IndyCar Series and Indianapolis 500 and Legislature and Economic Development Incentives and Indianapolis Motor Speedway and Tax Credits and State Government and Income taxes and Sales tax and Government & Economic Development and Economic Development and Sports Business

Tax break would barely put dent in Speedway's to-do list

February 16, 2013
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A former motel site is ripe for development. (IBJ photo)

The Indianapolis Motor Speedway will need far more money than it will get from a proposed state tax subsidy if it hopes to be in the top tier of U.S. racing venues, sports business experts said.

But already there are signs that new track leadership won’t be shy about scaring up cash.

Mark Miles Miles

Under new Hulman & Co. CEO Mark Miles, IMS appears poised to part with long-held traditions—including refusing to sell naming rights—to achieve state-of-the-art status.

The first step in that direction came Feb. 14 when the Indiana Senate Appropriations Committee unanimously approved a bill to create a motorsports investment district encompassing the Speedway. It marks the first time in the track’s 104-year history that it has gone after public money.

That’s not the only first Miles has spearheaded since taking over Dec. 17 at Hulman & Co., which oversees the Speedway and IndyCar Series. Besides the state funding proposal—something Hulman-George family members have strongly opposed in the past—Miles has launched the first effort to craft a master plan for Speedway facilities.

Though elements of the plan won’t be rolled out until spring, IMS officials say $120 million in needed improvements already have been identified. That includes $20 million for lights, $15 million for grandstand upgrades, and another $15 million for video boards. Changes mandated by the Americans With Disabilities Act are projected to cost $10 million.

IMSThat’s led some to ask what Miles is willing to do to raise cash for his grand plans.

The IMS tax assistance bill, which now moves to the full Senate for a vote, would capture for 20 years the sales, income and admissions taxes from events held on land owned by the IMS, including the Speedway itself and the IMS-owned golf course. The bill does not include property taxes.

Tax money for the Speedway would be capped at $5 million a year. The Speedway would match that to the tune of $2 million, for a total of $7 million annually toward modernization.

The money would be used to pay off bonds for a $100 million capital improvement project, IMS officials said. But sports business experts think a proper effort could take up to $200 million.

Miles is prepared to make other departures with tradition to pull the outdated venue into the modern era, sources close to the Speedway said. That could mean putting ads where none have existed before and selling the naming rights to the Indianapolis Motor Speedway or a title or presenting sponsorship for the Indianapolis 500.

Speedway CEO Jeff Belskus, who reports to Miles, said a presenting sponsorship for the Indianapolis 500 is possible, but he sought to dampen the idea of naming-rights deals.

“We’re certainly looking for ways to generate more revenue, but I have trouble envisioning a day we change the name of this facility,” Belskus said. “There’s just so much equity in that name, in that brand, and there’s a lot of good will involved with that brand.”

Leaving money on the table

Sen. Luke Kenley, a Republican who chairs the Senate Appropriations Committee, said the IMS had no option but to seek state assistance.

“They don’t see where they can find the capital resources they need in any other way,” he said.

But sports marketers say there is a way—that the IMS is sitting on tens of millions of dollars in advertising inventory.

A naming-rights deal could fetch $10 million to $15 million annually, said Zak Brown, CEO of Zionsville-based Just Marketing International, which has brokered some of the world’s biggest racing sponsorship deals.

Brown doesn’t think a naming-rights deal would tarnish the brand or status of the iconic facility at 16th Street and Georgetown Road.

Though Brown would be hesitant to sell the naming rights to the Indianapolis 500, he said doing so could generate another $3 million annually.

Luke Kenley Kenley

Last year was the first time the Speedway placed any ads on the walls encircling the 2-1/2-mile oval. But those ads just scratched the surface. Brown noted that most of the wall space remains blank, and that there is potential for signage and banners elsewhere.

“If you’re talking about making serious departures from tradition there, I don’t see why they couldn’t knock down $20 million annually in new revenue,” Brown said. “I know of companies that if certain opportunities became available there, they’d be interested.”

Naming-rights deals for prominent locations such as Victory Circle and pit lane could generate big money, said Jim Andrews, vice president for Chicago-based sponsorship consultancy IEG Sponsorship. He said an upgraded video board system would open another sponsorship avenue.

“We’ve been hearing rumblings that IMS is talking to a solar energy company about a deal that could include naming rights,” Andrews said. “It certainly wouldn’t be a stretch to say IMS is in talks for a naming-rights deal. How serious is it? That’s difficult to say.”

Belskus said there have been no serious talks about such a deal.

Fan reaction

Race fans seem more interested in the facility itself than in what it’s called or where ads are placed.

“They have to do something,” said Paul Henry, a 58-year-old Indianapolis resident who’s been to every Indianapolis 500 since 1968. “The facility is dated and it has become a turn-off. There are not a lot of attractions for what I’d call the casual race fans.”

Bloomington resident and longtime race fan Jeffrey Henderson, 46, called the track’s amenities “rudimentary.”

“What opened my eyes was the new [Formula One] track in Austin,” said Henderson, the principal at Bloomington North High School. “A state-of-the-art facility like that shines a light on just how much work needs to be done at the [IMS].”

The Speedway’s corporate constituents were crueler in their appraisal.

One racing industry executive called the IMS’ condition “horrendous.” An executive with one of the IndyCar Series’ corporate partners said on a scale of one to 10, with 10 being the best sports facility, “the Speedway would get a three.”

“The luster is gone from the Indianapolis Motor Speedway,” said former race car driver Derek Daly, who now serves as a racing analyst for WISH-TV Channel 8. “It creates an unattractive sports platform for commercial sponsors to get involved. The problems will take years to fix. The sooner they get started the better.”

IMS officials have identified three immediate needs: improved ADA accessibility, video monitors within the track, and possibly lights. Night racing could begin as early as 2014, but 2015 is more likely, officials said.

Racing fans and sponsors offer a much longer list of needed improvements, including better entrances and exits; more comfortable seats; improved viewing platforms; upgraded rest rooms, concession stands and hospitality areas; an expanded and improved museum; and more interactive fan activities.

Belskus declined to elaborate on specifics until the master plan is rolled out, possibly in May in conjunction with the Indianapolis 500.

Left in the dust

Speedway officials estimated they spend at least $5 million a year in off-season maintenance, such as grandstand refurbishment.

The IMS is well-maintained, but “is in the lower half among U.S. tracks in terms of amenities,” said Dave Moroknek, president of MainGate Inc., a locally based maker of licensed sports apparel and goods that does work at more than a dozen tracks.

“Indianapolis has not had anywhere near the level of investment expected by the fans at other facilities like Daytona, Charlotte and Las Vegas,” said Just Marketing’s Brown.

Brown Brown

Led by former IMS executive Joie Chitwood, Daytona International Speedway is the latest track to unveil a major upgrade.

Daytona is undertaking a project valued at more than $200 million that will result in five new entrances, a second pedestrian bridge, and an expanded grandstand area with thousands of new seats. The project also calls for upgraded concession areas, ticket gates and more common areas to view the race from different vantage points.

Daytona officials are also replacing garage walls with huge glass partitions that allow fans to look at behind-the-scenes work on cars. The window even has an opening where fans can talk to drivers and crew members and get their autographs.

The track in Charlotte also has undergone recent multimillion-dollar upgrades, including pit road VIP boxes, an infield entertainment compound, a Champions Pavilion indoor/outdoor hospitality area, and a new fan zone on the track’s property.

Miles is eager to keep pace.

“If you think of any major successful professional event or high-level collegiate event, the facility has a lot to do with the vitality of the event aesthetically and for the fan experience and economically,” Miles said.

He expects it to be easier for him to break with tradition than for the Hulman-George family members who previously oversaw the track’s operations and upkeep.

“Contemplating and managing change requires a real understanding of history,” but the past can’t get in the way of planning for the future, he said.•

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