A review of the Indy Eleven stadium financials

Rendering of Eleven Park

Let me start by saying that I want the Indy Eleven to have their own stadium. I'm an Indy Eleven fan and have been a season ticket holder from the start. That's my connection to this team before I was an official part of the grassroots media. So I've discussed the stadium significantly over the past 5 years, most recently giving my first opinions on the latest proposal. At that point, there wasn't an official bill in the Indiana Legislature for the Professional Sports Development Area and the financials of the proposal hadn't been seen. Now, there's a bill (SB 543), another bill that may get the details of SB 543 wrapped into it (SB 7), and an Appropriations Committee meeting for SB 7 that was used to discuss the details of SB 543.

At that meeting, which coincided with the Eleven's "Show Your Love" event at the Statehouse, Senator Sandlin (who originally authored the bill) discussed the bill and it's potential to receive its own evaluation in the Appropriations Committee or be included in SB 7 (which was authored by Senator Mischler, who is also the Chairman of the Appropriations Committee). Since Sen. Sandlin authored the bill, 8 more Senators have been added to the "Authored" or "Co-Authored" lists, including three that are on the Appropriations Committee.

A lobbyist and Ersal also presented to the Committee and presented their case, which included a financial packet that was given to each member of the Committee. I have been able to obtain a copy of the packet and have reviewed it.

Again, I'm an Indy Eleven fan, season ticket holder, and a long-time member of the grassroots media. All sides of me that want to see the Eleven in their own stadium.

Carroll Stadium, for all its painful charm and having the Eleven as the primary tenant, was always going to be a track-and-field stadium that held soccer games rather than a soccer stadium that held track-and-field events. It was designed for a specific purpose and that was not soccer.

Lucas Oil Stadium, regardless of whether people want to describe it as a "multipurpose stadium," is a Colts facility that others are allowed to use when the Colts don't want it. From Section 5.6 of the 2005 Lease Agreement between the Capital Improvement Board (CIB) and the Indianapolis Colts:

"Due to Club's significantly favorable economic impact on Indianapolis and the State, (i) the parties acknowledge that Club shall be considered the prime and preferential tenant of the Stadium, and (ii) CIB shall cooperate with Club and the NFL to maximize the scheduling flexibility of the Stadium to the Club."

Hence, football lines on a soccer field regardless of the time of year for this upcoming Indy Eleven season.

Rendering of Eleven Park

After my review of the packet presented to the Appropriations Committee, this does seem like the team's best presentation of a public-private partnership. A couple years ago, the team proposed to use one of Mr. Ozdemir's hotels (the one on Illinois Street) as a backstop for the state financing of the stadium. This iteration takes that concept and magnifies it. Instead of just one hotel serving as the backstop, a $450M development is serving as the backstop with multiple different types of uses built into that development. The success or failure of one hotel has now been replaced with the success or failure of a 200 room hotel, a 600 unit apartment building, 150,000 sf of office space, 100,000 sf of retail space, and public garages.

That's a much larger backstop.

Additionally, instead of one millionaire helping fund that backstop, Mr. Ozdemir has brought on 7 other successful businessmen from the area:

• Brian Bauer, President of Indiana University Health Fort Wayne
• Don Gottwald, COO and Chief Strategy Officer for KAR Auction Services, Inc.
• Shane Hageman, President of Hageman Group
• Jeffrey Laborsky, President and CEO of Heritage Environmental Services
• Fred Merritt, President of LFM Investments, Inc.
• Quinn Ricker, President and CEO of Ricker Oil Company
• Chris Traylor, Co-President of Traylor Bros., Inc.

That's a much more effective backstop.

After that, the stadium, which is proposed to be the "public" part of the public-private partnership (P3), will be owned by the CIB and leased by the Indy Eleven. This is exactly like the way that Lucas Oil Stadium is handled for the Colts, exactly the way that Bankers Life Fieldhouse is handled for the Pacers, and exactly the way that Victory Field is handled for the Indians. The Eleven are proposing that the taxes generated within the PSDA, which will include the private development, will be used to pay for the stadium. That's how they get to the "not asking for any tax money" from the government. It could be argued that the taxes generated by a new development could be used to fund schools, infrastructure, etc., but the team indicated during the Appropriations Committee meeting that they intend to use land that is currently not generating any taxes for the State/City. So they're not "taking" anything from the existing public coffers. They're building something new in that land and asking to use the money generated from that land to pay for a large public asset. 

It may be semantics, but combined with the two backstops, it might be enough to make this a realistic path for the Indiana Legislature. I think this might actually make it out of the Appropriations Committee and back onto the Senate and House floors for debate and potential resolution. Whether it makes it out of there is debatable. 

All that being said, my review of the "Analysis of Potential Available Revenues for Development" lists some assumptions that I have to question, as well as some interesting sidenotes. Let's start with the sidenotes. Emphasis mine.

Under the Tax Rate Assumptions for Food & Beverage Tax, "In 2005, the rate was increased one percent (1%) to two percent (2%). However, the additional one percent (1%) expires in by January 1, 2041 and was pledged to the payment of the debt issues for the LOS." Under the section about the Innkeepers Tax, "In 2005, the innkeepers tax rate was increased by three percent (3%) to nine percent (9%) to pay a portion of the debt obligations issued for the LOS. ... Per legislation, beginning in 2028 through 2040, the one percent (1%) increase in 1997, along with the three percent (3%) increase in 2005, were pledged to the payment of the debt issued for the LOS."

See a theme? It doesn't say anything about Bankers Life Fieldhouse or Victory Field, but Lucas Oil Stadium is forcing all kinds of reduced assumptions for the Eleven's analysis. "Through no fault of the Indy Eleven..."

I tweeted earlier this week that one of their assumptions for Admission Tax into the new stadium included:

• Indy Eleven - 19 games - 18,553 average attendance
• Pro Women's Team - 10 games - 4,500 average attendance
• Other Soccer - 3 games - 19,000 average attendance
• Concerts - 5 concerts - 14,000 average attendance
• Other Events - 10 events - 5,000 average attendance 

The main point of that tweet was a validation that there was an assumption of a professional women's team, which I had mentioned a couple weeks before as a potential use of a stadium. It was good to know that a women's team is still under consideration, particularly since Mr. Ozdemir's investment in the Indy Eleven NPSL team lasted just one season.

However, I question the average attendance numbers, which are the foundation for which all of the other revenue from the stadium are built. The Eleven and their financial advisors are assuming that for the life of the loan, the average attendance at an Indy Eleven game will be 93% full in a 20k person stadium. Given that the team have played 62 home games and have sold out just 18 of them, 14 of which came in the first season, it seems a bit of stretch to assume that high of an attendance for the life of the loan, even with a new stadium. Additionally, it would require an 82% increase in attendance over this past year's numbers, which had a significant bump from the outlier attendance of the first game in Lucas Oil Stadium against FC Cincinnati, or a 96% increase in attendance over the team's average to date for all seasons. Maybe this year's attendance numbers at Lucas Oil Stadium, with significantly fewer Wednesday games, will change my mind, but it seems like a stretch to assume that high of a value. Particularly when a world-class facility like LOS managed to average just over 10,000 this past year.

Moving to the "Other Soccer" events, that's assuming 95% capacity of...what? Men's or Women's National Team games? International friendlies? I'm not sure that I can fathom Indy getting 3 of those types of games every year for the life of the loan or that those games would consistently bring in a full capacity crowd. The USMNT game's this year, in significantly better climates than Indy, averaged just over 11,000 fans. 

It's going to take a bit more digesting of the other pieces for me to determine if I'm on board with their financial assumptions or the affect of what I would consider more reasonable attendance values, but I'm not sure what else the team can do to make a P3 more attractive to the Legislature. If this effort fails this year, I hope the team has some kind of Plan B for a stadium (modular) that is entirely privately funded. I have not been able to get anybody with the team to give me any hints on that though.

Thursday, the Appropriations Committee will discuss and vote on SB 7, so we may know by the end of the week if the latest Indy Eleven stadium proposal is dead, on life-support, or potentially making a miraculous recovery.