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MORTON: Indy's road to Oz will end soon for sports team owners

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MortonThe seemingly endless yellow brick road to Oz, or what residents of central Indiana have come to accept as privately owned professional sports franchises seeking financial sustenance to build and upgrade, is nearing a tipping point of practical expenditures.

The recent announcement that Pacers Sports & Entertainment reached a 10-year, $160 million agreement to ensure the NBA franchise maintains its home at Bankers Life Fieldhouse is definitely the right move by the Capital Improvement Board, the organization that owns the city’s professional sports venues.

Coincidentally, this agreement was announced as Stadium Magazine released its annual report ranking Lucas Oil Stadium as the National Football League’s top venue for stadium experience. For Colts fans, that’s good news given that taxpayers will pay $620 million of the $720 million construction costs financed by the state and city of Indianapolis for the stadium.

Other recent financial assistance packages include the state-funded $60 million refurbishment of the coliseum at the state fairgrounds that is now home to the soon-to-premier Indy Fuel hockey team and the $100 million, 20-year payback agreement by the state with Indianapolis Motor Speedway.

This year’s legislative session also included an aggressive, yet unsuccessful, campaign by Indy Eleven seeking state funding for an $85 million soccer stadium.

We should all thank Max Schumacher, president and chairman of the Indianapolis Indians, for the organization’s continued self-investment to maintain and improve what many consider minor-league baseball’s finest stadium. Unlike the Indiana Pacers and Indianapolis Colts, the Indians pay all costs to preserve and upgrade the 18-year-old stadium, plus $500,000 in annual rental fees.

To clarify, CIB is funded by revenue accrued from hotel, food and beverages, and admissions taxes. Additional revenue is collected from rental fees, parking garages, car rental taxes, cigarette taxes, and also downtown income and sales taxes. By law, the revenue is restricted for purposes associated with the professional sports venues and the Indiana Convention Center.

There is little debate as to the importance sports has had on Indianapolis since the forward-thinking sports strategy was established in 1979. However, CIB and the state don’t have unlimited resources, and must be extremely prudent to even consider additional financial liabilities to support professional sports facilities.

CIB is obligated to invest in the sports venues it currently owns and supports (Bankers Life Fieldhouse, Lucas Oil Stadium and Victory Field). Accordingly, the city and state need to learn to say no to newcomers that come to the city’s pay window seeking a “please build it for us” proposition.

There is no debate that the Colts, Fever, Indians and Pacers are woven into the sports-licensed fabric of Indianapolis. Despite the city and/or state being on the hook to pay the financing for their respective home fields and stadiums, losing any of the teams would be a huge negative, and any replacement franchise would seek an even less attractive financial package. Besides, CIB needs the revenue from the combined 140 regular-season games the teams play annually to pay down the debt accrued to build the stadiums.

In two sold-out home games, Indy Eleven has demonstrated that minor-league professional soccer has a future in Indianapolis. Can the city and/or state help support a stadium near equal in cost to the $100 million-plus that owners would be required to pay for a minor-league soccer franchise? Could the Eleven establish a public-private partnership with Indiana University and continue to invest in the long-overdue refurbishment of Michael A. Carroll Stadium as its permanent home without building another stadium on the shoulders of taxpayers?

What happens when the emergence of lacrosse in the grass-roots market results in the professional league’s entering with a, “We’re here to, you know, … ” message? Are cricket and other sports still to be established domestically soon to follow?

“No” should be the answer to any team executives seeking outright funding for sports venue projects. Without significantly increased revenue to CIB coffers, the requests to finance home-team stadiums require more parity by team owners to help pay construction and maintenance costs. Also needed are a short-term proven team history, realistic ticket sales projections, and a taxpayer-favorable business model for stadium financing.

Otherwise, please think of the successes of the likes of Arlington, Texas; Foxboro, Mass.; and Glendale, Ariz.—where the teams’ home “city” negotiated more favorable terms to build stadiums in suburban communities. Maybe Boone or Hamilton counties want to enter the big leagues.•

__________

Morton is principal of Indianapolis-based Sunrise Sports Group. Views expressed here are the writer’s.

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  • Indy 11 should be Indiana 11 and located in Hamilton County
    The Indy 11 should be Indiana 11 and should be located with a new stadium in Hamilton County, perhaps near Fishers on I69 or Carmel near Keyston or Meridian. Indianapolis should not have any more professional sports stadiums, soccer North of Indianapolis, hockey at the Colliseum, IUPUI at the Colliseum, Rugby in Carmel, Soccer in Carmel, Lacross in Carmel, Cricket in Carmel. Get real, the fans are in Hamilton County. Hamilton County could even support a A or AA baseball team.
  • Soccer
    Expect Indy Eleven to be at the trough in a couple years. They even thing they need a new stadium. Improve the IUPUI stadium, parking already in place.

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  1. Apologies for the wall of text. I promise I had this nicely formatted in paragraphs in Notepad before pasting here.

  2. I believe that is incorrect Sir, the people's tax-dollars are NOT paying for the companies investment. Without the tax-break the company would be paying an ADDITIONAL $11.1 million in taxes ON TOP of their $22.5 Million investment (Building + IT), for a total of $33.6M or a 50% tax rate. Also, the article does not specify what the total taxes were BEFORE the break. Usually such a corporate tax-break is a 'discount' not a 100% wavier of tax obligations. For sake of example lets say the original taxes added up to $30M over 10 years. $12.5M, New Building $10.0M, IT infrastructure $30.0M, Total Taxes (Example Number) == $52.5M ININ's Cost - $1.8M /10 years, Tax Break (Building) - $0.75M /10 years, Tax Break (IT Infrastructure) - $8.6M /2 years, Tax Breaks (against Hiring Commitment: 430 new jobs /2 years) == 11.5M Possible tax breaks. ININ TOTAL COST: $41M Even if you assume a 100% break, change the '30.0M' to '11.5M' and you can see the Company will be paying a minimum of $22.5, out-of-pocket for their capital-investment - NOT the tax-payers. Also note, much of this money is being spent locally in Indiana and it is creating 430 jobs in your city. I admit I'm a little unclear which tax-breaks are allocated to exactly which expenses. Clearly this is all oversimplified but I think we have both made our points! :) Sorry for the long post.

  3. Clearly, there is a lack of a basic understanding of economics. It is not up to the company to decide what to pay its workers. If companies were able to decide how much to pay their workers then why wouldn't they pay everyone minimum wage? Why choose to pay $10 or $14 when they could pay $7? The answer is that companies DO NOT decide how much to pay workers. It is the market that dictates what a worker is worth and how much they should get paid. If Lowe's chooses to pay a call center worker $7 an hour it will not be able to hire anyone for the job, because all those people will work for someone else paying the market rate of $10-$14 an hour. This forces Lowes to pay its workers that much. Not because it wants to pay them that much out of the goodness of their heart, but because it has to pay them that much in order to stay competitive and attract good workers.

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  5. It is sad to see these races not have a full attendance. The Indy Car races are so much more exciting than Nascar. It seems to me the commenters here are still a little upset with Tony George from a move he made 20 years ago. It was his decision to make, not yours. He lost his position over it. But I believe the problem in all pro sports is the escalating price of admission. In todays economy, people have to pay much more for food and gas. The average fan cannot attend many events anymore. It's gotten priced out of most peoples budgets.

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