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State to issue $95M in bonds for Speedway next week

June 26, 2015

Next year’s Indianapolis 500 will be the 100th, and an Indiana authority is selling bonds with an eye on another century of auto racing at the famed Brickyard.

The Indiana Finance Authority plans to issue about $95 million of 20-year, federally taxable municipal debt next week. The track’s operator will use the proceeds to refresh the Indianapolis Motor Speedway.

The venue, which can hold about 300,000 fans, is getting upgrades including high-definition video displays, Wi-Fi, and refurbished seats and concession stands. Critics deride the deal as corporate welfare for Hulman & Co., which owns the course. Supporters say the arrangement will keep a Hoosier icon competitive with newer raceways.

“When you think about Indiana, you think about the Indianapolis Motor Speedway and the Indianapolis 500,” Doug Boles, president of the Speedway, said in a telephone interview. “It’s an institution that’s been here for 106 years, and we plan on it being here 106 years from now.”

The Indiana Legislature approved the deal in 2013, authorizing the bonds and creating the Indiana Motorsports Commission, which will oversee the work, according to the Indiana Finance Authority.

The legislature will appropriate $7 million a year for 20 years to repay the bonds. The deal calls for the state to recoup the money through $2 million in annual payments from the Speedway, a new admission fee that started in 2014 and any increase in sales and income taxes since 2012 within a district encompassing the track.

If the state hasn’t been fully repaid after 30 years, Hulman & Co. has pledged to cover the shortfall. The arrangement would be binding on any new owner, according to Boles.

“We hadn’t gone to the legislature in 106 years for an ‘ask’ like this, and we wouldn’t have gone to them if we didn’t think that we could pay it back,” he said.

Demand for the bonds should be consistent with other Indiana appropriation debt because the state will be committed to the project, said Howard Cure, director of municipal credit research in New York for Evercore Wealth Management LLC.

“This is going to be view by the state as an important facility that would have a relatively high priority in the payment,” Cure, whose company oversees $5.9 billion, said in an interview.

Standard & Poor’s and Fitch Ratings give the bonds their second-highest grades, equal to the rating on the state’s appropriation-backed debt.

The state shouldn’t be subsidizing a private sports entity in the first place, said Indianapolis lawyer and political blogger Gary Welsh. Taxes used to offset appropriations for the bonds would be better spent on schools, he said.

“It operated for a 100 years without any public subsidies,” said Welsh, 52. “I’m frankly sick, as an ordinary taxpayer, of being taxed to make the super-rich wealthier at the expense of the rest of us.”

The work would’ve taken longer without state help, and the raceway would’ve lost ground to other venues, Boles said. The speedway hosts other contests, including a 400-mile Nascar race, an IndyCar Grand Prix event and a variety of concerts.

Besides $10.5 million video scoreboards, the course will also get $32 million for new stadium seats, elevators and improved visibility in the front stretch and the first turn, the most popular viewing area, Boles said.

Gov. Mike Pence has praised the deal as an investment in an internationally known state asset. The Indianapolis 500 generates about $510 million in economic activity annually in the state, according to a 2013 study by the Indiana University Public Policy Institute.

“The state’s doing pretty well, the rating’s pretty strong, so I expect there would be pretty good demand” for the bonds, said Cure at Evercore.

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