iPOPA on Pacers's Bailout

I was invited to appear on Fox 59's first "Faceoff" segment, during which two members of the community debate "issues of the day." The topic for myself and NUVO contributor (and talented writer) Andrew Roberts was whether the City should absorb the $15-$18 million cost of operating Conseco, thereby "bailing out" the Pacers. Here's my statement, which is a bit more detailed than what any 2-minute video can allow:

I don't want the Pacers to leave. But the City should not give an extra dime to millionaire ballplayers and billionaire owners when it's on pace to set a homicide record, can't pay for basic services like libraries and transportation, and has to use deficit spending, back-door tax hikes for sidewalks and roads.

The Pacers have not even shown us their books, so we have no idea how leanly they operate. All we know is they pay more in player salaries than one-third of the teams, and the NBA will almost certainly adopt NFL-style revenue sharing when it creates a new collective bargaining agreement at the end of 2011. How foolish will we look opening up the public coffers when bad management put the Pacers in the hole via low attendance and costs, and we can see the smoke from the money train pulling into the Pacers' station?

Most observers do not believe the Pacers could find a better deal in any other small-market city, they would have to pay between $50 and $150 million to move, and every objective study shows that when a team relocates, the psychological loss is real, but the economic one isn't. You can't even call this proposal a "bailout" because that connotes an opportunity to recover the dollars government provided. So far, all the Pacers have said publicly is that the taxpayers should eat a cost the Pacers agreed to cover. Sorry, but we're stuffed right now.

Here's the video segment:
 

iPOPA on Pacers's Bailout

CIB Needs to Let NBA Commissioner David Stern Solve Pacers' Problem

It strikes me as supremely ironic that Mayor Ballard, a Republican, wants to bail out the Indiana Pacers by assuming the $15 million annual operational cost for Conseco Fieldhouse. (Doesn’t anybody remember that the Pacers demanded the right to run Conseco because they wanted to get all the non-game event revenues? But we’ll put aside the whole “living up the terms you negotiated” thing for just a second).

In December of 2009, Forbes released a report that taught us forty percent of the NBA’s franchises (12 of 30 teams), including the Pacers, lost money in the 2008-2009 season. Another league source predicted 25 teams would lose money in the 2009-2010 season.

Can I ask a silly question? If "companies" that lose money are unsustainable, and forty percent of the NBA’s “companies” are in the red, is there any way to contend the NBA business model is not completely broken?

Of course not.

This is why Commissioner David Stern has said two things need to happen:

(1) Players need to be paid less (look at these salaries); and

(2) The league needs to adopt a revenue-sharing scheme closer to what the NFL employs so that small market teams can stay competitive and profitable.

While the first proposal is obviously controversial with the players union, the second one isn’t.

From NBA Fanhouse:

At least the union and the owners agree revenue sharing is needed to help small-market teams. Hunter was receptive when speaking about revenue sharing Friday, and Stern said it will be part of the next CBA, although it won't be negotiated until after a document is in place.

(As a quick aside, is anybody else amazed some Republican somewhere hasn't tried to grandstand on pro sports' revenue sharing models by claiming they're socialist?)

But I digress. Think about this. Mayor Ballard’s wants his CIB to bail out the Pacers even though they haven’t appreciably cut back their payroll while allegedly losing money every year they've been here and while some type of revenue sharing proposal is almost a certainty in the next collective bargaining agreement?

When Mayor Ballard bails out the Pacers, will it be just for this year? No, because it legally can't be. So if a revenue-sharing agreement is subsequently passed in late 2010, will the Pacers pay us back (with interest) for covering them for this year and into the future, just like the banks who got money from the federal government or will it just be a giveaway?

While I’m on the CIB issue, the Mayor has repeatedly stated that no dollars from the Cit Gas transfer will be used to pay the Conseco operating costs and no dollars from his administration will go to the Pacers. His comment is completely disingenuous, but I can’t technically say it’s a lie because money is a fungible good.

Say I have mentally earmarked $15 million for abandoned homes because I said I would do something about them during my campaign, but I still haven’t. When Cit Gas money comes in, I mentally unmark the abandon homes dollars and move them into the CIB. Then I take $15 million from the Cit Gas deal and tell everybody, “Look at me! I’m using Cit Gas money for abandoned homes!” In other words, unless CIB comes up with $15 million more in cuts, Ballard HAS bailed out the Pacers the minute we agree to pay for Conseco. The Mayor can't spin out of that reality.

I say "bailed out" because the company has a legal obligation to make the payments, says it can't, and we let them off the hook. According to the Hunden Strategic Partners report prepared for the CIB to provide political cover for Ballard's upcoming bail out, we should go along because the Pacers generate $55 million for the local economy per year. But as GOP blogger Paul Ogden writes, this report does not address the $150 million penalty the Pacers would have to pay to move the team.

I do not want people to misunderstand me. The Simon family have done some great things for this city, and the Pacers have brought me some of my greatest personal memories. But, in fairness, the Simons have always used the Pacers as a loss leader. When I hear Jim Morris say how many years they've lost money, it doesn't make me sympathetic. It makes me say, "Then it was really stupid of them to assume responsbility for Conseco knowing they were already losing money, wasn't it?" They gambled, and they lost.

Can anybody envision a professional sports team telling its host city, "Hey, we see you're struggling, so we're going to go ahead and pay more taxes?" The Colts sure didn't. Remember when GOP State Senator Luke Kenley floated a plan that would have the Colts giving the CIB just $5 million. Jim Irsay crushed that idea in a heartbeat because it wasn't "part of the deal." We can't get $5 million from a team riding high when we're in trouble, and yet, when this city is struggling, we'll pick up a $15 million tab?

Yes, I love the Pacers, but when libraries are allegedly closing (more on that later), our murder rate is on record pace, and Indianapolis has suffered disproportionate job losses, you can't let nostalgia make you soft in negotiations.

iPOPA, you say, if the Pacers go, we'll lose jobs. None of those popcorn sellers will be making their $10/hour for two hours per game. But that's if the Pacers go. And no matter what Jim Morris says, they won't. They won't pay $150 million in penalties when they can wait until the new revenue model is put in place later this year.

Make no mistake about it, if Mayor Ballard doesn't bail out the Pacers, they'll be living at David Stern's door to ensure the business model gets fixed.

In short, the best approach is to make sure the Pacers management team is highly motivated to change, not how the City of Indianapolis treats them, but how the NBA does.

CIB Needs to Let NBA Commissioner David Stern Solve Pacers' Problem

Shella Shoots...AND SCORES on Governor Daniels' Taj Mahalian-Sized Hypocrisy

When WISH-TV's political reporter Jim Shella gets sarcastic on you, it can be lethal. These are the two best "zinger questions" I've seen on the Capital Improvement Board mess:

In all the public negotiating over the Capital Improvement Board bailout there are a couple of things worth pointing out.

Thing 1: When Jim Irsay, Bill Polian, and the Colts say that a deal is a deal and they won’t renegotiate, how does that apply to Reggie Wayne’s contract? That’s the one they renegotiated last week when the outcome benefited them.

Thing 2: When the governor criticized school districts for building Taj Mahal athletic facilities, was he employing a different philosophy than the one used for Lucas Oil Stadium?

Ohhhhhhh! Takedown.

I'm with Shella. The Governor's Taj Mahal comment made me immediately think about my favorite scene in Remember the Titans, when the white and black co-captains are arguing:

Julius: You been doing you're job?

Bertier: I been doing my job.

Julius: Then why don't you tell your white buddies to block for Rev better because they have not blocked for him worth a plugged nickel, and you know it! Nobody plays. Yourself included. I'm supposed to wear myself out for the team? What team? Nah, nah...what I'm gonna do is look out for myself, and I'ma get mine.

Bertier: See man, that's the worst attitude I ever heard.

Julius: Attitude reflect leadership....captain.

Captain Daniels, how can you criticize? When it came time to say, "No, it's just a game. The state isn't putting money into a new stadium," you didn't. You said, "We can make money by using this dome as an attraction."

Why would you expect a school board to think differently after you set the example? I can see school board members actually thinking, "With a big stadium/natatorium/soccer field, we can draw big fans and facility users, sell big advertising and big concessions, collect user fees for soccer league or swimming lessons, and pay for the cost in no time."

Isn't that close to the same thing we said about the dome?

Shella Shoots...AND SCORES on Governor Daniels' Taj Mahalian-Sized Hypocrisy

Mayor Ballard is a Coward!

Yes, Your Honor. I'm calling you out. By name. You are a coward with a logic deficit.

In the most insane example of having your cake and eating it, too, you had the audacity to glamour shot your way into Luke Kenley's press conference about the CIB bail out proposal only to offer the following, which comes from today's Indianapolis Star:

Indianapolis Mayor Greg Ballard, who joined Kenley at a news conference Wednesday at which the plan was outlined, wouldn't say he endorsed the details but said he supported the need to preserve the convention and entertainment business in Downtown Indianapolis.

WHAT?!?!?!?

If you're not there to endorse THIS deal, what deal are you there endorsing? We don't know. Because you won't say. And you won't say because you're a coward. You KNOW you came into office on a platform of lower taxes, and here you are, ready to stick it to us already to make sure we take care of billionaires who pay millionaires to play a game.

Let me be fair, you also said the following:

"This is not about any individual teams or anything. This is about Downtown Indianapolis. This is about the convention business. This is about $3.5 billion worth of convention business, 66,000 jobs in Central Indiana related to hospitality -- that's what this is about," Ballard said. "We must maintain this economic engine."

That's the illogical part. We COULD make up the entire deficit by raising admission per ticket at Conseco events. You know why we won't do that? We're told it would be too costly. People will stop going to Pacer games. But isn't this Republican Party orthodoxy? Raise taxes, lose voters? Raise prices, lose customers? And yet, here sits a Republican Mayor saying that by RAISING hospitality taxes to one of the highest IN THE NATION, somehow we're going to save our convention employees. (In fairness to the Mayor, his non-approach benefits millionaires primarily at the expense of average folk who will take the hit on these regressive tax increases, so that part is consistent with Republican philosophy).

NO convention group books here because they want to go to a Pacer game. They book because we have a lot of low-cost but nice hotel space, nice restaurants and nightlife to enjoy, proximity between hotel and convention space, and a clean and interesting cityscape (a/k/a "ambiance").

But, Mayor, you let Luke Kenley take the largest competitive arrow out of your quiver and break it over his knee before your very eyes. (Seriously, if you're currently in high school taking your first economics class, can you PLEASE call the Mayor's Office?)

You see, Mr. Mayor, in economics we have a notion called "competition." If person A can get something CHEAPER from city B than from City I (for incompetent), they will. This means And the 66,000 people you claim to protect are all laid off because NOBODY is coming here.

Here are two other concepts you might find "neat." Demand for a good can be "elastic" or "inelastic." If demand is "inelastic," people will buy even if the prices rise insanely. Medical care is a great example. Most people like to live, so they'll sell their second-born to finance a life-saving surgery, even if you double the cost. But if demand is "elastic," an increase in price means people won't buy the good or service anymore even with a slight increase. You know what makes demand "elastic?" Having options to do other things.

So, say for instance I'm already thinking about not eating out anymore because things are tight, and NOW I'm going to have to pay even MORE, not only in downtown but everywhere in Marion County. Guess what I'll do? Eat out less. So NOW your expected new tax money never shows up, and all you've done in the mean time is hurt the very restaurants you claim you're trying to help by keeping the Pacers downtown.

See what you've done? You've stood silent while the most powerful Republican at the Statehouse save Mitch Daniels constructed a fix on a shaky foundation. But the truth is, this is what Kenley and you wanted to do all along. You'll put this ill-thought out bailout into play, SAY "Mission Accomplished," and you'll pray that President Obama gets the economy moving. Then if it happens, you act like you're geniuses. If it doesn't, you'll blame Obama for the "sluggish national economy," though we'll all know the truth. Whatever protection of, or growth of, our "hospitality economy" you could have afforded RIGHT NOW was stagnated because one of your top advisors runs in a millionaire boys club. How grand. How Bob Grand.

Mayor Ballard is a Coward!

Hey, Indianapolis Star! Ya Talkin' to Me?!?!?

There was an interesting tidbit in the Indianapolis Star's "Behind Closed Doors" this weekend, and since Ipopa (eye-pop-uh) was "agog" about this trip last week, I'm thinking the Star is calling me out along with Advance Indiana. Here's their missive:

Blogs don't get bogged down in facts

Local blogs were agog last week about a trip the financially strapped Indiana Pacers hosted for sponsors to Cancun, Mexico, recently.

The blogs reported the Pacers took 60 people on a five-day trip to an exclusive oceanside resort.

These bloggers, however, had it only half right.

They were outraged that the Pacers would pay for such largess while the team is asking the CIB to take over the $15 million cost of running Conseco Fieldhouse each year.

But as Greg Schenkel, vice president of corporate and public relations for the Pacers, pointed out, the annual trip is a part of the sponsorship contracts the team has with numerous companies, including The Indianapolis Star.

So the trip's costs are covered by the sponsorship dollars, he said.

Schenkel would not release a list of who went on the trip, but he did say no one from the CIB or the city or state government went.

Putting aside why Schenkel or the Star wouldn't list who attended the trip, can somebody make sense of this from a business perspective? Am I to understand that the Star actually PAID MORE on a contract so certain undisclosed individuals (management?!?) would get an all-expenses paid trip to Cancun (plus jewelry?) Since I'm assuming certain members of the Pacers organization attended, was THEIR attendance paid for by the sponsors, too? If so, I fear for the Star's management, which might be why they're mum on who went.

I'm sure there are many people reading this who work in corporate sponsorship/entertainment world. If this is done all the time, and I'm unfairly hitting these folks, let me know. Otherwise, I don't understand why a company would pay a premium on a promotional deal to have an organization whose product is professional sports play travel agent for them? (I have GOT to see one of these contracts).

But even if this happens all the time, isn't anybody worried about the potential effect on coverage? I've always wondered how an industry maintains journalistic objectivity when it has a business relationship with those whom it covers. At a minimum, shouldn't the Star disclose the nature of its business relationship and the amounts in play?

I ask because the Star editorial staff is calling for a CIB bailout (more on that in a second), and while Matt Tully wrote a strong column a few weeks ago telling the Pacers to put up (their financial spreadsheets) or shut up, his story today is an arguable softening of position.

You say, "WAIT! Tully said that if the Pacers left, it wouldn't destroy the city!" Yes, and he also said that the Pacers should stay, just "not at the cost of another sweetheart deal the city cannot afford."

Sometimes it pays to parse columnists' words like they're diplomats. You can then understand what they are REALLY signaling. Ask yourself these questions, "In Tully's mind, what makes the deal a "sweetheart" deal?" How does he define "the city," and how does "the city" decide what it "cannot afford?"

Later in the column, Tully basically tells you:

"If lawmakers decide a bailout is good public policy, the pain should be spread at least throughout Central Indiana. Remember: Carmel, Greenwood and the other suburbs benefit from a thriving Downtown Indy just as much as a homeowner living on the Far Westside."

See how subtle Tully and the Star are being? Next time you see Matt, call him "Smooth Operator" Tully. He takes the principal question - should we bail out the Pacers from their contract obligations - and fuses it into a completely separate (though clearly related) one -should we bail out the CIB for operating at a loss on everything else?

This subtle switch matters because the Star's editorial talks about the Superbowl and the Final Four and how those events help promote Indianapolis AND surrounding communities to other businesses that might seek to relocate here. Maybe so for national events that draw people from out of state who stay long enough to SEE the city. How often does that happen for a Pacer game? (Maybe a handful of people come from Columbus to see LeBron where there are seats still available).

And yet, here the Star (and Tully implicitly) stand, seemingly asking ten counties to accept regressive hotel and food and beverage tax increases so that corporations won't have to pay more for Conseco suites and Pacer fans, concert fans, and tractor pull fans won't have to pay more for their admissions. (I suppose in the interest of full disclosure, I'd be delighted to have Carmel, or even the rest of the state, pay something so I can still go out downtown without choking when I see my bill. Also, does anybody know if the CIB still has a suite at Conseco? If so, auctioning off that prime real estate could save the Pacers some money).

I admit that the Pacers haven't been the same in my eyes since the departure of Reggie Miller, but even in their glory days, I couldn't have seen giving more money to the Pacers in this type of economy. Let me say this as politely as possible. THEY PLAY A GAME!

Of course, will any of us be surprised when taxpayers take a hit when a deal gets done? This is capitalism, after all. While superior to any other system for generating prosperity, capitalism makes us cater to the financial elite by subsidizing their hobbies as the price for all the "trickle down" benefits the rest of us allegedly receive.

It's just funny how whatever "trickles down" onto average people always tends to smell funny.

Hey, Indianapolis Star! Ya Talkin' to Me?!?!?

CIB Bailout: Listen Closely, Legislators!

So our unelected Capital Improvement Board is in an operating hole that will get worse next year if the Pacers refuse to pay $15 million in operating expenses for Conseco. The Pacers tell us they lose money year after year. But then they pull a PR AIG.

Ruth Holloday reported last week that the Pacers took 60 people, including supportive corporate elite, on a five-day excursion to Cancun, Mexico. While one might argue the Pacers are prudent to ensure their advertising base is safe in a tough market, it bothers me that representatives from WISH-TV and the Indianapolis Star attended.

Holloday reports that the group was wined and dined at le Blanc Hotel and Spa, an all-inclusive oceanside resort with hot tubs in every room. The trip included side excursions for every one in attendance, and the Pacers gave the women expensive jewelry and the men fancy sport watches.

The question I would ask (were I a full-time reporter) is whether the Pacers have done THIS every year, or is there something special about THIS year and this TIME that makes it necessary? Oh, sure, there's a bad economy, but there was one last year, too. MIGHT the Pacers be trying to ensure a favorable corporate climate precisely when they seek to hoist the new costs onto the taxpayers?

Are we supposed to believe that there's NOT going to be any spillover from Star marketing to news/editorial? Really? Then why wasn't the story about this trip reported? Didn't every paper in the country report when the automotive executives who got bailed out fly to Congress in corporate jets? Remember when AIG execs paid for a $440,000 weekend retreat? EVERYBODY covered it. But the Star says nothing? (Look, we know the Simons are billionaires. But the rule of thumb is that if you're asking us to open the taxpayer wallet to bail you out, at least have the decency to ACT broke. Tighten your own belt first before asking us to go digging).

Also, the Indianapolis Star today runs a story about the CIB/Pacers fix under the heading of "Shared Pain." Guess where? BELOW "the internet fold." In other words, you WON'T see it unless you expand for today's top stories. What ran above it?

Homeless man held in blaze at complex
Officials say suspect set fire to intimidate his ex-girlfriend into coming back to him.
Indy says 'no' to Louisville's Downtown light show
Tourism promoters wanted to project messages onto buildings during NCAA regionals.
City, stadium get dress rehearsal for Final Four
Head-on crash kills Franklin man - 8:50 AM
United Way issues $1.4M in grants - 8:35 AM
Ban on smoking in car with kids advances - 8:26 AM
Finish Line 4Q losses narrow, beat estimates - 7:38 AM
12-year-old dies in industrial accident - 7:27 AM
Dozens seek Noblesville police chief job - 7:25 AM
Golf cart crash kills boy, 9, in Owen Co. - 7:25 AM
Read all of today's breaking news

I'm glad that the United Way still has money to give and that Finish Line did well (Hurray! They can keep their Pacer sponsorship!), but how do either of these stories have the impact that this one does on public policy? The meetings about the CIB are already being held "behind closed doors," and we can't even get the Star to front the options that are on the table so we can respond?

(As an aside Advance Indiana offers an interesting view of Jim Shella's coverage of a protest rally during which AI talked about the CIB bailout. Was any of the CIB portion covered by WISH-TV? Nope).

Anyway, here's what the Star says is on the table, along with my thoughts in response:

THE IDEA: Increase Marion County's 2 percent food and beverage tax to 3 percent. This would raise $18 million a year.

THE PROBLEMS: Every time you go out to eat, you get socked. If I owned a restaurant outside of downtown, I'd be hopping mad because my customers get popped, and I get close to NO benefit from the Pacer attendance. (MAYBE I get the guy who stops through after the game on his way back to Noblesville). You know who else would be hopping mad about this option? Me. I like to go out, but I will start eating at home more often, and every dollar they thought they would raise in new revenue goes off the table.

THE IDEA: Increase Marion County's motel/hotel tax from 9 to 10 percent to raise $4 million per year.

THE PROBLEMS: Let me understand this. We need the Pacers as the "bookend" for our convention business, but we're going to make it too costly for anybody to want to actually stay in Indianapolis? If somebody doesn't think a 1% increase matters, you're sadly mistaken when you're thinking about booking convention business. You're talking an additional $1,000 PER NIGHT for a small conference of 500 people with $200 per room PER PERCENT that the hotel tax is higher than competing cities. If I'm contemplating taking a conference that will book 2,000 rooms for three days to either Louisville, which has a 15% rate, or Indianapolis, with its 9%. Assuming only $100 per room, I can save $36,000. Why in the world would we give away that kind of competitive advantage if we're trying to make tourism our thing? Also, why apply the tax to EVERYBODY in Marion County? If I owned a hotel or motel near the county borders, I'd be hopping mad because people will just stay in the doughnut counties. In other words, my customers take a hit when I get NO advantage from downtown events.

THE IDEA: Raising the 6 percent admissions tax to 7 percent to bring in $1.5 million a year.

THE PROBLEMS: There aren't any with this idea. Having the "users" of the service pay for the service is the only equitable way this gets done. One percent increase? I'd make it five before I'd pursue any other options. The Pacers will say, "Yeah, but if we raise the cost, we'll lose some fans." And I'll say, "Then reduce your payroll! You were the ones who let the Pacers image get tarnished by not getting rid of the trouble spots earlier." I'm tired of rewarding bad management with bailouts. Aren't you? Also, as I understand this tax, it's for ALL Conseco events, not just the Pacers. People who go to concerts or rodeos at Conseco pay more.

Republicans may say, "Yes, Chris, but what about public libraries? You want us to make books available for free. Why not charge an admission fee for the central library?" Because, respectfully, some things should be public goods, such as educational information. So, no, I don't mind the "wealth transfer" that occurs when rich people have to pay so poor kids can get a place that encourages reading. Call me crazy! Are the Pacers a public good? Is a L'il Wayne concert a public good? There might be some camaraderie value, but certainly nothing that is close to a library. Sorry.

THE IDEA: The Indianapolis Colts are asked to give back a share of the revenue they now get from concessions, and we get $3.5 million.

THE PROBLEMS: None, in theory. The Colts should have never been offered concessions for events that had nothing to do with their product in the first place. But good luck getting that back from Jim Irsay! He's Christian and charitable, but he's not crazy.

THE IDEA: Expanding taxing districts: Adding new hotels and other stadium-related businesses to a sales tax increment financing district in Downtown would generate $10 million a year. Odds: Possible.

THE PROBLEMS: None. Next to having the fans absorb the entire operating cost of events they choose to attend, at least if you do this, you are putting the cost on those business ONLY that actually benefit from downtown events.

THE IDEA: Alcohol tax: Indiana's spirits, wine and beer taxes are on the low end, but lawmakers are more interested in solutions that affect Marion County alone, not the whole state. The taxes raise about $42 million a year, which is split between the state and local governments. Odds: Unlikely.

THE PROBLEMS: It's an easy fix to tax "sin," but thankfully this isn't really on the table. It's grossly unfair for every bar owner and grocery store in the state that does not benefit from downtown Indianapolis events.

In sum, legislators who try to make the pain TOO shared might be feeling their own come election time.

CIB Bailout: Listen Closely, Legislators!