IBJ Says Pacer Bailout No Slam Dunk

An editorial in today's IBJ offers a skeptical view of the Pacers' claim that the franchise is losing money and can remain in Indianapolis only if the CIB agrees to pick up $15 million in annual operating/maintenance expenses. The editorial reads, in part:

The Indiana Pacers franchise needs $15 million a year beginning in 2010—presumably from the public—to fund the operation of Conseco Fieldhouse. The franchise says it can’t afford to operate the venue, where it claims to have lost money every year but one since moving in 10 years ago.

That’s madness. We have a hard time understanding how the franchise could be such a money loser. The Pacers pay essentially no rent on the publicly owned fieldhouse but benefit from the more than 200 ticketed events held there every year—everything from basketball games to rock concerts.

We appreciate that the team hasn’t issued any ultimatums in this latest round of troubles, but it’s frustrating that taxpayers are once again being asked to subsidize a private enterprise that’s already getting a pretty good deal in the form of free use of a state-of-the-art entertainment venue.

You would think after reading that passage of the editorial that it would conclude there should be no bailout for the Pacers, but that's not the case. Instead, the editorial turns into a venture into Simon family estate planning. The editorial asks who will be in charge of the Pacers once Mel and Herb Simon are no longer around. It then goes on to suggest that the Simons give the City a cut of the selling price if the Pacers team is sold in the future. It reads:

And because Indianapolis has so much invested, why wouldn’t the Pacers give the city a cut of the upside? The Simons bought the team for $11 million back in 1983. A year ago, Forbes magazine valued it at more than $300 million. If the city is truly a partner, it should be rewarded if sometime down the road the franchise changes hands.

So essentially the IBJ concludes we should pick up the $15 million a year tab for the Pacers, even though all evidence would point to the claim that the franchise is losing money and has lost money in 9 out of the past 10 years as being completely false, as long as the CIB is offered some cut of a future sale of the Pacers. It looks like the IBJ has concluded the same thing I've already concluded. The Simons plan to sell the Pacers. They are simply trying to extract this additional subsidy for the team to bolster the team's selling price. The Simon family's crown jewel, Simon Property Group, is sinking fast from the mountain of debt it has piled up over the years. David Simon's plan to issue more stock as a ruse for raising money to pay off some of that debt went over like a fart in church with investors.

I see the IBJ's point in asking for this concession from the Simons, but if past is prologue, this would become an empty promise. The CIB already has a right of first refusal to acquire the team if it is sold, but it can't begin to afford to pay the purchase price. You know exactly what will happen. A potential purchaser will say he wants to move the Pacers to another city if he buys the team because the team isn't profitable enough here. The Simons will come to the CIB and tell them that they can guarantee the new team owner will keep the team in the city if the Pacers are let off paying the City its cut of the selling price so the Simons can reduce the purchase price from something like $350 million to $300 million. All of the negotiations with professional sports team owners end one way, and it's always to the advantage of the team owner and not the public. If the choice is between no Pacers and a Pacers team plus an additional direct subsidy of $15 million a year, it's a no brainer. Farewell, Pacers.

In a separate editorial in today's Star, the editors caution the CIB against rushing a resolution of the issue through the legislature. There are only a few weeks remaining in this session and there has still not been a single piece of legislation that has been proposed in writing so the public has an opportunity to review and be heard on the subject. That's a deliberate effort on the part of the CIB and Mayor Greg Ballard to make sure the public is shut out completely from the backroom deal they're negotiating at the State House. Nonetheless, the Star, without stating its own conflict of interest in this matter (its multi-million dollar loan to the CIB), seems to back a bailout with these conditions:

Every player -- including the Colts, Pacers, businesses, city and state governments -- will have to sacrifice something to find a sustainable model for operating Lucas Oil Stadium, Conseco Fieldhouse and other Downtown venues.

Second, the General Assembly must address the deficit before the end of April. The state took the lead in building Lucas Oil Stadium; it must not abandon the city now with operating costs pushing the CIB to the point of crisis.

Third, although it's clear that a range of options, not one overriding solution, will have to be employed to close the budget gap, the state and city must protect the region's convention business.

In other words, only the taxpayers will wind up paying for this bailout.

And then the push continues from the downtown elites. Roland Dorson and the ICVA's Don Welsh, who only recently moved to Indianapolis from Seattle, offer a guest column assuring you that the entire future of downtown rests on a taxpayer bailout of the CIB. They write:

What a shame, then, if we would somehow lower the bar, lose the momentum and sacrifice the national identity built in the past 40 years by retreating to the India-no-place of 1969.

But no less is at stake as we seek creative and collaborative solutions to the funding problems confronting the Capital Improvement Board. The issues extend far beyond Conseco Fieldhouse and Lucas Oil Stadium and their primary tenants, the Pacers and Colts. This is about sustaining the vibrancy of Downtown, maintaining and growing jobs and creating an environment that is attractive to business. The two then go on to throw out the phony ecoomic impact numbers they are always throwing around.

Let me explain this to Dorson and Welsh (who is no relation, thankfully). The massive amounts of public spending in the downtown one mile square over the past 40 years has done absolutely nothing to stem the tide of corporations that have closed or moved their corporate headquarters and taking their high-paying jobs elsewhere. In fact, it has done nothing to stem the exodus to the suburbs. Our population has remained virtually stagnant since 1970. Guys like Dorson and Welsh have a great gig going on. They convince stupid Marion County residents to continue paying tens of millions in tax dollars to the CIB year after year, and they get these great paying entertainment-related jobs that offers plenty of travel around the U.S., dining in all of the fine restaurants and overnight accommodations in five star hotels. Guys like this have been so successful that we spend more money on the CIB than we spend providing fire protection. We spend four times on the CIB than we spend on our city's parks. And we spend more on the CIB than we spend on the prosecutor's office, the public defender's office and the entire Marion County court system combined.

A final note to Welsh. Your former Seattle home lost its Sonics' NBA franchise to Oklahoma City. Think about it. Are all of the young, well-educated professionals going to stop moving to Seattle because the Sonics are no longer there and start moving to Oklahoma City instead? If you asked young, well-educated professionals across the country where they would rather live. Do you think they would pick Seattle or Indianapolis?

Indianapolis Airport Authority To People: F____ You!

The Indianapolis Airport Authority unanimously approved the appointment of John D. Clark, III as its new CEO despite ample evidence of his tenure in Jacksonville, Florida to demonstrate that he is an arrogant, self-aggrandizing person who has no time for answering to the public or treating those who work under him with any respect. Thanks, Mayor Ballard, for continuing to trash every principle upon which you were elected to serve the people of Indianapolis.

Ice Miller Locks Down Local Political Power

The 7th District Democrats have chosen Ice Miller partner Lacy Johnson as its new chair, replacing Sherlonda Anderson. You know what that means. As the Indiana Legislative Insight's Ed Feigenbaum put its:

In case you're not doing the math, the recent major party county and congressional district chair elections mean that the CD 07 Democratic and Republican party chairs and the Marion County Republican Party chair all hail from the same law firm, Ice Miller LLP, and even the same (public affairs) practice group.

Yes, John Hammond, another Ice Miller partner, is the 7th District GOP Chair. He lobbies for the firm and reports to Lacy Johnson. Ice Miller partner Tom John is the Marion County GOP Chairman. He also reports to Johnson. And Lisa Dietrick, an Ice Miller lobbyist, is the Marion Co. GOP Treasurer. She, too, reports to Johnson. That's good news if you work for Ice Miller. It's bad news for the Republican Party. It's no secret that Ice Miller is tight with the Center Township Carson gang and has served as its chief enabler, warts and all, for years. It's also no secret that the firm has favored Democratic mayoral candidates over Republican mayoral candidates in recent elections. I can say it until I'm blue in the face, but if you want to bastardize the two-party political process, put attorneys and lobbyists from a big law firm in charge of the political parties. Decisions will never be based on ideology or party principle. Instead, decisions will be based on what is in the best interest of the law firm and its clients.

And They Thought Bush Was Bad

The blunders by President Barack Obama are piling up. He insults our greatest ally, Great Britain, by slighting Prime Minister Gordon Brown during a formal visit to the U.S., treating him like an ordinary visitor to the White House and presenting him and his family with inappropriate gifts. We learned that he pocketed a $500,000 advance on a book deal, continuing his unprecedented trend of profiteering off his celebrity status before even being sworn into office. His administration belatedly admits that it approved the $170 million in retention bonuses for AIG executives, which he is now decrying. Obama hired a tax cheat to run the Treasury Department and a convicted thief to serve as the government's chief technology adviser. The teleprompter president thanked himself while reading the wrong lines from a teleprompter he never leaves home without. He makes a late-night TV appearance on the Jay Leno show where he compared his bowling skills to the Special Olympics. Did Bush even come close to making this many blunders so early into his presidency?

NFL Awards $3.25 Million In Bonuses To Colts Players

Your typical business is struggling to meet payroll these days but not the NFL. It awarded $3.25 million in performanced-based pay to each NFL team, including the Indianapolis Colts reports the Star's Mike Chappell. Here's how the Colts money was divvied up:

Players at the bottom of the pay scale who played extensively receive larger checks.
The largest checks went to guard Charlie Johnson ($201,309), safeties Antoine Bethea ($195,706) and Melvin Bullitt ($186,432) and offensive lineman Jamey Richard ($181,596).

Tight end Gijon Robinson ($158,882), defensive tackle Keyunta Dawson ($158,080), linebackers Clint Session ($134,605) and Freddy Keiaho ($134,203), defensive tackle Eric Foster ($133,877) and cornerback Tim Jennings ($118,984) also received six-figure checks.

"I knew when it came time for them to cut the check, mine would be pretty good because of how much I played," Jennings said. "I played more than a lot of people expected (13 starts) because of injuries to Kelvin (Hayden) and Marlin (Jackson)."

Defensive end Dwight Freeney ($9,828) and safety Bob Sanders ($3,751) picked up a little extra cash, too.

Backup offensive lineman Corey Hilliard received a check for $947.

Chew on that as Colts' owner Jim Irsay says forget it when it comes to the Colts helping defray the extra $20 million in costs for the Lucas Oil Stadium. You get to pay that with higher taxes. God forbid the high-paid players and wealthy team owner be asked to sacrifice anything.

Tobias Digs In His Heels On Clark

Another front-page scathing story about the Indianapolis Airport Authority's choice to become its new CEO and its President, Randall Tobias, isn't budging on John D. Clark, III. The Star's Mark Alesiaand and Heather Gillers offered these gems about Clark:

Airport Chief Executive John D. Clark III earned a reputation in Jacksonville, Fla., for being an anti-union spendthrift, cutting jobs while treating himself lavishly as he traveled the world.

He made separate business trips to Paris, London, Shanghai, Buenos Aires, Sao Paulo and Cairo -- four continents, all paid for by the airport and all within one year.

He once authorized $10,000 for a limousine in Paris for an airport board member and a lawyer, and ended up apologizing for it.

All of that on top of a $241,500 salary as Jacksonville airport chief executive officer, plus a car allowance and a private club membership . . .

Marcus Rau, former head of a carpenters union, said Clark "despises unions." He was especially upset that Clark cut 11 union jobs at a time when operating margins easily exceeded 30 percent.

"Praise the Lord that he's out of Jacksonville," Rau told The Star. "I'm sorry for people in Indianapolis, but I'm elated that he's gone from here."

Jacksonville City Council member Glorious Johnson described Clark to Folio Weekly as "dictatorial."

Clark once issued written instructions, retracted two days later, threatening to fire employees who complained to board members or the media.

Clark dismissed such criticism.

"I worked with members of the community, the City Council, the mayor," he told The Star. "I would disagree that I'm dictatorial."

Tobias, appointed by Mayor Greg Ballard, doesn't have a care in the world about all of these concerns raised about Clark's management style. "People try sometimes to make things into a big deal," Tobias said. "We're just trying to hire a CEO here." As for Clark, he's as flippant as one would expect based upon his past. "He said he planned to stay in Indianapolis 'for a number of years' but noted that he's in demand." "I am called very frequently about going to run other airports," he said, "both on a national and international basis."

Costly Cosmopolitan Fire Attributable To State Building Code Variance

The Cosmopolitan on the Canal apartment complex should have been built with concrete and steel because of its size, but the state building commission instead granted the owners a variance which allowed them to use wood construction, turning the complex into an inferno after someone intentionally set a fire there last week. WISH-TV's Mary McDermott reports:

A state commission granted the developers of the Cosmopolitan on the Canal a code variance, which gave them permission to not follow the current building code for buildings that size.

Documents show the developers of the Cosmopolitan asked for a variance from the state that allowed them to classify the building as four stories rather than five. It was granted, which allowed the building to be framed with wood instead of metal and concrete.

Why ask for that variance? Because, according to an Indianapolis Code Consultant, state code allows builders to use wood framing on buildings that are four stories tall, but not five.

"Basically, the code limits the number of stories and floor area based on the type of materials you use. For example, for combustible materials, wood, there's a limitation on how many stories you can build and how big the floor area can be. Once you're up to five stories, generally you're up to non-combustible construction. Wood framing would not be allowed," said Ralph Gerdes, Code Consultant.

Much of the Cosmopolitan built on a slope along the canal is four stories. But, because a small portion is five stories, the developer had to ask for a variance in order to use the highly combustible wood framing.

A spokesman for Flaherty & Collins, the owner of the apartment complex, claims such variances are common; however, it seems to have been a decision which was made in complete reckless disregard for the surrounding townhomes, apartments and businesses which were were put in danger from last week's fire. Ambers from the fire even reached the State House building because of the strong northerly winds during the fire. The fire would have never gotten that far out of control if steel and concrete had been used. More importantly, firefighters could have entered the building safely to fight the fire without fear of a total structural collapse as occurred during last week's fire. Anyone with any common sense should have known better than to permit such construction in a densely populated downtown area of the City.

It will come as no surprise to you that Flaherty & Collins has made tens of thousands of dollars in contributions to various Indiana politicians, Republicans and Democrats alike, over the last several years. That includes $2,500 to Gov. Mitch Daniels.

Pat Early Doesn't Get It

CIB Vice President Pat Early makes a pathetic attempt this morning to defend handing over an additional $15 million a year to the Indiana Pacers franchise at a time the CIB is facing an annual deficit of $30-$50 million. Early's guest column in today's Star is in response to Matt Tully's recent column criticizing the sports team owners for expecting more of the taxpaying public in these trying economic times. Naturally, Early can't discuss the economic benefit of the sports teams without lumping them in with the convention business. Early writes:

Many may not realize how important visitors and tourism are to Central Indiana. Each year, millions attend conventions and sporting events in Indianapolis. The economic impact of these visitors exceeds $3 billion annually to the city and state.

Attracting conventions without beachfront property takes some doing. City and state leaders developed a vibrant and vital Downtown with entertainment, shopping and a cultural district anchored by the Indiana Convention Center and Circle Centre mall. Conseco Fieldhouse and Lucas Oil Stadium provide the bookends. Add our mix of restaurants and hotels and you have an energetic Downtown.

The vast amount of the economic impact is derived from the conventions and not the sports franchises. The Colts and Pacers draw mostly from the Central Indiana region. People drive to the game and drive home the same day. They don't book a hotel room and many don't spend any money downtown beyond paying for parking. The convention center draws visitors for days at a time, generating lots of business for area hotels, restaurants and retail. Early doesn't even waste his time with an estimate on the impact of the two sports franchises alone because the true numbers aren't impressive.

Early's prediction of the loss of the Pacers on local revenues is equally misleading. He writes:

If they were to leave, it would eliminate more than $8 million of direct tax revenue to this county and state and countless dollars of economic benefit to the community. Our Downtown generates more than $400 million in state and local taxes. Much of this money comes back to Marion County to fund education, poor relief and public pensions. In various ways, all citizens benefit from this.

So Early is worried about losing $8 million a year in tax revenues and his solution is to spend an additional $15 million a year to make the Pacers more profitable. Early suggests that much of this money comes back to Marion County to fund education, poor relief and public pensions. That is simply false. To begin with, much of the downtown area is within a TIF district. That means increased revenues from development are diverted to pay for public improvement bonds within the TIF district instead of being distributed to political subdivisions. Further, income taxes generated from Lucas Oil Stadium are captured to help pay for the bonds on the stadium. Food and beverage taxes, hotel taxes, car rental taxes and admission taxes go to fund the CIB and Lucas Oil Stadium. The list of mechanisms for diverting revenues generated within the mile square to fund the various improvements there goes on and on.

Once again, the CPA Pat Early states as fact that the Pacers are losing $30 million a year. Early is guilty of professional malpractice. Early does not base that claim on audited financial statements that are available for public inspection. He bases his claim solely on what the Pacers PR machine has told him. Early claims the Simons, who purchased a franchise for $11 million that is now worth $300 million, are simply trying to break even. Everyone knows this latest demand from the Simons that the CIB pick up the $15 million in operating/maintenance costs on Conseco Fieldhouse has arisen because the Simons were peeved at the generous deal the CIB signed with the Colts, requiring the CIB to pay 100% of those costs. The Simons got the exact deal they wanted 10 years ago. Like a spoiled child, they want what the other kid has.

Early's childish closing reaffirms my belief that Early's CIB leadership has been abysmal and he should be forced to resign:

I have been a member of the Capital Improvement Board for 17 years. My sole focus has always been to do what is in the best interest of this community. I've done my best to explain the big picture. It doesn't surprise me Tully doesn't get it; I didn't have any crayons.

The guy has been on the board for 17 years. The Board has been running deficits for years despite numerous tax increases and tax diversions. The Board's budget has grown to about a tenth the size of the entire city budget. The Board decided to go forward with Lucas Oil Stadium knowing that it would be tens of millions of dollars short in paying for it. We now learn that the CIB couldn't even afford Conseco Fieldhouse, let alone Lucas Oil Stadium. Early's suggestion that Tully doesn't get it because he doesn't have any crayons to explain it to him demonstrates his arrogance and disdain for those of opposing views in the face of his glaring incompetence.

Revolt At The State House

One week from today, Hoosiers from across the state will gather at the State House to fight to take back our government from the lobbyists and special interest groups. If you're tired of politicians dabbling with bailouts for the billionaire sports team owners and the gambling industry, while government struggles to find funding for basic services, then come out for Revolt At The State House rally next Wednesday, March 25, 2009 beginning at 11:30 a.m. I'll be there. Will you? Click here for more information.