Saturday, October 28, 2006

Shaky Stadium Financing

As area taxpayers begin financing the $675 million Lucal Oil Stadium for Colts' owner Jim Irsay, the Star's Karen Eschbacher provides us an excellent analaysis of the shell game our city leaders have played with the financing of the 22-year-old RCA Dome slated for demolition. The RCA Dome, she tells us, cost $77.5 million to construct; however, charitable donations brought the total financing for the project down to just $47.2 million. Here comes the shocker. The taxpayers still owe $75 million on the RCA Dome and will be paying off that debt for another 13 years.

Instead of paying off the debt with the local taxes levied for this purpose, city leaders instead used those revenues to refinance and borrow money for more improvements. It's sort of like borrowing $75,000 for a $100,000 house on a 30-year mortgage, refinancing several times and borrowing more money so that you wind up owing $100,000 after you've been paying your monthly mortgage for 22 years. The only difference is that you're paying for an asset that's continually appreciating in value. In the case of the RCA Dome, we're going to spend a decade paying off a building that no longer exists.

Taxpayers should be absolutely outraged by the fiscal practices of the city on the RCA Dome, but the city has no qualms about what it's doing. "The average person has the right to feel like this is a jive deal, that they're continuing to pay for improvements for a stadium that is no longer going to exist," said Fred Glass, head of the city's Capital Improvement Board, which runs the Dome and is on the hook for the debt. "The fiscal realities, though, are that if we were going to move forward with a project with which we need to move forward, this is the only way it can be done," Glass said.

The RCA Dome fiasco helps explain why state lawmakers and the governor insisted on an entirely different funding scheme for the Lucas Oil Stadium. Like the RCA Dome, the new stadium is being initially financed by 30-year bonds. The state stadium finance authority, which is handling the financing, will pay off that debt with the new tax revenues being collected for that purpose. That is also one of the reasons that the state insisted that city leaders find an alternative source for paying for the new stadium's operating and maintenance expenses. With the additional $275 million being spent on convention center expansion, the taxpayers will wind up paying $1.8 billion for the stadium when interest costs are factored in to the costs. When the RCA Dome was first built, city leaders promised taxpayers the new taxes levied to pay for the stadium would be repealed once the stadium was paid off. They sure didn't keep that promise.


Anonymous said...

Excellent Star article, and mediocre analysis, Gary.

The financing scheme, construction schedule, and remodel bids were done entirely under Mayors Hudnut and Goldsmith. Peterson walked into office with all this in place. Nothing--not a damned thing--could be done about it.

That wasn't the only surprise. Fiscal conservative Goldsmith had just about borrowed the city into oblivion, whilst ignoring huge capital requirements like the jail, combined sewer overflow and a growing need for court space.

He had the willing assistance of the City County Council. And a Republican Party, led by John Sweezy, that was loathe to even mention taxes, let alone raise them. His favorites occupied every office in the C-C Building.

Those days are over.

Not to let Glass off the hook. The deal he negotiated with Irsay, on further reflection, might as well have been negotiated with Glass on the Colts' side of the table. It's frightening how much Irsay got, and we gave up.

Maybe they ought to let the next big negotiation be handled by people who negotiate for a living daily--real estate brokers, union officials, car dealers or salespersons. Don't laugh. They survive in a tough economy. Glass's penalty for negotiating a bad deal?

Nothing. A big law firm partnership was his before and after his city stint. He's an incredibly nice guy, but he had zero experience at this kind of thing.

And it shows.

Anonymous said...

This is old news, which the Star is really good at reporting. If anyone was paying attention, the Colts extorted funds every so many years and the bonds were refinanced.

And, of course, now our great city leaders want to give millions of dollars to another hotel. They really believe that their main purpose is to help fund private ventures. They have no idea what government is supposed to do. And it does not matter whether they are Democrats of Republicans. They all do the same crap. They will never stop doing this stuff. We need to be able to impeach these bastards immediately, when they get out of line.

The Capital Improvements Board is a joke. It should be called the Stadium Improvement Board. It has nothing to do with capital improvements. Not one dime of their money goes to real infrastructure. The ironic thing is that their whole purpose is supposed to be related to economic development, but they can't fund the police or criminal justice system, without which, economic development would be impossible.

Wilson46201 said...

I remember looking at the city budget report 15 years ago and couldn't find the damn Hoosier Dome! It was hidden well - I asked one of Goldsmith's's gnomes about it who showed me where it was shyly placed. There was a GOP financial genius named Rogers who worked the financial legerdemain. He was one of those guys who made complicated spreadsheets on large sheets of paper before computers made them popular. Rogers could cook the numbers while Hudnut and Goldsmith hornswoggled the population while the iron Republican domination of the CC Council let things slip on through.

Anonymous said...

Thank you Bart for shoving this down our throats and scaring the city with thoughts of abandonment. This is shameful. Bart comes in and runs up our debt. Did I say "thank you?"

I will election day.