Cash-strapped Indianapolis CIB makes more cuts

By Scott Olson, The IBJ

solson@ibj.com

The city's Capital Improvement Board approved cutting an additional $1.5 million from its annual budget today and may have moved a step closer toward funding its annual operating budget with an increase in hospitality taxes.

Local sports teams have been reluctant or noncommittal about shouldering a bigger financial load, CIB officials said. As a result, raising taxes at local restaurants and hotels may be one of the few remaining options.

The $1.5 million in budget cuts the CIB approved include $410,000 in grant funding to tourism and arts programs, and Indiana Black Expo Inc. The board also agreed to eliminate for one year a maintenance fund that contains $960,000 for emergency repairs to the buildings it manages.

The CIB's budget shortfall of $20 million this year could balloon to as much as $38 million in 2010 if the organization that manages the city's sports venues incurs $15 million in additional Conseco Fieldhouse operating expenses next year, as expected.

At a CIB finance committee meeting last week, members suggested that the Pacers cover at least a portion of their operating costs instead of having the CIB assume the entire amount.

But CIB Vice President Pat Early said a basketball franchise that is on pace to lose $30 million this year is in no position to continue paying the building's operating expenses. A contract provision allowing the Pacers to renegotiate their lease after 10 years likely will push that responsibility next year to the CIB.

Without the financial assistance, the city risks losing the team, Early said.
 
"None of this is about sports; it's about the economic development of downtown," said Early, who asked fellow members if they would rather Conseco Fieldhouse host Pacers games or cat shows.

Early said an admissions tax alone isn't going to solve the deficit problem and reminded members that even if the Pacers were to leave, the city would still have to pay the building's operating expenses.

The CIB also is hoping the Indianapolis Colts will forgo the $3.5 million annual payment the team receives for non-Colts revenue generated at Lucas Oil Stadium. The $1.5 million the CIB reimburses the Colts for game-day expenses is on the table as well.

Higher operating expenses for the larger Lucas Oil Stadium are contributing to the CIB's budget dilemma. But CIB Director Bob Grand said the Colts officials have not committed to any budgetary concessions, but are considering options.

Early said directors of the Indianapolis Indians addressed the CIB at the last board meeting and "feel strongly" that the team hasn't contributed to the budget shortfall. The team opposes an admissions tax and doesn't want to raise ticket prices, Early said.

Raising hospitality taxes would first need approval from the General Assembly and the City-County Council. A 1-percentage-point increase in food-and-beverage, innkeeper's and admissions taxes would raise more than $24 million annually but rank the city as one of the costliest in the nation for the taxes.

Marion County hotels already pay 16 percent in sales taxes - the 9-percent innkeeper's tax, plus the 7-percent state sales tax. Counting the state sales tax, restaurants now pay 9 percent in sales tax.

Phil Ray, general manager of the downtown Omni Severin Hotel, told the CIB that hoteliers are hesitant to support another tax increase after they backed hikes in 2005 to help fund the construction of Lucas Oil Stadium.

"This one, though, we are very concerned about," he said. "At some point, [the taxes] are going to stop the economic driver that's helping our city."