Indianapolis businesses say sales fine during NBA lockout

Finally, somebody who reads Slate! From last night’s WRTV in Indianapolis:

Although the National Basketball Association’s players and owners have failed to hammer out a contract, downtown businesses that normally depend on traffic from Indiana Pacers games said there’s a silver lining to the lockout’s dark economic cloud…

Chris Ratay, general manager at St. Elmo’s Steak House, said the lockout hasn’t really put a dent in his pockets, RTV6’s Rick Hightower reported.

“All I can say is I’m so happy we’re up even without the Pacers. I do look forward to them getting back to playing so we can start a promotion again with the pregame dinners, and maybe even increase our sales a little more,” Ratay said.

Also reporting strong attendance during the NBA lockout: The Indianapolis Children’s Museum and the Indianapolis Symphony Orchestra.

Now, this is just as limited anecdotal evidence as some of the news stories claiming that local businesses would be devastated by the lockout — though at least this is based on actual businesses reporting their actual sales, not projections based on a team consultant’s report. More concerted studies would be great, but in the meantime, it’s nice to see the media at least acknowledging the possibility that, as the WRTV report puts it, “the lockout won’t likely affect downtown business revenues because consumers with disposable income will redirect their entertainment dollars to other venues.”

Indy to pay Pacers $33m over three years for no damn reason

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.

In exchange, the city gets a commitment by the Pacers to stay in town … for three years. After that, the team could break its lease and leave town with a smaller penalty, which would dwindle to zero by 2019, the year that their lease is actually set to expire. I don’t think the Indianapolis Star used my quote, but what I told their reporter was something along the lines of “This is a pretty crappy payoff for $30 million in government subsidies.”

For its part, Deadspin, with its classic understatement, called the deal “the worst of all taxpayer-funded bailouts,” “a ransom, plain and simple,” and “a blatant cash grab by the Pacers, taking millions of dollars just to agree to live up to the terms of the deal they happily signed.”

None of which I’d argue with, though I would take issue with Deadspin’s contention that “Indianapolis needs the Pacers more than the Pacers need Indianapolis,” given that there aren’t a heck of a lot of cities with NBA-ready arenas, and certainly not with Indianapolis’ fan base. It seems like the city’s Capital Improvement Board caved to a major local business player — which may be partly explained by the fact that the CIB’s president is a former aide to this guy.

The CIB still needs to vote to cough up the dough, which it plans to pull out of its operating budget. Yes, that’s the same operating budget that ran out of money last year and had to be propped up with a $27 million state loan; with this in mind, at least one state representative says he wants to block the Pacers deal. Best of luck with that: The Pacers may not be able to beat anyone in the NBA Central, but they’re unstoppable when going one-on-one with Indianapolis elected officials.

Pacers may not get their lease subsidy before self-imposed “deadline”

It looks like talks over the Indiana Pacersdemand for an even sweeter sweetheart lease will go down to the wire — or a wire, anyway. The team’s owners set June 30 as a deadline for resolving the dispute, but Ann Lathrop, president of the state Capital Improvement Board (who was, incidentally, Indianapolis city controller at the time the original lease was signed) says there’s no guarantee a deal will be reached by then.

The big sticking point appears to be not the $15 million in annual operating-cost subsidies the Pacers want, which the CIB, despite its own budget woes, seems willing to cough up, at least in part. Rather, according to the Indianapolis Star, “the central sticking point has been who controls Conseco Fieldhouse,” with the CIB saying if it’s going to take on the cost of paying all operating expenses for a tenant that already pays no rent, it wants control of the arena back. The Pacers are reportedly “resistant” to this.

The Star article also quotes me (as saying that these kinds of talks always drag on longer than expected), but the quote of the day goes to economist Roger Noll, who told the paper: “In the absence of an active attempt by some other city to get them, deadlines like that are meaningless. The crucial issue has to do with whether they have any other options, and those don’t come overnight.”

In other words, pay no attention to the Pacers’ “deadlines,” pay attention to what’s going on in other cities. Like, say, Las Vegas, which is busily working on new arena plans to lure … um, whoops, never mind.

Pacers’ economic study: Pay our operating costs, or we won’t!

A consulting group issued an economic impact study of what the Indiana Pacers are worth to Indianapolis yesterday, an event so awaited that there were entire news articles just about the issuing of the press statement announcing the study’s release. And the findings are (drumroll, please):

  • If the Pacers left, the city would lose $55 million in annual economic activity.
  • The Pacers’ presence is worth 909 jobs.
  • The city would lose $17.8 million in annual revenue without its basketball team.

Economic impact, as I’ve covered here previously, is a meaningless figure, and 909 jobs isn’t an especially impressive number, especially if those include part-timers. That $17.8 million a year in actual revenues, though, is pretty substantial, especially on just $55 million in money changing hands overall. Does Indianapolis have a 30% sales tax that I didn’t know about?

No, as it turns out: The arena consultants estimated that the city would lose just $5.6 million in tax revenues without the Pacers (no word on whether they noticed that Indianapolitans might still spend their money elsewhere in town if denied NBA tickets), but would also lose $12.2 million if forced to run Conseco Fieldhouse, and pay its operating expenses — which the Pacers currently pay for, and are trying to get out of, which is the whole point of this exercise.

Let’s follow the bouncing logic here: The Pacers shouldn’t have to pay operating costs because if they didn’t pay them, the city would have to. So if they left, the city would be on the hook for operating costs anyway, so why not just let them stay and pretend they’d left, and have them pay nothing? I can’t wait to try this argument out on my landlord!

Of course, I didn’t agree to pay my landlord’s electric bills in exchange for getting to pay only $1 in rent and keep every penny from the basketball games I play in his backyard, but the Pacers seem to be conveniently forgetting that taking on operating costs was already a tradeoff on their part. As does the Marion County Capital Improvement Board, whose president Ann Lathrop told the AP yesterday that absolving the Pacers of operating costs is “the primary basis of a lot of our discussions right now.” It’s like taking candy from a baby…

Pacers threaten move unless city picks up $15m/year arena tab

Apparently the Phoenix Coyotes aren’t the only team demanding to be paid by their landlords for the privilege of having them play in their town: The owners of the Indiana Pacers have informed Indianapolis’ Capital Improvement Board that they want the city to pick up the $15 million a year cost of operating Conseco Fieldhouse — or else. Or else what?

On Tuesday, Pacers Sports & Entertainment President Jim Morris said if a deal isn’t inked by June 30, Simon would have to start searching for other solutions, and nothing would be off the table.

“We’ve been having conversations with the Ballard administration for two years,” Morris said, “and we’re now at the point where we need to wrap this up in the next 30, 40 days.”

If that doesn’t happen, he said, “[owner] Herb [Simon] would have to look at all of his options.”

Including moving the team?

“Herb would look at all of his options,” Morris repeated.

Morris did stress to the Indianapolis Star that “we do not want the team to move,” but that’s a typical sports owner non-threat threat, as we called it in the book. This is clearly a shot fired across Indianapolis’ bow, with the intent of getting headlines like … well, like the one that the Indy Star ran on its story.

The Pacers, you may recall, received Conseco Fieldhouse courtesy of local taxpayers in 1999, keeping all arena revenues while paying all of $1 a year in rent to play in the new facility — the one thing they did agree to pay for was operations costs, now estimated to run about $15 million a year. The team was smart enough to negotiate a lease opt-out clause for itself, though, one that it’s now threatening to invoke to get out of the lease if it isn’t renegotiated to reduce the Pacers’ costs to, well, zero, or thereabouts. Morris griped to the Star that despite the Pacers playing rent-free and keeping all revenues, “the losses have been really substantial and the only chance we have is to be able to use all the resources that are generated here to operate the basketball team.”

The stadium board, meanwhile, is running a deficit that hit $47 million last year. And at the same time as the Pacers are demanding lease breaks, they’re asking for new upgrades, including, per the Star, “a new scoreboard, floors, furniture, kitchen equipment, wireless Internet and other amenities.”

While move threats are a standard part of the sports owner playbook, it’s worth asking where the Pacers could possibly go: Before the Seattle Sonics moved to Oklahoma City two years ago, they weren’t exactly besieged with tempting offers. Kansas City has an arena but no reason to agree to an Indy-type sweetheart lease; Las Vegas has lots of talk about arenas, but that’s about it. It takes a lot of damn gall to demand rent breaks when you’re not paying rent, and threaten to move when you have nowhere to go — but if you’re an NBA team, you can probably just swing by the league offices and fill up at their gall fountain.

Indianapolis cuts arts funds to subsidize stadiums

The Indianapolis Capital Improvement Board voted yesterday to start plugging its $47 million a year operating deficit by suspending all grants to arts and tourism groups. The CIB also voted to look at renegotiating its union contracts and selling some of its assets.

The budget gap, you’ll recall, was created in the first place by the city’s sweetheart lease deals for the Colts and Pacers, compounded when the CIB agreed to let the Pacers stop paying $15 million a year in operations costs, either out of the goodness of their hearts or a sudden fear that the team would move to Kansas City otherwise. Next time someone tries to argue that stadium costs don’t cut into the money available for other public spending, remember this moment.

Indiana to stadium board: Drop dead

What if they built a stadium and nobody maintained it? The Indiana general assembly failed to agree on a bailout plan for the Indianapolis Capital Improvement Board yesterday, leaving the board that runs the Colts‘ Lucas Oil Stadium and the Pacers‘ Conseco Fieldhouse with a $47 million a year budget hole and no way to fill it.

The CIB has called an emergency board meeting for tomorrow, at which it will consider … well, no one seems to have much in the way of ideas. Indianapolis Mayor Greg Ballard “said they must do something,” according to WISH-TV, adding that the city could turn the stadium board over to the state, but he doesn’t like that idea; it’s hard to see where the state would like it either, since they already said they don’t want to be stuck with the board’s debts. Then there’s the suggestion, also from Ballard’s office, that Colts owner Jim Irsay might want to make a donation to the arts in lieu of paying rent; three guesses what Irsay’s reaction will be to that one.

The underlying problem remains the teams’ leases, which grant them pretty much all revenues from their buildings and ask them to pay next to nothing in rent ($250,000 a year for the Colts, $1 a year for the Pacers); it’s hard to find money to pay maintenance and operations when you don’t have any income. Nobody really thinks that the CIB will go ahead with its threat to close the buildings if it doesn’t get a cash infusion, it’s hard to imagine what they’ll do to get out of this one.

Legislators weigh Indy stadium bailout

WRTV News reports, somewhat dramatically, that Lucas Oil Stadium could close if a state bailout deal is not reached for the Indianapolis Capital Improvement Board. The CIB, which operates the Indianapolis Colts‘ one-season-old stadium along with Conseco Fieldhouse, home to the Indiana Pacers, is facing a $47.4 million operating deficit, after failing to budget properly for $26 million in annual operating costs for Lucas Oil Stadium.

The consequences of financial failure for the CIB remain unclear. CIB President Bob Grand sounded pessimistic, if vague, saying, “If you want me to give you worst-cases, I mean the worst-case scenario is we could be out of money and the facilities would be, arguably, closed.”

The bailout plan includes annual $5 million payments from both the Colts and Pacers, which neither team has agreed to as yet (UPDATE: Since the Pacers would be absolved of about $15 million a year in operating costs, this would actually save the team $10 million a year. -ND), as well as tax increases on alcohol, restaurant meals, hotel stays, and sports tickets.

Politicians are not yet on board with the plan, either. NWI reports that Thomas McDermott Jr., Mayor of Hammond in northwest Indiana, is incensed that a similar finance plan for flood protection levees in his district was blocked in December. “It seems to me that it’s more important to build football stadiums than it is flood walls,” he said on Thursday.

Indianapolis: Stadiums out of money, send more

Hey, remember that $20-35 million a year operating deficit Indianapolis’ stadium authority was projecting to run? Turns out it’s now $43 million a year – and the city or county may have to consider new taxes to help stem the flow of red ink.

Among the options being considered, according to the Indianapolis Star, are a food and beverage tax hike, a hotel tax hike, a sales tax increment financing district (which would just divert sales taxes that would otherwise go to the state treasury), a ticket surcharge (which, contrary to what the Star claims, would mostly come out of the pockets of the Colts and other local teams, who would be limited how much they could raise ticket prices, not local fans), and lease concessions from the Colts and Pacers. Noting that the Pacers are expected to demand a sweetheart lease akin to the Colts’, U of Indianapolis sports marketing professor Larry DeGaris remarked, “On one hand, the city has already played its hand by building the stadiums — it would be a shame to have these two huge white elephants Downtown (if the teams, in particular the Pacers, opt to move to new cities). But the teams don’t have the same leverage now, either. Where are the Pacers going to go that can help them?”

All this, on top of the $715 million that local taxpayers spent to build the Colts’ new stadium in the first place, could leave the public on the hook for more than $1 billion in construction and operation costs. But then, it’s not like anyone could have predicted that the stadium would lose money for its public owners once it opened – oh, wait…