City commission OKs sports development area expansion crucial for CIB

Efforts to secure future funding for the Capital Improvement Board advanced Wednesday, as a city commission approved changes to a mostly-downtown area used to capture tax revenue that helps fund the quasi-government agency.

The Metropolitan Development Commission voted unanimously to approve a resolution expanding the city’s primary professional sports development area, or PSDA, to include nine additional downtown hotels.

The PSDA, established in 1997, currently captures state income and sales taxes collected at Lucas Oil Stadium, Bankers Life Fieldhouse, Victory Field and four downtown hotels (the downtown Marriott, the JW Marriott, the Westin and the Hyatt Regency), as well as the Colts’ practice venue on the northwest side.

From the sports facilities, the CIB receives up to $16 million per year in tax revenue, while the hotels generate up to $8 million annually for the agency. Additional tax revenue goes to the state.

Hotels were first added to the PSDA in 2009, to increase funding for the CIB in the wake of Lucas Oil Stadium’s construction and ahead of efforts to expand the Indiana Convention Center.

State lawmakers last month approved—and earlier this month Gov. Eric Holcomb signed—Senate Bill 7, which outlines changes to the funding mechanisms for the CIB, including the expansion of the PSDA.

While lawmakers and city leaders had previously indicated (and IBJ reported) eight hotels would be added to the PSDA, the resolution presented to the MDC includes nine properties:

Hyatt Place/Hyatt House, 130 S. Pennsylvania St.; Crowne Plaza at Union Station, 123 W. Louisiana St.; Omni Severin, 40 W. Jackson Place; Embassy Suites, 110 W. Washington St.; The Conrad, 50 W. Washington St.; Hilton, 120 W. Market St.; Sheraton, 31 W. Ohio St.; The Alexander, 333 Delaware St.; and Le Meridien, 123 S. Illinois St.

The expansion of the PSDA previously centered on two new Hilton-brand hotels planned by Kite Realty Group Trust at Pan Am Plaza that wouldn't open for several years.

Those hotels, which would add 1,400 rooms to the downtown corridor, are moving forward, but lawmakers opted to go the current route with the PSDA plan amid concerns the project would be derailed by other downtown hotel operators opposed to the project.

The district expansion, which also must be approved by the City-County Council before it goes into effect, would generate millions in additional revenue for the cash-strapped CIB.

The approved bill caps the group’s revenue from the additional hotels on a sliding scale—up to $9 million in fiscal year 2022, up to $12 million in 2023, up to $16 million in 2024-2033 and up to $18 million in 2034-2041.

Combined with other components in the bill—such as county admissions taxes and auto-rental taxes—an average of $8.5 million would be generated annually for the CIB from 2019-2023. That figure jumps to $35.9 million annually from 2024-2028.

Not expanding the PSDA would put the CIB in a more precarious financial position, particularly as the agency looks to continue paying off existing debt in the coming years and looks to climb out from the red by the end of the next decade.

The change is also crucial for the CIB’s 25-year deal with the Indiana Pacers, which includes $270 million from the agency for capital improvements to Bankers Life Fieldhouse.

The deal, which also includes technology improvements and operating reimbursements to Pacers Sports & Entertainment, will cost taxpayers about $800 million over the life of the contract, though it would come through existing revenue streams rather than new taxes.

Lacking an expanded PSDA would endanger that deal, for which which state lawmakers gave city officials until Aug. 1 to get requisite local approvals.

Thomas Cook, chief of staff for Mayor Joe Hogsett, told IBJ the Pacers deal would essentially be nullified without the expansion, since there wouldn’t be enough funding in place to move forward with improvements to the fieldhouse.

“These are important steps we are taking, but it’s still early in the process,” he said.

John Dillon, president of the MDC, lauded the city and the Indiana General Assembly for their respective work on the resolution and the enabling legislation.

 “It really puts the city in a good position to have a long-term agreement with one of (our) key sports franchises in the Indiana Pacers,” he said.

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