Billionaire’s Basketball Team Gets More Money from Indianapolis Taxpayers

Published August 11, 2010

Indianapolis taxpayers are being forced to bail out the city’s National Basketball Association team, whose billionaire owner is one of the nation’s wealthiest individuals.

The city’s Capital Improvement Board (CIB), the government agency that owns and manages the city’s professional sports venues, voted 6-1 in July to provide $30 million over three years to the Indiana Pacers. Most of the funds are intended to help cover the Pacers’ operating costs for using the CIB-owned Conseco Fieldhouse. Approximately $3.5 million will be used to pay for improvements to the facility.

Additional terms of the deal also allow the Pacers to keep revenue from game and non-game events. Should the team move before the 2013-2014 season, it will be required to repay $30 million to the CIB. The amount the team would be required to repay will decrease every season it stays in Indianapolis, falling to $1 million if the team leaves before the 2018-2019 season.

‘Rent-Free Yet in the Red’
“I’m not sure how you can operate in one of the nicest facilities in the league for essentially rent-free and be so far in the red,” said Mark Rosentraub, professor of sport management at University of Michigan-Ann Arbor and a former dean at Indiana University-Purdue University Indianapolis. He said in eight of the 11 years the Pacers team has been playing in the Fieldhouse, the city’s economy has been strong.

City officials say the agreement is a good one.

“The mayor has said we need to protect the taxpayer and we need to protect the tax base. This agreement does both,” said Robert Vane, deputy chief of staff for Indianapolis Mayor Greg Ballard (R).

The agreement came about after Pacers officials told city leaders the team has lost money every year except one since the team moved into the Conseco Fieldhouse, which opened in 1999.

Huge Increase in Team’s Value
Billionaire shopping mall magnate Herb Simon took over full ownership of the Pacers upon the death of his brother Mel in 2009. Together they founded Simon Property Group, the world’s largest owner of shopping malls. The Simons purchased the Pacers in 1983 for $11 million. Forbes magazine now estimates the team is worth $300 million.

The Simons several years ago began telling city leaders they could not afford to pay the annual $14 million to $18 million required to operate the facility. The team cites low attendance as a factor.

Mayor Ballard, CIB board members, and Pacers representatives said if a deal to steer more money to the team could not be reached, Simon would have been forced to move the team to another city with lower operating costs.

However, the Pacers have never named a city as a potential new home for the team. The team’s financial records have never been made public.

CIB officials, however, say they have seen the financial records. CIB President Ann Latrop told the Indianapolis Business Journal, “We’ve seen the audited financial reports, and we have no reason to believe that those are in any way inaccurate.”

Skeptical of Team’s Numbers
Professor Rosentraub remains skeptical. He says the CIB should share the financial reports with the public.

“If these numbers are real, what’s the hesitancy?” he said.

Rosentraub added, “If the CIB is so convinced of the accuracy of those figures, which happened during some very robust times for the city and the state, you’d have to ask, ‘Is the conclusion that the Pacers can’t be operated profitably in the city?’ If that’s the case, what could possibly change in two to three years to turn this thing around? Or are we looking at a long-term situation of paying to keep the Pacers here?”

Ballard has stated keeping the Pacers in Indianapolis is vital to the city’s economy and that a deal had to be struck. In a guest editorial he wrote for the Indianapolis Star newspaper, Ballard cited a CIB study estimating the Pacers pump $55 million into the local economy each year.

“By maintaining the economic engine and cultural hub that is our downtown, we will preserve our status as one of America’s top-tier cities—a destination for employers, conventions, and visitors from around the world,” Ballard wrote.

Public Expressing Doubt
Few public officials have voiced dissent to the Pacers bailout, but some citizens are expressing discontent.

“I feel like this was done without any input from the taxpayers,” said bailout opponent John Beckman.

“I’m tired of hearing from the mayor and others that the Pacers will move if they don’t get this money. I don’t believe it for a minute,” said resident Theresa Westbrook. “The Simons are billionaires. Let them pay for it since they bought the Pacers to begin with. Why do the taxpayers have to pay for their team’s playground?”

CIB board member Douglas Brown was the only one to vote against the deal. He said the team should craft a longer-term deal now rather than delay it for three more years.

“I don’t think the environment for a long-term deal is going to get any better [than it is now],” he said during the CIB’s July meeting. “I think we need to strike while the iron is hot. I would hate to think that we’d be perpetually in negotiations with the Pacers.”

Nick Baker ([email protected]) writes from Washington, DC.