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Sports Business

Indians should holler loudest about ticket tax increase

January 29, 2013
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None of Indianapolis’ professional sports teams affected by the ticket-tax increase that the City-County Council approved Monday night are particularly pleased about it.

The Indianapolis Colts recently went public with their objections. And with good reason. The hike in the ticket tax from 6 percent to 10 percent means the tax will generate more than $1 billion for the city over the remaining 25 years of the Colts' lease deal. That’s a cost the team is either going to have to eat or pass on to fans. I’m guessing neither option seems appetizing.

But the Indianapolis Indians arguably have the biggest beef.

While the AAA minor league baseball team benefits from city police and fire protection during its games, it doesn’t receive nearly the financial benefits the Colts and Indiana Pacers get from their lease deals.

All three teams play in facilities owned by the city’s Capital Improvement Board—a primary beneficiary of the ticket tax. That’s where the similarity in their lease deals end.

The Pacers essentially pay nothing to lease Bankers Life Fieldhouse, which was built in 1999 for $183 million. The team does pay all operating expenses but in return keeps all revenue from basketball and non-basketball events, including concerts, circuses and ice shows.

For the last four years, the city has given the team $10 million annually to help with operating expenses and an additional $3.5 million for capital improvements to the arena.

The Colts pay $250,000 annually to play in the $750 million Lucas Oil Stadium. The team keeps all football-related revenue. In addition, the CIB pays the Colts $3.5 million annually. That amount is supposed to be approximately half of all non-Colts-related revenue, but the annual amount paid to the Colts is guaranteed whether or not the city can generate $7 million from non-Colts events.

The city also pays for operations and capital expenses related to Lucas Oil Stadium, which are considerable.

It should be pointed out that Colts owner Jim Irsay contributed $100 million to the stadium’s construction costs. However, $48 million of that came from money the city paid him to break his lease deal for the RCA Dome.

The Indians pay $500,000 annually to lease Victory Field, which was built in 1996 for $18 million. The Indians keep all revenue from its baseball games and other events. The team also is responsible for all operating expenses and capital improvements to the facility. In recent years, those improvements have included construction of Captain Morgan’s Cove and this off-season's re-surfacing of the main concourse, a $260,000 investment.

Few would argue the Indians have the economic impact on this city that the Pacers and Colts have. But the gap between the minor league team and its NBA and NFL neighbors might not be as wide as you think.

In recent years, the Indians have drawn just short of 600,000 fans to Victory Field per year. The team’s attendance remained rock steady even during the economic downturn.

Pacers games in recent years are drawing nearly 600,000 people annually, while the Colts draw slightly more than 650,000 people downtown in an average regular season.

The Pacers and Colts no doubt draw more attention to the city through their television and radio broadcasts, and that has to be considered when you’re determining relative value. There’s also more high-dollar corporate activity associated with Colts and Pacers games.

While I wouldn’t argue the city is necessarily getting a raw deal with its Pacers and Colts agreements, I would say the Indians are getting a raw deal by comparison.

The Indians aren’t about to ask the city to operate or maintain Victory Field.

“We really wanted to have that responsibility here,” Indians Chairman Max Schumacher said. “The city was supposed to be taking care of Bush Stadium (the Indians’ previous home), and they weren’t doing it.”

The Indians roster is composed by its Major League Baseball affiliate, the Pittsburgh Pirates. And Schumacher is acutely aware how little control he has over the quality of his team year-to-year.

“The condition of the ballpark is the one thing we can control,” Schumacher said. “We know it’s important for us to assure that no matter what happens on the field, it’s will be a wonderful day of Indians baseball at Victory Field.”

The Indians aren’t complaining about their deal, though if I were an Indians stockholder, I might.

It would seem fair that the Indians at a minimum should have their $500,000 annual lease payment waived. If I’m an Indians stockholder, I know that gesture by the city increases the team’s profitability about 50 percent annually. And that’s going to increase the stock value significantly.

The Indians have a decades-long streak of profitability. That’s why the 730 remaining shares of stock in the team are valued above $26,000 each. A better lease deal likely pushes the value easily above $30,000. And over time, a more favorable lease deal would likely push the team’s value even higher.

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