Saturday, July 17, 2010

More Ballard Lies On $33.5 Million Gift To Herb Simon's Indiana Pacers

Mayor Greg Ballard has turned into one big fat liar. He pens a column in the Star (this will make I believe the 10th pro-Pacer subsidy opinion column that has appeared on the Star's editorial pages compared to zero columns opposing additional subsidies) to defend his decision to give $33.5 million to billionaire Herb Simon and his Indiana Pacers. The column is filled with outright lies and half truths.

He begins in his column by stating, "Most importantly, the agreement accomplishes all this without any additional tax increases." Come again, Greg. Didn't we just hike the City's hotel tax last year to one of the highest in the nation to raise more money for the CIB? Aren't we siphoning off additional state income and sales tax revenues for the CIB that could have gone to schools and other basic government services? And isn't the state loaning the CIB $27 million over three years when the State Treasurer is telling us that more than half of the State's surplus disappeared over the last year and will disappear entirely if state revenues don't start picking up?

Ballard thinks the "Downtown economic engine" is the end all, be all for the City of Indianapolis. He continues to make this argument while factories in the City continue to shutter, putting thousands of well-paid workers out of jobs and our best employer, Eli Lilly, is laying off thousands of employees as part of a downsizing effort. Whatever contribution the Pacers make to a few businesses downtown, it pales in comparison to the many businesses outside the immediate downtown area that really drive the economic engine of the City. Strangely, Ballard claims the give-away to the Pacers is necessary "to save jobs and grow our economic base." What planet is he living on? Does he really think the Pacers are a critical component of the City's economic base?

Ballard claims in his column that "none of the money is going to fund team operations or salaries." He simply cannot say that. He doesn't have access to the financial records of the Pacers that would prove or disprove how the money is being spent. As I noted yesterday, testimony in the Mel Simon family feud court debate over who should manage his estate mentions a $46 million loan that Mel had taken out for the team prior to his death that that Herb agreed to assume as part of a buy-out  agreement of Mel's interest in the Pacers he reached just months ago. How do we know that Herb isn't going to use that money to pay off that loan?

Ballard makes another disingenuous claim of the fallout if the Pacers left. "If the Pacers left, the taxpayers would shoulder the entire $15 to $20 million per year to operate the building and jeopardize our ability to make the $18 million annual debt payment." First of all, could Ballard have not nailed down exactly what those operating costs are annually on Conseco Fieldhouse before inking this deal? At first, the Simons claimed the costs were $15 million a year. They later increased that number to $18 million. Now Ballard is telling us they range anywhere from $15 to $20 million. That's a 33% variance and is further proof Ballard made no attempt to learn the actual costs of running Conseco Fieldhouse. I've heard several building management experts doubt that the annual costs are actually that high. I'm told $10 million is a more believable number, and that's probably on the high side.

What Ballard conveniently leaves out of his analysis of the impact of the Pacers leaving is the fact that the City would then get to keep all of the revenues Conseco Fieldhouse brings in from concerts, circuses, religious gatherings, conventions and other sporting events. Further, the costs of operating the fieldhouse are likely to be much lower if the Pacers and Fever no longer are playing there. The City will also get millions of dollars in parking revenues it has been giving up to the Pacers. More importantly, the Pacers would have been required to pay a penalty in excess of $130 million if it sold the team and moved to another city. Hell, the CIB could nearly retire its debt on the fieldhouse from the penalty payment.

Ballard credits downtown as being the catalyst behind "nearly $1 billion in sales tax revenues for the state, and tens of thousands of jobs" directly or indirectly related to the City's convention, hospitality and athletic activity. Previously, Ballard has tossed around a figure in excess of 60,000 jobs as being created by the downtown convention and sports teams. In fact, most of those largely low-paying service jobs are outside the downtown area and are not directly related to the convention or sports-related activities, although they collect a significant amount of the taxes that benefit those facilities exclusively.

On the revenue side, Ballard tries to make the case that $55 million will be lost to the local economy if the Pacers leave. That figure has been thoroughly discredited by any objective expert who has reviewed that useless study the CIB commissioned earlier this year to make the case for this huge taxpayer give-away. First of all, most of the players who are paid high salaries by the Pacers don't even live in Indianapolis. They spend their money elsewhere. As for the money spent on Pacers games, those are discretionary entertainment dollars that will be spent elsewhere. Jim Morris, CEO of Pacers Sports & Entertainment, suggests there would be no Indianapolis Symphony but for the Indiana Pacers. What is he smoking? The symphony would likely benefit if the Pacers left down and stopped draining away corporate donations from them. Individuals and businesses will still spend that money and other cultural, entertainment and businesses will reap the benefits from the shifting of those discretionary expenditures.

To Ballard, this government give-away to one of our state's wealthiest citizens is essential to preserving "our status as one of America's top tier status." For someone who was born and raised in Indianapolis, Ballard sure is ignorant about what actually raised the status of Indianapolis. It's called the Indianapolis 500, one of the largest attended sporting events held annually in our City. It was that racing event that put Indianapolis on the map and continues to contribute far more economically to the City of Indianapolis than the Pacers. And how much of our money have we given to the Hulman family to operate the world's largest and most prestigious auto racing track in the world? Zero. Not one penny.

UPDATE: Apparently Dan Carpenter shares my views about this give-away to the Pacers and the debate that has surrounded. He writes, in part, in his Sunday column:

The notion that Indianapolis--one time transportation hub, erstwhile jazz mecca, proud bearer of literary tradition and historical home of good jobs--was a poor cousin waiting all these decades for billionaire redeemers is part of a strategy called setting the terms of the debate . . .

For instance, there's no quarrel from the mayor's office or the business leadership that Herb Simon is losing money on the Pacers, that he can't draw from his other enterprises, that he can't massage his losses through tax accounting, that his costs for operating Conseco Fieldhouse are X. The taxpayers are an open book, while the for-profit beneficiary of public funds lets us take his word for it . . .

The economic value of a fair-sized factory is far greater than that of a sports franchise to a city, and the former is not without its intangibles as well . . .

So we're not Seattle. We're not New York or New Orleans. We're being asked to buy what they've got, and it's not available for any price, including the bargain rate of $33.5 million. I may not be telling you anything you don't know, but I certainly stand in violation of the terms of the debate. Mea culpa, mea culpa. Go Pacers, and I mean that.

19 comments:

Marycatherine Barton said...

In "The Business Insider", Michael Snyder details the twenty-two statistics that prove, beyond a shadow of a doubt, that the middle-class is being systematically wiped out of existence in America, and that includes Marion County. Yet Mayor Ballard and the Republican-dominated Council are carrying on as if this is of no concern to them. More debt and less accountability is all that we are getting from them.

Unknown said...

I don't get it.

Why couldn't the CIB just take over the Fieldhouse and rent it to the Pacers for their home games?

This way, the CIB could act as use the Fieldhouse to book concerts or other events and keep the gate receipts for thos events? The CIB could have a steady, reliable revenue stream from the Pacers and turn a profit on the other events.

Am I missing something?

Southsider said...

Years ago we had Ronald Reagan, Johnny Cash and Bob Hope...now we have Ballard, no cash and no hope.....also applies nationally.... Obama, no cash and no hope...

Gary R. Welsh said...

The CIB didn't even consider that, Bob. That only happens in the real business world. As Thorton Melon said in "Back to School", "How about Fantasyland?" Isn't that really the world in which the Mayor, the Pacers and the CIB are operating?

Blog Admin said...

Bob, because that would require the city having a spine when doing the negotiations with the Pacers. However, because the CIB went in with the mindset of "We can't lose the Pacers", it gave the Pacers the ability to demand much more than what they should've gotten.

Downtown Indy said...

I'd go over to the IndyStar and put in my 2 cents worth but...

I did that on the Wishard deal, calling out Ryerson and Gutwwein both, using facts gleaned from here, other sources, and my own analysis. Never, ever was I obscene or vulgar. But I made an apparent mistake of using 'lie' in one post.

What it got me was (1) first my account would not let me log in again until 2 weeks after the referendum vote and (2) ever since that I can log in but my comments are 100% invisible to everyone else but me.

That's not what we call impartial media!

Unknown said...

All too true, Gary.

I would have hoped that with these quasi-private entities like the CIB, some sort of working business model would have been, at least, explored.

The folks on the CIB board seem to engage the business practices used by the tractor factories and collective farms of the old Soviet Union.

It is most disspiriting and dishearting. Especially, Melinda Kennedy's tepid response to the Pacers "loan."

Paul K. Ogden said...

Bob,

Your suggestion would have been rejected because the Pacers want the best of both worlds. They want income off the building without having to pay to run the place.

Paul K. Ogden said...

Gary, I assume you're talking about the early edition of the Sunday Star because I didn't see that letter in my Saturday Star.

How moronic could his political advisers be? They are putting the Mayor front and center in an editorial on Sunday, the best read paper of the week, on an issue in which which 80% or more of the public is livid against the Mayor's position. That has to be the dumbest political thing one could do.

Jon said...

Does the revised agreement limit the amount the Pacers would pay if they moved to 30 million dollars? Did the CIB just give the Pacers a three year out?

Gary R. Welsh said...

Yes, it is the Sunday early edition, Paul. Jon, my reading of it seems to keep the existing termination penalty in place; however, the interpretation of that penalty clause is what bothers me because the CIB and the Pacers insist it is anything near what a plain reading of the agreement says it is. I read it to be more than $130 million currently. They say it's more like $20 million. I thought the purpose of the penalty provision was to put us in a position where we wouldn't be holding the bag on a new arena we built especially for the Pacers if they skipped out early on their lease. They're telling us something entirely different based on a creative interpretation of the lease agreement.

Gary R. Welsh said...

Downtown Indy, Ryerson really took offense over people like you and me saying he was lying about the Wishard Referendum. He basically conceded the point we made as to why his editorializing was inaccurate on a key point--namely, his claim that no property tax increase was asked to be approved--but when ahead and bashed us for calling him a liar just the same. He never once criticized the misleading referendum language used. I guarantee that the results of that referendum would have been quite different if it specifically stated you were voting to approve a property tax levy increase to the extent such funds were needed to pay the debt service on the new hospital. Incidentally, every letter to the editor in the Sunday edition gives a big thumbs down to the Pacers deal. Not good news for Ballard. I keep wondering where he plans to go to get his 50% plus one portion of the vote when he spent his entire term wiping out his base support in a city that is trending Democratic. Kennedy can probably skate by without saying much about the issues and avoid making stupid mistakes and capture 55% of the vote easily.

Gary R. Welsh said...

One other point, you can have some real fun with the CIB numbers when you do the math. Let's see, they said they were facing a $46 million deficit last year. They said LOS cost $20 million to operate and no funds were available to pay those costs. That got a tax increase smaller than what they had wanted. It will generate just about $15 million, which is shy by several million of their projections, which wasn't enough to cover the operating costs on LOS. So they borrowed $9 million from the state. They cut their budget a little over $10 million and deferred debt. That should have left them about $10 million shy of closing their deficit, but somehow they managed to find $10 million to give to the Pacers this year and $3.5 million for a new digital scoreboard because their budget outlook improved dramatically. So were they lying about the $46 million deficit, or the $20 million price tag to cover operating costs on LOS? And why should we believe the claim it costs $15 to $20 million to operate Conseco?

Downtown Indy said...

One of the news stories on Friday mentioned that a new 'ribbon board' (which I presume is going to be similar to the one at LOS) was accounting for a chunk of the needed 'upkeep' for Conseco.

That's a lot different from the Okeson-touted picture of paint, wallpaper, flooring and other fixups. ...Not that I'm surprised...

Mann Law, P.C. said...

Any body consider if even evrything they tell us is true, whihc I do not, they sure are not in need of the $10 million all at once.

Gary R. Welsh said...

Like I said, it's quite possible the money is being used to pay off that loan Mel Simon took out that Herb agreed to assume in his buy-out deal with his estate.

dcrutch said...

The point is they WERE lying. You can trade these calculations and theories back and forth forever. The bottom line is if it's too convoluted to be percieved by the average voter, then it's because they're hiding something. Call me beyond jaded or lacking in accounting & legal training and you'd be right. But, I'm highly versed in reading current events in government for some thirty years, and I am not the only one that smells a rat.

If the city and every other level of goverment can't figure-out that a growing segment of America want simple integrity in our elected officials, then I dearly hope we prove it to them in November. "Simple" as in the average citizen is going to have to understand their fiscal presentations, at least until trust is restored. "Integrity"as in stop telling us how you're going to buy votes and instead offer a future for our children and our old age by NOT buying our votes.

Governor Daniels' screw-ups have been well documented here. But, I hear more candor on our national fiscal fragility from him than the average public servant. Can he or somebody else get elected with that candor, and not continuing to promise things that are unaffordable? We'll see. How possible is it in America to run on a "reality" platform? I'd love to see a Libertarian for Mayor take a crack at it here.

Gary R. Welsh said...

Lathrop claimed in her presentation at Friday's meeting that the CIB ended last year with $43 million cash on hand. Now there is no way that is possible unless the CIB totally lied about the $46 million deficit. Lathrop omits in her overview how much in debt that is past due that has been deferred indefinitely into the future, including a large loan owed to Circle Centre Mall investors.

M Theory said...

Ready for that Libertarian mayor yet?