What's The Truth Behind CIB's New Budget Numbers

The IBJ's Scott Olson had a story last week discussing a proposed $10 million increase in the CIB's proposed budget for 2011 over the current year's 2010 budget. That happens to match the amount of the first of three $10 million installments over the next years the CIB is giving to the Indiana Pacers because billionaire Herb Simon claims the franchise is losing so much money he can no longer afford to operate the team here withou additional public support. The CIB's President Ann Lathrop insists the $10 million in higher spending for next year is not the only reason the CIB plans to spend $73.1 million next year. A point I would make is that the first $10 million installment to the Pacers has already been paid out of the 2010 budget, and when the City-County Council approved the current year's budget for the CIB, it insisted there was no money in this year's budget to give to the Pacers. The CIB did, however, get approval from the City-County Council to raise the hotel tax in order to get an extra subsidy from state income and sales tax revenues from an expanded downtown sports area district, and it got approval to borrow $27 million from the state in three, $9 million annual installments. The CIB took elected to take that first installment late last year, even though Lathrop stated at the time the CIB didn't need the money. If we don't borrow it, she said, the CIB would lose the right to access those borrowed funds.

According to Olson's story, Lathrop attributed another $5 million in higher budget costs to improvements to Conseco Fieldhouse and other CIB facilities. "Instead, she pointed to $3.5 million in other improvements to the Fieldhouse, which is operated by the CIB, as well as $1.5 million earmarked for renovations and repairs to other buildings it owns," he writes. I'm sorry, Mr. Olson, but the CIB does not operate the Fieldhouse. Under the terms of a long-term lease, the Pacers are responsible for operating and maintenance expenses on the Fieldhouse because it gets to keep all of the revenues generated from it, including both game and non-game events; the CIB is not responsible for operating the Fieldhouse. The Pacers have also been allowed to keep parking revenues that are supposed to belong to the CIB. As part of the 3-year, $33.5 million give-away to the Pacers approved by the CIB earlier this summer, the CIB agreed to pick up $3.5 million in improvements to the Fieldhouse it otherwise was not legally obligated to cover. It seems the Pacers are dissatisfied with its current 10-year-old scoreboard above center court and wants to replace it with a brand new digital scoreboard.

Olson also notes the expanded convention center is expected to cost another $1 million in higher utility costs. Nonetheless, Lathrop tells Olson the CIB will balance its budget through "a combination of cuts and anticipated increases in revenue from hospitality and food and beverage taxes." Personnel costs are supposedly going to decline $3 million due to budget cuts. I've previously noted the CIB eked out most of its personnel cost reductions by significantly reducing the amount of temporary staffing it has been employing in the past. Of course, the only reason the CIB can really afford to spend an additional $10 million next year is because it is borrowing another $9 million from the state. How it plans to repay the full $27 million loan to the state is any body's guess at this point.

Perhaps the most important point Olson makes in his report is buried near the end of the story. "In addition, the Indianapolis Convention & Visitors Association is slated to receive $8 million from the CIB next year," Olson writes. "Unlike previous years, that the money will not come from CIB revenue but from downtown-development funds."The CIB typically funds about 70 percent of the ICVA’s budget." What are those "downtown-development funds"? And does that mean the CIB's budget is actually increasing by $18 million instead of the $10 million advertised by the CIB? Pat Andrews at Had Enough Indy asks that latter question. The Indianapolis Times blog builds on the point Pat makes with a discussion of how those funds come from a downtown tax increment financing (TIF) district. Yes, that would be property tax revenues. The blog explains the importance of this change in funding:

Is it coincidence that the $8 million in taxpayer money earmarked from the ICVA just about equals the amount of money for the coming year that the city has promised to pony up to bail out the Indiana Pacers?


If you remember, it was Mayor Greg Ballard who insisted that not a dime of taxpayer money would be used to bail out the Pacers and its billionaire owner.

While I have no doubt that the mayor will continue to insist that no taxpayer money is being used to help the Pacers, I think it would be safe to assume that the only reason the CIB is spending $8 million in your tax money on the ICVA is because of its obligations to the Pacers.

The CIB has funded the ICVA for years, but the the CIB has never had access to TIF funds, and has always funded the ICVA with a portion of its own revenues. There's only one reason that the CIB is now using TIF proceeds to fund the ICVA -- because it's short the $10 million it gave the Pacers.

The CIB, Mayor Ballard and administration officials will vehemently deny using property taxes to fund the Pacers, but the point here is that if those million of dollars hadn't gone to the Pacers, the CIB wouldn't need access to your tax dollars to fund the ICVA.

The mayor promised not to use tax dollars to bailout out the Pacers, so like any screwed sidewalk shill he's playing a shell game with your tax dollars.

The Indianapolis Times is absolutely correct in its assertion that the CIB's budget is nothing more than a shell game, just like it always has been. There is always more to its numbers than meets the eye. Yes, Greg Ballard lied again. The CIB didn't have the money in this year's budget to give to the Pacers so it tapped a property tax revenue-related fund to provide funding to the ICVA for the first time so it could afford to give away money to the Pacers, and it still had to borrow more funds from the state even with those additional property tax revenues. Our property tax dollars are being used to give money to billionaire Herb Simons' Indiana Pacers and support the CIB notwithstanding Ballard's assertions to the contrary. That's a fact you won't read in the mainstream news media reports.

UPDATE: Don't miss this story if you're a property taxpayer. It looks like the library board and IndyGo may file appeals to allow them to hike property tax levies next year to meet budget shortfalls. Although the boards are comprised of persons appointed by the mayor and the council, watch for politicians to distance themselves from the actions of those boards if property tax increases do occur.

UPDATE II: The rubber stamp members of the CIB approved the budget without asking any serious questions. Of course this is how it goes. They are part of the corrupt organized crime ring that runs this town, and they're all making money at your expense and laughing all the way to the bank. And to David Shane, you have proven yourself to be a totally worthless member of the CIB. I should have known better than to expect more from you.

UPDATE III: Here's some more details on the CIB's proposed budget. The CIB is passing out grant money to the Arts Council and the Indiana Sports Corporation. The Arts Council will get $300,000, while the ISC will get $150,000. The grant to Black Expo is being restored, notwithstanding the harmful economic impact this organization's summer celebration is increasingly having on downtown businesses. There is also a $150,000 cultural tourism matching grant in the budget. The CIB will spend $100,000 more on the Colts game day expenses next year. The CIB plans to spend $800,000 to pave that gravel parking lot at the site of the former Market Square Arena it has had a variance to operate for a number of years. No sinking fund is being established to repay the state loan. The CIB is relying heavily on the inter-local agreement for downtown development dollars (TIF revenues) as a permanent way of funding the ICVA as noted in the story above. It's budgeting at its worst when you consider how much other vital city budgets are being cut to deal with an anticipated revenue shortfall next year. We're going to wind up spending nearly 10% of what we spend on all other city services on the CIB's budget. The CIB's budget in 2011 will actually be 25% higher than it was in 2009, jumping from $84.7 million to $104.4 million. Absolutely incredible.

Marion County Legislators Need To Show CIB They Mean Business

Sen. Mike Young (R-Indianapolis) and Sen. Pat Miller (R-Indianapolis) amended a vehicle bill this week, SB 269, to enact a new law to repeal the authority of the Capital Improvement Board of Marion County to increase the auto rental tax or the admissions tax to events in Marion County. In light of the gross misrepresentations made by the administration of Mayor Greg Ballard and the CIB to gain approval for that 2009 bailout legislation, lawmakers are wise to eliminate this additional taxing authority for the CIB; however, I remain skeptical that these lawmakers are doing little more than political posturing.

Both of these revenue options were granted to the CIB under legislation enacted in 2009 to help bail out the CIB when its leaders claimed the government agency that oversees Lucas Oil Stadium, Conseco Fieldhouse, Victory Field and the Indiana Convention Center was facing a $47 million budget deficit and was teetering on bankruptcy. After lawmakers passed the bailout legislation, the Indianapolis City-County Council approved a hike in the city's hotel tax rate and taking out a $27 million loan from the state of Indiana over 3 years, two measures included in the state bailout legislation. The downtown sports authority district was also expanded to divert more state tax revenues to the CIB as part of the bailout plan. At the time the bailout was approved, the public was assured none of the money being raised from these new sources of revenues would be used to provide more subsidies being demanded at the time by the Indiana Pacers.

The CIB later borrowed the first $9 million from the state, even though the CIB said at the time it approved the loan it really didn't have an immediate need for the money. A few months later, the CIB announced a $33.5 million subsidy deal it had reached with the Pacers, which provides $10 million a year to the NBA franchise over a 3-year period to offset operating costs for Conseco Fieldhouse and $3.5 million in capital improvements, including a new ribbon board and digital scoreboard, both of which create new advertising marketing revenue opportunities for the Pacers. The owners of the Indianapolis Indians, which is a much smaller professional sports team franchise, purchased a digital scoreboard for Victory Field with their own funds to increase their advertising revenues a year earlier. Soon after the new Pacers subsidy was announced, the public was informed the CIB had entered into an agreement with the Metropolitan Development Commission to begin transferring $8 million a year from a downtown TIF to the CIB to award to the ICVA. Previously, the ICVA had been paid out of the CIB's general operating budget. Mayor Ballard had often reminded the public the CIB was funded entirely without property tax revenues, unlike other governmental agencies, in supporting new revenue funding for it That long-standing public commitment to fund the CIB without property tax revenues has been flushed down the toilet.

If that wasn't enough, we later learned the CIB has miraculously ended its 2010 budget year with an $11.5 million surplus and held cash reserves of $62 million. The funny numbers should have come as no surprise. As I pointed out frequently when the CIB claimed it was slashing its budget to help erase its claimed $47 million budget deficit in 2009, the CIB had deliberately inflated its budget numbers in 2009 by overstating its true expenses. Most of the claimed savings in staffing, for example, were made from temporary staffing expenses, not from eliminating full-time regular employees. The avoidance of one-time expenses and refinancing mechanisms created the illusion of further cuts in the CIB's budget. At the same time, the CIB grossly underestimated the windfall it would get from the tax increases and state tax diversions that were approved as part of the state bailout legislation. I remain convinced state taxpayers are being raped by these diversions made from the state's general revenue fund out of receipts claimed to have been generated from an expanded downtown sports development district. If the actual tax receipts generated by this expanded sports development district were audited, I suspect we would learn that more money is being diverted from the state's general revenue fund than are warranted based on actual receipts.

Reading a story in today's Star on the motivations of the lawmakers seeking to repeal the CIB's expanded taxing authority, I am more than skeptical that these Marion Co. lawmakers' efforts are more than just idle threats. Take this quote from a story in today's Star by Jon Murray:

After they learn more about the CIB's financial prospects, Young said, they will decide whether to move forward with the pre-emptive repeal.


CIB and city officials plan to meet with the lawmakers soon and will urge them to retain those tax options, particularly as insurance for millions of dollars in recent state loans to the CIB . . .

If the CIB's expected revenue over the next decade is enough to pay back those loans without exercising the two tax options, Young said, "then we'll get rid of them. If there's any question, then we won't."

Sen. Young, of course, came up with the bright idea of offering the CIB the $27 million loan over 3 years as an option to take instead of these other tax increase measures the city council chose not to enact. People like myself warned Sen. Young at the time he was making a big mistake by offering the loan option because he was only helping the CIB build up its baseline budget for future budget requests, which would lead to a call for even higher taxes down the road. And to no one's surprise, the CIB is not about to give up this additional taxing authority without a fight:

CIB and city officials plan to meet with the lawmakers soon and will urge them to retain those tax options, particularly as insurance for millions of dollars in recent state loans to the CIB.


In these officials' view, the CIB's fiscal health is encouraging but still fragile. Its budget for 2010 ran an $11.5 million surplus through November, the most recent figures available, and CIB leaders are working to build cash reserves.

"The General Assembly cast some very tough votes (in 2009) to give the CIB the resources it needed to become solvent again," said Robert Vane, a former mayoral communications director now serving as a consultant to the CIB. "The board stands ready to answer questions and work with people who are serious about its long-term stability." 

As Abraham Lincoln once aptly put it: "Fool me once, shame on you. Fool me twice, shame on me." We've gone well past the point of being fooled by lies and misrepresentations made by the CIB and the Ballard administration about the CIB's finances just once or twice. If our elected representatives in the legislature really mean what they say, they will simply repeal the additional taxing authority and ignore any explanations offered by the CIB in defense of itself. If this is all just political posturing as I suspect, then nothing will become of this legislation and the joke will once again be on taxpayers who will be on the hook to pay higher and higher taxes to continue funding the longest running Ponzi scheme in the history of Marion County.

About That CIB Bailout Meeting Tonight

Yes, it is is true. I had a bit of a dust up with CIB President Bob Grand at tonight's Municipal Corporations Committee meeting on the CIB's proposed $48 million bailout deal. Let's set the record clear. At the beginning of the committee meeting, Chairman Michael McQuillen announced that the Indiana Pacers and the Indianapolis Colts turned down an invitation to send representatives to attend tonight's meeting and explain why taxpayers should dig deeper into their pockets to subsidize their professional sports enterprises, but CIB President Bob Grand and CIB Vice President Pat Early appeared in their place on behalf of the CIB. I explained during my testimony at tonight's hearing that the Indiana Pacers were well-represented at the meeting by CIB President Bob Grand, who represents the Simons and Indiana Pacers. After a well-received applause from the audience, Grand said he was happy to see that I finally appeared in public to cast my aspersions against him, which he claimed were false. Grand added that nobody reads my blog anyway, which I assume included him since he knew what I had to say about his role as CIB President. Grand told the committee that he did not represent the Indiana Pacers; his law firm represented the Pacers. Laying aside the fact that he's the managing partner of the firm, let's chuckle and just move along. [If you want to see the video of last night's meeting, click here and highlight the video for the April 16 meeting of Municipal Corporations Committee. My statements begin at 1:09 on the video.]

I want to thank Councilor McQuillen for conducting the first public hearing at which someone other than the interests of the professional sports team owners were represented. I encouraged him to hold at least one public hearing at which the public could speak without all of the interference from the CIB mouthpieces. Members of the public were allowed just 2 minutes each to speak after the CIB representatives spoke for more than an hour to the committee. If committee members were listening closely tonight, they learned the following:

• The CIB does not own Lucas Oil Stadium. If it cannot afford the $20 million in added costs to operate it, it is within its rights to return the leased facility to the state-run authority that built it. CIB President Grand backed off his ridiculous claim he made a couple of weeks back that LOS would be shuttered if this bailout plan before the legislature is not approved.
• The CIB is not contractually obligated to hand over the $15 million a year the Pacers are demanding to cover operating and maintenance expenses on Conseco Fieldhouse.
• Bob Grand told the Committee the CIB has been operating at a deficit every year since 1999.
• Increasing the alcohol tax to fund a bailout could lead to the exodus of certain businesses within the alcohol industry to neighboring counties and Marion County-based businesses could see a loss of business to neighboring counties.
• John Dora of Dora Brothers hotels explained that the increase in the innkeeper's tax could be detrimental to his hotel and other hotels in Indianapolis like his which did not receive public subsidies like the Conrad Hilton and the J.W. Marriott convention hotel complex being built by billionaire Dean White of White Lodging. His message contradicted published reports in local media suggesting that the hotel industry in the City is on board in making Indianapolis' innkeeper's tax the highest in the country. Adding sales tax to the mix, the tax would reach 17%.
• Representatives of the car rental business explained to the Committee that the tax is paid largely by members of the local community and not by out-of-towners as suggested by the proponents of the CIB bailout plan. Increasing this tax in Marion County yet again to fund the CIB could lead to an exodus of business in this sector across the county lines.
• Representatives of the CIB could not respond to questions about the fuzzy math of the proposed tax increases as indicated by the Legislative Services Agency's analysis of the Ballard CIB bailout plan. CCC advisor Jim Steele says he needs more time to study the numbers.
• Representatives of the CIB could not explain why debt of the CIB had been converted from long-term fixed rate bonds to risky interest rate swap notes, which resulted in a $17 million penalty payment to the CIB, and which was covered by an emergency loan from the State of Indiana due in June of this year.
• The CIB is distributing more than $2 million in grant money to various groups, including the arts.
• The CIB is distributing $10-$12 million annually to the ICVA, which it defended as its marketing arm for the convention business.

Kudos to Councilor Ed Coleman, who had the courage to ask CIB President Bob Grand publicly if he should consider resigning from the CIB because of his conflict of interest. Grand became red-faced at Coleman's suggestion and insisted that he had fully disclosed his conflicts when he accepted the appointment to the Board by Mayor Greg Ballard. Councilor Lutz rushed to his defense, criticizing Coleman for casting aspersions at Grand for volunteering his service to the CIB. Democratic Minority Leader Joanne Sanders offered the Democrats' plan for expanding the professional sports development area to capture the sales tax revenues from Circle Centre Mall and the establishment of a downtown casino as a way of funding the CIB bailout without a tax increase. My problem with the Democratic plan is that it assumes the need for a bailout, which has not been proven to date, and it simply feeds the CIB monster and allows for even greater unwarranted subsidies for the billionaire sports team owners.

On those parking fee increases the state bailout legislation includes, Councilor McQuillen said Mayor Ballard's administration insists that was a mere "typo" in Sen. Kenley's drafting. The CIB seems to be singing a different tune on that one. The CIB is looking at raising rates as much as 20% on more than 7,000 parking spaces it controls downtown according to WTHR's Mary Milz. "CIB Executive Director Barney Levengood recently told the CIB Finance committee, 'You could raise them a buck or two. Where there's demand, we can raise rates and get more money for the CIB.'" Here's the kicker to Levengood's statement: "But Levengood said they'd have to consult with the Pacers before making any changes." Hey, you got to hand it to Levengood for his candor in telling us who's really calling the shots at the CIB, unlike its president, Bob Grand.

UPDATE: WIBC is the only local news source that has directed any attention to the issue of Bob Grand's conflict of interest discussed at last night's meeting. Brendan O'Shaughnessy's story in the Star completely omits any mention of it. WIBC's Stan Lehr writes:

It's not just the bloggers pushing it now.

A member of the City County Council is suggesting resignation to the head of the embattled Capital Improvement Board. It had gone unsaid in polite company until Libertarian Ed Coleman brought it up at a meeting of a Council Committee. The bloggers have repeatedly attacked CIB President Bob Grand, who is also managing partner of the Indianapolis office of the law firm Barnes and Thornburgh. The firm represents the Indiana Pacers, one of the key players in the CIB budget crisis.

Coleman told Grand he was stating a suggestion as much as a question when he asked, "Have you recognized there is a possible conflict of interest and considered resigning so we can get someone on this board who represents the citizens and not the Simons?" That's a reference to the Simon brothers, owners of the Pacers.

Grand says he has acknowleged his position and has sometimes abstained from votes to avoid any conflict. And to the suggestion that he step aside, he said, "I strongly disagree." He referred to "aspersions" cast on blogs that "not many people read." That brought jeers from some in the meeting room. Grand was there, at least. The Pacers and the Colts declined the committee's invitation to attend the meeting.

Irsay Thumbs His Nose At CIB Because He Can

Jimmy Irsay is no fool. He knows that all of those hundreds of thousands of dollars in campaign contributions he has passed out to Indiana politicians like Luke Kenley and Mayor Greg Ballard have paid off. When he says jump, they ask, "How high?" More importantly, Irsay has been assured by his attorneys that the lease agreement the CIB signed with him is so blatantly one-sided in his favor that the CIB has absolutely no leverage to make him contribute more to cover the costs of Lucas Oil Stadium. With that backdrop, Irsay can say the following to an Indianapolis Star reporter when asked about contributing to the CIB bailout:

“When it comes down to it, it’s very frustrating,” Irsay said. “What you’re saying is, ‘Hey, we worked on this thing. Our word is good. We stand behind it.’ That’s what a partnership is about. It would be very hard to recruit businesses here if they thought as soon as they worked on a lengthy, comprehensive deal for 25 years or more that four or five months later people would be talking about … renegotiating.

“What’s going to happen? A year from now it’s like, ‘OK, it’s not good enough. What we agreed to in ’09 in May is not good enough. We need to talk to you again.’ ”

"People don’t want to look at the facts,” Irsay said. “Look, (former Mayor) Bart Peterson and (former CIB head) Fred Glass came to me and said we need a new stadium to go with the convention center. Will you guys take this risk? We did. It was all on our risk. If someone can show me someone else who put a hundred million into a building and doesn’t own it … that’s what I don’t understand.”

Did Jimmy Irsay put a $100 million of his inherited money into LOS? No, unless you count $50 million the CIB paid as a break-up fee to him for terminating the lease on the RCA Dome to enter into a new one for LOS, or the $50 million the NFL kicked in for the new stadium. Is Jimmy Irsay not telling the truth about wanting a new stadium. You bet. Back in the 1990s, Irsay had already been making waves to CIB insiders that the RCA Dome just didn't cut it. He wanted an open air stadium. Mayor Goldsmith had to explain to Irsay that he couldn't sell the public on a new stadium when the RCA Dome was barely more than a decade old. Goldsmith agreed to renegotiate the lease with Irsay in 1998. The deal gave Irsay's Colts $9 million a year in Dome-related revenues and required the CIB to spend about $20 million in improvements to the Dome. The Colts were required to stay in the Dome through 2014; however, beginning in 2007, the team could terminate the lease if it paid $11 million a year to the CIB to break the lease.

Soon after the 1998 lease agreement, the CIB began buying property at the site where LOS now sits. In 2002, Bart Peterson would deny that the land was being acquired to build a new stadium, but we learned that was a big lie. In fact, he began negotiating a new stadium deal as soon as word leaked out that Irsay might move the team to L.A. In 2004, the Indianapolis Star discovered through a public records request that design plans for a new stadium (sans retractable roof) had quietly been prepared at the CIB's request. When Irsay realized what a generous deal Mayor Peterson and then-CIB President Fred Glass were willing to negotiate with him, he added the demand for a retractable roof and the two dutifully complied, adding at least another $75 million to the stadium's cost.

Irsay now suggests that Peterson and Glass wanted a new stadium simply as an excuse for expanding the convention center. I'm not buying that. The two knew that convention center expansion needed to happen to generate more revenues to offset the added cost of a new stadium. They knew that conventions are what drive the hospitality taxes like the food and beverage tax and hotel taxes that support the CIB, not the stadium. If the City had a new and bigger stadium, it would need that many more conventions to provide added revenues to support the CIB. The problem is that the CIB has been operating on borrowed money for many years. When people use the term Ponzi scheme to describe what has been going on with the CIB's finances, they are not far off the mark. A series of carefully crafted financing schemes has provided the CIB with sufficient funds to operate, albeit courtesy of borrowed funds. The chickens are now coming home to roost and the CIB's back is against the wall.

Instead of doing a top-down investigation of the CIB's finances, Mayor Greg Ballard, who simply inherited the mess from the Peterson administration, is insisting on a series of new tax increases to not only help shore up the CIB's finances but provide more taxpayer-paid subsidies to the Indiana Pacers, who for the record, say they've never asked the CIB for a dime. Ballard has completely dismissed calls for an investigation, saying he doesn't want to lay blame or look backwards. That doesn't cut it for the taxpaying public. The taxpayers have a right to know why it costs four times as much to operate the CIB as it does the City's parks. When we can't even find enough money in the City's budget to open up all of the public pools at city parks, which have already been operating on a shortened season to cut costs, we can't ask taxpayers to give more money to the CIB.

Curiously, some City-County Councilors are publicly saying they won't vote for new tax increases for the CIB; however, they are wanting to give an equal amount of money that would otherwise be raised from new taxes out of state revenues by expanding the professional sports development area to include the new J.W. Marriott convention hotel complex and Circle Centre Mall. These councilors are acting as recklessly as Mayor Ballard. Either plan means taxpayers are rewarding the mismanaged CIB, which has been operating in virtual darkness for too many years. I don't care whether we're talking about state revenues or new locally-raised revenues, the notion that the CIB should receive more taxpayer dollars is simply wrong.

As I've repeatedly explained, the CIB does not own LOS. If it doesn't have the financial means to operate the stadium within its existing budget, which it knew when it signed the lease with the Colts, then it should turn the stadium back over to its rightful owner, the State of Indiana. Gov. Mitch Daniels and state lawmakers like Sen. Luke Kenley, who crafted the stadium construction deal, knew the CIB did not have sufficient revenues to operate LOS once it was constructed. Yet these same state leaders went ahead with the plan anyway. That plan required the state to kick in $16 million a year in state income tax revenues and tens of millions more from food and beverage taxes levied on the neighboring counties and Marion County. Let's see how efficiently the state can run the stadium compared to the CIB. And remember, the Colts claimed in its letter to fans this week that the CIB exaggerated the true costs of running LOS. That's even more reason to be skeptical when CIB leaders say they need another $20 million just to operate LOS. As for the Pacers, there is no contractual obligation to pay the Pacers another $15 million to operate Conseco Fieldhouse. The CIB has plenty of leverage with the Pacers should they decide to terminate the lease, including financial penalties ranging from $44 million to well in excess of a $100 million. The fact that the CIB decided on its own to offer this up to the Pacers even before a demand had been made from them is proof of the complete incompetence of the CIB leadership, all of whom should have been asked to resign yesterday.

More Huffing and Puffing From CIB Leaders

During an emergency board meeting today, CIB leaders elevated the level of their dramatic performance to trick state lawmakers into bailing out their mismanaged agency during a special session of the legislature to tackle the state budget next month. They stopped short, however, of setting a September 1 closure date for the CIB's operations as a result of its claimed $48 million a year shortfall. I'm told that cooler heads prevailed in getting the CIB leadership to tone down its tactics a bit for fear that their public comments were actually doing great harm to the convention center's ability to book conventions. The IBJ's Scott Olsen outlines the contingency plan the CIB plans to implement in the short-run to pressure lawmakers into approving a bailout:

On the cost-cutting drawing board: Renegotiating operating contracts for its venues, suspending all grant payments and potentially selling assets. It also will ask the state for help making a $27 million bond payment that comes due in September.

It was not immediately clear how much money the various tactics would free up to cover the gap. But the Indianapolis Convention & Visitors Association certainly won’t receive the additional $3 million it had requested for tourism marketing.

ICVA chief Don Welsh said the CIB’s financial mess could strain the organization’s efforts to attract conventions and events.

“The longer this goes unresolved, the longer our competitors will hold this against us,” he said today.

Legislators failed to take action on a bill that would have allowed Indianapolis to raise hotel, car rental and ticket taxes to help fund the CIB, which oversees Lucas Oil Stadium, Conseco Fieldhouse and the Indiana Convention Center.

Olson's story discusses the problem the CIB faces in paying off a $27 million debt obligation which comes due in September. Inexplicably, the CIB rushed last month to pay off a $17 million loan from the State of Indiana that was not due until June, further exacerbating its financial plight. Observers believe the State would have agreed to a deferral on the loan repayment if it had been requested. The CIB's suggestion that it might consider the sale of assets is interesting. The biggest asset driving the CIB's costs is Lucas Oil Stadium. The State of Indiana, not the CIB, owns the stadium. If the CIB can't afford the cost of operating the stadium under its lease agreement with the Colts, logic would dictate that it return the stadium's control to the State of Indiana and remove its most onerous financial burden. The CIB claims it costs $20 million a year more to operate LOS than the RCA Dome. Observers, including the Colts, have expressed doubt about the size of that figure. To many, the CIB is deliberately inflating that figure to heighten its financial predicament.

Making matters worse, the CIB has unilaterally renegotiated its lease agreement with the Pacers before the two parties even sat down at the negotiating table to discuss the lease agreement. The CIB foolishly agreed to pay $15 million a year in costs the Pacers claim they are paying to maintain Conseco Fieldhouse. Again, observers tell me that that number is grossly inflated and ignores expenses the CIB has been paying over the past decade that it has not been contractually obligated to pay. Others believe that the Pacers' claim that the franchise is losing $30 million a year and has lost $200 million over the past decade is patently false. The Pacer official making those claims is Jim Morris, the former Indianapolis Water Company executive who help sell the City of Indianapolis on the idea of purchasing the water company for more than double its actual value. Taxpayers are now strapped with a water utility that is carrying close to $1 billion in debt. Water rates will have to be increased exponentially in coming years to cope with the burdensome debt. Morris retired from the water company after its purchase and walked away with more than $6 million under the terms of his separation agreement.

Morris told WTHR the Pacers also want to discuss revenues the CIB gets from the Virginia Avenue parking garage. "The Pacers are not asking for help for the team. That's our responsibility to operate the team, but the team does not have the financial capacity to operate the building," Morris said. "Morris said there were at least a dozen other issues it needed to address, including the revenue the city now gets from the Virginia Avenue garage."

On that parking garage on Virginia Avenue, the IBJ's Olson indicates that the CIB is considering shortened hours of operation for that garage. Earlier, the CIB had proposed raising parking rates on all CIB-controlled parking spaces downtown by 20%. The Senate-passed bailout for the CIB included an option to allow the CIB to collect a surcharge on parking in Indianapolis to help finance the CIB's supposed shortfall. After the bill's passage, CIB officials and lawmakers said the inclusion of the parking surcharge was a drafting error.

State Bailout Plan Leaves Many Unanswered Questions

Under a plan proposed by Sen. Luke Kenley and approved by the Senate Appropriations Committee last week in HB 1604, state taxpayers will shoulder as much of the tax burden to bail out the Capital Improvement Board as will Marion County taxpayers. The plan attempts to fill a $47 million annual budget gap the CIB claims it faces. HB 1604, however, will generate only $28.3 million for the CIB annually by FY 2012. Revenues will be millions short of that amount in the first two fiscal years. In FY 2010, it will generate $20.3 million and in FY 2011, it will generate $24.7 million. The plan assumes the CIB will get the Pacers and Colts to contribute an additional $5 million each, or a combined $10 million. Alleged CIB budget cuts will make up another $10 million. Assuming the current annual deficit is $47 million, it is very doubtful this proposal will be enough to close the budget gap.

The plan calls for state contributions in the form of a doubling of the state's alcohol tax. Of the $42 million raised statewide, $8 million will be allocated to the CIB; however, the tax in the first fiscal year will raise about $7.2 million for the CIB. The state plan also calls for the creation of a new professional sports development area that will encompass only the new J.W. Marriott Hotel complex. This will divert sales and income tax revenues generated from the hotel complex to the CIB. The PSDA will generate about $6 million annually by FY 2012; however, it will generate just $600,000 in FY 2010 and $3.2 million in FY 2011.

To raise another $14.1 million, the state plan relies on a series of tax increases the City-County Council will need to adopt by June 30, 2009. By increasing the admissions tax from 6% to 10%, an estimated $4.5 million will be generated annually. A quarter percent increase in the local food and beverage tax from 2% to 2.25% will generate about $5.1 million annually. Finally, a 1% increase in the hotel tax from 9% to 10% will generate $4.5 million annually. Initially, those revenues will fall at least $2 million short of the $14.1 million target. Also, these projections don't take into account the possibility that an extraordinarily high food and beverage tax in Marion County of 9.25% and a 17% hotel tax may negatively impact the City's hospitality industry.

There are other items in the state bailout legislation that have not been discussed. The local tax increases will not expire until 2041, or 32 years from their enactment. The new revenues will be deposited in a "special fund" of the CIB where they must be spent on the "usual and customary expenses that have a positive economic impact with respect to the capital improvements" that are operated by the CIB. The proposed state bailout plan would bar the CIB from using any of these revenues for "current or future obligations owed by the CIB." The CIB currently budgets about $34 million a year for debt service on bonds and other debts it owes.

What is clear from this analysis is that the proposed bailout plan will not be sufficient to meet an annual $47 million deficit, if that is indeed the actual amount of the CIB's deficit. At least $15 million of that deficit amount is being deliberately incurred by the CIB from an apparent decision to assume that much in annual operating costs for Conseco Fieldhouse that the Pacers are currently required to pay. The CIB has not produced proof that the Fieldhouse costs are $15 million a year for the Pacers. Further, the Pacers have not produced audited financial statements which would prove that the NBA franchise is truly losing money as it claims. The current lease with the Pacers does not legally obligate the CIB to pay these costs. The CIB is unilaterally renegotiating the lease, even before the Pacers sit down and renegotiate at the 10-year anniversary interval as provided under the current lease. If you subtract this part of the deficit, it shrinks to $32 million.

Another $20 million is said to be attributable to the increased cost of operating and maintaining Lucas Oil Stadium according to the CIB. Instead of giving away $15 million to the Pacers, the CIB should be asking for a $20 million concession from the Colts. Without this concession, the CIB could simply turn control of LOS back to the state, which owns the stadium under the auspices of a state stadium authority. That solves a $20 million funding problem for the CIB. The state is already collecting the regional taxes on food and beverages, hotels, car rentals and $16 million annually from the professional sports development authority for LOS and the convention center expansion. These revenues are generating more than the state authority currently needs to pay for the debt on bonds issued to construct LOS. To date, the state has collected $141.8 million from the regional taxes, or $7.6 million more than the taxes were projected to generate.

Let's also keep in mind that before the CIB announced it had a $47.3 million deficit, it approved a 20% increase in its current budget, or about $20 million. The CIB says it is shaving $10 million in expenses in the current budget to help close the deficit. If the CIB turns over LOS to the state, rejects the $15 million in additional costs requested by the Pacers, the CIB will have succeeded in closing $45 million of the $47.3 million it now claims it has. The CIB can close the balance of its deficit with an admissions tax increase, limiting the higher tax burden to users of the sports facilities. The state built the stadium. If it thinks Jim Irsay should pay nothing to operate and maintain LOS, then let it pay those costs. If the Pacers want to leave town if the CIB doesn't agree to pay them $15 million a year, then bid them fairwell.

Rule Of Law Does Not Apply To The CIB

The Marion County Alliance of Neighborhood Associations (MCANA) has questioned the legality of the interlocal agreement entered into between the Metropolitan Development Commission and the Capital Improvement Board to divert $8 million a year annually to the CIB out of excess TIF funds that are derived from property tax collections within a downtown TIF district. MCANA cites a state law requiring the CIB's fiscal body, the Indianapolis City-County Council, to approve the interlocal agreement. WRTV reports:

"We question whether the law is being correctly interpreted," said group President Cathy Burton, who wrote letters to council members expressing concern. "I hope they'll listen and will hear us and step back and look a little more closely at how they're making the decision."


Burton said McANA read the law to mean that the City-County Council is the CIB's fiscal body, meaning members would have to approve the deal.

But representatives with the CIB said their fiscal body is the group's own board, despite the fact that the City-County Council has to sign off on the organization's budget.

"We followed what is required and we had very open discussions at the CIB board and MDC, which was what was required for this transaction," said CIB President Ann Lathrop. "Before we entered into this transaction, we received two legal opinions from two reputable law firms in town."

Deron Kintner with the Bond Bank, the debt-issuing entity for the city, told 6News that he believes the decision was legal and that he does not think the city will be susceptible to lawsuits.

But Burton said no matter how the law is interpreted, the City-County Council and the public should have been involved in a decision involving $8 million in taxpayer money.

"There needs to be more public conversation, even if they're not required to do so by law," Burton said. "Shouldn't the city council be looking at this? Our answer is yes."

When Pat Andrews, MCANA's Vice President first raised this issue with me, I told her that's exactly how the CIB would claim its actions were lawful. Never mind that the CIB is not statutorily authorized to levy a property tax, never mind that the CIB has never been a recipient of property tax revenues, never mind that no public notice was ever provided of this plan to divert property tax revenues to a governmental entity that has never been funded with property tax revenues and never mind that the City-County Council is truly the fiscal body for the CIB because it is the body by law that must appropriate any money spent by the CIB during the annual budget process for city-county government. The rule of law does not apply to the CIB. It's just that plain and simple.

That is why the CIB could enter into a loan agreement with the Indiana Pacers obligating itself to loan $30 million to the privately-owned NBA franchise over the next 3 years without any appropriation in its 2010 budget to make such loans or, more importantly, absolutely no authority granted to it in its enabling statute that permits it to loan money to a private corporation for any purpose. That is why the CIB could write into that loan agreement a provision that forgives repayment of the initial $10 million it has already loaned to the Pacers if the City-County Council refuses to go along with the loan plan. That is why the CIB can deposit the $8 million from property tax revenues into a bond fund intended solely to repay indebtedness of the CIB instead of its operating budget fund, but cannot offer any explanation to City-County Councilors at tonight's Municipal Corporations Committee meeting tonight on its budget why it did this. That is why the CIB can agree to borrow $27 million from the State of Indiana without a sinking fund established to repay that loan. That is why the CIB could borrow a similar amount from the investors in Circle Centre Mall more than a decade ago without establishing a sinking fund to repay that loan. That is why Ann Lathrop can tell members of the committee that the CIB's 2011 budget relies on no new tax revenues even though that is exactly what the TIF revenues represent. That is why the CIB can spend $4 million from this new source of revenue that was never appropriated to it by the City-County Council in its 2010 budget. That is why the CIB's President can describe it as simply a minor audit exception when the State Board of Accounts determined that the CIB had paid millions of dollars in legal fees to Toby McClamroch and his law firm as the CIB's counsel without a written fee agreement as required by state law. You see, the rule of law doesn't apply to the CIB. It's just that plain and simple.

Ann Lathrop boasted that she had fixed a $47 million deficit she and the Ballard administration inherited. That's total bullshit. She hasn't fixed any deficit. We've poured tens of millions of dollars more into this rat hole and they've passed out tens of millions of dollars more into private hands. That $47 million deficit still exists in the form of debt for which the CIB will freely admit it has no plan for repayment. Yes, there will have to be even more tax increases in the future to pay for that debt. Lathrop knows that. City Controller David Reynolds knows that. And Mayor Greg Ballard knows that. But all of them will lie and tell you that won't be necessary for bringing the CIB's budget under control. Councilor Angel Rivera actually patted Lathrop on the back for a job well done during tonight's hearing. Either he is totally stupid or is just the consummate ass kisser trying to win favor to help land more government contracts through his city council position for the MBE firm that employs him.

More Lies From The CIB

Once again, the CIB lied to the City-County Council and the public to extract more of our tax dollars for their budget. CIB President Ann Lathrop, a former city controller, is now saying the CIB is magically running ahead of budget by $12 million despite its claimed urgency earlier this year in having $8 million a year diverted from a downtown TIF district it said was critically necessary to continue funding of the ICVA. Everyone with any common sense knew the real reason for the diversion of property tax revenues to the CIB was to help fund the 3-year, $33.5 million give-away to billionaire Herb Simon and his Indiana Pacers. Now it turns out the CIB's budget this year is running $12 million ahead of where it told the City-County Council it stood when it insisted it needed the $8 million diversion from the downtown TIF district. The IBJ's Scott Olson reports:

The Capital Improvement Board of Marion County is running $12 million ahead of budget, due in large part to higher revenue and fewer expenses than members expected.


Through the first nine months of the year, the most recent budget numbers available, CIB posted $67 million in total revenue—$6.5 million more than budgeted—and trimmed $5.8 million in expenses.

A large chunk of the revenue, $4 million, is part of $8 million CIB received from the city to use toward the $10 million it will provide the Indiana Pacers to help operate Conseco Fieldhouse. Overall, CIB will give the team $30 million over the next three years.

Still, CIB President Ann Lathrop is satisfied with the agency’s financial situation, particularly since it spent most of last year wrestling with a $47 million budget deficit. CIB will meet for the last time this year at 3 p.m. Monday in the Indiana Convention Center board room.

“I think our revenues are trending higher,” she said. “Even if you take out the $4 million, we’re still trending ahead.”

If you back out the $4 million the MDC already transferred to the CIB from a downtown TIF district to fund the ICVA, that still puts the CIB's budget $8 million ahead, which is the exact amount it requested for the ICVA. According to Olson's story, the CIB collected about $1 million more in food and beverage taxes than it budgeted, and it received $1.3 million more than it budgeted from the expanded Professional Sports Development Area, which was part of a combination of tax diversions, tax increases and borrowing the CIB incurred to avert what it claimed was "a going concern problem" just last year. Olson also reports county admissions tax revenues were close to $1 million more than the CIB had anticipated. So the CIB underestimated its revenues by more than $3 million. Does anyone believe that was not intentional?

I don't know how many times the City-County Council will allow the corrupt leadership of the CIB to pull the wool over its eyes to extract more of our tax dollars before it finally says enough is enough. The CIB's total budget for next year, which the council has already approved, is $104.4 million, an 11% increase over this year's budget. Olson says the CIB thinks hotel and food and beverage tax receipts could climb 3% to 6% next year because of the additional business the CIB anticipates from an expanded convention center. The CIB continues to heavily subsidize out-of-town conventioneers in order to lure business to the city. "The downside is that CIB can’t bill a convention for the use of extra help, which shows up in its budget as an $863,878 shortfall through September in labor reimbursements," Olson writes. “There are still extreme price pressures out there to make the city competitive [to host a convention],” Lathrop said. “There’s just a lot of deal-making going on right now.”

CIB Lied To Council And Public Again: Does Anybody Care?

Truth in budgeting has never been one of the CIB's strong suits. In recent years, however, fudging of numbers has turned to outright lies being made by its officials during the budgeting process to hide its true spending plans, particularly when it comes to handouts totaling in the tens of millions of dollars. CIB officials claimed in 2009 a bailout plan approved by the state legislature and the City-County Council that included tax hikes and new state subsidies was necessary to maintain its solvency as a going concern. No sooner had the ink dried on the bailout plan than the CIB announced a three-year, $33.5 million give-away to billionaire Herb Simon's Indiana Pacers.

During this year's budget negotiations, CIB President Ann Lathrop claimed the municipal corporation was still working on a deal with the Pacers. Its proposed 2013 budget included no additional payments to the Pacers, and the City-County Council approved additional payments in this year's budget. When the City-County Council tacked on a $15 million, one-time PILOT payment to its 2013 budget to help defray public safety expenses for Lucas Oil Stadium and the Fieldhouse, the agency claimed its long-term solvency was threatened, even though it held $65 million in cash reserves, more than the amount held by the City of Indianapolis. Lathrop knew when she made those statements that the CIB was planning to make another $10 million payment to the Pacers before year's end out of this year's budget to explain why proposed new taxes to benefit the CIB next year won't be paid out the new taxes. The Indianapolis Star finds Lathrop's lying humorous, which it only mentions in passing in its "Behind Closed Doors" column in an item labeled "Pacing Payments":

The Capital Improvement Board unveiled a surprise earlier this month: a one-year extension of its three-year agreement with the Indiana Pacers, providing a new payment of $10 million to the team to help offset the cost of operating Bankers Life Fieldhouse.

The decision turned heads -- not only for how suddenly it cropped up but also because the CIB, which runs Indianapolis' sports venues and convention center, found a way to avoid seeking approval from the City-County Council.

The CIB is splitting the new payment between the CIB's current year and 2013 budgets -- within spending levels the council has already approved. That negates the need for the council's further sign-off.

Council Vice President Brian Mahern, one of the council's most vocal CIB critics, has cried foul over that arrangement.

It's the same council, controlled by Democrats, that slapped a $15 million one-time tax on the CIB for next year; the CIB is challenging that move, charging it was done improperly. Some council members also have criticized CIB spending priorities -- including giving the Pacers three $10 million installments of a forgivable loan under the 2010 agreement, which would have expired in June. That $33.5 million deal also included $3.5 million in fieldhouse upgrades.

Now, with the $10 million extension inked this month, the deal will last through June 2014.

During that time, the city and the Pacers will examine what each wants out of a new deal. For the city, one item now on the table is the potential transfer of responsibility for fieldhouse management from the Pacers to the CIB or even a third-party venue management company, confirmed Lotter, the mayor's spokesman.

Until the CIB's Dec. 3 meeting, President Ann Lathrop and Pacers officials had said only that they were working on a new long-term deal, making the short-term deal unexpected.

The Pacers, it turns out, will get the new $10 million payment before the one-year extension begins. The CIB planned to pay the team $5 million this month and $5 million next April.

Lathrop said the early payment wasn't unusual since the earlier installments under the 2010 deal occurred in advance of each year, the final one last January.

The first $5 million portion, paid this month, came from savings this year in utilities, temporary labor for big events and contractual setup costs, among other areas, Lathrop said.

The second installment in April will come from cost-cutting in next year's budget. "So we have $5 million that we need to come up with," Lathrop said.

The CIB approved the Pacers extension just as CIB leaders are examining whether to request council approval of increases to the ticket admission tax and auto rental excise tax. The hikes, part of a 2009 state bailout package of the CIB, are available only the first two months of 2013, and city leaders say a portion of the proceeds would go to offset the CIB's use of public safety resources.

Opponents fear those tax increases would only free up more money to subsidize the Pacers.

But for now, Lathrop insisted money from the potential tax increases wouldn't go toward the one-year extension payments.

"The first thing to say," she said, "is that we've passed the Pacers agreement to pay the $10 million under the current revenue streams we have."

In the future, the City-County Council should as a matter of practice slash the CIB's budget across-the-board and make it come back before it from time to time to seek additional budget authority for specific expenditures to remedy this problem. It might also want to consider putting Lathrop and her colleagues at the CIB under oath when they appear at public meetings to testify on the the CIB's budget. The threat of prosecution for perjury may be the only think left to force the CIB to provide truthful information when its officials testify in the future. As for the lack of seriousness taken by the Star to the CIB's transgressions, I suggest the taxpaying public stop subscribing to the newspaper since it obviously is no longer interested in being a watchdog for taxpayers.

As An After Thought, How Will We Pay For Simon's $33.5 Million Gift From Taxpayers?

The Star's Franseca Jarosz makes a stumbling attempt to discuss the day after the CIB announced it would pay an additional $33.5 million to billionaire Herb Simon's Indiana Pacers franchise over the next three years, so he wouldn't move his team to an imaginary city somewhere in America to accept an even better imaginary agreement than his team is already being offered by the City of Indianapolis, how we're going to pay for that subsidy. Jarosz takes a hard fall in her opening paragraphs:

Officials for the once-debt-ridden Capital Improvement Board -- which this past year went to the legislature for a multimillion-dollar bailout -- insisted Monday that the CIB can afford to give the Pacers $33.5 million to stay in town.

But to do so, CIB officials said, the agency must not only continue to live with its already deep budget cuts, but also come up with a way to increase revenue.

"Once-debt-ridden?" Come again, Francesca. Does she actually believe the CIB has reduced its debt in recent years. Quite to the contrary, the CIB's debt grew 10% last year, or $105 million, to nearly $1.2 billion. That additional debt included $16.2 million in short-term debt the CIB took on in 2009, which included a $9 million loan the CIB's Ann Lathrop at the time said wasn't needed, but the CIB should take the first installment of a potential short-term $27 million from the state anyway because it would lose it if it didn't take it before the end of 2009. The CIB's debt burden grew even as its revenues declined despite the infusion of revenues from a higher hotel tax and more state tax revenue sharing. Its tax-related revenues actually fell last year by $4.6 million from $129 million to $123 million. Its operating revenues derived from fees, parking lots revenues, concessions and reimbursements for labor grew from $19.8 million to $21.3 million, or about 7%. Combining their operating and non-operating revenues, the CIB actually experienced a $4.6 million decline in revenues.

Were those budget cuts really deep as the CIB claims and as Jarosz reports?  It depends on how you look at it. The CIB's total operating expenses did decrease by just under 10% in 2009, but some of those savings were achieved by deferring maintenance expenses and the biggest savings came from accelerating depreciation and amortization of the former RCA Dome that has since been demolished. The cuts in non-operating expenses of $25.8 million or 35% looks impressive at first blush. But on closer examination you discovery that over half , or $16.4 million, came about as a result of a one-time swap termination fee. Also, $1.2 million in Colts' game-day inducement payments ended in 2008, creating another big savings. The CIB also saved $21.5 million in 2009 by cutting grants to other agencies and the ending of amortization expenses related to the termination fee on the Colts old lease agreement. It's also important to note that the CIB's 2008 budget shot up nearly 20% in 2008 so spending in 2009 was still above the 2007 levels. And most of the savings the CIB claimed from salary reductions actually came from a big reduction in temporary staffing.

I guess what I'm trying to say is that most of the savings the CIB has claimed to date have been paper savings and not real long-term savings. Unless their revenue picture improves significantly the remainder of this year, which is not likely to happen, it's going to have to continue borrowing more money from the state and deferring the payment of other debts as it has done in the past to balance its checkbook. With the additional $33.5 million debt being taken on by the CIB to subsidize billionaire Herb Simon over the next three years, you can bet there will be a need for yet another tax increase before this is all done and said.

Jarosz' story claims the bailout approved last year helped the CIB avert a $47 million budget deficit. The CIB has a history of inflating its projected costs in order to get more money budgeted to it than it really needs so it can later brag that it came in under budget when the actual numbers come in below the earlier inflated numbers. I remain unconvinced that the CIB actually incurred an additional $20 million in operating expenses related to Lucas Oil Stadium after reviewing their statements. I also believe the Simons were inflating the $18 million it claimed it needed to operate and maintain Conseco Fieldhouse each year. It might turn out that the
$33.5 million we are giving Herb Simon over the next three years actually covers 100% of those costs. It wouldn't surprise me. That's the sort of games the CIB has played with the public for years when discussing financial costs to the taxpayers. I should also point out that the CIB discontinued having its financial statements audited in 2009 by an outside accounting firm. Instead, it is relying on the State Board of Accounts to give its seal of approval to its financial numbers, which it did in 2009 since nobody over there really knows how to perform what equates to an actual audit of financial statements. The State Board of Accounts did note the failure of the CIB to have executed contracts for legal services and certain other service contracts totalling about $1 million before making payments on them during the period reviewed.

And from the "I'm not surprised department," the incompetent editorial staff at the Star says the deal announced yesterday "should be taken by city residents as good news." Once again, the Star editors refuse to disclose their own conflict of interest when discussing the financial concerns of the Pacers and Conseco Fieldhouse. They tell us there is some bad news in yesterday's announcement. "The bad news, potentially, is that the Pacers can come back in three years asking for more," the editorial reads. No, they wouldn't do that now would they? "The bad news that is no longer news is that the CIB has had to make severe cuts in community programs not related to pro sports in order to accommodate the Pacers and Colts, and most of those losses are permanent," the editorial continues. Uh, news bulletin for the editors. The CIB was never established to fund community programs; its job is to manage our capital assets. Get that? "As the city turns its attention back to basic priorities, such as streets and libraries, it appears to have breathing room on an important if often aggravating front," the editors reassure us. Oh yeah, the job government was actually established to do and not to see how much we can subsidize billionaire sports team owers.

Enjoy Field of Schemes take on this latest handout to a billionaire sports team owner with the headline, "Indy to pay Pacers $33m over three years for no damn reason":

It's a couple of weeks late, but the Indiana Pacers have obtained their boodle: The city of Indianapolis has agreed to pay the Pacers $10 million a year for the next three years (plus $3.5 million for a new ribbon ad board, among other things) to play at Conseco Fieldhouse, the taxpayer-funded arena that the team plays at rent-free and keeps all revenues from. That's less than the full $15 million in annual operating costs — the Pacers' only arena-related expense — that the team owners said they wanted the city to cover, but not a whole heck of a lot less, especially considering that the Pacers' lease isn't actually up yet.


In exchange, the city gets a commitment by the Pacers to stay in town ... for three years. After that, the team could break its lease and leave town with a smaller penalty, which would dwindle to zero by 2019, the year that their lease is actually set to expire. I don't think the Indianapolis Star used my quote, but what I told their reporter was something along the lines of "This is a pretty crappy payoff for $30 million in government subsidies."

Of course the Star didn't use the blogger's quote during his interview with one of their reporters, "pretty crappy payoff for $30 million in government subsidies." It didn't fit the Star's meme that this deal was welcome news to Indianapolis residents.

Dumb Media Still Hasn't Figured Out How The CIB Operates

Local reporters in the news media, who should no better by this point, make much ado over the non-inclusion of continued subsidies to the Indiana Pacers as part of the CIB's proposed 2013 budget. Billionaire Herb Simon, who lavishes campaign contributions on politicians of all stripes, ordered the municipal corporation to give him a $33.5 million subsidy over a three-year period back in 2010, or he would move his team elsewhere, even though no other city in America would offer him the one-sided deal he enjoys under his long-term lease agreement with the CIB. Simon, without substantiation, claims his team is bleeding cash, but his actual financial statements show something different altogether. Because he is not required to publicly disclose his statements, he can make up any claims he wants about losing money. Both the Star and the IBJ think it's news because the 2013 CIB budget as proposed does not include additional subsidies to the Pacers when their 3-year deal runs out this year. Have they learned nothing about how the CIB conducts business?

The CIB doesn't ask the city-county council for permission to do anything. It tells the city-county council what it wants and it always dutifully complies. That's exactly what occurred when the current subsidy agreement was approved. There was no appropriation included in the CIB's budget. The CIB approved a deal hammered out behind closed doors with the Simons, cut the first check and then handed it to the city-county council for approval on a take it or leave it basis. The CIB and Mayor Ballard told councilors the Pacers would leave the city if they didn't approve the deal. The city-county council did exactly what it was ordered to do and approved the deal without any serious discussion.

Never in the history of the municipal corporation has the city-county council denied any request the CIB makes. CIB officials falsified their financial statements to claim a huge budget deficit that it claimed threatened its operations as a going concern a few years back. The state legislature and the city-county council dutifully acquiesced to its demands for more state and local tax revenues. When the revenue increases were approved, CIB officials claimed all of the new revenues were needed simply to close its budget deficit, knowing that was a complete lie. CIB officials insisted the money would not be used to pay subsidies to the Pacers. That's because Simon had already cut a deal behind closed doors with Mayor Ballard and the CIB to tap a downtown TIF district to fund the annual subsidies to the Pacers for the first three-year period.  The CIB is now flush with cash and can afford permanent, long-term subsidies for the Pacers on its own.  No sooner had the bailout plan been approved by the council than the CIB announced a deal with the Pacers. The CIB used its surplus thanks to the bailout to pay for millions of dollars in unfunded costs of the Super Bowl the city had not budgeted. The CIB managed to kill two birds with one stone.

In short, it doesn't matter whether it's in their budget. The deal has already been made. Mayor Ballard and CIB President Ann Lathrop are lying to claim otherwise. The city council repeatedly proves that it's nothing but a rubber stamp for the demands of Simon and its proxy, the CIB, while it makes budget choices daily to short-change basic city services it has a duty to fund.

Ballard's Arguments For CIB Bailout Don't Hold Up

If you want to see a good example of why Mayor Greg Ballard's plan to bail out the CIB to the tune of $47.5 million a year isn't selling with the public, check out Ballard's performance at the Mayor's Night out in Lawrence on April 21. You can view the video of the meeting by clicking here.

When questioned about the CIB at public meetings, Mayor Ballard demonstrates a lack of patience with the people posing the questions. His performance at the Lawrence meeting was no different. He begins by telling his audience that the CIB bailout has nothing to do with the Colts or Pacers. "It's about the downtown and the convention business," he says. "It's about the huge economic engine that downtown represents to the city and to the state." He then cites statistics claiming downtown retail--thanks to the convention business--generates $220 million in sales taxes, $3.5 billion in gross receipts and 66,000 jobs. "75% of the retail sales generated from Circle Centre Mall come from out-of-town visitors." "That's what this is all about," he claims. "This downtown was all planned out 30-40 years ago," Ballard says. "It's all connected." "Every business leader I speak to in this city says the same thing." "We don't want to set off a row of dominos falling and hurt the convention business." "I inherited this mess."

Where to begin with the Mayor's circular reasoning. First of all, saying that it has nothing to do with the Pacers or Colts doesn't change the facts. The CIB has said from the outset of this debate that $20 million of its annual deficit has resulted from the higher costs of operating and maintaining Lucas Oil Stadium. The CIB has decided on its own that it needs to absorb $15 million in annual costs the Simons claim their Pacers team is currently picking up to operate Conseco Fieldhouse. Together, these two items represent $35 million of the supposed $47.5 million deficit. How can you claim, Mr. Mayor, that the deficit has nothing to do with the Pacers or Colts? The Mayor insists the Pacers are losing money. "There's no question about that." The Pacers have never been required to provide audited financial statements that would support their claim that they are losing money. If the Mayor claims he knows they are losing money, he offers that opinion based on information that has never been shared publicly to verify the claim. I also observe that the Mayor boasts about the revenues generated from Circle Centre Mall without acknowledging the $320 million public contribution to its construction and the fact that the Simons are allowed to operate it for their private benefit without paying a dime in rent to the City.

The Mayor's arguments completely fall apart when he tries to rope in the convention industry into the argument for the bailout. When questioned by a relentless citizen at the Lawrence meeting, he returned to his common meme that the Pacers and Colts provide a national and international presence for Indianapolis. In other words, but for their presence, groups would not come to Indianapolis to host their conventions. That's total bull, and if he doesn't understand that, then he needs to do some more homework on this issue.

When a citizen asked Mayor Ballard what he planned to do to make the CIB more accountable, he once again became defensive. He boasted that all of the CIB's meeting are now open to the public. Theoretically, the Board's meetings have always been open to the public. Nothing has changed here. It's what gets decided ex parte that sticks in the crawl of the taxpaying public. Ballard notes that the CIB now has a website at which the public can access information. As far as the Mayor is concerned, there is nothing more the CIB can do to make it more accountable to the public than what it has already done. Another citizen asked Mayor Ballard when he was going to replace the current CIB leadership and Board. "That's a good question," he replied without answering the question.

At one point, Ballard said he recently spoke to former Mayor Bart Peterson about the CIB mess. Peterson's administration signed the lease with the Colts for LOS knowing that the CIB had no additional money to cover the costs of operating and maintaining the new stadium. "Great, Greg. Your options range from bad to awful," Ballard quoted Peterson as telling him. Peterson's solution at the time for covering those costs was to either build a downtown casino or allow the CIB to use food and beverage tax revenues intended to pay down the debt on the bonds issued for the construction of LOS. Gov. Daniels and the legislature nixed both of those ideas. Instead, the state decided to build the stadium using a state-created stadium authority. The state left it to the City of Indianapolis to figure out how it was going to cover the costs of its lease agreement with the Colts. Mayor Ballard's solution is to raise taxes on such things as admissions, hotels, car rentals and alcohol, and to capture more of the state revenues generated within the downtown by expanding the professional sports development area.

Mayor Ballard can make most of the CIB's deficit go away with two simple solutions. Tell the Pacers the taxpayers can't afford to subsidize its team to the tune of $15 million a year more. The lease agreement the team negotiated requires it to pay for the operating and maintenance expenses on Conseco Fieldhouse. The CIB, nonetheless, has paid expenses over the last decade that the Pacers were legally obligated to pay. Also, the Pacers aren't sharing with the CIB all of the parking revenues the team is legally obligated to share with the City. Pay up, now. As for LOS, the CIB doesn't own it. It belongs to the state. If the CIB can't afford its lease deal with the Colts, then it needs to turn it back over to the state to operate. The CIB leaders are demanding a statewide and regional solution to the CIB's funding mess. That would go a long way towards solving the CIB's funding problem. Stop insulting our intelligence by insisting, Mr. Mayor, that this has nothing to do with the Pacers and Colts and has everything to do with the convention business. Your CIB solution is all about holding the downtown convention business hostage until the two teams get everything they want, the taxpaying public be damned. That's not what you were elected to do.

Why Does CIB Need A PR Contract When Media Does Its PR Work For It?

WTHR's Mary Milz recently questioned a $36,000 a year public relations contract the CIB awarded to former Ballard communications director Robert Vane. Perhaps the real question is why the CIB would even need to pay anyone to do PR work given the local news media's proclivity to fall all over itself applauding the CIB for a job well done. Exhibit one is Jon Murray's story in today's Star discussing how the CIB miraculously turned a huge budget deficit of just a couple of years ago into a cash surplus with large cash reserves:

Two years ago, projections of a $47 million annual deficit sent Indianapolis' sports and convention board begging for help.


Now a financial turnaround -- aided by boosted tax revenue and ongoing cost-cutting measures -- has left the Capital Improvement Board flush with cash reserves and a budget well into the black. A report released Monday shows that as of November, in the most recent figures available, the CIB's budget for 2010 was running an $11.5 million surplus.

The CIB's budget had forecast a $5.2 million deficit by that point -- meaning, officials say, that the board's financial position is actually $16.7 million better than expected.

For CIB officials, who have come under fire for giving millions to the Indiana Pacers and other controversial decisions, the prospect of financial stability, at last, brings relief.

"I feel like we're in a position to self-determine what the future looks like," CIB President Ann Lathrop said, adding that a strategic plan is in the offing this year. "(Gaining) stability is probably the biggest change we've had."


The CIB operates the Indiana Convention Center and the city's professional sports facilities.

Perhaps the strongest indication of its financial strength is its cash reserves, which stand at $62 million, according to Dan Huge, the CIB's chief financial officer. In May 2009, reserves had fallen to $26 million, their lowest recent level.

But don't expect to see any money returned to taxpayers.

Huge and Lathrop said their lesson from the crisis is that the CIB's heavy reliance on hotel and food and beverage taxes -- which take a hit during a recession -- requires deeper reserves. That will help ensure a strong bond rating for the CIB's debt, they said.

Lathrop said 40 percent to 50 percent of the operating budget -- set at $73 million in 2011 -- is the new minimum she hopes to maintain in reserves. The excess in there now is needed for upcoming expenses and to guard against uncertainty, she said.

"It's important to remember that our revenue is basically at 2007 levels," Lathrop said.

Murray's story glosses over the fact the CIB is borrowing $27 million from the state at the same time it says it has a cash surplus of $11.5 million and cash reserves of $62 million. "It also recently received a $9 million loan from the state that was part of a rescue package approved by state legislators during the 2009 session," Murray writes. "Lathrop said CIB officials opted to take the state's loan last month at a low interest rate to provide more budget cushioning." News reports at the time the CIB approved taking out the first installment of the $27 million loan authorized by the state bailout legislation quoted Lathrop as saying the CIB had no immediate need for the money, but if it failed to approve the loan by the end of 2009, it would lose out on the opportunity to borrow the money. I guess you could say it's sort of like a homeowner taking out a second, line of credit mortgage when he or she refinances their principal mortgage just because it's made available to them whether they need it or not. Meanwhile, the library, parks, IndyGo and other city agencies providing basic services face major budget cuts. It's more important to take care of those billionaire sports team owners first you see. We could write a book on all of the misrepresentations CIB officials have made to the public about its financial picture over the past several years, but it's become pointless. Indy taxpayers need to just come to the realization that the CIB, unlike other governmental bodies, lives and operates in Fantasyland where no dream goes unfulfilled.

CIB Officials Downplay Lucas Oil Stadium Funding Debacle

I've been warning about this problem for a long time. The chickens will soon be coming home to roost on the ongoing funding problem for the new Lucas Oil Stadium. The CIB projects a $20 million operating deficit for the new stadium in its first full year of operation alone according to the IBJ's Jennifer Whitson. Operating expenses for 2009 are expected to be $27.7 million, while operating revenues generated from events are estimated at $7.7 million. The CIB plans to use a reserve fund, which was set aside for the construction of the new stadium and convention center expansion, to cover the shortfall. The CIB plans to tap $25 million in reserve funds to shore up the stadium's funding in 2009. CIB Chairman Bob Grand tells Whitson that some belt tightening is in order to get through the next few years:

“We’re expecting fairly significant increases in revenues,” said CIB President Bob Grand. But in the interim, the board’s bracing for tight budgets and potential cuts to shore them up.

“We’ll have to be very fiscally responsible in the next three years,” Grand said.

He said CIB has dropped a couple of charitable golf outings and also has flatlined a total of $1.4 million in grants to the Arts Council of Indianapolis, the Indiana Black Expo and the Indiana Sports Corp. in its 2009 budget. He said those could be cut if needed.

“If those activities are driving revenues … then I’m going to support them,” Grand said. “If not … they’ll probably be reviewed and cut.”

But spending reductions of that magnitude would be a drop in the budget. Lucas Oil’s $27.7 million in estimated operating costs represent nearly 36 percent of CIB’s operating expenses.

CIB didn’t face the same challenges at the RCA Dome, in part because it controlled more of the revenue. Barney Levengood, executive director of CIB, told IBJ that he did not have revenue and expenses for the RCA Dome, saying his office does not break out the information that way.

CIB may be able to find some relief to financial pressures by using revenue generated by other venues it oversees, said Rob Hunden, a consultant who formerly worked for the Indianapolis Bond Bank.

“They have a lot of ways to move things around,” said Hunden, president of Chicago-based Hunden Strategic Partners.

Bet you didn't know the CIB has been helping to fund the arts and Indiana Black Expo? That is a complete deviation from the CIB's mission. Hunden's comment that the CIB has "a lot of ways to move things around" to shore up the funding problem highlights the fact that the CIB operates as a private slush fund for the City, operating completely without accountability to the taxpayers.

The fact is that there is no money to operate Lucas Oil Stadium because Fred Glass and Bart Peterson gave away the store to the Irsays during the negotiations on the new stadium construction. Notice there is no talk of reopening those negotiations. No other NFL team owner has received a larger subsidy than Irsay's Colts. The deal is the biggest taxpayer ripoff in NFL history. Irsay gets most of the revenues generated from the stadium and pays absolutely none of its operating and maintenance expenses.

This comment from Grand in Whitson's story is infuriating. "Grand said he didn’t think the board would need to tap taxpayers for any additional money to cover operating expenses 'at this point,' adding that the CIB traditionally has operated 'pretty efficiently.'" The CIB has operated "pretty efficiently" my ass. If it were a business, it would have long ago been shut down from bankruptcy. Note how much over budget the stadium is. The stadium's original construction cost was $625 million. The final tab is now expected to be $720 million, consuming a $90 million contingency fund. Thanks to Gov. Daniels, any extra funds raised from new taxes on food and beverages, hotels, car rentals and admissions above what is needed to meet annual debt obligations must be used exclusively to pay down the debt sooner. This was not the case with the RCA Dome, where CIB officials diverted tax revenues intended for debt reduction to other projects. As a consequence, the CIB still owes about $70 million on the RCA Dome, nearly what it cost to build originally, as its demolition begins to make way for the expanded convention center.

A Bailout Is A Bailout

While lawmakers have decided to short Mayor Greg Ballard a few million in his quest to bail out the CIB through a series of tax increases, state tax diversions and loans, the fundamentals of what they are proposing to include in the state budget have not changed. It's still a bail out. It still includes tax increases. It still takes money that could otherwise be spent on education or other more deserving areas of state government and gives it to one of the worst run governmental entities in the state. Instead of making the agency more accountable, the plan further politicizes it with political appointees beholden to the billionaire sports team owners. And at the end of the day, it still positions the CIB to carry out its plan to give an additional $15 million a year subsidy to the billionaire Simons for their Indiana Pacers team. The Star's Jon Murray explains the deal lawmakers intend to include in the state budget it votes on later today:

Under the latest rescue proposal, lawmakers agreed to allow an increase this year in the hotel tax only, boosting it to 10 percent from 9 percent.

The other two proposed tax increases could not be enacted until 2013 under the latest version of the bailout. They would raise the auto rental tax to 6 percent from 4 percent and the admissions tax to 10 percent from 6 percent.

All tax increases would be subject to approval by the City-County Council.
The plan, included in the proposed state budget set for a final vote today, would force the CIB to cut spending by a total of $22 million to cover its projected deficit next year.

That's close to the $23 million in cuts that Gov. Mitch Daniels identified when he unveiled his CIB proposal earlier this month.

Ballard is really getting no less than what he would have gotten under the original bailout plan proposed by Sen. Luke Kenley, which passed the Senate. Instead of getting all three tax increases this year, the state will allow the CIB to borrow $9 million over each of the next three years. When you add the hotel tax and the $8 million a year in state tax diversions, the CIB will have at least $20 million a year more to spend than it currently has. Remember, the CIB hiked its current budget by about $20 million from $100 million to a little more than $120 million. The claims that the agency is being forced to make deep budget cuts are all smoke and mirrors. Lawmakers want you to believe this deal is a real slap in Mayor Ballard's face; it's not. It's a slap in the face of taxpayers. Also, those other two tax increases on admissions and car rentals are still included in the plan. The City-County Council will just have to wait until 2013 to raise them. By that point, Democrats will have completely regained control of Indianapolis as planned by the downtown elites, Mayor Greg Ballard will have a cushy new job lined up for him as his reward, those other two taxes will be raised and the state will forgive the debt owed by the CIB. See how it works.

UPDATE: House Republican Leader Brian Bosma led his Republican caucus over the cliff today. All GOP members voted for the budget bill, while only 14 Democrats voted for it. Several Marion Co. Democrats wisely voted against the bill containing the CIB bailout, which the Democrats bashed in debate on today's budget bill. This begins the process of exterminating the Republican Party in Marion County. The downtown elites have decided there can be only one party rule in Indianapolis because it's too much trouble to control things if you have to deal with competing political parties. House GOP Leader Brian Bosma and Gov. Mitch Daniels signed on to the plan and ordered the Marion County Republican delegation, which is obviously devoid of any ideological conscience, to vote for the tax and spend bailout of the most corrupt and inefficient governmental entity in the State of Indiana. All the talk of government reform by the GOP turns out to have been one big fat lie. I'm ashamed to call myself a Republican today. I hope they enjoy their free tickets to Colts and Pacers games and the campaign contributions, even if they don't care about the harm they are doing to taxpayers. Bosma will continue to rake in legal fees for government contract work. Who cares how much damage he does to his own party. As long as he's making money, that's all that counts.

Here's the LSA synopsis of the CIB provisions contained in the state budget:

Provides that the state treasurer shall invest in obligations of the Marion county capital improvement board (CIB) if certain conditions are met. Provides that the investment may not exceed $9 million per year for 2009 through 2011. Provides terms for the CIB obligations issued to the state treasurer. Permits the Marion County city-county council to increase, before September 1, 2009, the innkeeper's tax by not more than 1% (9% to 10%). Permits during January through March 2013 the supplemental auto rental excise tax to be increased by not more than 2% (4% to 6%) and the admissions tax to be increased by not more than 4% (6% to 10%). Deposits the revenue from the county tax increases in a new sports and convention facilities operating fund for the CIB. Restricts the use of the new operating fund to paying usual and customary operating expenses with respect to capital improvements owned, leased, or operated by the CIB. Allows for an addition to the Marion County professional sports development area to include the hotels in an area bounded by Washington, Illinois, and Maryland streets. Provides for state sales taxes and state and local income taxes from the additional area to be captured for the CIB up to $8,000,000 per year. Allows the captured taxes to be deposited in the new sports and convention facilities operating fund for the CIB if: (1) the budget director determines that the innkeepers' tax is imposed at the maximum rate and in effect on January 1 of a year (September 1 for 2009); or (2) the city-county council raises at least $4 million from the innkeeper's tax and the capital improvement board issues obligations to the state treasurer. Reduces the number of appointments to the CIB by the county commissioners from two members to one members. Provides that one member shall be appointed to the CIB jointly by majority vote of a body consisting of one member of the board of county commissioners of each county (other than Marion County) in which a stadium and convention building food and beverage tax is in effect. Provides that the terms of the members of the CIB expire January 15, 2010, and new members must be appointed to serve terms beginning January 15, 2010. Requires the CIB to submit its operating and capital budget for review, approval, or rejection to the city-county council. Requires the CIB to present a long range financial plan to the city-county council before January 1, 2010. Requires the state board of accounts (SBOA) to do a financial and compliance audit annually of the CIB. Requires the CIB to submit the SBOA reports to the city-county council. Requires the city-county council to review the SBOA reports at a public hearing. Requires the city-county council to approve the issuance of revenue and general obligation bonds by the CIB. Removes the Marion County board of commissioners from the review and approval of general obligation bonds and adds a requirement for the mayor's approval. Makes corresponding changes. Authorizes an admissions tax for paid admissions to certain sports and recreational complexes. Provides that the admissions tax rate is 5% of the price of admission. Exempts certain events.