CIB, which manages the city’s professional sports stadiums and its convention center, needs to close a $47.4 million annual budget deficit. On April 2, the Indiana Senate’s Appropriations Committee approved Sen. Luke Kenley’s CIB rescue plan 10-2. So far, it’s the only solution on the table.
Unfortunately, it misses the mark by millions, at least in the first few years.
Under the best-case scenario, with the Legislature adopting Kenley’s entire plan, the cash-strapped municipal corporation would be left with an $8.7 million deficit the first year, plus another $4.2 million deficit the second, according to an analysis by the Legislative Services Agency. And that’s assuming the economy doesn’t worsen.
In later years, Kenley’s plan likely would generate more revenue than CIB needs.
“We’re trying to put a plan in place which will last 20 years and more,” said Kenley, a Republican from Noblesville. “When you look at it from that perspective, you have to realize you’re going to have some ups and downs.”
Imagine this. Our City-County Council votes for a plethora of new tax increases in June based on Kenley's plan, only to learn that all of the higher taxes they just approved won't be enough to cover the CIB's shortfall. What this tells us is that nothing short of a major restructuring of the CIB will be necessary to fix this problem. That's why I think it is incumbent on the state to assume control of the Lucas Oil Stadium and its $20 million a year in operating and maintenance expenses.
Schnitzler digs deeper into Kenley's bailout plan's reliance on $6 million a year in revenues from expansion of the professional sports development area to include the new J.W. Marriott convention hotel. It is obvious the $6 million calculation is based on a very rosy scenario. Schnitzler writes:
But the performance of the JW Marriott may be the biggest variable in the equation. Kenley’s plan would expand the downtown Professional Sports Development Area that currently covers Conseco Fieldhouse and Lucas Oil Stadium to include the 1,626-room, $450 million convention hotel complex. The project will be anchored by a 1,005-room, upscale JW Marriott hotel. All sales taxes generated at the complex will go straight to CIB.
Kenley is counting on the development to produce $6 million in sales taxes annually. That means a hotel project still under construction must earn at least $85.7 million in revenue during its debut year, then keep up that performance or better indefinitely.
It assumes 65-percent room occupancy—far above what the Indianapolis hotel market is achieving in the recession. It also assumes the JW Marriott will be able to charge more than $180 for its rooms. That’s $50 more than the average the rest of downtown’s convention hotels are currently getting.
And since the JW Marriott won’t open its doors until February 2011, CIB
will have a long wait for its cash . . .
The JW Marriott’s potential to reach its financial projections depends on its ability to help expand the local tourism trade in step with the expansion of the Indiana Convention Center. That project, scheduled to be complete in 2010, will increase exhibit space from 403,000 square feet to 745,000 square feet.
ICVA must not only retain the 40 annual citywide conventions Indianapolis already hosts, but continually attract new ones. And the JW Marriott must draw a steady traffic in smaller conventions and meetings it can hold inside its own walls . . .
CIB Chairman Bob Grand conceded that the board has a problem if the bailout doesn’t close the financial gap for several years.
“It’s a work in progress,” he said. “If revenues come in later, clearly, we need other revenues now to make sure we remain solvent and in operation. It doesn’t help if we don’t get through the next two years.”
In the meantime, CIB’s problems are beginning to hamstring ICVA’s attempts to land new convention business. Word of its crisis is spreading beyond state lines. “We need to get the funding of CIB behind us. Our competitors are saying, ‘Indy is uncertain. Who knows if Lucas Oil [Stadium] will even be open?’” Wells said. “In a competitive world, that’s what people do to you.
“The one thing Indianapolis has always been able to sell is that we deliver,” he added. “I’m confident that with Sen. Kenley’s help, we can show the rest of the country Indianapolis will be just like it always has been in the past, stable and a great place to stay.”
And now you see the wisdom of the people making these decisions about the future of the CIB. When Mayor Greg Ballard took office, he had two choices for governing this city. He could change the city's direction by reordering its priorities. Or, he could maintain the status quo and spend his entire term in office trying to balance the City's books to pay for all of the excesses of the eight years of Bart Peterson's administration. By choosing the latter, he has sealed his fate as a one-term mayor.