The small-market Pacers have had trouble turning a profit since at least the 1990s. Things got really hairy when the markets collapsed in 2008 and team owner/mall mogul Herb Simon saw his net worth drop dramatically.
Not so long after, and with Simon increasingly concerned that his favorite luxury holding was becoming an annual fiscal burden, the team struck a deal with the city of Indianapolis.
In exchange for pledging not to move the team (without paying a huuuuge penalty), the city would pay some of the team’s operating expenses and invest in upgrades to The Fieldhouse that would improve the building’s standing as a revenue generator.
In all, Indianapolis pledged a reported $33.5 million and, violá, the Pacers would remain in the great state of Indiana.
As the terms of that arrangement neared sunset, however, the same fundamental questions returned. How can Herb Simon keep a team in a city where it is so hard to make annual profits by running a professional basketball team?
Apparently the city still empathizes with his blight and wants to ensure the team remains in Naptown because they just re-upped on the deal, this time shelling out $160 million to keep the team through the 203-24 season (and potentially through 2026-27), according to the Indianapolis Star’s Tony Cook.
Here is where all that money goes:
The city’s Capital Improvement Board will subsidize team 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 license the $16 million scoreboard and sound system the team bought in 2012. The CIB will pay $8 million over 10 years and will take title of the equipment at the end of the deal.
In exchange, the city’s Capital Improvement Board will provide $11 million to $13 million a year in operating expenses, plus $33.5 million for capital improvements at Bankers Life.
In short, the city is dropping some heavy coin into the Pacers. And that means fans will get to continue cheering for the blue and gold even when Paul George is 34 years old (and quite possibly playing in a different city).
Some citizens will surely take issue with all this public funding going to a basketball team. Particularly after the lockout in 2011 gave NBA owners much more solid financial footing on which to stand.
But thems the breaks, I guess. Our own Tim Donahue wrote about the tradeoff of using tax dollars for a team back when the original Pacers/CIB deal was struck.
I’ve been thinking about this for some time, and I’ve come to the conclusion that spinning this as a handout to billionaires grossly misrepresents the very odd relationship between small-market NBA teams, their owners, their fans and their cities.
What is happening in Indianapolis is a kind of bizarre symbiotic/parasitic relationship where the owners and the city actually conspire to subsidize a hardcore fan base that is too small to support the teams existence in the city during lean times. In effect, it isn’t Herb Simon that’s getting the handout, it’s me.
Ultimately, for the Pacers to stay in Indianapolis, they will often rely on both the ownership and the city to fill in the holes during down times. And down times are virtually inevitable.
But, I want to be clear about one thing: I am not saying that the people who have argued against taxpayer money going to this purpose are wrong. In fact, it’s almost impossible to argue that point. The Pacers are a luxury, and, regardless of what economic impact studies do or don’t say, it is probably not a luxury that brings economic benefit to the city. I like love having the Pacers in Indianapolis, but I cannot financially justify their existence in Indianapolis.
As for me, I don’t live in Indiana so I really don’t have a strong opinion about any of this. From a financial sense, we know the Pacers are now better set to operate than they would be without the money. And that will keep them in the city.
Would that money be better used for schools or bridge repair?
Probably. But in 49 states it is just basketball.
Tags: Indiana Pacers