One topic that I've been wanting to write about lately is the Indianapolis Capital Improvement Board (CIB). The CIB manages various assets in Marion County/Indianapolis - in particular, the new home of the Indianapolis Colts. Lucas Oil Stadium was opened for this past football season. (It should be noted that my Chicago Bears defeated the Colts in the regular season opener!)
The latest news on this subject is the operating budget shortfall of the CIB. The CIB is a government-chartered and funded corporation. As such, it is essentially funded by taxpayers. I was wishing that I could do a ton of research on this whole issue, but, alas, time is the enemy. So, I'll do my best to summarize.
The Colts got a sweet deal on a new stadium. The estimated cost of the stadium was $720M and the Colts paid $100M. The rest was funded by state and local government. The CIB is also responsible for most of the operating costs of the stadium. There are various expense and revenue sharing arrangements (visit the CIB website linked above and you can review all the legal contracts and budget documents if you wish) in place; however, the CIB (thus the taxpayer) is on the hook for most of the expense.
It has come to past that the operating expenses will exceed early expectations. This leaves the CIB in a precarious positions - they need more money. Now, to me, the obvious source of additional revenue to cover expenses would be to raise ticket prices. But, in all the discussions I've heard or read on this topic, I have not heard this discussed. This leads me to believe that it is probably a non-starter due to something in the legal agreement.
This subject has been central to the debate in this session of the Indiana General Assembly. They are not required to come up with a solution and may pass the buck back to the CIB and Mayor Greg Ballard. Incidentally, the General Assembly is also trying to pass a budget. They have failed to do so while in session, so a special session will have to be called. (Apparently they were too busy with other legislation to pass a budget.)
So... I'm not trying to solve the CIB issue here. For more information, you can read here, here and here. I do want to discuss this from a philosophical perspective. As I've stated before, I am not opposed to all government spending. I have also outlined my basic philosophy of governance. How do sports stadiums fit into the puzzle?
I'm a sports fan. No doubt. I do like the fact that I live in a city with pro sports teams. I don't own season tickets and I haven't been to either a Colts or Pacers game in a few years. It is also clear that the presence of a pro sports team can provide benefits to local businesses and indirectly provide additional tax revenues. If we look at the stadium as an investment for the state/city, then is it a wise investment? Does it provide a positive return?
The problem with such analysis is that politics always gets involved when assessing such problems. Further, the Rule of Law is often subverted or perverted to give the government exceptional powers. I'm not an expert in the history of the development of Conseco Fieldhouse (home of the Indiana Pacers) or Lucas Oil Stadium, but I would bet a large sum of money that the political risk of losing a professional sports franchise weighed heavily in the negotiations.
There is a myriad of data which could be analyzed to determine if, in fact, Lucas Oil Stadium (or other public investments) was an objectively wise financial investment for the state/city. The problem with this line of thinking is twofold.
First, such analysis implicitly assumes that government has a right to tax and spend on any investment it chooses. I disagree with this premise prima facie. To illustrate, would you be willing to let the government put at risk your entire wealth (or future wealth... use your imagination) on an even money bet that I'm thinking of number greater than 50 between 1 and 100? It is clearly immoral to place other people's money at risk, or take their money by force, to invest or spend on projects which are not universally/mutually agreed upon.
Second, let's assume that such an investment is undeniably positive without relying on additional taxpayer funding of any sort. In this case, private business would be making incremental revenue to a point where the additional tax revenues (only a fraction of the incremental profits) exceed the investment cost. This circumstance would describe a great investment which would attract private capital which would out-perform government management and investment. As an example, if the local hotel industry recognized the value of investing in a new stadium, then a consortium could be created to invest in the stadium as bond or equity holders in the stadium.
I will follow this article up with a discussion on one potential solution to the CIB issue: a casino in downtown Indianapolis.
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