Saturday, October 17, 2009

Oh Look, Here's $25 Million We Overlooked

I told you throughout the debate this past year over the CIB's financial woes that the CIB leaders were deliberately overstating the municipal corporation's financial woes in an effort to get as much money out of taxpayers as possible so it could turn around and give $15 million a year to the billionaire Simons to make their current sweetheart lease deal on Conseco Fieldhouse for the Pacers as sweet as the one it gave to billionaire Jim Irsay and his Colts team for Lucas Oil Stadium. We were told the $27 million a year bailout plan for the team included no additional payments to the Simons. Well, hold on, everything has changed. It turns out there was a $25.4 million debt service payment that the CIB won't have to pay after all. The Star's Francesca Juaroz reports on this un surprising development:

The Capital Improvement Board's monthslong struggle against insolvency took a positive turn this week, when it said it might not need to borrow $9 million from the state.

The loan was made available this summer when political wrangling over funding for the CIB, which runs the city's major sports venues, wound its way through city hall and the state legislative session . . .

Still on the table, however, is whether the CIB is strong enough to keep the Indiana Pacers from leaving town.

After years of financial losses, the Pacers have said they no longer can afford to pay the $15 million it costs the team to operate Conseco Fieldhouse.

CIB Vice President Pat Early said it's not likely the money will be needed this year. He emphasized, however, that it will be necessary to come up with a solution soon. He could not give a specific time frame.

Greg Schenkel, a Pacers spokesman, said the team would continue to work on a resolution and agreed there's some urgency to reaching a deal.

"The sooner, the better," he said. "It's not a situation that time will resolve."

First, the board expects to cut about $26 million from its budget this year. Those cuts range from reduced cleaning at the buildings to staff layoffs. Eleven positions have been eliminated since Oct. 9, and executive staff members have taken pay cuts of 5 percent to 15 percent, as well as unpaid time off. Capital expenditures also have been reduced from $3 million to $6 million in a typical year to about $600,000 this year, Lathrop said. Other reductions include travel expenses, legal fees, energy costs and cell phone bills.

Second, the CIB avoided $25.4 million in debt service reserve payments in September by persuading the city and state to back up its insurance policy on more than $200 million in bonds.

"We're not out of the woods yet, but what we have done is make significant progress," said Bob Grand, CIB president. "We outlined a worst-case scenario, and we've taken every element and either reduced it or cut costs to meet it."

Whether the board declines the $9 million loan from the state still depends, in part, on how revenues come in this year. Lathrop, the CIB treasurer, said the CIB is assembling revenue projections. But with hotel, food and beverage receipts down in a tough economy, they are expected to be lower than last year -- and perhaps not enough to meet projections for an expanded sports district and hotel tax that the legislature also passed as relief measures for the CIB last session.

Declining the $9 million loan would save the CIB from paying interest, which is projected to be about 5.25 percent, and would let the board avoid paying back the debt in coming years.

"It's not that we don't still have challenges -- we do," said Lathrop. "It's what's the right fiscal decision about borrowing the money."

The latest round of steep budget reductions follows a summer when CIB and city leaders said the cuts proposed by Gov. Mitch Daniels would not work and said new taxes and fees were needed to bail out the board.

At that time, the CIB faced the prospect of a $47 million deficit next year. Daniels said cutting $13 million, on top of the $10 million the board already had trimmed from its budget, was doable, while city leaders, including Ballard, thought $2 million was more appropriate.

Daniels based his figure on a pair of reviews by independent experts saying the CIB could cut payroll and maintenance expenses while reducing the amount spent on outside services such as lawyers.

The measure the legislature passed provided the CIB with about $4 million from a hotel tax increase in Marion County, $8 million from an expanded sports district and, for the next three years, an annual $9 million in state loans. It also left the CIB to find ways to cut.

"The new figures from the CIB are consistent with the projections we made earlier this year when we worked closely with the city on a solution," said Ryan Kitchell, director of the state's Office of Management and Budget. "This development is very encouraging."
Let's face it. The Indiana Pacers can't make the kind of money they want to make in this market because they are not supported by the fans. Most tickets go unsold, and they can't even get the corporate community to keep buying suites at Conseco Fieldhouse. According to the IBJ's Anthony Schoettle, there are at least 10 vacant suites for a basketball season that starts in two weeks. These were all sold out a few years ago. Look, if these people aren't satisfied with their current revenues, then they'll just have to look elsewhere. The taxpayers are tapped out. I'll be damned if we give more subsidies to these billionaire sports team owners when we can't even fund our city parks and repair our crumbling infrastructure. Enough is enough.


Anonymous said...

This makes me absolutely sick to my stomach... There are no lengths "they" will not go to, no lie "they" will not tell... to make the "rich cats" richer on OUR DIME. Disgusting!

Pacers: GTFO! Take the Colts with you!

Paul K. Ogden said...

Gary, you were the one who called it first...the CIB was lying about their deficit. Why do we continue to trust any numbers the CIB gives us?

Jon said...

At the very least we need to change the name of the taxes we pay on food from a restaurant tax to a pro sports tax. Let's at least call it what it really is, it is a tax to support pro sports and their billionaire owners.

Downtown Indy said...

We really, really 'needed' to replace MSA with a venue that provided more suites, didn't we?

I believe I heard on WIBC yesterday that LOS likewise has vacant suites.

Gary R. Welsh said...

According to the IBJ story, there are about 5 suites at LOS that are used for promotional purposes and booked on a game to game basis. It gives the appearance that is by design and not because they can't lease them out.

Anonymous said...

And just how much in public subsidies has Bridget Sloan received?

Had Enough Indy? said...

If you bring your pro-sports team to Indianapolis you don't have to run it well. The taxpayers will make sure you get the profits of a big-market team.

Meanwhile, why not raise the salaries of the maids and busboys who were the supposed target of the Council's and the Mayor's support just a few months ago? Any news coverage of their jobs? Hmmm. Maybe they weren't really the point of concern after all?

It would seem that the State's analysis of how the CIB's budget can be trimmed was a tad ($9m) more generous than deserved. The CIB seems to have proven the bailout sceptics were right.