Loss of Pacers season would deal blow to CIB, state revenue

October 11, 2011
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Taxing bodies and downtown businesses are bracing for an economic body blow with the crushing impact of a Roy Hibbert pick now that cancellation of the Indiana Pacers' entire 2011-2012 season is a real possibility.

NBA Commissioner David Stern canceled the first two weeks of the regular season on Monday—including the Pacers first seven games—after owners and players were unable to reach a new labor deal and end the lockout. Failure to reach a deal soon could emperil the entire season.

If that happens, the Capital Improvement Board might lose $1.5 million in food-and-beverage taxes, and the state could miss out on $3.5 million in Professional Sports Development Area funds, CIB Chief Financial Office Dan Huge said at Monday afternoon's CIB meeting. The PSDA captures state sales tax revenue generated by downtown venues, including Conseco Fieldhouse.

Huge did have some good news to report at Monday's meeting. He said that through August, CIB is running $13 million over budget, largely because of improving tax revenue.

CIB’s proposed 2012 budget up for approval by the City-County Council on Oct. 17 is $77.5 million, up $4.4 million from this year.
 
Board member Michael McQuillen, who also is a City-County Councilor, doesn’t think the entire NBA season will be canceled. But if it is, he wants to ensure CIB is prepared to absorb the shortfall.

“I wouldn’t say the budget is rosy, but it’s solid,” he said. “I think [CIB is] doing a good enough job where the loss won’t be devastating, but $5 million [in CIB and state revenue] is $5 million.”

Life without a Pacers season has been on the minds of city leaders for several years, as team executives complained of multimillion-dollar losses and hinted that the franchise might need to move elsewhere.

In 2010, the CIB agreed to subsidize the Pacers's operation of Conseco Fieldhouse to the tune of $33.5 million over three years. Some opponents of the funding argued that the team, founded here in 1967, should fold or move to another city if it couldn’t be financially viable on its own.

“I guess it’s a case of being careful what you wish for,” Mark Rosentraub, a former IUPUI dean who has written two books about professional sports operations, said in an August interview with IBJ. “If Indianapolis loses the Pacers even for a season, it won’t be at all good economically for the city.”

Losing the team for a year would wipe out about $55 million in economic activity, according to a 2010 study done by Chicago-based Hunden Strategic Partners for the CIB.

The impact would stem from less money being spent at restaurants, bars and hotels, as well as to decreases in the Pacers’ payroll and diminished tax revenue for units of government.

“There’s going to be a real economic hit, and we’re going to feel that pretty quickly once we start losing games,” CIB President Ann Lathrop said earlier this summer.

“This city is also going to lose out on some significant branding opportunities (through television broadcasts and media mentions) without the Pacers and I think a sense of community pride,” Lathrop added. “It’s a lot more than just money.”

Downtown businesses have been bracing for a financial hit for months, anticipating a shortened or eliminated 2011-2012 season.

“For us, it would be a huge loss,” said Troy Gregory, general manager of Mo’s, a steakhouse a block north of Conseco Fieldhouse, earlier this summer. “There are games, including those when the Pacers play teams like Miami, Chicago, Boston or Los Angeles, where we do at least as much business as we would during a Colts home game.”

On big game nights, Gregory said revenue more than quadruples compared with a normal night.

“It would be a really big impact on us, and we’re far from alone,” Gregory said. “We’re hoping games don’t get canceled, but from what we hear, it doesn’t sound good.”

Downtown restaurant owners interviewed by IBJ estimated they each could lose as much as $500,000 without a Pacers season.

Parking lot operators also would take a big hit, with several around the arena saying they’d lose from $25,000 to $100,000 depending on the size of the lot and proximity to the arena, which dictates rates.

While hotels generally don’t see a lot of business from Pacers games, the Conrad does. The high-end hotel on Washington Street downtown has contracts with 23 of the NBA’s 29 teams that play here.

“It’s a good piece of business for us, and naturally, we’d hate to lose it,” said Greg Tinsley, the hotel’s general manager.

Tinsley said each team uses about 40 hotel rooms. The cancellation of an entire regular NBA season would cost the Conrad about 1,600 room nights. Though Tinsley wouldn’t say what the financial hit would be, it would likely be more than $500,000 after tallying room rates, meals and other charges.

The Pacers were scheduled to play 41 regular season home games and four pre-season games at Conseco Fieldhouse in the 2011-2012 season. So far, all preseason games have been canceled, as well as the Pacers' first seven games.

Including its playoff games last year, the Pacers drew about 620,000 people through the turnstiles in the 2010-2011 season.

Regardless of how many games are canceled, the CIB in January will give the Pacers the second of three $10 million installments to offset Conseco Fieldhouse operating expenses. The payment is related to building expenses at Conseco Fieldhouse, not operating the team, Lathrop said.

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