessions. The CIB also will pay for $7 million in improvements directly to replace the floor, upgrade the cooling tower, and improve the facility’s steam pressure control system.

Finally, the CIB will pay $8 million over 10 years for the scoreboard and sound system and will take title of the equipment at the end of the deal…

Subsidies under the new deal amount to an average of $16 million a year. That’s higher than the $11.2 million average annual subsidy under the current three-year deal.

I really shouldn’t be surprised by this, since Indianapolis, as noted, has been paying the Pacers $33 million over the past three years just to keep playing in their taxpayer-provided arena. Stretching out the annual operating subsidy over another ten years, though — and upping the ante in the process — solidifies the city as a rare winner of the sad trifecta of supplying 100% of arena construction costs, collecting no rent or other revenues, and then paying the team to play in its free arena. Indianapolis doesn’t so much host an NBA team as lease one.

For all the stupidity on display here, there’s one person who needs to be singled out: Whoever it was in Mayor Stephen Goldsmith’s administration who, after agreeing to gift the Pacers with a new arena, looked at the team execs’ demand for a clause letting them opt out if they weren’t happy with how things were going and thought, “Yeah, sure, that’s fair!” Behaving like sports teams are hostage takers who need to be placated by any means necessary is a common sight among city officials across the U.S.; this, though, was like paying off the hostage takers and then handing them a gun. And a new hostage. A baby puppy hostage.

Stephen Goldsmith, incidentally, after having to resign as New York City deputy mayor following his arrest for spousal abuse (he was later acquitted), is now back at his previous job as a professor of government at Harvard. It’s gotta be awkward when he runs into Judith Grant Long at the cafeteria, and she just shakes her head sadly at him.


24 comments on “Indianapolis throws yet another $160m at Pacers, because that’s what Indianapolis does

  1. No, the Simons didn’t pay anything for Conseco. The CIB built a 175 million dollar arena with a 25 year bond. The Pacers get 100% of everything that comes through the door; signage, suites, naming rights, concessions, parking and for the last three years we also pay the maintenance. Meanwhile the city has a homicide rate that Detroit calls scandalous and the city infrastructure is crumbling.

  2. That’s appalling; it really is. Was there much debate in their Council at all? What kind of a government are they running that would allow this?

    I’ve been told a few times that if I don’t like the deal the Kings got, I should consider moving to another town. I only say this because I think anyone who opposes what’s going on in Indy would be absolutely batshit insane to stick around there. Spent your whole life there? Don’t let emotions be your guide — leave. You will be better off.

  3. Found it: The Simons paid $3.5 million a year for ten years as a share of parking revenues for luxury suite holders. Meanwhile, they got $2 million a year for 20 years for naming rights to the publicly owned-and-constructed building.

    http://www.ogdenonpolitics.com/2009/04/four-year-old-letter-details-pacers.html

    That’s pretty much a wash, so I think “free arena” is a fair description. (Judith Grant Long, for what it’s worth, has the Pacers arena as 96% publicly funded.)

  4. This is why American sports leagues make so money compared to other leagues around the world. That’s why Selig bragging about revenue is a joke.

  5. For a nation that was founded 250 years ago on the principle of no taxation without representation, and an objection to rule by divine right of a monarch, America has done a pretty bang up job of creating it’s own oligarchical class. It also supplies that class with the effective power of taxation, and insulates them from the questioning eyes of those who’s tax dollars they misuse.

    Life is funny sometimes.

  6. Neil:

    How would you rate Indianapolis’ basketball largesse relative to Glendale’s arena fiasco? Or Miami’s baseball ‘generosity’?

    Seems to me the Coyotes have a slightly higher level of direct taxpayer subsidy in their free arena than the Pacers do… am I wrong about that?

  7. John, I’m not sure how it could possibly be more generous than the Pacers deal is. The Indy taxpayers built the arena, the Pacers get 100% of the revenue off the building from every event held there, can play their for free, and the taxpayers now have to pay to run the place. How could any city top that generosity?

  8. Thank you for the clarification, Neil.

    One thing being overlooked is that the Pacers are just about the most movable franchise in American major league (meaning: not counting MLS) sports. The NBA is willing to move teams, the Pacers have always struggled to draw and the Simons appear to lack the home town attachment that Herb Kohl has to Milwaukee.

    I find the idea that the Pacers would’ve signed a longer term lease in 1999 if the city would’ve demanded it dubious. And I find the idea that the Pacers would’ve stayed beyond this season without this new ten year handout dubious. If you’re in a tough market and you want to keep your team, this is what politicians have to do.

  9. John and Paul: Glendale likewise put up 100% of the arena funding, charges 1% a year rent, and pays operating subsidies to the Coyotes of about $15 million a year. I haven’t sat down and done an apples-to-apples comparison, but they’re both in the same range of hideously awful.

    And Ben, clearly Indiana (and Glendale) had less leverage than, say, New York in negotiating to keep its sports teams, by virtue of being a more marginal market. Still, Indianapolis does have *some* virtues as a market — strong hoops fandom, bigger than Albuquerque, team doesn’t have to start from scratch there — so you have to wonder if they could have at least bargained the Pacers down to 90% public funding and $5 million a year in operating subsidies, say. But we’ll never know what the least is that the Pacers would have accepted, because Goldsmith and his successors were all happy to bid against themselves.

  10. Two points to be made here. One, the amount the Pacers claim it costs them to maintain and operate the Fieldhouse has never been documented and furnished to the public. We only know what the CIB says the Pacers spend. The second point is that we have no documentation concerning how much the Pacers are making renting out our publicly-owned Fieldhouse for concerts and other events. Both the CIB and the Pacers have a long history of lying to the public about everything concerning their relationship. The interwoven, conflicted relationship between these two organizations and the Simon family has never had the light shone on it; if it were, the public would be even more outraged than it already is by the cozy relationship that exists between the Pacers and the CIB.

    On that escape clause in the lease, there again we have a situation where the Pacers claim they’ve lost all kinds of money, but if you track the statements made by the Pacers’ Jim Morris, he can’t get the number right on just how much it is the Pacers have lost. There have been wildly varying numbers spewed from his mouth. The CIB does not require the Pacers to produce audited financial statements. They were never losing money. Herb Simon never spoke up about demanding subsidies from the CIB to run the Fieldhouse until after he saw that Jim Irsay got an even better lease deal for Lucas Oil Stadium than he got for the Fieldhouse. From the outset, Irsay never paid a dime of the cost of maintaining and operating the LOS; the CIB picked up all of those costs and Irsay gets all of the revenues. It infuriated Simon that a pill-popping brat born with a silver spoon in his mouth got a better deal than he got. That’s when he started demanding that he get a comparable gig. There had to be a backstory to support subsidies after 10 years so they agreed they would fabricate a tail about how much it cost to run the Fieldhouse and how much he was losing. Look at Kansas City’s Sprint Arena. No NBA team as a tenant, but the city has no problem generating enough revenues to pay the bond debt and pay the maintenance expenses on it. Like they say, figures never lie but liars always figure.

  11. You know, the Orioles tried that same “But mom! He’s getting one, why can’t I?” trick when the Ravens weren’t charged rent on their stadium but the O’s were. (This was mostly because of consequences of the 1986 Tax Reform Act; the Ravens also paid operating costs where the O’s didn’t.) Baltimore said “Nuh-uh,” the Orioles sued, the Orioles lost, case closed.

    I don’t blame Simon for demanding operating subsidies, any more than I blame any businessman for naked greed. It’s the part where Indianapolis gave in — repeatedly — without a fight that baffles me.

  12. Ben- where could the Pacers have gone? Who is going to give them an arena?

  13. Ben is also overlooking the fact that there was still 5 years left on the original deal and substantial financial penalties if the Pacers tried to move. Plus, I highly doubt that any other city could match Indianapolis’ famous generosity towards its billionaire sports owners. But if someone can, so be it. These professional sports teams do very little for the local economy anyway.

  14. Sports leagues routinely require prospective franchisees to provide personal guarantees regarding funding and obligations of the franchise (Trans: if the team loses money, the owner cannot simply declare bankruptcy, he is personally responsible for those debts to the league and to others, possibly even after his franchise is revoked). This is also one of the reasons many leagues do not allow direct corporate ownership (corporations have ‘escape chutes’ that individuals who provide personal guarantees do not)

    It is mind boggling that governments do not require the same level of personal guarantee regarding financing agreements…

    You want $X million to help you compete with “New York”?

    First, justify your claims that you are losing money (rather than just not making as much as you’d like).

    Second: Sign This.

  15. The city leases Bankers LIfe to the Pacers for $1 a year. Gosh it’s great to be a billionaire team owner in Indy…

    http://www.indystar.com/story/news/2014/04/11/tax-increases-fund-pacers-deal-city-officials-say/7614459/

  16. A major reason for the situation is the fawning media which is always ready to tell the people that downtown Indianapolis will implode without the presence of professional sports. In these days of international crises and political upheaval, the sports editor is as likely as anyone else to rate front page space on our only daily newspaper.

  17. Fred McCarthy brings up the boosterism of local papers in selling these absurd subsidies. It’s a symbiotic relationship, as most papers would probably cease to exist if it weren’t for their sports pages. Here in Phoenix, the sports pages dominate and probably represent two-thirds of the locally-produced writing in the paper. Sports writers likely think their jobs depend on keeping the subsidy spigot open.

  18. Local media never examine these deals because they absolutely require these teams to survive. They never investigate these deals, ever. Conflict of interest, for sure.

  19. Fred: That is absolutely true. However, in fairness I have to say that the sportswriter “Pro arena/stadium” puff pieces nearly always appear in the sports rather than politics or business sections.

    Ok, so they really should be in with the cartoons, but no-one expects sportswriters to be honest or forthright about anything. And people are generally right not to…

  20. Just from reading the Indianapolis Star on a road trip, I can tell that most of the people there are drinking the Kool-Aid when it comes to corporate America. Yes, Indiana has a lot of factories and businesses, but I fear they’re losing a ton of money being taken advantage of. They’re even subsidizing residential skyscrapers there with tax dollars. And they think that’s ok. Do these people understand how the business world is supposed to operate? They’re supposed to be self-sufficient!

  21. Tom,

    Best I can tell Seattle, VA Beach, San Jose, Anaheim, St. Louis, Vancouver, Kansas City and Newark all have politicians and/or rich guys who have expressed interest in a team in recent years.

  22. Follow the link below to see just how egregious a contract the Pacers have from the city of Indianapolis.

    http://www.capitalimprovementboard.org/main/cib-content/uploads/2013/07/Indiana-Pacers-Agreement-2014.pdf