Monday, June 06, 2011

Irsay To Make $10-$15 Million From Big Ten Championship Without Expending A Dime

Indianapolis city leaders have been gloating over news that the City of Indianapolis will play host to the Big Ten football championship over the next five years, but it's Colts' owner Jim Irsay who should be gloating. He stands to make $10-$15 million conservatively from the revenues the event will generate for Lucas Oil Stadium even though he won't lay out a dime of his own money to help put on the event. The IBJ's Anthony Schoettle explains why this is possible:

Nobody has more reason to smile about Indianapolis winning the bid to host the Big Ten Football Championship than Indianapolis Colts owner Jim Irsay.
Indianapolis’ victory to host the game for the next five years means Irsay’s Colts will reap $10 million to $15 million over the period—2011 to 2015—while making little if any capital outlay to make it happen. That’s because the Colts lease with the city’s Capital Improvement Board stipulates the Colts get half of all revenue from non-Colts related events while the city picks up the tab for operations.
The $10 million to $15 million could be conservative. Lucas Oil Stadium holds 63,000 but is expandable to 70,000. If the game puts 63,000-plus fans in the seats—which most football followers believe it will—that will generate more than $3 million in ticket revenue alone. Add the Colts’ share of $1.5 million in ticket sales to the concessions, parking and other ancillary revenue, and the Colts’ total annual take easily eclipses $2 million.
The annual city-wide economic impact of the game is estimated at $20 million. The Colts should net more than 10 percent of that.
And it’s an unforeseen revenue stream for the Colts. When the stadium opened in 2008, there was little discussion of even having a Big Ten Football championship, let along Indianapolis hosting such an event.
This is another example of why taxpayers must demand that the Capital Improvement Board re-negotiate its lease with the billionaire Irsay. It is utterly criminal that this man can pile up huge profits from the efforts of the CIB and ICVA to win these events for the City, while he doesn't contribute one dime to the maintenance and operating costs on Lucas Oil Stadium built entirely with our tax dollars. Our elected officials should be imprisoned for allowing this fleecing of the taxpayers to take place. We pay an exorbitant tax every time we buy food and drink in this damn town to fund these operations, while this selfish man who has never had to work a day in his life piles up a massive fortune for himself. Meanwhile, the taxpayers are struggling to make ends meet during the worst economic downturn since the Great Depression that has no end in sight. The so-called civic leaders celebrating the landing of the Big Ten championship all receive tickets, food and drinks to all of the events, while you and I have to dig deep into our pockets to attend any events at these publicly-financed facilities. They should all be holding their heads in shame at the sleazy arrangement they've brokered with this billionaire. When will someone say enough is enough?

UPDATE: Too much honesty for Irsay and the Downtown elites? The IBJ has pulled Schoettle's blog post from earlier today discussing the potential windfall to Irsay from hosing the Big Ten football tournament at Lucas Oil Stadium. It's obvious someone reached his boss at the IBJ and ordered the blog post pulled. One of the comments posted on Schoettle's blog before it was pulled accused him of taking a cheap shot at Irsay.

UPDATE II: Colts' owner Jim Irsay responded with anger to Anthony Schoettle's blog post via Twitter:

IBJ n little anthony, r u incompetent and irresponsible,or just plain STUPID! So eager 2 spew venom,u play the retractable fool . . .

Notice how little anthony brings my name into false negative light,while leaving my friend Herb Simon out of his misrepresentation.
If the revenue sharing provision is what it appears to be, Irsay takes $3.5 million annually whether the City hosts the Big Ten championship or not. In other words, he would have pocketed $17.5 million over 5 years regardless of whether the Big Ten football championship is played at Lucas Oil Stadium. That may explain the reason Schoettle's blog post was pulled. Of course, Irsay doesn't have to pay any of the $20 million in annual operating and maintenance costs on LOS. The taxpayers pick up that tab.

UPDATE III: Schoettle has posted his correction, which essentially confirms what I write in the immediate paragraph above:

Eating crow once in a while is good for you. It may not be tasty, but it keeps you humble.


Making mistakes, on the other hand, is never good. Especially in my line of work, when mistakes reach thousands of people.

In my blog post Monday, I wrote that the Indianapolis Colts could make $10 million to $15 million from the Big Ten Football Championship at Lucas Oil Stadium over the next five years.

It’s true that the team does get about half of the stadium’s non-Colts revenue. But what I failed to mention is the Colts’ take is capped at $3.5 million annually. And according to Colts and city officials, the team already receives its maximum share from other non-Colts events. So, in actuality, if the current number of events keeps rolling into the stadium along with the Big Ten Championship, the Colts won’t receive a dime from the Big Ten Football Championships.

The game proceeds, then, will be split between the conference, its teams, and the city, which owns the stadium.

One more thing also needs clearing up. Monday’s post (which has since been removed in light of the error) said the Colts will make no capital outlay to host the game. In actuality, the Colts agreed to pony up $400,000 as part of the bid package to host the game from 2012 to 2015.

16 comments:

Concerned Taxpayer said...

Bart Peterson. The gift that keeps on giving!

Downtown Indy said...

I suppose by now Jimmy has forgiven everyone involved with denying him permission to fly a helicopter between his home and the stadium/training facility.

He lost a battle but has most definitely won the war.

Advance Indiana said...

Not to mention the free get out jail card he received for prescription drug fraud.

David said...

Is this really accurate? It certainly doesn't pass the smell test. I can't imagine that the Big Ten would have chosen Indy over Chicago if they really have to turn over 50% of their ticket sales revenue to the Colts. Seems like most other stadiums in the Big Ten footprint could hold the event at a fraction of the cost to the Big Ten. It doesn't help the credibility of your report that your source link is dead

Advance Indiana said...

Schoettle accurately reported what the lease provides. The question is what concessions the City offered to the Big Ten to win this deal--that might tell more about why Indianapolis was chosen over Chicago. Most cities simply won't subsidize these events the way Indianapolis does.

Citizen Kane said...

"Our elected officials should be imprisoned for allowing this fleecing of the taxpayers to take place. We pay an exorbitant tax every time we buy food and drink in this damn town to fund these operations, while this selfish man who has never had to work a day in his life piles up a massive fortune for himself."

Amen!

David said...

I don't live in Indy, and I'd agree that if those are the terms, the lease sounds brutal. I can see turning over concession and parking revenues if the team is running the event, but it's amazing you guys are able to get any of the big events you get if leagues are being asked to turn over millions of dollars in ticket sales. You're talking about over $30 million in Super Bowl ticket sales being relinquished by the NFL and over $5 million by the NCAA for the Final Four. The same would go for smaller events like the concerts and high school games that fill out the schedule there. That would take a lot of subsidies on the city's part to make up. Is there a copy of the Colts' lease posted online anywhere for the public to review?

Advance Indiana said...

The link to the Colts' lease on Lucas Oil Stadium is here:

http://www.capitalimprovementboard.org/agreements/COLTS_Lease%20Agmt.pdf

Indianapolis has the Indiana Sports Corporation, a nonprofit entity that is heavily subsidized with public funds that may have kicked in something to sweeten the deal. Not sure.

Advance Indiana said...

As for the Super Bowl, the NFL rules for distribution of the revenues trumps the normal revenue sharing agreement. Hell, the NFL makes the hotels in town kick a fee back to them for hotel bookings for the event, not to mention the special tax exemption the NFL gets for the Super Bowl under state law.

Nate Dunlevy said...

page 50 of the lease indicates that each year, the Colts receive a payment of $3.5 million intended to represent 50% of revenue from non-Colts events.

If I'm reading that clause correctly, it says the Colts are not entitled to any additional payment if revenue exceeds that mark. Therefore, it's untrue that the Colts make any additional money because of the Big 10 Title game. They get a guaranteed payment that 'represents' 50% of revenue, but they 'shall not be entitled to any other portion of revenues'.

Am I reading that right? Because it makes it look like IBJ misread the clause and that's why the article was taken down.

Advance Indiana said...

The real question should by why any non-game event revenues are shared with Irsay. The taxpayers pick up the $20 million it costs to maintain and operate the stadium; he pays nothing. He pays a very small, nominal payment that constitutes his lease payment. There are not a lot of non-game events held in Lucas Oil Stadium that generate a whole lot of revenues. You may recall some organizations that held events in the RCA Dome balked at holding them in LOS because the cost charged to them was so much higher than the RCA Dome. I would be curious to see what those revenues have been in each of the years the stadium has operated.

Nate Dunlevy said...

Again, if I'm reading the lease correctly, the rational for Irsay receiving payments is that he paid $100 million of his own money to help build the stadium, and the $3.5 million annual payment reflects his portion of the investment in the building.

It's correct he pays nothing for upkeep now, it's not correct that he never paid anything.

It's fine to say the lease is too generous; that may well be. Working out whether the city will ultimately come out ahead on the project is an important piece of civic duty.

Advance Indiana said...

Irsay did not pay $100 million of his own money. He didn't have that kind of money laying around. The CIB was charged a $50 million break up fee even though it was Irsay who was demanding a new stadium or he might break up the lease on the RCA Dome (which still had about $70 million debt) and take the team to another city. Irsay forgave the $50 million break up fee and got credit for the more than $100 million generated from selling the naming rights on a stadium built with taxpayer dollars. If you consider that Irsay paying $100 million, then you must live in fantasyland.

Nate Dunlevy said...

That's interesting information. Again, I'm just working with what the lease said.

My understanding of the situation was that while the Colts wanted a new stadium (though had not overtly threatened to leave), the city also needed to build a new building to replace the RCA Dome. The Convention center needed expansion and the only way to do that was to expand into the area around the dome. That meant a new building had to be built or the city was going to lose out on valuable convention dollars. Obviously, you dispute that narrative.

I would love to hear your interpretation of how things went down.

Nate Dunlevy said...

By the way Schoettle just retracted his story and apologized

http://www.ibj.com/the-score/2011/06/07/correction-colts-wont-see-big-ten-payday/PARAMS/post/27599

Concerned Taxpayer said...

"IBJ n little anthony, r u incompetent and irresponsible,or just plain STUPID! So eager 2 spew venom,u play the retractable fool . . ."

SPEAKING OF RETRACTABLE FOOLS!! HOW MANY TIMES HAS ***OUR*** $75MILLION$ DOLLAR RETRACTABLE ROOF THAT IRSAY JUST **HAD** TO HAVE, BEEN OPEN?