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UPDATE: CIB wringing money from general operating fund to pay Pacers

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The Capital Improvement Board is hoping to squeeze the more than $30 million it has promised the Indiana Pacers over the next three years out of its general operating budget. The money will come from a combination of existing taxes aimed at downtown visitors and users of the city’s professional sports complexes, with a state loan being the last resort.

CIB and Pacers officials are set to announce their three-year deal at 2:30 p.m. Monday on the 25th floor of the City-County Building.

The CIB has also agreed to pay for at least $3.5 million in capital improvements at Conseco Fieldhouse, which sources in the mayor’s office said would include a video ribbon board circling the interior of the venue. That ribbon board, city officials said, will help the Pacers raise sponsorship revenue to become more financially self-sustaining.

CIB President Ann Lathrop is hopeful that increases in revenue from things like hotel and restaurant taxes along with savings in the CIB’s general budget will help the agency come up with the cash needed to subsidize the Pacers. The city recently agreed to expand the downtown sports taxing district and to increase the hotel tax by 1 percent, which Lathrop said should help raise CIB revenue.

She noted that CIB revenue in the first five months of 2010 is running $3.8 million ahead of the same period a year earlier. Expenses, meanwhile, have declined $7.5 million during the same period.

Lathrop is also hopeful that more revenue will come in after the Indiana Convention Center expansion opens late this year.  A few months later, a 1,005-room JW Marriot hotel is scheduled to open on downtown’s west edge.

But Lathrop said if all that isn’t enough, the CIB could use part of a $27 million three-year loan from the state to pay for the Pacers deal.

During negotiations, Pacers Sports & Entertainment—which is owned by retired real estate executive Herb Simon—contended it has been in the red every year but one since moving into Conseco Fieldhouse and could no longer afford to pay to operate the facility.

A CIB-commissioned study concluded that the Pacers along with the Indiana Fever contribute an estimated $55 million a year to the Indianapolis economy.

The CIB’s first priority in negotiating the deal, Lathrop said, was to keep the Pacers in Indianapolis. Though she said Simon voiced his desire to keep the team here, city negotiators received little assurance that would be the case after the three-year deal is complete.

As part of the deal, the Pacers would have to pay back part of the $33.5 million if the team leaves before 2019, which marks the end of the city’s original 20-year deal with the team.

CIB officials discussed Simon’s long-term ownership plan for the Pacers with the team’s ownership, Lathrop said, but she declined to divulge details of that discussion.

Lathrop said a short-term deal was secured because city officials need time to evaluate the economy and see what happens with the NBA’s collective bargaining agreement. The deal that governs players’ salaries expires July 1, 2011, and team owners are trying to reduce players’ pay.

Currently, players receive 57 percent of all of the NBA’s basketball related revenue. Owners are seeking to reduce that amount to 50 percent. NBA Players’ Union President Billy Hunter is fighting that proposal, and league sources say a 1-percent to 3-percent drop in the players’ take is more likely than the 7 percent sought by team owners.

Pacers officials said they’ve lost money in 10 of the 11 years they’ve been in Conseco Fieldhouse, including about $60 million over the last two seasons. Though the CIB declined to grant the team the $15 million it sought for Fieldhouse operations, Lathrop said she agrees “100 percent,” with the Pacers’ financial disclosures.

“We’ve seen the audited financial reports, and we have no reason to believe that those are in any way inaccurate,” Lathrop said.

But sports economist and former IUPUI dean Mark Rosentraub is less convinced.

“I’m not sure how you can operate in one of the nicest facilities in the league essentially rent free, and be so far in the red,” Rosentraub said Monday morning.

Rosentraub also pointed out that eight of those 11 years were during relatively economic robust times.

“If the CIB is so convinced in the accuracy of those figures, which happened during some very robust times for the city and the state, you’d have to ask, 'Is the conclusion that the Pacers can’t be operated profitably in this city?' If that’s the case, what could possibly change in two to three years to turn this thing around, or are we looking at a long-term situation of paying to keep the Pacers here?”

While Rosentraub said he thinks the Pacers and Conseco Fieldhouse are important components to a vital downtown, he said the CIB and Pacers should put all the financial cards on the table.

“The CIB is a public agency,” Rosentraub said. “If these numbers are real, what’s the hesitancy?”
 

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  • Lawsuit I will agree with
    The CIB's press release announcing a $33.5 million dollar deal with the Pacers to pay for $30 million in operating expenses on Conseco Fieldhouse over the next three years and pay for at least $3.5 million in capital improvements to the facility never mentions the word "loan." A careful reading of the proposed amendment to the Pacers' lease agreement with the CIB, however, tells something different. The $30 million to be paid out over three years is actually three separate interest-free installment loans over the next three years as spelled out in the proposed amendment to the Pacers' lease agreement. An observant reader of this blog, UniGov, points out the state constitutional prohibition found at Article 10, Section 6, which reads:


    No county shall subscribe for stock in any incorporated company, unless the same be paid for at the time of such subscription; nor shall any county loan its credit to any incorporated company, nor borrow money for the purpose of taking stock in any such company;
    A similar prohibition on loans to any incorporated company is found at Article 11, Section 12 for the state of Indiana, which reads:


    The State shall not be a stockholder in any bank; nor shall the credit of the State ever be given, or loaned, in aid of any person, association or corporation; nor shall the State become a stockholder in any corporation or association. However, the General Assembly may by law, with limitations and regulations, provide that prohibitions in this section do not apply to a public employee retirement fund.
    It appears to me the CIB may be leaving itself open to a lawsuit challenging the "loan" to Herb Simon's Pacers. What do you think?
  • Indy Non-Profits Are Loaded
    Tom,

    The non-profits you mention are all loaded with cash and paying out six figure salaries to scores of directors and executives. They are not hurting for money at all. In fact, the City just threw a million dollar at arts groups that didn't need the money. The CIB should have never been in the business of handingout money to arts groups and other non-profits.
    • Public Entity
      From the CIB site;

      "The Capital Improvement Board (CIB) is a municipal corporation of Marion County created in 1965 by the Indiana General Assembly pursuant to the provisions of Indiana Code 36-10-9, and authorized by the statute to finance, construct, equip, operate and maintain any capital facilities or improvements of general public benefit or welfare which promote and serve the commercial, industrial and cultural interests of Indiana and its citizens. The Board may assist, cooperate and fund governmental, public and private agencies and groups for these purposes. The CIB operates the Indiana Convention Center, Lucas Oil Stadium, Conseco Fieldhouse, Victory Field, Virginia Ave Parking Garage, and Capitol Commons, all located in downtown Indianapolis..

      As a public entity, the citizens of Marion County, Indiana are its stakeholders. There are no private stockholders or investors. All revenues and other receipts must be deposited and disbursed in
      accordance with provisions of its enabling statute. The Board is composed of nine members. By statute, six members are City of Indianapolis Mayoral appointees, two are Marion County Board of Commissioners appointees, and one is appointed by the City-County Council of the consolidated City of Indianapolis-Marion County. The Board also seats one ex-officio member that historically has been the President and CEO of the Indianapolis Convention & Visitors Association. Since its inception, there have been 7 Presidents, 56 total Board Members, and 3 Executive Directors."

      As a public entity how can they refuse a FOIA request?
    • CIB Operating Illegally...Again
      How can Ann Lathrop legally say the will not discuss this?
      "CIB officials discussed Simonâ??s long-term ownership plan for the Pacers with the teamâ??s ownership, Lathrop said, but she declined to divulge details of that discussion.

      If CIB is public entitiy (?) she must divulge this. If she says pacers don't have to divulge as they are not a public entity, why would we use public $$ to support a failed private business? If they can justify this they should have propped up Frank Irish and Sons when they failed. or Hanson and Horn. Get the idea?

      Someone needs to set up a class action lawsuit against this.

      Or charges should be filed against the members of CIB for embezzlement or misuse of public funds. A good lawsuit against the individuals on the board would probably bring this nonsense to halt.

      Who has the initiative and the guts to do so?
      • Pacers Colts and nothing else
        So Indy keeps the Pacers and Colts and the CIB cuts all it's arts funding. Time for the ISO, IMA, Childrens Museum, Dance Kaleidoscope, Childrens Choir, IRT, Phoenix, Civic Theatre, etc., to look elsewhere for a home? It's time for the Simons and the Irsays to establish an arts fund for the community they are sucking all the life out of. They pretend to care about the community but they really just care about themselves.
      • It's More
        The Pacers are getting 10 million plus they won't pay the 15 million per year maintenance; isn't that a 25 million dollar swing per year?
      • Pacers Departing
        If the Pacers depart it wiuld probably be the same way the Colts departed Baltimore.
      • Discretionary Spending
        Just a Taxpayer,

        Don't worry, city officials understand that about discretionary spending. They just don't care. They're all about giving away our tax dollars and they're not going to let facts get in the way.
      • HMMM SHOW ME THE NUMBERS
        Gee, what do they base their losses on?

        1. Mulitmillion $$$ Compensation for the Owner as Salary Expense;
        2. Interest of the corporation to buy out Melvin Simons Estate Onwership Interest;
        3. Amortization of Player Contracts;
        4. Amortization of Goodwill of buying out a partners interest;
        5. Consulting and Management Subcontracts to Affiliates....
      • Let's get ALL the facts
        When all this is brought to the general public we only hear a small portion of what the real economic picture is. Let's see all the facts. Income in sales revenue, expenses, etc. If the Pacers get to keep all the revenue brought into this venue from ALL events and they lease out the facility to vendors then how much total income is there and what are the expenses...NOT including the salaries of the Team and Management? Please put it all in black and white before asking the grneral public if this is a good use of public funds.
      • Keep Conseco/Lose the Pacers
        â??Iâ??m not sure how you can operate in one of the nicest facilities in the league essentially rent free, and be so far in the red,â?? Rosentraub said Monday morning.

        Rosentraub also pointed out that eight of those 11 years were during relatively economic robust times."

        This sums it up. Let the Pacers go. Downtown gets more business from concerts and other events at Conseco than from the Pacers games anyway. Get a team that can support itself, maybe even an NHL team, instead of paying this pathetic organization to stay.
      • GOP role for Government
        The GOP politicians and specifically Ballard in the Mayor's office continues to deceive and lie to the citizens of the city. Special deals with the wealth club to ensure they even get richer off the backs of the taxpayers including those who will never go to a sports event. This is mismanagement of our tax resources. Tax relief special deals, closing of schools, laying off teachers and public employees, what a shame. It is time to privitize sports in the city and not government subsidize them. It is time for governement in Indianapolis and the state to begin doing the business of government and stop the sweetheart deals of the elete special interests rolling in money
      • Another Way
        Indianapolis needs to take the lead in setting up a rival league - one in which teams are owned by citizen fans, as is the case with the Green Bay Packers.

        There is no way that a team owned by several thousand local fans would ever threaten to leave, thus ending the owner blackmail game once and for all.

        And there is no reason why fans cannot be passionate about teams that do not necessarily feature the very best players. One need only look to the enthusiastic fans of college sports teams to see that.

        In any case, a league of teams that each boasted legions of fanatical local supporters would soon eclipse the NBA (or NFL).

        It's time to end the blackmail.
      • Someday...
        Someday I hope to see a reckoning... between these multi-millionaire players and the peon fans who support them. Nearly all of us taxpayers have had to downsize in one way or another during this recession, with many people losing jobs or getting their salary cut. Why are we being pillaged for more money for millionaires? Why have they not instituted a mandatory salary cut for the players that would compensate for this lack of revenue? I get that there's an economic benefit from having sports teams, but when our libraries are threatening to close from lack of funds, we have crumbling old sidewalks, bad streets, and a hundred other problems that seem more pressing to me, it's absurd to throw more money at this team. Let us not forget why no one wants to support the Pacers anymore - bad management and bad behavior from the players. So let's get this straight, the Pacers cannot successfully run their organization, so we the tax payers get penalized AGAIN.

        Furthermore... the libraries better NOT close. If the city can find this much money for the Pacers, they better dig up enough to save ALL the library branches.
      • Economic Impact...
        I would love to see a disclaimer on these so called "economic impact" studies that acknowledges that these funds are, in large part, discretionary spending. More clearly, people would spend this money on something else if the Pacers weren't in the picture... I just wish, for once, that city leaders understood this.
        • The Real Reason
          Why are the Pacers losing money? Because nobody wants to come see them. Fix the basics, make the team strong players and good role models, and there will be a turnaround.

          I'm skeptical about the $55M economic impact that the study disclosed. Is it available online somewhere for our review?
        • Todd Might Have a Point
          I think it's possible that the new deal amended the old one in such a way to give the Pacers the right to leave without paying a penalty after three years. We'll never knkow until we see the proposed amendment.


          new three year deal would suddenly give the Pacers a way to break the deal.
        • clarification
          My understanding is that if the Pacers depart, they would have to pay the relocation penalty under the old/original contract ($150M+) in addition to the penalty in this new deal. But let's not get ahead of ourselves.
        • Off the Hook
          Under the previous contract the Pacers would have had to pay %150 million to relocate the team before the twenty year deal expired. Now they are getting a subsidized deal and can relocate at fraction of the cost in three years. Herb will sell off the team in three years and come out smelling like a rose. The Simons hose Indy again!
        • DEMO CONSECO ITS FAR CHEAPER
          Look it is time for the city to tighten the belt. Terminate the Lease with PSE CORP release at Lucas Oil except the Pacers cannot play on about 11 Sundays... and demo the crap out of Conseco.

          The taxpayers are tired of the HUMAN BOOSTER SHOTS this CIB and Mayor are giving us.

          Now that is a Business Decision why not consider closing Conseco instead of absorbing all the operating and repair costs.

          Public Corruption at its finest.... Pacers Sports & Entertainment Corp should have to divulge Profit and Loss numbers. This is pathetic. I am voting democratic done with BallardLIES
        • Leave Town
          Personally, I would rather see the Pacers and Colts leave town then continue to steal from taxpayers. This is completely wrong and not a good use of taxpayer funds. Gov't has done us wrong far too many times and it's time for us to push back. It has nothing to do with political party; both sides are equally to blame. The corporatist/elitist mentality is ruining our nation.
        • won't stand for it
          We're firing teachers, and now we're giving Herb Simon 33.5 million bucks that we don't even have.

          GREAT IDEA, GUYS!
        • Taxpayers Bleeding Green
          Let's see...Lilly CUTTING more jobs...Indy home sales DOWN 10%...Herff Jones CLOSING plant...taxpayers gouged for $$33.5 MILLION MORE to support a BILLIONAIRE.
          What's wrong with this picture?
          The Republicans in this county have all gone far stupid.

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        1. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

        2. If you only knew....

        3. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

        4. The facts contained in your post make your position so much more credible than those based on sheer emotion. Thanks for enlightening us.

        5. Please consider a couple of economic realities: First, retail is more consolidated now than it was when malls like this were built. There used to be many department stores. Now, in essence, there is one--Macy's. Right off, you've eliminated the need for multiple anchor stores in malls. And in-line retailers have consolidated or folded or have stopped building new stores because so much of their business is now online. The Limited, for example, Next, malls are closing all over the country, even some of the former gems are now derelict.Times change. And finally, as the income level of any particular area declines, so do the retail offerings. Sad, but true.

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