Greg Ballard and Local Government and Capital Improvement Board and Government & Economic Development and Privatization

City not ready to privatize Capital Improvement Board

June 5, 2010

Mayor Greg Ballard has put privatization of Indianapolis’ stadium and convention center management on indefinite hold.

His Republican administration last fall put out a “request for information” from businesses interested in operating Lucas Oil Stadium, the Indiana Convention Center and Conseco Fieldhouse.

The request, spurred by the Capital Improvement Board’s budget crisis, drew 12 responses, including proposals from national heavyweights in facilities management.

Lathrop CIB Chairwoman Ann Lathrop said privatization isn’t off the table “completely.”

But ultimately Ballard decided the city has too much on its plate to consider a CIB privatization, including hosting the 2012 Super Bowl, completing the convention center expansion in December, and concluding negotiations with the Indiana Pacers.

“There are no plans to pursue a large-scale outsourced contract at this time,” Deputy Mayor Michael Huber said. “But we’ll do anything we think is in the long-term best interest of the taxpayers.”

Rather than award one enormous private contract to run the three facilities, Ballard instead adopted a piecemeal approach that uses smaller elements of various proposals.

For example, the city included CIB in its plan to audit and retrofit city buildings to make them more energy-efficient. It also is including CIB parking in its plan to privatize thousands of Indianapolis street, surface and garage parking spaces.

In addition, CIB has consolidated its health insurance with the city’s, Huber said, turning an expected 25-percent premium increase into a 5-percent cut.

CIB Chairwoman Ann Lathrop said privatization isn’t off the table “completely,” but that the agency already has slashed its annual budget from $78 million to $45 million.

For now, she wants to limit further tinkering to the margins.

“We have a new building opening up and the Super Bowl. Those are two fairly large events that would weigh in on when would be an appropriate time to do a global change in management,” she said.

“I think you have to be thoughtful about how those two ... events could have an impact if we were to think about moving forward” with the next step in the process, issuing a full-blown request for proposals.

CIB manages the convention center and Lucas Oil Stadium, while the Indiana Pacers manage Conseco Fieldhouse.

City officials have been negotiating for months with the Pacers over whether the city should take over $15 million in annual Conseco Fieldhouse operating expenses.

Lathrop said those negotiations also bear on the decision to table privatization, but she declined to share details on the talks or a time line for a deal.

The Ballard administration’s decision surprised Philadelphia-based SMG, the oldest and largest firm in the stadium-and-convention-center management industry.

SMG, whose portfolio includes five NFL stadiums and more than 200 venues, hadn’t heard anything from the city since responding to Ballard’s initial request last year.

The mayor originally pursued privatization because firms like SMG have the scale to find additional cost savings and the connections to increase bookings, boosting revenue.

“Our understanding was that the city was going to further examine the issue,” Ginty said. “Absolutely, we would like to pursue it. I think we are the premier company that does this.”

SMG’s chief rival in pursuing the CIB deal was a four-way partnership between the Pacers, the Indianapolis Convention and Visitors Association, and the two other biggest companies in stadium management, Philadelphia-based Global Spectrum and Los Angeles-based AEG.

ICVA President Don Welsh was on vacation and could not be reached for comment. Global Spectrum and AEG did not return IBJ’s calls. Asked about the decision to table privatization, Pacers spokesman Greg Schenkel said: “My assumption is they have a lot of other priorities.”

Schenkel declined to comment on the status of the Pacers negotiations with the city.

It makes sense to resolve the Pacers’ situation before moving ahead on privatization, said Mark Rosentraub, the University of Michigan’s Bickner Chair of Sport Management.

The same goes for CIB’s getting its financial house in order. Operating deficits at both Lucas Oil Stadium and Conseco Fieldhouse were the initial causes of CIB’s financial crisis.

“You’ve got to do first things first. And the first thing is to stabilize Conseco and Lucas Oil,” Rosentraub said. “That’s job one.”

Eventually, Rosentraub expects Indianapolis to return to the idea of negotiating a major venue management contract with SMG, AEG or Global Spectrum.

But until the public knows more about the nature of those operating losses, he said, it’s impossible to speculate on a time line. The city and the Pacers have kept negotiations behind closed doors.

“We don’t have a report. Why does that $15 million [Conseco Fieldhouse operating] shortfall exist? What is it a product of?” Rosentraub asked.

“Until we know that, it’s a beer and pretzel conversation. ‘What if?’ And, ‘Suppose this.’”•

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