Ballard On Herb Simon: "Everybody Knows He's Lost A Lot Of Money"

When Greg Ballard the candidate sat down with me for an interview in June, 2007 to discuss why he thought he was the right choice to be Indianapolis' next mayor and during subsequent discussions, he could not have been more clear he thought the city was spending too much money on professional sports and needed to focus on doing a better job providing basic city services. On his election night upset victory over Mayor Bart Peterson, he credited the hard working grassroots supporters for his victory and declared the end of country club politics in Indianapolis. That was then. Sometime during the transition from his election night victory to the day he was sworn into office, Ballard decided it was more important to curry favor with all of the people who fought hard to defeat him and toss to the curb everyone who actually worked to put him in office, along with all of the major public policy decisions he staked out during his campaign. His reversal in public policy positions has been most pronounced in his view of subsidies to the professional sports teams.

Under fire by the Marion County Alliance of Neighborhood Associations for a secretive move by his administration to funnel $8 million a year in excess property tax revenues from the downtown TIF districts to help pay for a $33.5 million, 3-year public subsidy for Herb Simons' Indiana Pacers, Ballard took to the airwaves to defend his decision to subsidize the billionaire Simon. Ballard told WTHR:

"We built Lucas Oil Stadium with tax dollars and it's run by tax dollars. We built the Convention Center with tax dollars and it's run by tax dollars. We built the new library with tax dollars and it's run by tax dollars. We built Conseco Fieldhouse with tax dollars. It's run by Herb Simon. He's been running that Fieldhouse on his dime for ten years - a public building. Now, he has said 'I can't continue to do that.' Everybody knows he's lost a lot of money. So, the dilemma we have - if he leaves - a real possibility because he's losing so much money, then I have an empty building. I have an empty building that I have to run for $18 million every year hoping to put a circus or a concert in there occasionally or we can help them run the building," said the mayor.

Let's dissect that statement because there's quite a mouthful there. "We built Conseco Fieldhouse with tax dollars." "It's run by Herb Simon." "He's been running that Fieldhouse on his dime for ten years--a public building." Yes, Mr. Mayor, the taxpayers did build Conseco Fieldhouse with our tax dollars--under threat from the Simon brothers that they might have to move their precious NBA team to another city that appreciated them more by building a brand new arena for them. The City negotiated a 20-year lease on precisely the terms requested by the Simons. Give us total control of the building rent-free, including all of the revenues it generates from both game and non-game events, and we'll pick up the operating and maintenance expense on the building. A win-win situation we were assured. Yes, Herb Simon has paid most, but not all of the operating and maintenance expenses on Conseco Fieldhouse. Past budget expenditures show several million dollars in costs were actually picked up by the CIB. On the other hand, the Pacers have been using our publicly-owned stadium on our dime and keeping all the revenues it generated.

Next, Ballard boldly states, "Everybody knows he's lost a lot of money [on the Pacers]." Uh, no, Mr. Mayor, everybody doesn't know that. You see, Herb Simon has never disclosed audited financial statements for the Pacers that would give us a clue whether his team is losing money, making a profit or breaking even. We know for a fact you have never seen those documents, and if they had been shown to you, I seriously doubt you are capable of discerning what they mean. Further, we know that during the past year, Herb Simon bought out his late brother's 50% interest in the team. If the team had lost so much money, why was Herb so anxious to buy out his brother's interest in this losing team? And how much money did Herb pay for this big money loser? This information was never disclosed to Mayor Ballard, the CIB and certainly not the taxpayers who have been asked to subsidize Simon with an additional $33.5 million of our money in exchange for the promise he won't break his lease during the next three years that he is legally obligated to fulfill or face a termination fee well in excess of $100 million. What we do know is the Simon brothers scooped the team up for $11 million, and the franchise is now estimated to be worth about $300 million. Not a bad return on investment I should say. We also know from Bren Simon's sworn testimony in her late husband's disputed estate proceedings that Herb has a tendency to speak out of both sides of his mouth. So as far as the public knows, there is absolutely no proof Herb Simon has lost a lot of money on his Pacers. Put up or shut up, Mr. Mayor.

The mayor then goes on to lament how the CIB would be faced with $18 million in costs to operate an abandoned arena that would only occasionally be occupied for a concert or circus. The Mayor seems to forget the large break-up fee Simon would be forced to pay the CIB if he breaks his lease--money that could be used to pay down debt and cover operating costs. Moreover, with no Pacers or Fevers, the arena could actually be used to host far more concerts and other events than it currently does and the CIB would get to keep all of the revenues that are now going to Simon. As for the economic loss to the city, I would point to what the owner of the Seattle Sonics argued in court when that team picked up and moved their NBA franchise to Oklahoma City. An expert hired by the team argued Seattle would realize virtually no detectable economic impact. As the Seattle Times reported:

A city expert, economist Lon Hatamiya, offered his analysis Thursday that the Sonics contribute $188 million a year to the local economy through payroll, ticket sales and other consumer spending.


If the Sonics leave, that spending "may go away," Hatamiya said. "There is no certainty that money will continue to be spent here... Much of that impact would shift to Oklahoma City."

But [Brad] Humphreys, the Sonics' expert, countered that such economic-impact studies grossly exaggerate the benefits of sports teams and do not pass muster for peer-reviewed economics journals.

Humphreys said he has studied the relocation of every major professional sports team over the past 40 years, and discovered no discernible harm to the local economy of the cities that lost teams.

"When a team leaves, they don't take that consumer spending with them ... it simply gets spent on other entertainment activities," he said.

So help us out, Mr. Mayor. What do you know that we don't know? Enlighten us, please.