CIB Annual Shortfall Now Pegged At $50 Million

BALLARD WANTS TAXPAYERS TO PICK UP THE TAB
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.