Major companies seek CIB privatization bidding opportunity

A dozen heavyweight firms have responded to Indianapolis’ proposal to privatize Lucas Oil Stadium, the Indiana Convention Center and, perhaps, Conseco Fieldhouse.

IBJ reviewed all 12 responses, which the city released today, after a public records request.

As sports industry experts expected and IBJ reported first on the front page of its Nov. 23rd edition, the three biggest U.S. businesses that specialize in stadium and convention center management all signified their interest.

Philadelphia-based SMG, which manages over 200 stadiums and arenas, including five NFL facilities, submitted an individual response establishing its credentials. Founded in 1977, SMG is the oldest business in its entertainment industry niche.

SMG’s two biggest competitors, Los Angeles-based AEG and Philadelphia-based Global Spectrum, joined together with Pacers Sports and Entertainment and the Indiana Convention and Visitors Association for a four-way partnership proposal. Together, AEG and Global Spectrum run a similar number of sports and convention facilities as SMG.

Global Spectrum was founded in 1994; AEG a decade later in 2004. Typically competitors, this may be the first time the companies have aligned to pursue an NFL stadium management deal.

“We are prepared to offer our full corporate concentration and resources to this project, and we look forward to the opportunity to work with you on this exciting civic project,” wrote Pacers Sports and Entertainment President Jim Morris and ICVA CEO Don Welsh in their joint cover letter to Mayor Greg Ballard’s Office of Enterprise Development.

“As you continue this review of how to best operate/manage these facilities, we look forward to cooperating with you to identify the best ways to achieve efficiencies, enhance performance, and create benefits that are in the best interests of this community,” Morris and Welsh wrote. “We are committed to insuring that these valuable assets are operated to the maximum benefit for the entire community, both economically and socially.”

The Indianapolis Capital Improvement Board, a local municipal corporation, currently manages the convention center and the home of the Indianapolis Colts. It also oversees the Indiana Pacers’ home building, which the team operates. The CIB struggled all last year to close a projected $47 million budget deficit.

Seeking to trim the CIB’s expenses and hike its revenues, on Oct. 20, Ballard’s Office of Enterprise Development released a “Request for Proposals” soliciting businesses’ best privatization ideas. Sports business experts say large companies may be able to cut the facilities’ procurement costs via mass purchasing.

They might also be able to multiply the number of dates the CIB’s facilities are utilized annually. Along with San Antonio-based Clear Channel, SMG, AEG and Global Spectrum are the biggest players in the talent-booking business.

Indianapolis got 10 RFI responses in addition to the ones it received from SMG and the four-way Pacers/ICVA/AEG/Global Spectrum partnership. Some come from companies that are national or international in scope with heavyweight credentials in facility management, but less experience with sports and convention venues. Others originated from companies that want to bite off just part of the CIB’s business, for example offering proprietary IT systems. Locally-based ProLiance Energy LLC proposes helping the CIB cut its gas procurement costs.

A response from Los Angeles-based CB Richard Ellis, which proposes partnering with locally-based Venture Real Estate and Keystone Construction Corp., was the only one besides the Pacers/ICVA/AEG/Global Spectrum consortium with a significant local connection.

CIB Chairwoman Ann Lathrop said much of her board is still doing its homework on possible privatization of facility management. In November, Ballard shook up the 9-member CIB, replacing four of its directors. Former CIB president Bob Grand stepped down and was replaced by Lathrop, who had been CIB Treasurer. Lathrop, who served as Indianapolis City Controller under Mayor Steve Goldsmith, is an executive with Oak Brook, Ill.-based public accounting firm Crowe Horwath LLP.

For now, Lathrop said, the CIB is deferring to the Office of Enterprise Development for analysis of the 12 privatization RFI responses Indianapolis received.

“Clearly, at some point in time, the board would have to get involved if there’s going to be some kind of wholesale execution, because we’d have to approve ay kind of contract,” Lathrop said.

“A lot of smart people are giving us ideas. We ought to take a look at them.”

Michael Huber, who directs the Office of Enterprise Development, said the RFI process has already yielded small- and medium-sized efficiency opportunities the city can pursue immediately, such as energy audits and retrofits of CIB buildings; streamlining of their maintenance; and contract renegotiation and consolidation among current service providers.

The Office of Enterprise Development will spend the Spring analyzing whether to move ahead with a broad “Request for Proposals” soliciting business bids for the general stadium and convention center manager’s job.

“I think what you’ll see is a series of small- and medium-sized cost savings initiatives, including some new RFPs or transactions start in the first part of 2010,” Huber said. “And then we’ve got a lot of homework to do to figure out if there’s a larger contracting opportunity that the CIB could pursue.”
 

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