INDIANAPOLIS — The Indiana Pacers will continue to play basketball in Indianapolis for at least another decade under a $160 million deal the team and the city plan to announce Monday morning.
The agreement locks the team into Bankers Life Fieldhouse for another 10 years, with three one-year renewal options, according to documents obtained by The Indianapolis Star. In exchange, the city will provide $160 million to cover operating costs and facility upgrades.
The city's Capital Improvement Board is expected to vote on the deal Monday.
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The new deal appears to be more costly for the city than the current agreement with the team, though sports business experts say it's in line with similar arrangements in other cities. Supporters say it ensures a continued economic impact and vibrancy for Downtown. Critics question whether the financial burden is too great for a city that struggles to fund police and pothole repairs.
The agreement locks in the Pacers through the 2023-2024 basketball season, and possibly through the end of the 2027 season. That coincides with the final debt service payments on the fieldhouse.
The deal sticks even if the Pacers begin to lose money.
The city's Capital Improvement Board will subsidize fieldhouse operating costs to the tune of $3.7 million a year. That will cover things like liability insurance, security, and utilities. The CIB will also pay the fieldhouse's manager $7.1 million a year, with that amount rising 3 percent each year.
In addition, the CIB will provide $26.5 million dollars to the Pacers for upgrades to seating, new paint, and improvements to locker rooms and concessions. The CIB will also pay for $7 million in improvements directly to replace the floor, upgrade the cooling tower, and improve the facility's steam pressure control system.
Finally, the CIB will pay $8 million over 10 years for the scoreboard and sound system and will take title of the equipment at the end of the deal.
It's difficult to make comparisons between the new deal and current one because they are structured differently. However, it appears the new deal will cost the city more.
Subsidies under the new deal amount to an average of $16 million a year. That's higher than the $11.2 million average annual subsidy under the current three-year deal. That agreement called for an initial $3.5 million in upgrades and $10 million a year in operating costs.
The new deal makes provisions in the event of the death of the team's billionaire owner, 79-year-old shopping mall magnate Herb Simon.
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If the team's lenders call its current loans due, or if those loans mature, the Pacers must seek replacement financing that is secured by collateral, likely real estate. The CIB would have time to ask state lawmakers and the City-County Council to help the Pacers obtain such financing. If the team can't obtain such financing and the Pacers' parent company, Pacers Sports & Entertainment, decides to sell the team, the city is entitled to a right of first offer.
Supporters of the deal say it will continue to fuel the $208 million economic impact of Bankers Life by locking in its largest tenant for the foreseeable future.
"The Indiana Pacers and Indiana Fever attract hundreds of thousands of people to Indy on an annual basis," Mayor Greg Ballard said. "Many downtown workers and businesses rely on those fans for their income. Amenities like professional sports, art, and museums make our community a more vibrant and attractive place to live and do business."
But the cost is a concern among those who question publicly subsidizing a team whose value Forbes puts at $475 million. The team brought in $121 million in revenue and $12 million in profit for the 2012-2013 season, the magazine reported.
"I love having professional sports in town, but there comes a point in time when you have to ask yourself what you can afford," said City-County Councilman Zach Adamson. "Is it something we can obligate the taxpayers to fund when we don't have enough to fund the things we are obligated to pay for, like road repair and police officers?"
The city leases Bankers Life, which opened in 1999, to the Pacers for $1 a year. The Pacers keep all game and non-game revenue.
The deal could also put a new strain on the CIB's already rocky financial situation. Since last year, the semi-independent municipal corporation's expenses have outpaced revenues, leaving a projected $33.1 million budget deficit this year.
Still, sports business experts say the average annual subsidy of $16 million for the team and the fieldhouse is typical, especially for small-market teams.
"It's not out of line with what we see in professional sports," said Victor Matheson, an expert on sports economics and a professor at College of the Holy Cross in Massachusetts.
It's tougher for owners in big markets like New York or Los Angeles to move their team to places with smaller revenue pools. But Indianapolis faces competition from a variety of other cities — some of which have NBA-ready arenas just waiting for a tenant.
Matheson said he views claims about the economic benefits of pro sports teams with suspicion. Without a team, the city wouldn't necessarily lose money because residents would simply spend their entertainment dollars on other events.
"Professional sports may make us happy," Matheson said. "But there's not a lot of evidence they make us rich."
Tony Cook writes for The Indianapolis Star, a Gannett property.
Highlights of the deal
Term: The agreement locks in the Pacers for 10 years, or until the end of the 2024 basketball season, with three one-year renewal options.
Funding: The city would pay about $160 million over 10 years, including $10.8 million a year for operations and $33.5 million for facility upgrades.
Termination: The Pacers would not be allowed to terminate the agreement due to operating losses.
Ownership: If team owner Herb Simon dies and the Pacers' loans come due, the team will be required to seek replacement financing. If they can't get it and the team is put up for sale, the city would have the right of first offer.
Source: Capital Improvement Board
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