Monday, February 25, 2013

Senate Sponsor Of $100 Million IMS Subsidy Says It's Not A Bailout

The proponents of legislation before the Indiana General Assembly don't seem to agree on their talking points as to why it's necessary for Indiana taxpayers to provide up to $100 million in subsidies to the Indianapolis Motor Speedway over the next 20 years. The IMS' CEO Mark Miles says the investment is needed because of substantial improvements the IMS is required to make to its motorsports track facilities, and to restore the track to a top-tier status among race tracks that it has lost in recent years as newer and better tracks have been built. Sen. Luke Kenley says the IMS had no choice but to seek assistance from the state because "they don't see where they can find the capital resources they need in any other way." And Sen. Mike Young, the principal sponsor of the legislation, says the public subsidy is necessary to stem declining revenues generated by the IMS.

I was finally able to review video for the debate on SB 91 when it was heard in the Indiana Senate on February 19 after the Senate finally updated its website today with the archived video after nearly a week's delay. The debate was relatively short given the extraordinary and unprecedented nature of what is being undertaken. Sen. Young began his presentation of SB 91, which creates the Motorsports Investment District, by stating it was not a bailout of the IMS. "The Speedway is not in trouble," he said. "They don't need any state help to continue for another 110 years or so, but they do have a project that they can't complete and they've asked that the state become a partner."

Young insisted that the legislation was not unconstitutional in reference to federal bailouts because the state wasn't picking winners or losers since the IMS is not in competition with any other motorsports facilities in the state. Yet he suggested the IMS was in competition with tracks in other parts of the country in explaining the need for improvements to be made at the track. To follow Young's logic, the IMS doesn't need state assistance, but if it doesn't receive state assistance, it won't be able to make improvements that will allow it to be competitive with other tracks. Hopefully that makes more sense to you than it did to me.

Young blamed the federal government for forcing the IMS to invest somewhere between $25 to $40 million to bring it into compliance with the ADA to accommodate disabled persons. This seems to be a floating number. The IMS in one release said those costs would be $25 million. When the bill was heard in committee, it was stated that ADA improvements would cost $10 million. I've previously discussed how the ADA compliance issue is totally bogus, notwithstanding the concocted settlement the IMS reached with U.S. Attorney Joe Hogsett as part of an orchestrated effort to massage public acceptance of such a massive public subsidy for a privately-owned business. The ADA complaint filed against the IMS was more than a decade old and seemed of no concern to the U.S. Attorney, a close friend of certain IMS officials, until its officials opened up talks with lawmakers to seek state assistance.

After venting about federal over-reach, Young then shifted his focus to the need to help the IMS regain business it has been losing. He said income and tax revenues generated by the IMS have been declining for several years due to smaller attendance at race events. The declining attendance he said is due to temperatures being too hot for the running of the Brickyard 400, and that the fans won't return unless lighting is added to allow the race to be run at night. Young said fans insist on being able to view what's happening around the track during the race, which explains the need for investment in high definition video boards to replace the existing video boards. The seating is also too uncomfortable for many fans, and it's necessary to replace current seating with more comfortable seating.

According to Young, the financial impact generated by the IMS annually is $500 million. I'm not sure how he came up with that number, but it's a nice round number. To the chagrin of IMS CEO Mark Miles, the chairman of the local Super Bowl Committee, Young insisted the IMS' financial impact was greater than the Super Bowl, which Young said actually lost money for the city. Miles in the past has claimed the Super Bowl had a $150 million net impact on the Indianapolis economy.

At one point, Young claimed the IMS spends $10 to $15 million annually to maintain its motorsports facilities. Remarkably, that's the same number the Indiana Pacers say it takes to maintain Banker's Life Fieldhouse. When Lucas Oil Stadium opened--without funding in place to pay its operating expenses--the CIB claimed it cost about $20 million to maintain. Does anyone else get the feeling that these numbers are always pulled straight out of someone's ass and have no grounding in reality?Young said the IMS plans to spend somewhere between $70 to $100 million on improvements. That's quite a variance. One would think that a more precise estimate of the cost of those improvements could be provided.

Young says the IMS is currently generating about $3 million annually in state income and sale taxes, which includes the IMS, the Brickyard Crossing golf course and two buildings adjacent to the IMS that are operated by the IndyCar Series. The Legislative Services Agency's fiscal statement on SB 91 does not break down what part of the $3 million is generated from income versus sales taxes, which should come as a surprise to noone since the IMS isn't about to open up its books for public scrutiny. As I previously observed, LSA's estimate was $3 million before SB 91 was amended to remove admissions tax revenues from the MID. That tax isn't currently collected on ticket sales at the IMS like other sporting events held at Lucas Oil Stadium and Banker's Life Fieldhouse. Before the admissions take was taken out of the bill, I noted that the admissions taxes alone could generate close to $3 million annually based on estimated attendance figures at IMS events.

The $2 million in minimal investment the IMS will supposedly contribute annually is based on LSA's current $3 million figure the IMS, golf course and IndyCar supposedly generate annually in income and sales taxes. Under SB 91, the maximum amount of state tax revenues that can be captured by the MID is $5 million. You can bet the Department of Revenue will certify a $5 million figure annually regardless of whether that amount of revenue is generated. That's been the modus operandi with the downtown sports district, which currently captures $11 million in state income and sales taxes to benefit the CIB. The only thing that's clear is that $5 million a year would not be sufficient to service debt on a $100 million bond issue, which would only be sufficient to repay principal, not interest costs.

To my surprise, Sen. Lonnie Randolph (D-East Chicago) actually raised the possibility that the track might be sold in the near future during his questioning of the bill's author. Randolph noted that the improvements could add to the value of the track and what would happen to that money. Young was not at all concerned that the IMS might be sold, or that any contingency could or should be imposed by his legislation to address that possibility. He assured Randolph that the same obligations to contribute towards the debt service on the bonds would apply to any successor owner without any increased liability on the part of the state. In Young's view, the improvements to the IMS facilities would ultimately create additional revenues for the state--even if that took 20 years before that would occur.

Sen. Greg Taylor (D-Indianapolis), a co-sponsor of SB 91 and a bond lawyer by trade, also reassured his colleagues that the City of Indianapolis would never be called upon to contribute anything towards the IMS, and that if he was still around and this occurred, he would be the first to stand up and speak out on the commitment that had been made by the IMS that no city aid would be sought by the IMS. Of course, the City of Indianapolis has always contributed considerable public safety costs each year associated with crowd control during all IMS events without any contribution from the IMS. Moreover, the City has also agreed to exempt tickets sold to IMS events from the admissions tax that applies to other sporting events.

1 comment:

Flogger said...

Thank you for the update.

What tangled webs our elected officials weave, when they try to justify Corporate Welfare.

Sen. Young -"The Speedway is not in trouble," he said. "They don't need any state help to continue for another 110 years or so, but they do have a project that they can't complete and they've asked that the state become a partner."

Why not ask the financial institutions that exist to provide loans? They are called Banks.

When I needed to re model my house to make it wheel chair accessible for a family member I went to the mortgage company for a construction loan.

Mike Pence campaigned on a Conservative Platform. I am sure through some fancy dance steps he will sign to this Corporate Welfare bill.