Saturday, February 07, 2009

CIB Annual Shortfall Now Pegged At $50 Million

At first we thought it was going to be a $10 million shortfall. The number later grew to $20 million. Now, CIB officials say they will need at least another $50 million annually to cover a $20 million shortfall it faces in funding operating costs for the Lucas Oil Stadium, provide $15 million more to the Pacers for operating Conseco Fieldhouse, cover a $ 6 million deficit for the convention center, which is currently undergoing a major expansion, provide $3 million for the ICVA for marketing activities and pick up $4 million in debt refinancing costs. Although Mayor Greg Ballard will not publicly discuss his plan for resolving this colossal financial mess, the IBJ's Peter Schnitzler tells us today that Ballard's administration is quietly lobbying state officials for authority to shift the additional burden to taxpayers. "In private discussions, Republican Mayor Greg Ballard’s administration has proposed hikes to CIB’s existing mix of hospitality taxes, or, alternately, permanently shifting sales or income tax revenue away from other government agencies," Schnitzler writes.

And who is at the center of those private discussions as a paid lobbyist for the City of Indianapolis? That would be CIB Chairman Bob Grand, who faces a direct conflict of interest because he personally represents the Simons, who own the Pacers. “Keep in mind that the Capital Improvement Board cannot do anything on its own to raise revenue. We can’t raise any taxes. We can’t create any taxes. We can’t create any sources of revenue,” said Grand, a partner with the local law firm Barnes & Thornburg LLP. “At the end of the day, it’s outside of our control. We’re going to lobby to go do something. Somebody needs to help us figure out a longterm solution.”

Grand's continued participation in these negotiations represents a clear violation of Indiana's Rules of Professional Conduct for attorneys. Those rules specifically bar an attorney from representing a client "if the representation of one client will be directly adverse to another client", or "there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer." When Grand accepted the appointment to be the CIB's President, he promised to wall himself off from any discussions involving the Pacers. With the long-term Pacers lease in the mix with this funding debate, there is no way Grand can participate in these discussions without affecting the Pacers' lease, and Mayor Ballard should not be allowed to waive the conflict by consenting to this untenable, conflicting representation.

Laying aside Grand's conflict of interest problem, it has now become clear that the taxpayers of Indianapolis will not be able to count on Mayor Greg Ballard to protect them. Instead, we are going to have to rely on the good sense and fairness of the Indiana General Assembly to look out for the public good. We may have a friend in Sen. Luke Kenley (R-Noblesville), the Senate's point guy on these discussions. Kenley tells Schnitzler that the teams and their fans and out-of-town conventioneers should bear these additional costs. “We’ve kind of asked the taxpayer to give their contribution,” Schnitzler quotes Kenley as saying in reference to taxes approved by the legislature used to fund construction of Conseco Fieldhouse and Lucas Oil Stadium. “If [the team owners] had at least some skin in the game, maybe that would help control cost overall,” he said. [Note: During last year's election, I asked all Marion County legislators to pledge to oppose a state bailout of the CIB. Only two incumbent legislators made the pledge, Rep. Phil Hinkle (R) and Rep. Jon Elrod (R). Elrod lost his re-election bid to Democrat Mary Ann Sullivan, whose husband's employer is making millions off construction contracts with the CIB. Sullivan refused to take the pledge, not surprisingly.]

Ballard, now clearly demonstrated to be no friend of the taxpayers, even if he has to rely on others to do the talking for him, wants to expand the Professional Sports Development Area, which currently captures all income taxes generated from the Lucas Oil Stadium to include other downtown businesses. According to Schnitzler, the CIB collects $16 million from that mechanism, of which $5 million is used for the CIB's operating expenses and another $11 million is used to cover construction costs for Lucas Oil Stadium. Ballard also wants to create a sales tax increment finance district, akin to a TIF district for property taxes, to divert sales tax revenues towards the CIB and away from other governmental units. Ballard is also looking at raising the food and beverage tax, the innkeepers tax and a ticket tax on sporting events, which collectively would raise about $28.5 million annually.

Meanwhile, the Pacers billionaire owners, Mel and Herb Simon, continue their public crying game for help. They whine to the IBJ's Anthony Schoettle that the team has lost money in 25 of the last 27 years. "Apparently, not even housing the team in the much-ballyhooed Conseco Fieldhouse or a trip to the National Basketball Association finals could stop the Pacers’ bleeding," Schoettle writes. According to Schoettle, the Pacers aren't alone. Ten of thirty NBA teams are losing money he says. And back to the pledge by Grand not to participate in any discussions involving the Pacers, he's still talking. "CIB President Bob Grand said at this point nothing is off the table, including increasing a variety of taxes and user fees to cover the Fieldhouse operations and other CIB shortfalls," Schoettle writes.

The Pacers pay just $1 a year to lease Conseco Fieldhouse, while pocketing all suite and concession revenues for both game and non-game events. Player salaries are the biggest reason the Pacers are losing money. That figure has reached close to $80 million annually according to Schoettle. The Pacers still owe $15 million on Jamaal Tinsley's contract, who doesn't even sit on the bench with the team anymore because of his numerous brushes with the law.

At least one expert blames the Pacers' woes on poor management. “Running a facility of that magnitude is a challenge, no doubt,” [Randy] Schwoerer said. “But I have a hard time understanding losing money to that level in a town with the sports support and entertainment appreciation that Indianapolis has. If you’re losing money to that level, it’s poor management and poor leadership, not solely the building.” Schwoerer suggests that an extensive audit of the franchise be conducted before the taxpaying public shells out more to help the franchise. Yeah, like that is going to happen.


Downtown Indy said...

My God this is appalling.

I had long considered either incompetence or dishonesty as the source of the financial woes. Clearly, though, it is both!

You cannot become $50M in the hole suddenly and without knowing it back when the problem was much smaller.

Everyone involved with the two stadiums, from concept to construction to operation, need to be held accountable and severely penalized.

We have been constantly reassured that this is an economic boon for all of us. Yet when the curtain is pulled back, time and time again we see somebody needs more tax money to make it work.

Since the earliest days of the LOS I have labelled it a Ponzi scheme. There's always been someone there to poo-poo that and chastize me for wanting a dead city and cornfields. Yet those critics seem to have evaporated as the problems have grown.

Once again, the 'solution' being floated is taxes. And still the near-total giveaways to the primary tenants is held sacred.

This has to stop. All the blood has been squeezed from us poor turnips. It's clear the economic impact figures have always been a lie to sway public opinion.

Now we're screwed and the new tactic seems to be 'these are tough times and we all will have to make sacrifices to get through them.' Will that include Irsay and Simon? I'm betting it won't.

Downtown Indy said...

Remember how the story went two years ago?

Fred Glass: 'There is no plan B'

Bart Peterson: considering the issue and expects a solution will be found

Fred Glass: "I'm confident this will be solved, because the money's there to solve it and the consequences of not solving it are too dire for everyone"

Both are now out of the picture of course and it's somebody else's problem to deal with. And actually it's 5 times worse than what they were telling us it was.

Mary Jo said...

Gary, I will say you are at least inteleectually honest by stating that having these franchises period is a bad deal for taxpayers, not that we agree with it. But it is a consistent and legitimate opinion, so kudos.

Gary R. Welsh said...

Mary Jo, And I know that is not your real name, I reluctantly even allow you to post a comment, particularly one that links the anonymous blog you are publishing for the sole purpose of discrediting Paul Ogden. I suspect you are being paid by someone to write that blog, and I find the fact that you are doing it anonymously the ultimate in cowardice. If someone wants to go to that much trouble to discredit a person's professionaly credibility, then he or she should be publicly identified so that those who read your blog can judge your objectivity, particularly since the whole theme of your blog is that Ogden has his own hidden agenda. I screen and reject many comments posted to this blog to prevent drive-by, anonymous hit artists. Some other blogs allow anonymous commenters to say anything defamatory they want about another person and then accept no responsibility for the comments. In some cases, I believe the actual blogger for that site is posting the vicious comments to his own blog and pretending someone else made them, which is pretty sleazy all around.

Paul K. Ogden said...

AI, thanks for having my back. "Mary Jo," however, is but a flea on my back that is easily flicked off . "She" does provide entertainment fodder, however.

M Theory said...

Mary Jo is obviously too afraid to sign his real name. Mary Jo wishes he had half the kahunas you and Paul possess.
Gary, thanks for being so pro 1st Amendment. Something tells me that is far less than "Mary Jo" would extend a citizen.

Citizen Kane said...

The whole downtown is a Ponzi scheme; the Conrad,LOS, Marriot, and Convention Center expansion are just the latest. Government can run Ponzi schemes much longer because of their ability to raise taxes and unfortunately because we don not make them accountable for their actions. We just accept what they say, without question.

Remember, government officials always lie; the only question is how big is the lie.