Despite a hefty 10-year financial aid package and a new era of transparency declared by city officials, it’s still unclear whether the Indiana Pacers or the team's parent firm, Pacers Sports & Entertainment, will make money or even break even going forward.
“We’re doing better. This will help put us on solid footing,” said PS&E President Jim Morris at a press conference Monday to announce the deal between the Pacers and the city’s Capital Improvement Board. Some details were revealed last week.
City officials said that, during months-long negotiations to get the Pacers financial aid, they pleaded with the team to be financially transparent. Yet Morris declined on Monday to make any financial projections for the course of the agreement. It's expected to be approved at Monday afternoon’s Capital Improvement Board meeting.
CIB will spend $160 million over 10 years on subsidy payments and improvements to Bankers Life Fieldhouse for the Pacers in exchange for a lease extension through the 2023-2024 season. The Pacers’ original fieldhouse lease was to expire in 2019.
The pact, which includes up to three one-year extensions, calls for the Pacers to create a separate entity—Fieldhouse Management LLC—to manage and operate Bankers Life Fieldhouse. CIB would subsidize the new entity to the tune of at least $10.8 million per year.
That breaks down to $3.7 million for direct operating expenses and $7.1 million for “operating reimbursement” payments, according to the CIB presentation Monday at the Indiana Convention Center. The $7.1 million figure would rise 3 percent each year over the course of the deal.
CIB also would provide $26.5 million for improvements to Bankers Life Fieldhouse's locker rooms, concession stands and video boards, and another $7 million for capital replacement items including new carpet. About half of those improvements would be completed in 2014.
The rationale for the formation of the separate entity, in part, is “to usher in a new era of transparency,” said CIB President Ann Lathrop.
But it appears the only financial information PS&E will be compelled to give will be related to fieldhouse operations. That information was requested by city officials, Lathrop said, because there were some complaints by local citizens when the city began a round of subsidies for the Pacers in 2010 that PS&E could use the city’s money to pay for running the team or other organizational operations.
Morris did disclose part of PS&E’s financial picture Monday when he said revenue from non-Pacers and Indiana Fever events brought in $5 million to $6 million annually for the organization.
“A huge amount of money goes to the [entertainer] and the promoter,” Morris said of non-Pacers/Fever events. “We take the risk for all those events.”
Those events would appear to have a big upside, according to a recent financial analysis commissioned by CIB. It showed that the local economic impact of all events at Bankers Life Fieldhouse is nearly $209 million annually.
In 2010, an economic impact study conducted by Chicago-based hospitality consulting firm Hunden Strategic Partners concluded that the local economic impact from the Pacers and Fever is $55 million annually. Different economic development studies typically don't use the same assumptions in their projections.
During negotiations, PS&E—which is owned by retired real estate executive Herb Simon—contended it has lost money every year but one since moving into Bankers Life Fieldhouse (previously named Conseco Fieldhouse) and could no longer afford to operate the facility as it did when the original lease for the venue was crafted in 1999.
In its most recent NBA valuations study, Forbes magazine concludes the Pacers posted $10.9 million in operating income in the team's 2013 fiscal year and $11.6 million in 2014. Simon has told IBJ in previous interviews that Forbes’ numbers are “way off.”
Either way, the city has virtually assured with the new lease deal that the Pacers will occupy the fieldhouse for the next decade—whether the team makes or loses money or is even sold.
But city officials aren’t satisfied with just that. Mayor Greg Ballard is applying pressure on team officials to go after the NBA All-Star Game. Despite its reputation as one of the NBA's elite facilities, the fieldhouse has not hosted an All-Star Game in its 15 years.
“The Mayor is encouraging us to go after the NBA All-Star Game and we aspire to have it here in the future,” Morris said.
Ballard, sitting beside Morris at Monday’s press conference, nodded in agreement.
Pacers officials after the press conference didn’t say what year is being targeted to bring the all-star game to Indianapolis, but characterized the effort to bring the event to Indianapolis as a front-burner issue.