Due diligence is apparently not one of Ballard's Rules. The administration of Mayor Greg Ballard put out a press release today announcing that the City had inked a $16 million contract with Zanett, Inc. to implement an enterprise management Oracle sofware solution for city-county government. “This project is being driven by the collective goal to make Indianapolis-Marion County one of the most efficient municipalities in the country,” said ERP Executive Committee member, I.T. Board Member, and Controller, David Reynolds. “Residents should expect to receive the highest quality of service from their local government, and a fully integrated and functional ERP system will allow us to meet that demand.”
According to Tech Trader Daily, Zanett recently announced that it expected to be delisted from NASDAQ because its stock continued to trade below $1 a share. "Yesterday, the company announced that it expects to receive a Nasdaq de-listing notice related to having a stock price trading under $1 for too many days in a row," TTD reported in March of this year. "The company, an IT services consulting firm, said it plans to appeal. In trading Wednesday, the stock fell 3 cents to 31 cents." TTD commented at the time that "something peculiar [was] going on . . . with a micro-cap stock called Zanett, Inc." TTD went on to discuss how the company claimed that business was booming, having just recently signed $12 million in contracts during the first two months of the year. After the company released its press release in March, the price of its shares shot up 521% in a single day of trading from 31 cents to $1.93. It makes you wonder if someone wasn't trading on inside information about future contracts to be signed with the company, including the Indianapolis deal just announced today for the stock to move that much after it announced it might be delisted. According to the IBJ, the publicly traded company last year reported a $2.3 million loss on $41.4 million in revenue. The latest trading of the stock today as reported by Daily Finance shows the trading down 3.85% at $1.25 a share off its 52-week high of $3.74 a share.
The final price tag for the Indianapolis contract announced today is much higher than expected according to the IBJ. "Early estimates had pegged the Indianapolis IT project’s cost at $4 million for implementation, plus another $1 million for annual maintenance," Peter Schnitzler reports. "But that was before its scope had been professionally studied by a vendor and become fully understood." He continued, "Rodman pointed out that, in the bidding process, some vendors pegged the project’s full cost as high as $30 million." Apparently the Ballard administration has already dumped $2 million into the project from funds set aside in the current IT budget. An expert told Schnitzler that the planned project might be a bit of "overkill."
I used to be general counsel for an IT company. I can tell you from my experience during the late 1990s and early 2000s with my former employer, whose primary customers were government agencies, that I often heard complaints from government agencies who implemented Oracle's PeopleSoft software. Its costs are outrageous, and its effectiveness is often overrated. I think it's designed to ensure that the customer will have to keep going back for expensive maintenance overhauls to keep the revenues flowing to Oracle for years to come. It is astonishing that the Ballard administration would dump this much money into a new IT project at a time that the City-County government budget could be facing enormous deficits. I would like to know who these vendors used to lobby for this contract. It might say a lot about why Ballard was so anxious to sign the deal.
Wednesday, June 09, 2010
GOP Has Egg On Its Face After Waterworks Board Fails To Approve Utility Transfer
Mayor Greg Ballard and the Republican-led council's grand plan to transfer the utilities and pass the largest tax increase in the history of Marion County in order to fund hundreds of millions of dollars in favored pork barrel projects prior to next year's election fell flat yesterday after the Waterworks Board failed to garner enough votes to approve the plan. The Republicans have threatened to dissolve the Board after two Democratic members of the Board failed to attend meetings to prevent action on the resolution. Yesterday, the Democratic members showed up and one even voted for the transfer, but a Republican member of the committee abstained because he said he needed more time to review the proposal--the same reason Democrats had given for stalling action on the matter. The Star's Francesca Jarosz reports:
The Republicans cry foul every time someone calls this proposal a tax increase, but that's exactly what it is. They insist it will lower, not raise utility rates over the long haul but that is simply not the case. The fact is that the transaction requires the borrowing of hundreds of millions of dollars to fund street and sidewalk improvements that have a short life span with 30 year bonds. In order to pay off the bonds, higher utility rates will be passed on to Indianapolis ratepayers, who are already facing 300% and 100% increases in their sewer and water rates, respectively, regardless of whether this proposal goes through. Ratepayers have already seen double-digit rate increases in recent years. The plan also assumes Citizens Energy will achieve savings from the combined operation of the utilities; however, it will be straddled with the current costly and inefficient operating agreements the City entered into with United Water and Veolia to operate the utilities, continuing the two management team approaches to their operation.
If the Republicans were truly concerned about keeping utility rates down, they would have come up with a proposal that didn't make ratepayers pay for these pork barrel projects they want to get under way before next year's election, which have absolutely no connection to the utilities. The Ballard administration has already said it plans to fund at least $140 million of those projects with PILOT revenues from the utilities even if the deal is not approved. We're seeing our local Republican leaders taking the same approach to governing as the policies of President Obama and the Democratic-controlled Congress with their reckless federal stimulus spending that Republicans nationally have criticized. We thought we voted for change when we elected a Republican mayor and city council in 2007. Instead, we've gotten the biggest tax and spend administration in city history. The Republican-led council approved a host of fee increases on businesses this week, a move that will raise about $2 million. Yes, that's a tax increase. Or at least that's what Republicans called it when Mayor Bart Peterson and the Democrats were in charge.
After facing public pressure from Republican leaders about absences, the two Democrats on the bipartisan Board of Waterworks showed up Tuesday for a meeting where they approved several million dollars in water projects.
But Tuesday's meeting left one big matter unresolved: The board didn't reach a consensus on the $1.9 billion sale of the city's water and sewer utilities.
That will leave City-County Council Republicans to ponder whether to move forward with a proposal introduced this week to eliminate the board.
Council Republicans said they introduced the ordinance because Democratic board members had failed to show up to meetings and were holding up votes on water projects and the utilities' sale to Citizens Energy Group.
The city has said the board, which oversees the Department of Waterworks, should sign off on the sale along with the Board of Public Works, the City-County Council and the Indiana Utility Regulatory Commission. The Board of Public Works has approved the sale, but votes from the other bodies are pending.
On Tuesday, three waterworks board members -- including Democrat Jack Bayt -- voted for the sale, while Democrat Frank Short voted against it and Republican Dan DeMars abstained because he wanted more time for discussion. The board must get four votes to pass a proposal.
The Republicans cry foul every time someone calls this proposal a tax increase, but that's exactly what it is. They insist it will lower, not raise utility rates over the long haul but that is simply not the case. The fact is that the transaction requires the borrowing of hundreds of millions of dollars to fund street and sidewalk improvements that have a short life span with 30 year bonds. In order to pay off the bonds, higher utility rates will be passed on to Indianapolis ratepayers, who are already facing 300% and 100% increases in their sewer and water rates, respectively, regardless of whether this proposal goes through. Ratepayers have already seen double-digit rate increases in recent years. The plan also assumes Citizens Energy will achieve savings from the combined operation of the utilities; however, it will be straddled with the current costly and inefficient operating agreements the City entered into with United Water and Veolia to operate the utilities, continuing the two management team approaches to their operation.
If the Republicans were truly concerned about keeping utility rates down, they would have come up with a proposal that didn't make ratepayers pay for these pork barrel projects they want to get under way before next year's election, which have absolutely no connection to the utilities. The Ballard administration has already said it plans to fund at least $140 million of those projects with PILOT revenues from the utilities even if the deal is not approved. We're seeing our local Republican leaders taking the same approach to governing as the policies of President Obama and the Democratic-controlled Congress with their reckless federal stimulus spending that Republicans nationally have criticized. We thought we voted for change when we elected a Republican mayor and city council in 2007. Instead, we've gotten the biggest tax and spend administration in city history. The Republican-led council approved a host of fee increases on businesses this week, a move that will raise about $2 million. Yes, that's a tax increase. Or at least that's what Republicans called it when Mayor Bart Peterson and the Democrats were in charge.
Tuesday, June 08, 2010
Arizona Diamondbacks Draft Derek Eitel
My nephew, Derek Eitel, will be joining one of the Arizona Diamondbacks farm teams after he was drafted in the 511th spot in today's second day for the Major League Baseball draft. He becomes the first athlete from Rose-Hulman to enter the pros in the school's history. WTHI-TV in Terre Haute was there to witness the moment with Derek, family members and friends at his family's home in Marshall, Illinois.
Don't Let The Door Hit You On The Way Out, Helen
Monday, June 07, 2010
Star Relentless In Its PR Push For Billionaire Sports Team Owners
The Indianapolis Star continues its nonstop PR push on behalf of the City's billionaire sports team owners. One of its lead stories today focuses attention on the role Herb Simon and Jim Irsay, respective owners of the Pacers and Colts, are playing in helping raise $100 million for the Indianapolis Symphony Orchestra. The story begins:
$15 $18 million a year additional public subsidy demand for his Pacers. In the real world, we call that extortion. In Indianapolis, we're told that's being a good corporate citizen. And while we're on the subject of the ISO, did Steve Hilbert ever fulfill his multi-million dollar contribution pledge to the ISO that led to the renaming of the Circle Theater to Hilbert Circle Theater? The article doesn't mention how much the billionaire sports team owners are pledging to the ISO, but maybe it can be renamed the Irsay-Simon Circle Theater. Notice that Jay Harvey's story mentions there are 9 members serving on the committee with Irsay and Simon but none of the others are mentioned in his story.
The Indianapolis Symphony Orchestra has launched a capital campaign to increase its endowment by $100 million, and it has tapped some of the city's most influential residents to get the job done.Well, it's the least they can do. The more than $1 billion dollars the two Carmel residents have received in public dollars for their private Indianapolis ventures makes their charitable giving look like a pittance. The Glick family's contribution of tens of millions for the Cultural Trail makes the pair look stingy. If the two corporate citizens don't get the public subsidies they demand, they simply threaten to move their sports teams to another city, as evidenced by Herb Simon's latest
Co-chairing the nine-member committee are two of Indiana's four billionaires (according to Forbes magazine): Herb Simon, owner of the Indiana Pacers and co-founder of Simon Property Group, and Jim Irsay, owner of the Indianapolis Colts. Simon and Irsay are also ISO donors.
"They're leading corporate citizens of Indianapolis," said Simon Crookall, orchestra president and CEO. "Their involvement demonstrates the close ties there are here between the sports world and the arts world."
Sunday, June 06, 2010
Major League Baseball Draft Week
UPDATE: Here's a story from the Terre Haute Tribune-Star discussing his prospects in the draft.
UPDATE II: The Arizona Diamondbacks drafted Derek during the second day of the draft today. He was the 511th pick. he becomes the first Rose-Hulman athlete to be drafted into the pros. Congratulations, Derek. You've earned it.
OSC Clears One Dearborn County Official Of Hatch Act Violation
The incoming executive secretary of the state's Attorney Disciplinary Commission, Michael Witte, caused quite a stir in Dearborn Co. recently when, in a parting move as the county attorney, he publicly disclosed two county officials against whom he had filed complaints to the federal Office of Special Counsel to investigate possible violations of the Little Hatch Act because they also held partisan, elected positions in county government. One of those officials has received an opinion from the OSC that he is not in violation of the Act because he was elected to his partisan position at a party caucus as opposed to a primary or general election. Eagle Country 99.3 FM reports on the OSC's finding:
As an observation, Andre Carson resigned his job as a state excise police officer assigned to the Department of Homeland Security after his election at a party caucus to fill a vacancy on the Indianapolis City-County Council because concerns were raised that his political activities violated the Little Hatch Act. According to this opinion, he could have continued in his federally-funded state job while serving on the council and through the caucus election to fill the congressional seat left vacant by the death of his grandmother, Julia Carson. He would not have become a candidate for a covered partisan election until he won the caucus vote and became the party's candidate for the special election in which the voters of the district were eligible to participate.
At the May 17 meeting of the county commissioners, Witte alleged that two county employees - Prosecutor's Office victim advocate Bryan Messmore and Dearborn County Sheriff's Office and Special Crimes Unit detective Shane McHenry - were in violation of the Hatch Act, a 1939 federal law barring some public employees from running for or holding public office. Messmore sits on the Dearborn County Council while McHenry is a Republican candidate for District 3 County Commissioner.The OSC's interpretation of the Act to exclude party caucuses from the meaning of an election is unfortunate. If the General Assembly had required in the election code that such vacant positions be filled at a special election, as is the case with congressional seats, the employee would be considered to be participating in a "election" and be covered by the Act. It seems to me to be a distinction without any practical difference. In both cases, the candidates are campaigning for a partisan, elected position, but appointment by caucuses means you can both run for the office and serve in that office while holding a government position that is paid in whole or in part by federal funds. In the case of Messmore, if he decides to run for re-election to that same position, he will be barred by the Act according to the OSC. You can read the OSC's opinion here.
Messmore, who was selected via caucus to fill a council seat vacated by Charlie Fehrman, has since been found not to be in violation of the Hatch Act. A letter to Messmore from the U.S. Office of Special Counsel's Hatch Act Unit dated May 28 says "the caucus vote is not an election for the purposes of the Hatch Act."
Hughes said he was "deeply troubled" by Witte's accusation which came as a surprise to he and others at the meeting.
"It appears that our Attorney acted completely on his own and without the authorization of his client, the Dearborn County Board of Commissioners. I feel that he may not have done an adequate job researching the issue before he acted on it," Hughes stated in a press release.
Witte has resigned as county attorney and been appointed as the new executive secretary of the Indiana Supreme Court's Disciplinary Commission starting mid-June. However, he may soon be under investigation by the same office as Hughes has filed a complaint against Witte.
Hughes said he "believes Mr. Witte may have possibly engaged in behavior that is within the jurisdiction of the Disciplinary Commission of the Supreme Court. I have requested an investigation to be conducted by the Disciplinary Commission and understand that any final determination is up to the Supreme Court."
As an observation, Andre Carson resigned his job as a state excise police officer assigned to the Department of Homeland Security after his election at a party caucus to fill a vacancy on the Indianapolis City-County Council because concerns were raised that his political activities violated the Little Hatch Act. According to this opinion, he could have continued in his federally-funded state job while serving on the council and through the caucus election to fill the congressional seat left vacant by the death of his grandmother, Julia Carson. He would not have become a candidate for a covered partisan election until he won the caucus vote and became the party's candidate for the special election in which the voters of the district were eligible to participate.
Pacers Still Have A Friend In The Star
I've long since given up on expecting any objectivity from the Indianapolis Star when it comes to the issue of asking average taxpayers to dig deeper into their pockets to subsidize the lifestyles of the state's two wealthiest families, the Simons and the Irsays, in order to support their professional sports franchises. Today is no exception. Once again we are treated to a load of crap on the editorial pages telling us why we should give the billionaire Simons a helping hand with $15 million a year more in public aid while we close schools, lay off teachers, cut bus services, contemplate closure of libraries, close public pools, shorten the season for those pools that are still open and slash funding for our parks. The "Conversations" page, which is supposed to share the perspective of both sides of an issue, gives us a half-page column from former Indianapolis resident and good friend of the Simon family, Mark Rosentraub, to supposedly explain from one person's point of view from afar why it is important we not fail to give Herb Simon $15 million a year more for his failing NBA franchise.
Rosentraub is a former economics professor at Indiana University and supposedly an expert on the economics of sports. Apparently he has decided to discard decades of objective research by himself and others who've studied the issue and come to the conclusion that investments in professional sports teams do not pay off economically. If you weren't so angry by the time to you reached the last paragraph of Rosentraub's dribble that you tore up your newspaper (I know. Most of you gave up your subscriptions to the Star long ago), you really missed out on an opportunity to have a good laugh at Rosentraub's expense. "I still own a house in Marion County, and I know what that investment will mean for my property taxes," Rosentraub writes. Either Rosentraub doesn't own a house in Marion County or he has never read his tax bill because if he had, he would know that the CIB and the facilities it supports are not funded by property taxes. We've paid for those sports palaces with taxes on food and beverages, hotels, rental cars, cable franchise fees, some help from the Lilly Foundation and a lot of borrowed money. The taxing has never kept up with the borrowing, and we've torn down two sports facilities, Market Square Arena and the RCA Dome, without ever paying off the borrowed funds.
Nonetheless, for Rosentraub it all comes down to keeping our city from being known as "India-no-place." He seems to think businesses only choose to locate here if there is a professional sports team, oblivious to the closure of so many manufacturing businesses over the past three decades that used to employ generations of city residents with good-paying jobs. He obviously has never visited Austin, Texas sans professional sports teams and thriving economically. He also seems to think that people choose to live downtown only because there are two professional sports teams here. On that point, he could not be more wrong, and I know that as a downtown resident for the past 20 years. Sporting events hurt most downtown businesses that rely on foot traffic because people avoid the area like the plague when folks drive in from the wealthier suburbs to attend the high-priced events, clogging area streets, filling up parking lots and then quickly returning home to suburbia without stopping at an area restaurant for some food and beverage or shopping at Circle Centre Mall. People choose to live downtown to be close to work, and to enjoy its many amenities, including White River Park, the canal, museums, theaters, shopping, etc., all within walking distance or a short bike ride. Rosentraub, of course, cites to no credible economic studies to support his wild claims he takes time out of his busy Michigan job to share with us.
Equally as laughable is an editorial today entitled, "With some team effort, deal can be a win-win." The Star's editors are apparently privy to information that has not been shared with the public by the CIB. After all, it is an investor of sorts in Conseco Fieldhouse. Yes, that is a disclaimer that the Star editors have repeatedly failed to make in any reporting or editorializing on this subject. The Star's predecessor company invested in the Simons' Circle Centre Mall, along with other area businesses when it was first built; it's really your mall because it was built with your taxpayer dollars and is managed by the Simons rent-free, who get to keep all of the profits, but that's part of your civic duty as an Indianapolis resident. Instead of repaying money invested in the mall by the Star and other area businesses from the revenues generated from the mall, the CIB got their permission to redirect the money to Conseco Fieldhouse so your taxes wouldn't have to be raised as much as they would otherwise need to be raised to pay for a new palace for the Pacers to show off their stuff. The CIB has had to get several extensions from the investors, including the Star, to repay this loan because the funds haven't been there. The Star management approved of these extensions at the same time it has laid off a bunch of reporters, cut the pay of other staff and otherwise slashed funding needed to put out a credible daily newspaper.
Let me return to the point that I started to make. "Completion of a deal to transfer the operational costs of Conseco Fieldhouse from the Indiana Pacers to the city's Capital Improvement Board appears to be more of a layup than a long shot," the editorial begins. Okay, so that means millions of dollars more will need to be spent annually by the CIB, which is already operating with a structural deficit, having just taken out a $9 million loan from the state with plans to borrow $18 million more over the next two years. Does the Star know about a pot of money sitting out there just ready to be tapped that none of us have been told about? If such a pot of money exists, does it make sense to spend that money to subsidize the billionaire Simons instead of funding our libraries, parks and city bus services? And does Dan Carpenter head up to the roof of the Star building and contemplate plunging to Pennsylvania Avenue below every time the Star pens another one of these wacky editorials? If it helps ease your pain any, the Star editors think the actual cost of taking over the operation of Conseco Fieldhouse from the CIB will be cheaper "than the $18 million that's been discussed." No, you didn't read that number wrong. The Simons increased the annual cost $3 million a few weeks back to sweeten the pot. The higher price tag to operate the much-larger Lucas Oil Stadium was $20 million. Go figure on why Conseco's cost would be nearly as high but don't expect any one at the Star to make an attempt to figure out that discrepancy for you.
And history repeats itself. The Indianapolis Tennis Center, which was built so the City could host a professional tennis tournament is about to meet the wrecking ball. A little west of there sits the IUPUI Natatorium, which was built as part of the City's ambitious plan to host the Pan-Am games back in the 1980s. It is in a complete state of disrepair and needs millions of dollars invested in it in order to keep national swimming and diving events coming back. IUPUI says it has no money to make the repairs, although it's been on a non-stop building boom for the past three decades. It wants the CIB to pay for those repairs, and the CIB seems obliged to help them out. Where the money comes from is anyone's guess. Maybe it just falls out of the sky.
Rosentraub is a former economics professor at Indiana University and supposedly an expert on the economics of sports. Apparently he has decided to discard decades of objective research by himself and others who've studied the issue and come to the conclusion that investments in professional sports teams do not pay off economically. If you weren't so angry by the time to you reached the last paragraph of Rosentraub's dribble that you tore up your newspaper (I know. Most of you gave up your subscriptions to the Star long ago), you really missed out on an opportunity to have a good laugh at Rosentraub's expense. "I still own a house in Marion County, and I know what that investment will mean for my property taxes," Rosentraub writes. Either Rosentraub doesn't own a house in Marion County or he has never read his tax bill because if he had, he would know that the CIB and the facilities it supports are not funded by property taxes. We've paid for those sports palaces with taxes on food and beverages, hotels, rental cars, cable franchise fees, some help from the Lilly Foundation and a lot of borrowed money. The taxing has never kept up with the borrowing, and we've torn down two sports facilities, Market Square Arena and the RCA Dome, without ever paying off the borrowed funds.
Nonetheless, for Rosentraub it all comes down to keeping our city from being known as "India-no-place." He seems to think businesses only choose to locate here if there is a professional sports team, oblivious to the closure of so many manufacturing businesses over the past three decades that used to employ generations of city residents with good-paying jobs. He obviously has never visited Austin, Texas sans professional sports teams and thriving economically. He also seems to think that people choose to live downtown only because there are two professional sports teams here. On that point, he could not be more wrong, and I know that as a downtown resident for the past 20 years. Sporting events hurt most downtown businesses that rely on foot traffic because people avoid the area like the plague when folks drive in from the wealthier suburbs to attend the high-priced events, clogging area streets, filling up parking lots and then quickly returning home to suburbia without stopping at an area restaurant for some food and beverage or shopping at Circle Centre Mall. People choose to live downtown to be close to work, and to enjoy its many amenities, including White River Park, the canal, museums, theaters, shopping, etc., all within walking distance or a short bike ride. Rosentraub, of course, cites to no credible economic studies to support his wild claims he takes time out of his busy Michigan job to share with us.
Equally as laughable is an editorial today entitled, "With some team effort, deal can be a win-win." The Star's editors are apparently privy to information that has not been shared with the public by the CIB. After all, it is an investor of sorts in Conseco Fieldhouse. Yes, that is a disclaimer that the Star editors have repeatedly failed to make in any reporting or editorializing on this subject. The Star's predecessor company invested in the Simons' Circle Centre Mall, along with other area businesses when it was first built; it's really your mall because it was built with your taxpayer dollars and is managed by the Simons rent-free, who get to keep all of the profits, but that's part of your civic duty as an Indianapolis resident. Instead of repaying money invested in the mall by the Star and other area businesses from the revenues generated from the mall, the CIB got their permission to redirect the money to Conseco Fieldhouse so your taxes wouldn't have to be raised as much as they would otherwise need to be raised to pay for a new palace for the Pacers to show off their stuff. The CIB has had to get several extensions from the investors, including the Star, to repay this loan because the funds haven't been there. The Star management approved of these extensions at the same time it has laid off a bunch of reporters, cut the pay of other staff and otherwise slashed funding needed to put out a credible daily newspaper.
Let me return to the point that I started to make. "Completion of a deal to transfer the operational costs of Conseco Fieldhouse from the Indiana Pacers to the city's Capital Improvement Board appears to be more of a layup than a long shot," the editorial begins. Okay, so that means millions of dollars more will need to be spent annually by the CIB, which is already operating with a structural deficit, having just taken out a $9 million loan from the state with plans to borrow $18 million more over the next two years. Does the Star know about a pot of money sitting out there just ready to be tapped that none of us have been told about? If such a pot of money exists, does it make sense to spend that money to subsidize the billionaire Simons instead of funding our libraries, parks and city bus services? And does Dan Carpenter head up to the roof of the Star building and contemplate plunging to Pennsylvania Avenue below every time the Star pens another one of these wacky editorials? If it helps ease your pain any, the Star editors think the actual cost of taking over the operation of Conseco Fieldhouse from the CIB will be cheaper "than the $18 million that's been discussed." No, you didn't read that number wrong. The Simons increased the annual cost $3 million a few weeks back to sweeten the pot. The higher price tag to operate the much-larger Lucas Oil Stadium was $20 million. Go figure on why Conseco's cost would be nearly as high but don't expect any one at the Star to make an attempt to figure out that discrepancy for you.
And history repeats itself. The Indianapolis Tennis Center, which was built so the City could host a professional tennis tournament is about to meet the wrecking ball. A little west of there sits the IUPUI Natatorium, which was built as part of the City's ambitious plan to host the Pan-Am games back in the 1980s. It is in a complete state of disrepair and needs millions of dollars invested in it in order to keep national swimming and diving events coming back. IUPUI says it has no money to make the repairs, although it's been on a non-stop building boom for the past three decades. It wants the CIB to pay for those repairs, and the CIB seems obliged to help them out. Where the money comes from is anyone's guess. Maybe it just falls out of the sky.
Saturday, June 05, 2010
CIB Abruptly Drops Privatization Move
Three weeks after this blog exclusively reported on a troubling conflict of interest facing CIB board member and former Chief of Staff to Mayor Ballard, Paul Okeson, the City has announced it is dropping its recent initiative to privatize the operation of CIB facilities. “There are no plans to pursue a large-scale outsourced contract at this time,” Deputy Mayor Michael Huber told the IBJ's Peter Schnitzler. “But we’ll do anything we think is in the long-term best interest of the taxpayers.”
In a May 12, 2010 post, this blog called on Okeson to resign from the CIB after discovering that his new employer, Keystone Construction, had partnered with John Bales' Venture Real Estate in a proposal to operate the CIB facilities submitted by CB Richard Ellis. Okeson has served as the point person on the board renegotiating the terms of the Pacers' current long-term lease on Conseco Fieldhouse, which requires the NBA team to pay a minimum $50 million penalty to the City of Indianapolis if it decides to sell the team and relocate it to another city. The Pacers organization, which claims it loses tens of millions of dollar annually on the team, had set a June 30 deadline for the CIB to provide it an additional $15 million a year subsidy to operate and maintain Conseco Fieldhouse to avoid the loss of the NBA team. Ironically, Pacers Sports & Entertainment, which already operates Conseco Fieldhouse, also submitted a proposal to manage the other CIB facilities in response to the City's Request for Information in competition with the proposal submitted by CB Richard Ellis. Pacers Sports & Entertainment's proposal involved a four-way partnership that included the participation of the Indianapolis Visitors & Convention Center, a nonprofit which receives more than $10 million in funding from the CIB annually.
Throughout the negotiations with the Pacers, Okeson has made it clear that he believes the CIB must come up with the $15 million a year subsidy demanded by the Pacers to avoid losing the team. The Pacers are not required to make their audited financial statements available to the public that would show whether the team is making or losing money despite the huge financial subsidies the CIB has paid to the team over the years. Under its current lease, it pays no rent and keeps the revenues it generates from Conseco Fieldhouse; however, it is required to pay for the operation and maintenance of the building, unlike the Colts, which gets the use of Lucas Oil Stadium rent-free and pays none of the stadium's operating and maintenance costs. Those $20 million in additional costs after the stadium opened sent the CIB's budget into the red and led to last year's tax increase and plan to borrow $27 million from the state over three years to close the deficit. The CIB has paid for several million dollars' worth of operating and maintenance cost on Conseco Fieldhouse over the past decade that it was not legally obligated to pay and allowed the Pacers to avoid paying for the use of parking facilities as called for in the lease agreement, another deviation from the lease agreement that has cost taxpayers millions.
Because the Pacers organization had not cried foul over Okeson's participation in renegotiating the terms of its lease, this raised the concern of potential collusion in the privatization proposal in which both Pacers Sports & Entertainment and Okeson's firm were competing to win. The Board's president, Ann Lathrop, said the current negotiations with the Pacers factored into the decision to table the privatization plan for now. "City officials have been negotiating for months with the Pacers over whether the city should take over $15 million annual Conseco Fieldhouse operating expenses," Schnitzler writes. "Lathrop said those negotiations also bear on the decision to table privatization, but she declined to share details on the talks or a time line for a deal."
This week's announcement surprised SMG, one of the largest operators of public facilities in the country, which also submitted a proposal in response to the City's RFI. "SMG, whose portfolio includes five NFL stadiums and more than 200 venues, hadn’t heard anything from the city since responding to Ballard’s initial request last year," Schnitzler writes.. "The mayor originally pursued privatization because firms like SMG have the scale to find additional cost savings and the connections to increase bookings, boosting revenue," Schnitzler writes. “Our understanding was that the city was going to further examine the issue,” Ginty said. “Absolutely, we would like to pursue it. I think we are the premier company that does this.”
I'm surprised Schnitzler didn't dig deeper into this story like he normally does.
In a May 12, 2010 post, this blog called on Okeson to resign from the CIB after discovering that his new employer, Keystone Construction, had partnered with John Bales' Venture Real Estate in a proposal to operate the CIB facilities submitted by CB Richard Ellis. Okeson has served as the point person on the board renegotiating the terms of the Pacers' current long-term lease on Conseco Fieldhouse, which requires the NBA team to pay a minimum $50 million penalty to the City of Indianapolis if it decides to sell the team and relocate it to another city. The Pacers organization, which claims it loses tens of millions of dollar annually on the team, had set a June 30 deadline for the CIB to provide it an additional $15 million a year subsidy to operate and maintain Conseco Fieldhouse to avoid the loss of the NBA team. Ironically, Pacers Sports & Entertainment, which already operates Conseco Fieldhouse, also submitted a proposal to manage the other CIB facilities in response to the City's Request for Information in competition with the proposal submitted by CB Richard Ellis. Pacers Sports & Entertainment's proposal involved a four-way partnership that included the participation of the Indianapolis Visitors & Convention Center, a nonprofit which receives more than $10 million in funding from the CIB annually.
Throughout the negotiations with the Pacers, Okeson has made it clear that he believes the CIB must come up with the $15 million a year subsidy demanded by the Pacers to avoid losing the team. The Pacers are not required to make their audited financial statements available to the public that would show whether the team is making or losing money despite the huge financial subsidies the CIB has paid to the team over the years. Under its current lease, it pays no rent and keeps the revenues it generates from Conseco Fieldhouse; however, it is required to pay for the operation and maintenance of the building, unlike the Colts, which gets the use of Lucas Oil Stadium rent-free and pays none of the stadium's operating and maintenance costs. Those $20 million in additional costs after the stadium opened sent the CIB's budget into the red and led to last year's tax increase and plan to borrow $27 million from the state over three years to close the deficit. The CIB has paid for several million dollars' worth of operating and maintenance cost on Conseco Fieldhouse over the past decade that it was not legally obligated to pay and allowed the Pacers to avoid paying for the use of parking facilities as called for in the lease agreement, another deviation from the lease agreement that has cost taxpayers millions.
Because the Pacers organization had not cried foul over Okeson's participation in renegotiating the terms of its lease, this raised the concern of potential collusion in the privatization proposal in which both Pacers Sports & Entertainment and Okeson's firm were competing to win. The Board's president, Ann Lathrop, said the current negotiations with the Pacers factored into the decision to table the privatization plan for now. "City officials have been negotiating for months with the Pacers over whether the city should take over $15 million annual Conseco Fieldhouse operating expenses," Schnitzler writes. "Lathrop said those negotiations also bear on the decision to table privatization, but she declined to share details on the talks or a time line for a deal."
This week's announcement surprised SMG, one of the largest operators of public facilities in the country, which also submitted a proposal in response to the City's RFI. "SMG, whose portfolio includes five NFL stadiums and more than 200 venues, hadn’t heard anything from the city since responding to Ballard’s initial request last year," Schnitzler writes.. "The mayor originally pursued privatization because firms like SMG have the scale to find additional cost savings and the connections to increase bookings, boosting revenue," Schnitzler writes. “Our understanding was that the city was going to further examine the issue,” Ginty said. “Absolutely, we would like to pursue it. I think we are the premier company that does this.”
I'm surprised Schnitzler didn't dig deeper into this story like he normally does.
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