The Indiana Pacers franchise needs $15 million a year beginning in 2010—presumably from the public—to fund the operation of Conseco Fieldhouse. The franchise says it can’t afford to operate the venue, where it claims to have lost money every year but one since moving in 10 years ago.
That’s madness. We have a hard time understanding how the franchise could be such a money loser. The Pacers pay essentially no rent on the publicly owned fieldhouse but benefit from the more than 200 ticketed events held there every year—everything from basketball games to rock concerts.
We appreciate that the team hasn’t issued any ultimatums in this latest round of troubles, but it’s frustrating that taxpayers are once again being asked to subsidize a private enterprise that’s already getting a pretty good deal in the form of free use of a state-of-the-art entertainment venue.
You would think after reading that passage of the editorial that it would conclude there should be no bailout for the Pacers, but that's not the case. Instead, the editorial turns into a venture into Simon family estate planning. The editorial asks who will be in charge of the Pacers once Mel and Herb Simon are no longer around. It then goes on to suggest that the Simons give the City a cut of the selling price if the Pacers team is sold in the future. It reads:
And because Indianapolis has so much invested, why wouldn’t the Pacers give the city a cut of the upside? The Simons bought the team for $11 million back in 1983. A year ago, Forbes magazine valued it at more than $300 million. If the city is truly a partner, it should be rewarded if sometime down the road the franchise changes hands.
So essentially the IBJ concludes we should pick up the $15 million a year tab for the Pacers, even though all evidence would point to the claim that the franchise is losing money and has lost money in 9 out of the past 10 years as being completely false, as long as the CIB is offered some cut of a future sale of the Pacers. It looks like the IBJ has concluded the same thing I've already concluded. The Simons plan to sell the Pacers. They are simply trying to extract this additional subsidy for the team to bolster the team's selling price. The Simon family's crown jewel, Simon Property Group, is sinking fast from the mountain of debt it has piled up over the years. David Simon's plan to issue more stock as a ruse for raising money to pay off some of that debt went over like a fart in church with investors.
I see the IBJ's point in asking for this concession from the Simons, but if past is prologue, this would become an empty promise. The CIB already has a right of first refusal to acquire the team if it is sold, but it can't begin to afford to pay the purchase price. You know exactly what will happen. A potential purchaser will say he wants to move the Pacers to another city if he buys the team because the team isn't profitable enough here. The Simons will come to the CIB and tell them that they can guarantee the new team owner will keep the team in the city if the Pacers are let off paying the City its cut of the selling price so the Simons can reduce the purchase price from something like $350 million to $300 million. All of the negotiations with professional sports team owners end one way, and it's always to the advantage of the team owner and not the public. If the choice is between no Pacers and a Pacers team plus an additional direct subsidy of $15 million a year, it's a no brainer. Farewell, Pacers.
In a separate editorial in today's Star, the editors caution the CIB against rushing a resolution of the issue through the legislature. There are only a few weeks remaining in this session and there has still not been a single piece of legislation that has been proposed in writing so the public has an opportunity to review and be heard on the subject. That's a deliberate effort on the part of the CIB and Mayor Greg Ballard to make sure the public is shut out completely from the backroom deal they're negotiating at the State House. Nonetheless, the Star, without stating its own conflict of interest in this matter (its multi-million dollar loan to the CIB), seems to back a bailout with these conditions:
Every player -- including the Colts, Pacers, businesses, city and state governments -- will have to sacrifice something to find a sustainable model for operating Lucas Oil Stadium, Conseco Fieldhouse and other Downtown venues.
Second, the General Assembly must address the deficit before the end of April. The state took the lead in building Lucas Oil Stadium; it must not abandon the city now with operating costs pushing the CIB to the point of crisis.
Third, although it's clear that a range of options, not one overriding solution, will have to be employed to close the budget gap, the state and city must protect the region's convention business.
In other words, only the taxpayers will wind up paying for this bailout.
And then the push continues from the downtown elites. Roland Dorson and the ICVA's Don Welsh, who only recently moved to Indianapolis from Seattle, offer a guest column assuring you that the entire future of downtown rests on a taxpayer bailout of the CIB. They write:
What a shame, then, if we would somehow lower the bar, lose the momentum and sacrifice the national identity built in the past 40 years by retreating to the India-no-place of 1969.
But no less is at stake as we seek creative and collaborative solutions to the funding problems confronting the Capital Improvement Board. The issues extend far beyond Conseco Fieldhouse and Lucas Oil Stadium and their primary tenants, the Pacers and Colts. This is about sustaining the vibrancy of Downtown, maintaining and growing jobs and creating an environment that is attractive to business. The two then go on to throw out the phony ecoomic impact numbers they are always throwing around.
Let me explain this to Dorson and Welsh (who is no relation, thankfully). The massive amounts of public spending in the downtown one mile square over the past 40 years has done absolutely nothing to stem the tide of corporations that have closed or moved their corporate headquarters and taking their high-paying jobs elsewhere. In fact, it has done nothing to stem the exodus to the suburbs. Our population has remained virtually stagnant since 1970. Guys like Dorson and Welsh have a great gig going on. They convince stupid Marion County residents to continue paying tens of millions in tax dollars to the CIB year after year, and they get these great paying entertainment-related jobs that offers plenty of travel around the U.S., dining in all of the fine restaurants and overnight accommodations in five star hotels. Guys like this have been so successful that we spend more money on the CIB than we spend providing fire protection. We spend four times on the CIB than we spend on our city's parks. And we spend more on the CIB than we spend on the prosecutor's office, the public defender's office and the entire Marion County court system combined.
A final note to Welsh. Your former Seattle home lost its Sonics' NBA franchise to Oklahoma City. Think about it. Are all of the young, well-educated professionals going to stop moving to Seattle because the Sonics are no longer there and start moving to Oklahoma City instead? If you asked young, well-educated professionals across the country where they would rather live. Do you think they would pick Seattle or Indianapolis?
5 comments:
Whether the Pacers stay in Indy or not, I have said for weeks that they will be sold within one year. There is far too much property and corporate investment opportunities to take advantage of in this economy, where a good investor can make a killing.
Bravo. It's time to buck the sports franchise bullies.
pThere's a much bigger sport than either basketball or football. It's called 'rape the taxpayer.' And the Simons, Irsays and their counterparts across the country are All Star players. Time to rein them in and stop giving them whatever they want instead of what we can afford.
PP, it won't be within a year. The Simons know the PR consequences of getting an agreement for $15 million more and then turning around and selling the team. It will be at least 3 years after the anger dies down.
To "Bob", the guy who e-mailed me a link (without his return e-mail address) to the Star story bragging about SPG raising $1.1 billion from its stock offering this week, here's a perspective of another reader that might provide would-be investors a fairer picturer of SPG. I don't think you will get this perspective from the Indianapolis media:
"The reason the Star article sounded as it did was as a result of the fact that the Star got their info from the WSJ. Les Morris, spokesman for Simon Property did not issue the local media a release and did not return phone calls. That tells me Simon does not want to discuss the nitty gritty. A red flag!
Also, the Star noted Simon's $3.5 billion line of credit but did not mention what Simon owed on that credit line. Again, another red flag.
Somebody or some group snatched up those new shares very fast without batting an eye. There's a reason for that and it's not a positive for Simon. Wait until a hedge fund starts short selling Simon stock again just like they've done for over a year. Personally, I would short sell it down to a $24 per share target once their Q Report comes out.
Here's the clincher that shows Simon is in trouble. They took on NEW DEBT in the amount of $650 million when the sold 10 Year Senior Notes (bonds) that are paying WHOPPING 10.75% !!!!!
My lord, the Fed rate is virtually at zero and Simon takes on new debt of $650 million and is going to pay 10.75% on that debt over a 10 year period!!! Junk Bonds soon to be sure but at 10.75% a pop somebody was willing to take that gamble. If Simon were to go bankrupt the Senior Notes are ALWAYS paid of first while preferred and common get zip.
And to top it off some idiot ANALyst in Connecticut says Simon now has money to buy "distressed malls". What freaking idiot, those malls are distressed for a reason and nobody will touch them even if they had the money.
So these are the facts as I see them and people a whole lot smarter than me see them too. When a company takes on $650 million of new debt at an enormous rate of 10.75% for ten years it speaks volumes.
I do believe that David Simon has successfully ran Dad and Uncle's company in the ground with a debt burden they cannot overcome in this economy.
For what it's worth, I have two major credit cards and the highest rate of interest of the two is 10.25%. Simons are paying 10.75% on $650 mil and that's a deal????? They are screwed."
The $imon$, like all the other billionaire families, seem to be circling the horses. They obviously are smart enough to see the writing on the wall. This entire country, for the last 30ish years or so, was only stable and prosperous due to one thing: Debt. Consumer debt drove up prices and wages in numerous industries. The growing economy allowed our various governments to print more and more debt obligations. The game is now up and those elite rich folks who benefited the most seem to be trying to maximize their returns prior to the complete collapse of this country.
As for SPG stock, I looked it up prior to this reply. I then read AI's reply to "Bob." I am also seriously considering shorting SPG when the bell rings on Monday.
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