New Indianapolis Stadium May Already Need Bailout

Published January 1, 2009

Taxpayers in Indiana may already be on the hook for a financial bailout of Lucas Oil Stadium, the new home of the Indianapolis Colts of the National Football League and reputedly the most heavily subsidized professional sports stadium in the nation.

The Capital Improvement Board (CIB), which manages Lucas Oil Stadium, announced about two years ago the stadium’s annual operating costs would be $10 million while yearly revenues would be only $7.7 million.

The financial picture grew even bleaker in September, when CIB officials announced the cost of running the stadium would be $20 million a year. They say the increased expenses are the result of higher energy costs and the need to hire more vendors, cleaning crews, and parking attendants.

CIB is tapping into a $25 million reserve fund while working to find a solution before the fund dries up in 2010.

CIB Chairman Bob Grand told the Indianapolis Star in September, “We’re bleeding cash right now, absolutely.”

Politicians Punt

There has been talk among Indianapolis officials of going to the state for a bailout, but few state legislators have taken a public position on the idea. Several political blogs in Indianapolis pressured candidates in the November general election to tell voters whether they would support a bailout, but few candidates responded.

Fewer than a dozen incumbents in the 150-member state legislature have publicly announced their opposition to such a plan.

Pat Andrews, vice president of the Marion County Alliance of Neighborhood Associations, believes she echoes the feelings of many Indianapolis residents who blame the politicians.

“They’re all to blame. They went and paid for toys instead of food and rent,” Andrews said. “The operating costs problem is just the icing on the cake. This stadium will be an albatross around our necks for years.”

The $750 million stadium received approval in 2005 to replace the RCA Dome, which opened in 1984. Also included in the project was $275 million to renovate the city’s convention center and expand it on the site of the soon-to-be-demolished RCA Dome.

Taxes Climb

The City-County Council for Indianapolis and Marion County approved funding through increases in taxes for food and beverage sales, auto rental taxes, innkeeper’s taxes, and admission taxes. The board of commissioners in seven of the eight “doughnut” counties around the city also agreed to an increase in their food and beverage taxes.

Additional funds are currently being raised from an increase in admission fees and sales of Colts license plates.

Subsidies Pour In

According to the agreement negotiated between city and state officials, taxpayers were responsible for funding 87 percent of the stadium. That makes Lucas Oil Stadium the most heavily taxpayer-subsidized stadium in the country.

Colts owner Jim Irsay was able to cover his 13 percent portion of the cost when he sold the naming rights to the Lucas Oil company for $120 million. Taxpayers also picked up the tab for the $48 million cost of breaking the lease on the RCA Dome.

Under the terms of the deal, the city is paying $70 million still owed on the RCA Dome, nearly the same amount originally owed when it was built. For the past 20 years, any additional funds raised through the RCA Dome were diverted to other CIB projects instead of being applied to the debt owed on the facility.

Indiana Gov. Mitch Daniels (R) did not want a repeat of that debacle and stipulated any additional revenue from food and beverage sales, car rentals, and hotel room bookings be used to pay off the new stadium’s construction bond debt early. That funding, however, would not cover operating expenses for the new stadium or any new CIB programs.

New Funding Uncertain

State Sen. Luke Kenley (R-Noblesville) helped put together the final deal and says city officials knew they were responsible for finding money for the operating expenses. He said he is open to a new plan, such as increasing user fees instead of new taxes.

CIB officials are hoping the renovated convention center, set to open in 2010, will provide the needed revenue to cover the shortfall. Until then, Grand has formed a study committee to review the CIB operating budget and cut any unnecessary spending. Grand told the Indianapolis Business Journal he did not anticipate “at this point” asking taxpayers for additional money.

The Colts receive a portion of sales from tickets, concessions, parking, and memorabilia that earns the franchise $20 million per year. In an editorial, The Star called on Irsay to share some of that money to help cover the increased operating expenses, but that option appears to be off the table.

“As a tenant, we’re not in a position to comment or suggest a solution” to the shortfall, said Colts Vice President Steve Ward. “To suggest reopening [the lease] agreement that took four years to negotiate is ridiculous,” he said.

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

For more information …

A collection of links to research, commentary, and organizations addressing sports stadium subsidy issues: