Tuesday, February 12, 2013

How We Can Make Subsidies To The Indianapolis Motor Speedway Equal to Subsidies For The Pacers And Colts

With this week's big news story about the mega-millionaire Hulman family seeking up to $100 million in public assistance to make improvements to their privately-owned race track, the rallying cry by the proponents of this theft of public assets is that the state of Indiana and the City of Indianapolis have been subsidizing the Indianapolis Colts and the Indiana Pacers for decades, while the Indianapolis Motor Speedway has never sought a dime of public assistance. What they are conveniently overlooking in their false analogy is that the Colts and Pacers subsidies are being invested in what are ostensibly publicly-owned facilities. The Colts and Pacers may operate the stadium and fieldhouse almost exclusively for the benefit of their billionaire sports team owners, but the buildings in which they play are publicly-owned. The Colts and Pacers could relocate their franchises to another city, but they can't take the investment the public made in the stadium and fieldhouse with them. The Hulmans can relocate the IRL headquarters to another City, but there is no race track in the world that can stand toe-to-toe with the Speedway and it's not moving anywhere.

During an interview with Amos Brown on his show, "Afternoons With Amos," Mike "Rent-A-Civic-Leader" Miles, argues that the IMS is producing tax revenues that are going to benefit the Colts and the Pacers and not motor racing. I borrow the term "Rent-A-Civic-Leader" from Rex Early, who exposed in his book "It's A Mighty Think Pancake" how the cable TV industry rented prominent civic leaders to serve as local investors in their bids to win approval of cable TV franchises from the Indianapolis City-County Council back in the early 1980s. Once the cable franchises were secured, the local investors were paid out huge payoffs by the cable franchisees, far exceeding their original investments. Rex explained what happened after he got a phone call from a business executive putting the deal together behind the scenes, a tale which bears repeating since it's one you will never read in the local newspaper:
American Cablevision was busy all over the country trying to get the lucrative cablevision franchises. Their modus operandi was to set up a separate corporate entity of which they would own 80 percent, and the local yokels would own 20 percent. Obviously, they wanted partners from the community who were well known and had some influence with the governing bodies that handed out the franchise.
This process was dubbed by the press as "Rent a Civic Leader." Because the governing body here was the City-County Council, Joe wanted me to help put together a group of Indianapolis people who might have some influence with the City-County Council.
The president of Inland Container had already asked some of his acquaintances to join this effort. The problem was that although the ones he picked were the high and mighty in the corporate world, none of them had a clue about the City-County Council. Some of the names who were already onboard were Otto Frenzel III, President of Merchants National Bank, Frank McKinney, Jr. President of American Fletcher Bank, Al Stokely from Stokely-Van Camp; Sarkes Tarzian from Bloomington, Lew Enkema; and Sam Sutphin. They were all community leaders, but I was not sure whether they were going to be a lot of help with the council.
I added some names who might not belong to Woodstock Country Club but who knew what a city councilman looked like (besides myself). My recommendations were Julia Carson, Pat Chavis, Larry Buell, Bill Crawford, Jack Dillon, Bob Eichholtz, Frank Otte, Ed Yates of the UAW, Margaret (Mrs. Alex) Clark and Letha Rhea.
Other members were John B. Smith, Carl Dortch, Tom Hasbrook, P.E. McAllister and Gene Sease, all of whom were well known in the community and also were or had been involved in the political arena. This was our "Rent a Civil Leader" team.
In addition to the American Cablevision group, there was another group competing for the franchise. That Indianapolis Cablevision. They, too, were loaded for bear. Their general partners were Tom Binford, Art Angotti, Jim Ackerman, Eldon Campbell, Joe Dawson, Eddie French and Kelley Robbins. In addition, they had as investors Bob Borns, Hallie Bryant, Clarence Doninger, Dick DeBolt, F.C. Tucker, Dr. Frank Lloyd, Gordon St. Angelo, Glen Swisher, Dave Knall, Dick Petticrew, Gene Hibbs, and others.
Indianapolis Cablevision had a virtual platoon of heavy-weights. Needless to say, the winners would share a payday, so the feelings ran high . . .
As Early explains, in the end, the City-County Council made both sides winners by awarding two cable franchise: one covering the city limits before UniGov and the other covering the suburban areas outside the old city limits. Early couldn't speak for other investors, but he said his 11 shares were later bought out at a price of more than $80,000 per share. "Santy Clause came early to Rex's house that year," Early wrote.

Miles has been a leading proponent of giving subsidies to the Colts and Pacers as a leader of the Central Indiana Corporate Partnership and as the head of the local Super Bowl Committee, which by my estimate, managed to squander about $50 million in public dollars to host last year's Super Bowl, which benefited very few local residents and businesses. The Hulman family brought Miles aboard its team late last year for the same reason Herb Simon brought Jim Morris aboard his Pacers organization several years ago. Both men have a reputation of being great civic leaders in the community, which in Indianapolis means they have a great gift for using the guise of civic service as way of creating wealth for themselves. Morris has succeeded in winning $43.5 million in public subsidies for Simon's Indiana Pacers over the past four years. I can only imagine the size of the bonus Herb has paid him for his "Rent-A-Civic Leader" duties. Miles, who greatly admires Morris, is now hoping to accomplish an even bigger fete for the Hulman family's IMS.

Now, Miles understands that he has a more difficult sell since the subsidies his buddy Morris won for Simon's Pacers arguably were being used for operating and maintaining a publicly-owned building. For purposes of this discussion, we will accept that premise, even though we understand that both the tax-exempt stadium and the fieldhouse are operated rent-free for the exclusive use of their billionaire sports team owners. Miles makes the case during his interview with Brown that the IMS is a "near public institution," which should make it eligible for public subsidies, even though it is 100% privately-owned by the Hulman family.

Miles ticks off three reasons to support his view that the IMS should be treated as a "near public institution." The three events hosted annually at the IMS equate to hosting one Super Bowl. Secondly, it can't be disputed the image and name ID the IMS has brought to Indianapolis. And thirdly, the motorsports cluster in and around the Speedway has created more than 6,000 jobs that pay 50% more than the average per capita income in Indiana. Of course, Miles pulled those last figures straight out of his ass the same way we were told that 65,000 jobs were at risk of being lost if we didn't go along with a massive tax increase and new state subsidies for the CIB in 2009 to support the professional sports teams and downtown convention business. The CIB faked a financial crisis to convince lawmakers and the City-County Council to go along with that scheme and three years later the CIB was sitting on cash reserves of $65 million while the City's budget for basic services had to be slashed by tens of millions of dollars to balance the budget.

Here's my suggestion for a friendly amendment to the big tax giveaway being sponsored by Sen. Mike Young that apparently the legislative leaders already signed off on after conducting secret talks with IMS officials out of the public's view for the past two years. If the IMS wants $100 million from the taxpayers, then it should begin incrementally transferring a 5% stake in the IMS properties to the state of Indiana each year that it receives a $5 million handout from the taxpayers to make improvements to the IMS. The Star reports today that tax assessments on 26 parcels in and around the IMS owned by the Hulman family are currently assessed at $81.9 million. That's down from the $90.6 million at which the property was assessed in 2006. If the Hulmans elect to take up to $100 million over the next 20 years, then by the end of the 20-year period, the state will own 100% of the IMS, putting it on the same par vis-a-vis the Colts and Pacers when it comes to public subsidies for professional sports organizations. Fair enough, Mark? That way the entire public will benefit from your "Rent-A-Civic-Leader" scam, not just you, the Hulmans and the platoon of lobbyists they've hired to carry out what would be one of the biggest public heists of all time in Indiana.


Jon said...

I agree that Indianapolis owns BLF and Lucas and that Indianapolis doesn't own IMS the fact remains that the Simons and Irsays have received tens of millions of dollars from Indianapolis taxpayers. Maybe the Speedway needs to create IMS as a TIF, that seems to work in this town unless you live in Avondale/Meadows.

Gary R. Welsh said...

A TIF district has already been created for the area of the Speedway. That was done several years back. That's how they have been financing all of those improvements you see in and around 16th Street near the IMS.