Saturday, August 09, 2008

CIB Officials Downplay Lucas Oil Stadium Funding Debacle

I've been warning about this problem for a long time. The chickens will soon be coming home to roost on the ongoing funding problem for the new Lucas Oil Stadium. The CIB projects a $20 million operating deficit for the new stadium in its first full year of operation alone according to the IBJ's Jennifer Whitson. Operating expenses for 2009 are expected to be $27.7 million, while operating revenues generated from events are estimated at $7.7 million. The CIB plans to use a reserve fund, which was set aside for the construction of the new stadium and convention center expansion, to cover the shortfall. The CIB plans to tap $25 million in reserve funds to shore up the stadium's funding in 2009. CIB Chairman Bob Grand tells Whitson that some belt tightening is in order to get through the next few years:

“We’re expecting fairly significant increases in revenues,” said CIB President Bob Grand. But in the interim, the board’s bracing for tight budgets and potential cuts to shore them up.

“We’ll have to be very fiscally responsible in the next three years,” Grand said.

He said CIB has dropped a couple of charitable golf outings and also has flatlined a total of $1.4 million in grants to the Arts Council of Indianapolis, the Indiana Black Expo and the Indiana Sports Corp. in its 2009 budget. He said those could be cut if needed.

“If those activities are driving revenues … then I’m going to support them,” Grand said. “If not … they’ll probably be reviewed and cut.”

But spending reductions of that magnitude would be a drop in the budget. Lucas Oil’s $27.7 million in estimated operating costs represent nearly 36 percent of CIB’s operating expenses.

CIB didn’t face the same challenges at the RCA Dome, in part because it controlled more of the revenue. Barney Levengood, executive director of CIB, told IBJ that he did not have revenue and expenses for the RCA Dome, saying his office does not break out the information that way.

CIB may be able to find some relief to financial pressures by using revenue generated by other venues it oversees, said Rob Hunden, a consultant who formerly worked for the Indianapolis Bond Bank.

“They have a lot of ways to move things around,” said Hunden, president of Chicago-based Hunden Strategic Partners.

Bet you didn't know the CIB has been helping to fund the arts and Indiana Black Expo? That is a complete deviation from the CIB's mission. Hunden's comment that the CIB has "a lot of ways to move things around" to shore up the funding problem highlights the fact that the CIB operates as a private slush fund for the City, operating completely without accountability to the taxpayers.

The fact is that there is no money to operate Lucas Oil Stadium because Fred Glass and Bart Peterson gave away the store to the Irsays during the negotiations on the new stadium construction. Notice there is no talk of reopening those negotiations. No other NFL team owner has received a larger subsidy than Irsay's Colts. The deal is the biggest taxpayer ripoff in NFL history. Irsay gets most of the revenues generated from the stadium and pays absolutely none of its operating and maintenance expenses.

This comment from Grand in Whitson's story is infuriating. "Grand said he didn’t think the board would need to tap taxpayers for any additional money to cover operating expenses 'at this point,' adding that the CIB traditionally has operated 'pretty efficiently.'" The CIB has operated "pretty efficiently" my ass. If it were a business, it would have long ago been shut down from bankruptcy. Note how much over budget the stadium is. The stadium's original construction cost was $625 million. The final tab is now expected to be $720 million, consuming a $90 million contingency fund. Thanks to Gov. Daniels, any extra funds raised from new taxes on food and beverages, hotels, car rentals and admissions above what is needed to meet annual debt obligations must be used exclusively to pay down the debt sooner. This was not the case with the RCA Dome, where CIB officials diverted tax revenues intended for debt reduction to other projects. As a consequence, the CIB still owes about $70 million on the RCA Dome, nearly what it cost to build originally, as its demolition begins to make way for the expanded convention center.

16 comments:

artfuggins said...

How could Mitch Daniels who insisted that the state take over the construction and financing of Lucas Oil Stadium, let it get into this shape...this may be another reason that he needs to be replaced,

Bart Lies said...

If, as we have been led to believe, the stadium is booked nearly every day of the year, and $7.7M is all we can net from that, we're screwed.

roger61611 said...

Fred Glass and Bob Bedell and Bart Peterson should be in prison.

Flynn said...

AI, our local folks who have negotiated these deals over the years are lauded for what they've accomplished. But when you take a close look at the numbers, it wasn't hard to negotiate the deals. They basically gave everything away.

The Colts are a tenant in the new stadium. They didn't pay a dime for the stadium. Yet we gave them 1/2 of non football event revenue at the stadium? That is positively insane. The Colts negotiators must have thought we were the biggest idiots around.

It was a horrible deal. Everyone talks about the great ownership of the Colts. The minute the Colts start losing though, this city will want to run them out of town on a rail. They have royally screwed over the taxpayers. And let's not forget, this is the same organization which gave a total of $35,000 for victims of the Indy tornado and the state flooding. Real generous. (Sarcasm.)

Here's an idea...let the Colts make up the $20 million difference, perhaps by letting the
CIB keep the revenue from the non-football events as it should be. What do you want to bet the Colts will refuse to contribute a dime toward paying the $20 million operating deficit?

I don't know why we can't get straight, honest answers out of the CIB. We need a shakeup over there. The CIB needs to have some people on it who will ask tough questions and demand answers.

Mike Kole said...

Every stadium that is built on taxpayers' backs is sold on a low figure, with the real-life figure only emerging mid-construction. The 'over-runs' here are no different than what was experienced in Cleveland, Pittsburgh, and a host of other NFL cities.

Why the public never questions the role of socialized sports is beyond me.

Concerned Taxpayer said...

Wilson46201 said...
That horse has died! Stop flogging it!

Concerned Taxpayer said...

"If, as we have been led to believe, the stadium is booked nearly every day of the year, and $7.7M is all we can net from that, we're screwed."

That's because IRSAY gets all the money. Where have you been?

artfuggins said...

roger61611, as you may not be aware, Mitch Daniels insisted on the control of the financing and constructiof of the stadium in exchange for aid from state funding.....you are naming the wrong culprits...start with Mitch Daniels.

Money77guy said...

Ok we have a surplus in the state government and Daniels dolled out all of the contracts. It's time for the gov to step up and bail the city out of this mess. Hmmm can we renegotiate the contract! Better yet someone should sue the city! ;)

spooknp said...

Why the public never questions the role of socialized sports is beyond me.

I believe we are just now seeing the unrest that is to come. I am talking about a complete collapse of social disorder that this country has not seen since the riots of the 60s. Things will be much worse this time around. You see, no one really cares when _they_ are doing OK. No one cared about others making millions or even tens of millions on the backs of taxpayers when you could walk into a ton of union factory jobs, work over-time and make over $100K/year. That was back when decent homes were only $70K/year, cars were cheaper,...well, everything was cheaper. Half of my family is "rich" because of these sorts of jobs. However, most blew through their money buying junk. Then things started to change. The average person couldn't get the easy union job, but no bother, interest rates got cut big time, so now even if your only making $15/hr, as long as you have a pulse, you could get a 40 year interest only mortgage or some sort of ARM loan that allowed you to live like your parents did. So people did that. Now the credit well is tapped. The number of welfare leaches has grown so large, millions upon millions are required to feed, school, care, and house the poor.

The property tax protest was just the start. There are more, much more, things to come. Skyrocketing property crime rates (I know a lot of crimes are not even getting reported, because the cost to replace things are under the insurance deductible). Killings are going through the roof. People are demand more and more services. The elite have their hand in the public's bank account.

Look at our stadium/CC expansion. The performance auto parts convention..gone. Gencon, now in bankruptcy, who knows about future shows. The FFA is going to decide this year if they are going to stay in Indy, or go back to Louisville. Wonder which city can find the most money to pay off the FFA? You see, this is what this country has become: A nation of debt. As soon as the debt runs dry, and other nations figure we are a laughing stock, that is when the fireworks really begin. When our fiat money finally becomes worthless on a global scale. Debt and taxation has allowed for "private" companies to survive. It has allowed for the typical American to live like a king. The American empire is no different than the Roman empire or many others that have come and gone. The only question is when does the $#!t hit the fan?

Citizen Kane said...

Government perpetuates itself by always solving problems with solutions that are not really solutions. So, of course, either the problems persist or the "solutions" create new problems, which government proposes to solve with more half-baked solutions.
Government officials never want to concede that there are some problems that they can not solve.

So, in the downtown area, they have created a pyramid scheme that can only be maintained by successive subsidized projects designed to prop up, support and maintain the previous (and many times extended) subsidized businesses (Hoosier Dome, Convention Center, hotels, expanded convention center, hotels, mall, expanded convention center, hotels, new arena, hotels, new stadium, hotels, expanded convention center, hotels, etc.). It is all a house of cards that would eventually collapse without further subsidy. They know it, but won't admit it.

Of course, when government largess is made available, someone will always be available to take it, but willingness to participate in a pyramid scheme does not validate it as a viable or appropriate method of development.

Most pyramid schemes collapse. Unfortunately, government can levy additional taxes, borrow money and use all sort of financial voodoo to maintain the pyramid regardless of its long-term impact on the city’s core mission or viability.

Bart Lies said...

"That's because IRSAY gets all the money. Where have you been?"

Right here, for the past two years, saying the stadium is a raw deal for every taxpayer - while dozens of people kept spouting the standard lines about it's great economic impact. Great, yes, good, no.

Bart Lies said...

People allow socialized sports because it (a) gives them the opportunity to get the autograph of a famous quarterback or (b) allows them to brag to equally numbskulled folks in other cities that 'we pwned you in the last game.' The use of the word 'we' is important, because these fools are projecting their simple, pathetic lives onto the rich and famous stars of their chosen sport, themselves 'becoming' the rich and famous star for a few hours, a few weeks a year.

Concerned Taxpayer said...

"The Colts negotiators must have thought we were the biggest idiots around."

Uh-h-h-h...I think you meant "must have KNOWN we were the biggest idiots around."

ProCynic said...

I think the difference between Lucas Oil Stadium and the Cleveland stadium is that in Cleveland the people approved public fuinancing for the stadium in a public referendum. By a better than 2 to 1 margin, in fact. That was never done here. It would never have succeeded here.

HOOSIERS FOR FAIR TAX said...

I don't think many of the people supported subsidized socialization of sports funding.

As I recall, it was rammed down our throats.

They are also ramming down the property relief package which is not relief at all. They plan to screw us when they open up the Indiana Constitution and change the language to make it legal for them to do what they've been doing illegally to us for decades.

It's already August and supposedly property tax REPEAL is in a summer study session. Why haven't we heard anything?