This is an archived version of a Field of Schemes article. Comments on this page are closed. To find the current version of the article with updated comments, click here.
May 11, 2010
Pacers' economic study: Pay our operating costs, or we won't!
A consulting group issued an economic impact study of what the Indiana Pacers are worth to Indianapolis yesterday, an event so awaited that there were entire news articles just about the issuing of the press statement announcing the study's release. And the findings are (drumroll, please):
- If the Pacers left, the city would lose $55 million in annual economic activity.
- The Pacers' presence is worth 909 jobs.
- The city would lose $17.8 million in annual revenue without its basketball team.
Economic impact, as I've covered here previously, is a meaningless figure, and 909 jobs isn't an especially impressive number, especially if those include part-timers. That $17.8 million a year in actual revenues, though, is pretty substantial, especially on just $55 million in money changing hands overall. Does Indianapolis have a 30% sales tax that I didn't know about?
No, as it turns out: The arena consultants estimated that the city would lose just $5.6 million in tax revenues without the Pacers (no word on whether they noticed that Indianapolitans might still spend their money elsewhere in town if denied NBA tickets), but would also lose $12.2 million if forced to run Conseco Fieldhouse, and pay its operating expenses — which the Pacers currently pay for, and are trying to get out of, which is the whole point of this exercise.
Let's follow the bouncing logic here: The Pacers shouldn't have to pay operating costs because if they didn't pay them, the city would have to. So if they left, the city would be on the hook for operating costs anyway, so why not just let them stay and pretend they'd left, and have them pay nothing? I can't wait to try this argument out on my landlord!
Of course, I didn't agree to pay my landlord's electric bills in exchange for getting to pay only $1 in rent and keep every penny from the basketball games I play in his backyard, but the Pacers seem to be conveniently forgetting that taking on operating costs was already a tradeoff on their part. As does the Marion County Capital Improvement Board, whose president Ann Lathrop told the AP yesterday that absolving the Pacers of operating costs is "the primary basis of a lot of our discussions right now." It's like taking candy from a baby...
What is missing from this study is any financial data from the Pacers. The study notes this; "It should also be noted that access to actual Conseco Fieldhouse and Indiana Pacers data was not provided due to the proprietary nature of the data."
So we have a study paid for by the Indiana Bond Bank, of which Hunden the author of the study is a former member, for a group that wants to give the Pacers more money, our CIB, that surprise, surprise finds that the Pacers leaving Indianapolis would have dire financial consequences for the city.
Absent any data from the Pacers we are led to believe that the assumptions in the study are valid and that the Pacers have a $55 million dollar a year impact, I don't think so but apparently the local politicans are pushing to give them more money regardless of reality.
Posted by IndyRes on May 11, 2010 10:03 AM
I am so glad I moved out of Indianapolis. It's not like Indianapolis has other things to pay for, I mean they have an awesome school system, a huge mass transit system, and no crime.
What a waste. The Simon family's rich enough, and they were given a new stadium. Pay your damn bills and put a team that actually wins some games on the floor.
Posted by Jimmy P on May 11, 2010 10:58 AM
Your logic regarding rent to a landlord is flawed. Your landlord can rent that space to thousands of others whereas Conseco is suitable only for a very limited # of tenants.
You're correct that the Pacers taking on O&M was part of the original deal. And that made sense. Unfortunately, the landscape has changed. Look at the deal that the Colts received from the CIB. That should be part of this entire discussion rather than just a focus on the Pacers.
Posted by indymoon on May 11, 2010 12:41 PM
Would you like my analogy better if my landlord had built my apartment on my request and entirely to my specs?
I do like the idea, though, that because the Colts got a sweetheart deal, now everyone should be allowed to cite that as precedent. I think I'm going to tell my landlord I'm selling naming rights to my house and keeping all the revenues...
Posted by Neil on May 11, 2010 12:54 PM
Then your landlord should lock you in to a long-term lease to cover his costs over and above what the market would likely bear. I think the City did that.
Now the Pacers are claiming hardship. Yes, it seems that the lease terms may allow the City to tell the Pacers to pound sand. But is an empty Fieldhouse a good solution?
Whether the public likes it or not, the landscape has changed. The Colts are a prime example. But the fact that other cities are willing to pay this extortion to be consider "big-time" raises the bar for Indy.
Posted by indymoon on May 11, 2010 01:16 PM
"Look at the deal that the Colts received from the CIB. That should be part of this entire discussion rather than just a focus on the Pacers."
What does the amount of dollars the Colts receive have to with the amount of dollars the Pacers receive? So the Pacers pay for operating and maintenance and the Colts don't, that is part of the Pacer's deal with the city. By your logic the city should pay the Pacers more dollars because the other guy negotiated a better deal. P
Well, Indymoon, that's the $64,000 question, right? Not "what's fair?" but "what will other cities offer?"
As I've written here before, I don't think the Pacers have much chance of getting a better deal elsewhere than they already have in Indy - AEG isn't going to offer them free rent in KC, Las Vegas is a pipe dream for the foreseeable future, and even Seattle is talking about using arena revenues to help pay for a new building. Not to mention that they'd be giving up a good basketball town for the unknown. Meanwhile, Indianapolis would be free to offer its mere free-rent deal to other NBA teams, and see if one of them came running.
The Pacers are trying very hard to paint this as "meet our demands or you'll have an empty Fieldhouse." But the Pacers need a place to play even more than Indianapolis needs a team to play there.
Actually, that'd be a great exercise - figure out how much Conseco Fieldhouse is worth to the Pacers, given that without it they'd be selling tickets to watch games in a cornfield. I'd bet it's more than they're paying on operations.
Posted by Neil on May 11, 2010 01:51 PM
The whole argument is really based on what a team does for a city.
Take Seattle--for years the Mariners, Seahawks, and Sonics were at best average, if not worse (don't even mention the Pilots). Yet the city itself has turned into a great example of civic dynamism, innovation, and quality of life. Would anyone suggest this is because the good people of Seattle could rally around the Mariners?
Take a look at the real numbers of cities like Cleveland, Baltimore, Detroit, and other fading towns that have overinvested in sports arenas. The Red Wings haven't done much to keep autoworkers in business, and Cleveland has lovely sports palaces and is one of the poorest cities in America.
"The environment has changed" indeed. Cities are broke and should be telling sports owners to build their own arenas, as they used to regularly do (and do even now, from time to time).
Posted by B-man on May 11, 2010 03:27 PM
What I can't figure out is why don't they let the Pacers test the market, you know, like a free agent?
We should know whether there's a bona fide offer out there and have a chance to match it or let them go.
Posted by John Howard on May 11, 2010 04:23 PM
Indymoon, one thing you're leaving out of your calculcations is that the Simons have no right to break the 20 year deal they struck 10 years ago. They have a right to terminate if they're losing money and selling the team out of town. They refuse to offer the financials for No. 1 and there is no indication they are selling the team. Even if they do they have to pay a $150 million plus penalty. Now how does that figure into your calcuation that taxpayers should have to pay for the stadium?
Posted by tmcfadden317 on May 11, 2010 05:16 PM
yes lets not forget the penalty they have for packing up and leaving... the powers that be are so smitten with the pro sports mentality that all reason disappears. The pacers do not have a leg to stand on at the negotiating table. Ok we take on ops/mant, they give up the parking garage, the non basketball events, keep half of all concessions and most importantly,,,,pay rent.. Remember this,Simon owns the pacer/fever complex. We the taxpayers own the rest.
Posted by guido on May 11, 2010 06:55 PM
The city gave the Simons $23 million for their new headquarters building a few years back, plus some land to build it one PLUS letting them take over the underground parking garage at Pan Am plaza.
So we have them well-trained to expect gifts from the taxpayer. Or maybe they have US trained to give them stuff whenever they ask for it - the old 'when I say jump, you ask how high' scenario.
Posted by John Howard on May 12, 2010 08:27 AM
Response to IndyRes:
Because regardless of whether used to manage Conseco or LOS, the $ are from the same place � the CIB. I am merely asking that before the public says �screw the Pacers� they should have an understanding of the landscape � all costs and revenues of the CIB. Why are you opposed to making the Colts deal part of the discussion?
Yes, the Pacers and Colts have separate and distinct contracts and each should adhere to those contracts. But it�s not in the best interests of the CIB to choose winners and losers. As an extension of city government, the CIB has to be balanced in dealing with these so-called tenants. Also, long-term contracts are renegotiated all the time in business if the deal is underwater for one party. In this case, I don�t think the City is better off if the Pacers fold. Who pays the Conseco O&M under that scenario?
Also, by my logic the city should not pay either team anything.
Response to Neil:
I�ll defer to you regarding other markets. It seems as though there is always a city out there looking to make a name for itself. In the NBA, who would have thought OKC 10 years ago? In the NHL, the Devils now play in Newark.
Although perhaps not evident in my posts, I�m not a fan of public subsidies of sports teams.
Replying to Indymoon:
Other than the fact that both the Colts and the Pacers have egregious deals you can't compare the two teams. The fact that the dollars provided to the teams are from the same source is not revelant nor is the fact that the Colts receive more dollars than the Pacers. Your argument is simply that the other guy receives more dollars so I should get a raise.
Lucas cost the taxpayers 750 million while Conseco cost 183 million by your logic should we build a 750 million dollar basketball for the Pacers?
Two thoughts here. One, could we get the Pacers folks to negotiate with the Chinese on the exchange rate issue? Based on their ability to extract more concessions without any power is simply amazing negotiating skill. They should teach this stuff in a class.
Two, how utterly stupid are the government officials running the show? These people are not incompetent nor are they dumb. They are stupid. If you do not understand what a contract is, then you are stupid. Tell the Pacers to piss off for another 10 years.
Posted by bevo on May 14, 2010 07:28 AM