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Pacers remain mum on financial details

Anthony Schoettle
April 14, 2014
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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.

 

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  • "Far more used than Yum..."
    I wouldn't disagree that the Fieldhouse might have more total events over the course of the year than Yum in Louisville since the Pacers and Fever give them far more automatic bookings every year than Yum gets from Louisville basketball. However, with concerts it hasn't even been close. Looking at acts that YUM has landed in the last few years that the Fieldhouse hasn't it's quite an impressive list : Billy Joel, Bruce Springsteen, The Who, Arcade Fire, Rod Stewart/Santana, Beyonce, etc. There are many acts that both buildings have landed such as McCartney, Taylor Swift, Eagles, etc. but if you follow the concert industry nationally you'll know that right now YUM is blowing the Fieldhouse away with concert bookings and has become a much more common tour stop on A list tours despite Louisville having a metro population that is significantly lower than the Indy metro population.
  • peers
    Indytodd, I can't speak to Nationwide, but it's far more used than Yum. Most big concert acts come through Indy during the summer and are at Klipsch Center an other venues. Cbus and Louisville don't have large outdoor concert venues.
  • Pacers
    The Pacers are a business not a charitable trust or a nonprofit. Does the city give financial support to other businesses that year after year claim they make no profit? Without seeing the books how does the CIB know that the Pacers are not actually profitable? If Mr. Simon wants to have a basketball team that’s fine but why should the taxpayers pay for it.
  • Concerts
    I found it interesting that the Pacers commented that they are taking on financial risk booking concerts, etc. Why don't they just give Live Nation or AEG an exclusive booking deal for the venue? They could just function as building manager and make a profit off of rental, concessions,etc. The Fieldhouse did a nice job of booking concerts in the early years of the venue but has clearly fallen behind their peers in recent years. Take a look at similar building in nearby cities that our Indy's size or smaller (KFC Yum Center in Louisville, Nationwide Arena in Columbus, etc.) and you'll quickly see that Indy is missing out on a lot of major tours that should be playing here. I would much prefer to see them contract all that out to one of the nationwide promoters. The end result would be more shows at the venue for local music fans and the Pacers remove any financial risk they have been taking on. Just because you know how to run a basketball team doesn't necessarily mean you know anything about booking concerts...
    • Nice building
      Can we please just make sure the building is kept in prime condition. This building is a keeper and when the building is paid for, the Pacers should "not" want a new building for quite a long time. It is a great venue, just keep it fresh. The Cubs still use Wrigley, the Red Sox use Fenway, and the Bulls used the Stadium for a long time. No need for a new one for at least 40-50 years of use in my opinion.
    • Public Money, Public Discloser
      Just because corporate welfare is a fact of life, doesn't make it right.
    • Yep
      Especially state, Mark...
    • Public Discloser
      Completely agreed, but what city, state, country are you living in?
      • Public Money, Public Discloser
        It would seem to me that if the Pacers need to take money from the City to make it, then they should be bound to make their books available to the public. That goes for the Colts as well, and now the Speedway!

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