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Consultant paints expensive picture of Expo Center future

Thursday, September 20th, 2012

Public investment of up to $55 million needed to maximize Expo Center.

Amos Bridges News-Leader

via – Springfield News-Leader

“Go big or go home” was the advice given Thursday to members of the task force trying to determine how to snare more business for Springfield’s Expo Center.

“You have to put a complete package together,” consultant Rob Hunden told the Convention Competitive Assessment Task Force during a conference call Thursday. “Don’t fool yourself into thinking you have the cards to play, ’cause you don’t.”

For Springfield, a competitive hand would require a new, full-service hotel on the vacant lot east of the Expo Center, upgrades at the center and University Plaza Hotel across the street, and development of additional restaurants and retail stores in the immediate area.

“To be successful you really need all of them,” Hunden said, whose firm was hired by the city, Springfield Convention and Visitors Bureau and John Q. Hammons Hotels.

All the improvements would require taxpayer money.

“A bank would not fund that (new) hotel, regardless” of the business it receives from the adjacent Expo Center, said Hunden, who has estimated the total public investment needed at $24 to $55 million. “The private sector’s not going to do it.”

The question, Hunden said, is whether Springfield wants to make the investment.

Under current agreements, the public bears no financial risk associated with the Expo Center, Hunden said. “It’s not really doing much but it’s not costing (taxpayers) anything, either.”

Investing in a competitive convention complex could pay dividends in the form of additional hotel stays, restaurant business and tax revenue, he said, “but there are pitfalls.”

“Most communities your size or larger have a convention center, which makes the market difficult,” he said. “It’s not as big a buck as it used to be, but it’s still very sizeable.”

Hunden said an additional economic impact analysis is needed to determine how much extra tax revenue Springfield could expect to earn for each dollar spent on various upgrades.

Task force members plan to meet within the next few weeks to discuss their next move. Most members appeared to want the additional analysis in hand before Hunden makes a formal presentation to City Council, the Springfield Convention and Visitors Bureau and John Q. Hammons Hotels & Resorts.

Officials skeptical

Burris thanked Hunden on Thursday for an “honest assessment, warts and all.” But he and other task force members didn’t take everything the consultant had to say at face value.

Joe Morrissey, senior VP of operations at Hammons, and Missy Handyside, general manager at Ramada Oasis Hotel & Convention Center, both were skeptical that recommended upgrades at University Plaza would allow the hotel to charge up to $30 more a night.

While several committee members agreed greater connectivity between the the Expo Center area and downtown is needed, Rusty Worley, executive director of the Urban Districts Alliance, questioned whether the area could absorb a half-dozen additional restaurants.

Hunden thinks it will.

“Downtown is just far enough away it’s not visually connected,” he said. Although restaurants four or five blocks away from the Expo Center can help, event organizers will go elsewhere if options aren’t available within a few hundred feet. “The minimum expectation has increased over time.”

Handyside and other task force members suggested Springfield might build on an existing strength and try to focus on snagging sports tournaments, rather than general business conventions. Hunden said the idea had merit, although the sports and recreation niche has become increasingly competitive, as well.

Burris asked whether Springfield might “leapfrog” the competition by putting off any major improvements until the competing facilities going in now begin to show their age.

“The longer you wait, I think the more you’ll have to build to be competitive,” Hunden said.

Additional Facts

Consultant complimentary, too

Still in draft form, consultant Rob Hunden’s assessment of Springfield’s convention facilities doesn’t sugarcoat the city’s position. Critical of facilities at the Expo Center and University Plaza, the report says Springfield also suffers from a reputation as overly traditional and out-of-touch.

“Your description of us as ‘dowdy’ is catching on,” City Manager Greg Burris joked Thursday, prompting Hunden to note that “perception is different than reality.” “There’s not one thing that defines Springfield,” the consultant said, listing the city’s status as a growing regional center, its universities and attractive downtown as valuable strengths.

“What you have (downtown) is authentic, it’s not manufactured,” he said.

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Posted in 2011, Competitive Assessment, Convention Center, Convention Hotel, Exposition Center, Hunden Quoted, Missouri, Rob Hunden, Springfield | Comments Off

Springfield fights negative perceptions

Thursday, September 20th, 2012

Written by

Amos Bridges

11:00 PM, May. 26, 2011

via – Springfield News-Leader

For anyone writing a personal ad or online dating profile, the word “dowdy” is an adjective best avoided.

For a city trying to drum up tourism and convention business, it’s no better.

But the word has been applied to Springfield in a consultant’s evaluation of the city Expo Center, along with “overly traditional … perhaps even out-of- date/out-of-touch.”

The report, by Chicago-based Strategic Partners, identifies a number of facility and infrastructure upgrades needed if Springfield wants to effectively compete with the likes of St. Louis, Branson and cities even farther afield.

The city has an image problem, as well, the report says.

Despite the presence of local universities and the downtown area, the report says, Springfield “has a reputation in the state for being a bit old-fashioned, part of the buckle of the Bible Belt and perhaps not ‘fresh’ and ‘new’ …”

“To a certain degree I don’t argue with that analysis,” said City Manager Greg Burris, noting — as the report does — that outsiders may not be giving Springfield the credit it deserves.

“We’re already a fun place — it’s more us not telling our story very well,” Burris said. “We have conservative values but we’re also not afraid to have fun.”

“They’re not mutually exclusive,” added Jim Anderson, president of the Springfield Area Chamber of Commerce. “I think you can be conservative, as we are, and be progressive, as we are.”

Still, Anderson acknowledged the report — commissioned in part to determine whether a new hotel next to the Expo Center is warranted — isn’t the first to raise the issue.

Previous studies commissioned by the chamber and others have noted the city suffers from negative perceptions.

Fair or not, “the image and the brand of our community remains a challenge,” Anderson said.

The good news is that Springfield has many assets to market, said Rusty Worley, head of the Urban District Alliance.

“I was encouraged by the (consultant’s) comments on the investments made downtown, the restaurants and nightlife we have here and the strong ties with our colleges and universities,” said Worley. “I think those are all strengths for us to build on.”

Discussion of the Expo Center’s shortcomings and other facility needs identified in the report is yet to come. Burris declined to comment ahead of a June 2 meeting, other than to say it’s yet to be determined whether the city ought to spend the money necessary “to play in this convention and expo market.”

“Those are the kinds of conversations we’ll have in the committee meeting when we have a chance to talk to (consultant Rob Hunden),” said Burris, who sits on the task force evaluating the report. “It needs to be a group discussion rather than discussed through the media before the meeting occurs.”

Call for Renovation

In addition to facility upgrades at the Springfield Expo Center, the consultant’s report highlights the need for renovation at the University Plaza Hotel and possible changes to the city’s Expo Center management contract with John Q. Hammons Hotels & Resorts. Justin Harris and Joe Morrissey, two Hammons Hotels representatives on the committee evaluating the report, said Thursday they had not had a chance to review the document in detail. “We’ll be prepared to have some remarks or comments on it” at the June 2 meeting, said Harris, Hammons Hotels’ general counsel. “We’re just not up to speed on it yet.”

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Posted in 2011, Competitive Assessment, Convention Center, Convention Hotel, Exposition Center, Missouri, Springfield | Comments Off

Report: Expo needs more than hotel

Thursday, September 20th, 2012

Written by

Amos Bridges

11:00 PM, May. 25, 2011

via – Springfield News-Leader

An attached, full-service hotel could make the Springfield Expo Center more competitive, but it won’t do the job alone, a consultant’s report said.

Upgrades at the center and the University Plaza Hotel across the street, new restaurants and retail stores are needed as well, if Springfield hopes to compete effectively with Branson and other cities for convention business.

Those improvements altogether could require more than $53 million in private investment, as well as public subsidies and incentives estimated at $24 million to $55 million, according to the report from Chicago consulting firm Hunden Strategic Partners.

Alternatively, the report said connecting the Expo Center to University Plaza while trying to land a smaller, limited-service hotel would lead to some improvement at the cost of a few million dollars, but the benefit would belong mostly to University Plaza, owned by John Q. Hammons Hotels and Resorts.

“It would not benefit the community other than to help save a hotel that may otherwise continue to be a drag on the market,” the report says.

The 185-page report — distributed in draft form to members of a task force that includes city, Convention and Visitors Bureau and Hammons representatives — doesn’t appear to pull punches.

In addition to describing the University Plaza as over-priced and in need of significant renovation, the report says Springfield as a whole suffers from a reputation “as overly traditional, dowdy, perhaps even out-of-date/out-of-touch.”

Developing a more “fun” image that highlights the vigor of the downtown area and involvement of local universities could help attract convention business, the report says. Otherwise, the city could “embrace this existing reputation and market heavily to the family/religious market (and suffer from low price points) …”

Other needs and suggested remedies include:

» The Expo Center, built for $16 million in 2003, needs a kitchen, ballroom and more meeting rooms. The report suggests demolishing the old Sears & Roebuck portion of the building to make room, at a cost of $10 million to $17 million.

» The city’s management contract with Hammons for operation of the center should be renegotiated, the report says. The current contract makes Hammons responsible for any losses, which discourages the company from booking smaller or less-profitable events that still might benefit other businesses.

» About a dozen additional restaurants and retail stores are needed along St. Louis Street to connect the Expo Center area with downtown, the report says, suggesting the city foster private development with subsidies or other public investments, such as a parking garage.

The truth hurts

The promise of such a blunt assessment was one reason HSP was hired, City Manager Greg Burris and CVB President Tracy Kimberlin said.

“That’s what this is all about, to get an outside, expert opinion about our current s ituation and where we go,” said Kimberlin, who provided a copy of the draft report in response to the News-Leader’s request. “I think there are probably things in there that will make everybody squirm a bit, but we need to hear that.”

Kimberlin said members of the city, CVB and Hammons task force are scheduled to meet and discuss the draft June 2.

“We will have Rob Hunden, the consultant who did the report, on the phone,” Kimberlin said. “The committee will be able to ask him questions, suggest any changes they may have and just kind of gather information that may not be contained in the report that they have questions on.”

Hunden then will prepare a final version of the report, which he will present in person to the City Council and other interested parties at a yet-unscheduled time, Kimberlin said, noting the task force will be providing input to the council as well.

The back story

Hunden Strategic Partners, of Chicago, was hired in December to evaluate the competitiveness of Springfield’s convention facilities and recommend the best use for an empty lot east of the Expo Center on St. Louis Street.

The Springfield Convention and Visitors Bureau, the City Council and John Q. Hammons Hotels & Resorts agreed to split the $39,000 cost of the report. City Manager Greg Burris suggested the competitive assessment almost a year ago as the city weighed whether to buy back the 1.7-acre tract east of the Expo Center from Hammons for $1.

Hammons bought the site from the city in 2008 with the promise that he would build an Embassy Suites hotel connected to the center. He failed to do by an April 2010 deadline, despite several extensions from the city, pending a decision by council on a buyback.

Posted in 2011, Competitive Assessment, Convention Center, Convention Hotel, Exposition Center, Hunden Quoted, Missouri, Springfield | Comments Off

Reinsdorf’s sweet deal at U.S. Cellular Field gets even sweeter

Thursday, September 20th, 2012

By: Shia Kapos October 26, 2011 (Crain’s) —

Jerry Reinsdorf is about to make a lot more money from his operations at U.S. Cellular Field, while cutting out his landlord, an Illinois agency created to build the baseball stadium.

Mr. Reinsdorf’s franchise pays just $1.5 million in annual rent to the state, which owns the South Side ballpark, while keeping gross receipts for ticket sales, parking, concessions, signage and merchandise operations — including a soon-to-be-opened Chicago Sports Depot store and Bacardi at the Park, an adjacent restaurant that opened last spring.

The White Sox do not pay rent on the properties, even though the Illinois Sports Facility Authority is paying the debt service on the restaurant project. The Sox paid for the build-out on the souvenir shop. Mr. Reinsdorf has leased the Bacardi restaurant to Gibsons Restaurant Group, which runs it. The retail shop will be leased to Delaware North Companies Sportservice, which also runs the retail shops in the stadium.

Construction terms were permitted by the lease between the Sox and the state, according to a Nov. 18, 2010, agreement on a 35th Street revitalization project that includes the restaurant and store. In that deal, White Sox Executive Vice-president Howard Pizer notes a supplemental state fund would finance the restaurant’s construction and the Chicago White Sox would be responsible for building the retail shop.

The agreement was signed by former Gov. Jim Thompson, who was chairman of the sports authority at the time.

The supplemental fund was created when the state authority and the White Sox renegotiated their original contract so that, after 18 years of free rent, the ball club would begin paying a base rent to the authority. That revised agreement also set terms on annual rent based on ticket revenues. Since 2008, the team must pay $3 to $7 for every ticket sold above annual attendance of 1.9 million.

With paid attendance under 1.9 million in 2011, the Sox won’t pay ticket fees this year.

In 2010, however, paid attendance was 2,074,011, exceeding the trigger by 149,011. So Mr. Reinsdorf paid $455,974, or about $3 per ticket.

Including rent, that means he paid about $2 million to the sports facility authority last year for the 80-or-so games played at the Cell—far less than some other MLB teams in similar relationships with municipalities.

Philadelphia, for example, pays $18.5 million a year, which includes $2.5 million in base rent and $17.9 million in interest payments on the bonds issued to fund the stadium’s construction.

Minnesota pays $12.5 million: $600,000 in base rent plus $300,000 for inflation adjustments and $11.5 million for debt service.

On the lower end, Kansas City pays $450,000 in base rent. The team also must pay 5% of gross receipts above annual revenue of $7.5 million.

Within Chicago, the Chicago Bears pay $5.7 million (including a parking allotment fee) to the Chicago Park District for playing about 10 games each year at Soldier Field.

Under the terms of its original 1988 lease with Illinois, the White Sox, valued by Forbes at $526 million, do not report their revenues. The authority says it can only guess what Mr. Reinsdorf is raking in from ticket sales, parking, concessions and signage.

Mr. Reinsdorf has declined to comment.

In an interview earlier this month, Mr. Thompson praised the 35th Street deal as benefiting the community. “They (the White Sox) get the profits for the duration of the lease, and at the end of the lease (the state) owns both properties,” he said, adding that the development project could include future properties that would immediately benefit the state.

“Quid pro quo was that the White Sox would agree to the deal if they got (the profits of) the first two properties,” said Mr. Thompson.

The former governor acknowledged that there are no plans for any future development on 35th Street. And even if there were, Mr. Reinsdorf would have to give his thumbs-up before they could go forward.

“He can’t develop the property without our consent and we can’t develop without his consent. We own the property but he has the lease,” said Mr. Thompson, who recently was booted from his position as chairman by Gov. Pat Quinn.

That relationship carries through in all areas of the lease, which states Mr. Reinsdorf has “unfettered discretion” to determine how the stadium will be used.

That hasn’t stopped the authority from talking about possible revenue-generating events — though none have come to fruition.

Last year, the authority commissioned a study to analyze what the financial and economic impact from one hypothetical special event held in the summer, on a day when the Sox are playing out of town. The study by Hunden Strategic Partners concludes that it could generate $2.8 million in gross revenue from admission, concessions and parking — or $1.3 million in net revenue.

Mr. Reinsdorf, meanwhile, has used the ballpark for personal events. A few years ago, he hosted a 50th birthday party at the ballpark for his friend, Andrew Berlin, who is CEO of Arlington Heights-based Berlin Packaging.

Emil Jones, the newly named chairman of the Illinois Sports Facility Authority, told Crain’s Chicago Business earlier that he plans to examine the White Sox lease.

Acknowledging the team pays less than other Major League Baseball teams that play in stadiums owned by municipalities, Mr. Jones said, “It’s something we’ll be looking at.”

The ISFA has yet to meet on the issue. The agency is under the auspices of the state, though its seven members include three appointed by the Chicago mayor and four by the governor.

For years, the politically connected agency had been overseen by Mr. Thompson, who helped broker the original lease agreement with the Sox when he was governor and his friend, Mr. Reinsdorf, was threatening to take the White Sox to Tampa, Fla. (The men have known each other since attending law school together).

Mr. Quinn replaced Mr. Thompson last summer with Mr. Jones. He also appointed Chicago attorney Manny Sanchez; real estate entrepreneur Elzie Higginbottom Jr., and Dennis Gannon, formerly the head of the Chicago Federation of Labor.

Mayor Rahm Emanuel has yet to weigh in on his own appointments, leaving holdover board members Peter Thompson, a nephew of former Mayor Richard M. Daley; Alvin Boutte Jr., a financial-services adviser; and attorney William Power.

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Posted in 2011, Chicago, Illinois, Mixed Use, Sports | Comments Off

Report claims Expo failure

Saturday, January 28th, 2012

Report claims Expo failure

via news-leader.com

Inadequate facilities and the lack of a connecting hotel have been cited as reasons Springfieldʼs Expo Center isnʼt doing more business.

In a report distributed to City Council on Tuesday, city staff said John Q. Hammons Hotelsʼ management of the center has fallen short of expectations, as well.

“Staff does not believe the Exposition Center has been marketed or used to its maximum potential,” the report says, noting Hammons Hotels has failed to submit required reports on a regular basis.

The memo, drafted in response to questions posed by Councilman Tom Bieker, said the problems likely fall short of justifying termination of the Hammonsʼ management contract, which runs through at least 2028 and could be extended a decade past that.

City Council voted Nov. 28 to buy back a tract of land next to the Expo Center after Hammons failed to build a connecting hotel as promised.

Echoing a concern contained in an August consultantʼs report, Bieker said finding another developer to build a hotel could be difficult if Hammons continues to manage the Expo Center. He asked whether the city had reason to cancel the contract and what the consequences of doing so would be.

An answer to the latter part of the question is still being drafted, said Mary Lilly Smith, the cityʼs economic development director. The memo distributed Tuesday focuses on the first part.

“We donʼt think thereʼs been a material breach” of the contract, said Smith who worked with Phil Broyles and Jonathan Gano from Public Works and Convention & Visitors Bureau President Tracy Kimberlin to draft the memo.

Still, “we think there are some things that could potentially be better addressed,” Smith said.

Shortcomings mentioned in the report included Hammonsʼ failure to adequately market the facility and failure to coordinate with the CVB to the extent required in the contract.

The memo also notes that Hammons typically has turned over various financial reports and other documentation only when asked, rather than submitting them on the schedule outlined in the contract.

Changes being made

Justin Harris, a senior vice president and spokesman for Hammons Hotels, did not respond Wednesday to a message seeking comment.

Smith said the company has agreed to do a better job of reporting to the city and working with the CVB to market the facility.

But, as noted in the report, some issues are beyond Hammonsʼ control, she said.

In addition to high utility costs and inadequate facilities, Hammons staff “pointed out that there are some things that may be inconsistent just on their face in the operating agreement,” Smith said.

Different provisions in the agreement require Hammons to try to maximize business while at the same time operating “at least on a break-even basis.”

“They shouldnʼt be losing money” hosting shows, Smith said, but hosting shows at a loss might bring in more business.

The Catch-22 in the contract is a consequence of the way the Expo Center was financed, Smith said.

“It was smart on the one hand because the city has no financial responsibility,” she said.

The city issued bonds to build the Expo Center, but the debt is being repaid solely with special taxes assessed on nearby Hammons properties.

“We own the facility, but Mr. Hammons is responsible for all of the debt service on the bonds and he is responsible for any shortfall,” she said. “But he has no incentive to discount the space or to bring in shows that may be money losers on the Expo Center side but have greater economic benefit to the community.”

Councilman reaction

Bieker said Wednesday heʼs only had time to skim the report, but thinks it will help foster improvements.

“I think it was an honest look into what has been happening there,” he said. “Now we know what the deficiencies are … If we can tackle them and correct them and keep on that path, then good. If not, then we need to address that again.”

Kimberlin, from the visitors bureau, said he thinks better coordination with Hammons and other actions outlined in the memo “hopefully will pay dividends.”

A significant increase in business at the Expo Center likely will require additional changes and a larger investment, he said.

“As the consultantʼs report pointed out, the Expo Center is an exhibit hall. It is not a convention center,” Kimberlin said. “I think if we wind up getting a true convention complex over there, changes to the operating agreement certainly would be in order.”

Kimberlin said “itʼs way too early in the process to say” how or when the contract might be amended.

“I think we know we have a problem …,” he said. “How itʼs addressed will depend a lot on what happens with the total complex, whether another hotel developer comes in.”

Another study coming

The Expo Centerʼs ability to attract convention business to Springfield has been a focus of several recent reports.

In a study released in August, consultant Rob Hunden described the Expo Center, which opened in 2003, as underused and ill-equipped to compete with newer convention centers in the region.

Hunden said Springfield needs to “go big or go home” when it comes to investing in a convention center complex.

His initial report, paid for by the city in partnership with John Q. Hammons Hotels and the Springfield Convention & Visitors Bureau, suggested as much as $55 million in public funding might be needed.

CVB President Tracy Kimberlin said a follow-up report analyzing the benefit the city might gain from that investment is almost complete and could be released “hopefully in the next several days.”

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Posted in 2011, Cities, Competitive Assessment, Exposition Center, Hotel, Missouri, Project, Springfield, States, Year | Comments Off

Consultant evaluates city’s Expo Center

Saturday, January 21st, 2012

Consultant evaluates city’s Expo Center

Written by Amos Bridges News-Leader
9:24 AM, Aug. 3, 2011|

As much as $55 million in public funding is needed to make Springfield convention facilities competitive but more study is needed to know whether the investment would pay off.

Those were among the conclusions consultant Rob Hunden presented to City Council and other local officials during a lunch meeting Tuesday at John Q. Hammons’ University Plaza Hotel.

Hammons’ company, in partnership with the city and the Springfield Convention and Visitors Bureau, paid Hunden $39,000 to evaluate the city’s Expo Center and determine the best use for the 1.7-acre lot just east.

The city sold the tract to Hammons in 2008 with the promise that the hotelier would build an Embassy Suites connected to the center. Hammons’ failure to do so means the city can buy back the land for $1, but officials agreed to wait for Hunden’s report before making a decision.

Mayor Jim O’Neal said Tuesday he thinks council should make that decision soon. “The ball’s back in council’s court, we need to decide what to do,” said O’Neal, who thinks “it’s clear (the city) should buy it back.”

“No matter who owns it, I’m of a mind that that piece of land needs to sit still right now,” the mayor said. “There’s no rush to judgment or sense of urgency now.”

O’Neal said he thinks the recommended investment “just doesn’t seem feasible in this economy.”

CVB President Tracy Kimberlin and City Manager Greg Burris acknowledged the funding likely is beyond the city’s reach right now, but said they want the city and other stakeholders to continue the discussion.

“We know that nothing is going to happen any time soon,” Kimberlin said. But by doing nothing, Springfield will continue losing ground to Branson and other cities that have or plan to build new facilities.

“Staying where we are today, we are in effect packing up.”

Even if money is not available right away, plans could be developed, Burris said.

“This could literally be years of work before it gets to the point of spending much money.”

As a next step, he and Kimberlin recommended signing a new contract with Hunden for a follow-up study evaluating the benefit — in new jobs, spending and
tax revenue — the city could expect in return for investing in the Expo Center.

Kimberlin said the CVB and Springfield Area Chamber of Commerce each have agreed to pay for 1/3 of the $15,000 cost of the study if the city will pay the
remainder.

Burris said Tuesday that — seeing no opposition from City Council — he likely will authorize the expense.

“We know how much (the improvements) will cost … now we need to see the other side of the equation,” Burris said. “For us to invest $5,000 to avoid making a $50 million mistake, I think it’s worth it.”

To read the consultant’s report, go to News-Leader.com.

Recommended upgrades

If Springfield wants to compete for convention business, consultant Rob Hunden recommended a number of upgrades to the existing Expo Center and nearby
facilities.

In addition to an estimated $53 million in private investment, the improvements would require between $24 million and $55 million in public investment, as well, according to his report.

Suggested improvements include:
» Construction of a 240-room convention hotel on the former arena site east of the Expo Center.
Private cost: $26 million
Public cost: $5.2 million to $16 million

» Renovation of the Expo Center, including demolition of the old Sears portion of the building (to be replaced with ballrooms, meeting rooms and a kitchen) and construction of pedestrian connections to University Plaza and the new hotel on the old arena site.
Private cost: $0
Public funding: $10.2 million to $17 million

» Renovation of University Plaza Hotel and Convention Center, including an upgrade to a branded hotel.
Private cost: $9.5 million
Public cost: $3.5 million to $8.5 million

» Development of additional restaurants, retail and entertainment venues in the immediate area.
Private cost: $13.1 million
Public cost: $1.8 million to $7.7 million

» Construction of a parking garage with restaurant and retail space next to the Discovery Center.
Private cost: $5 million
Public cost: $3.8 million to $6.3 million

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Posted in 2011, Cities, Competitive Assessment, Exposition Center, Hotel, Missouri, Project, Springfield, States, Year | Comments Off

NBA talks break down, preseason games wiped out

Saturday, January 21st, 2012

NBA talks break down, preseason games wiped out

IBJ Staff and Associated Press October 4, 2011

NBA Commissioner David Stern floated it as an idea more than a firm proposal: a 50-50 revenue split. Even so, the union’s reply was unequivocal.

“They said, ‘We can’t do it.’” according to Stern.

And with that, the remainder of the preseason was lost and the first two weeks of the regular season moved to the brink of cancellation.

The National Basketball Association shelved the rest of its exhibition schedule Tuesday and will wipe out the first two weeks of the regular season if there is no labor agreement by Monday.

The Indiana Pacers will lose eight preseason games to the lockout, including at least three games at home.

Three preseason games already had been called off, including at least two home games.

“We were not able to make the progress that we hoped we could make and we were not able to continue the negotiations,” Stern said after nearly fours of talks between owners and players ended without gaining ground on a new deal.

No further meetings are scheduled, making it even more likely the league will lose games to a work stoppage for the first time since 1998-99, when the season was reduced to 50 games.

If the season is canceled, Indianapolis stands to lose about $55 million in economic activity, according to a 2010 study done by Chicago-based Hunden Strategic Partners for the city’s Capital Improvement Board, which owns Conseco Fieldhouse.

Stern and Deputy Commissioner Adam Silver said owners offered players a 50-50 split of basketballrelated income. That’s below the 57 percent that players were guaranteed under the previous collective bargaining agreement, but more than the 47 percent union officials said was formally proposed to them.

The only numbers that matter now, however, are the millions that stand to be lost when arenas go dark. “The damage will be enormous,” Silver said.

Players had offered to reduce their BRI guarantee to 53 percent, which they said would have given owners back more than $1 billion over six years. They say they won’t cut it further, at least for now.

And they insist the 50-50 concept wasn’t an even split, because it would have come after the league had already deducted $350 million off the top.

“Today was not the day for us to get this done,” players’ association president Derek Fisher said. “We were not able to get close enough to close the gap.”

With superstars like Kobe Bryant, Paul Pierce and Kevin Garnett standing behind him, union executive director Billy Hunter said the players’ proposal would have made up at least $200 million per season — a sizable chunk of the $300 million owners said they lost last season.

“Our guys have indicated a willingness to lose games,” Hunter said.

The sides are also still divided on the salary-cap structure.

Training camps were postponed and 43 preseason games scheduled for Oct. 9-15 were canceled on Sept. 24. Both sides said they felt pressure to work toward a deal with deadlines looming before more cancellations would be necessary.

Stern said the owners had removed their demand for a hard salary cap, were no longer insisting on salary rollbacks, and would have given players the right to opt out of a 10-year agreement after seven years. But the money split was always going to be the biggest hurdle in these negotiations, with owners insistent on
the ability to turn a profit after the league said 22 of its 30 teams lost money last season.

“We want to and have been willing to negotiate, but we find ourselves at a point today where we in some ways anticipated or expected to be, faced with a lockout that may jeopardize portions if not all of our season,” Fisher said.

After hardly budging off their original proposal for 18 months, owners finally increased their offer to players from 46 to 47 percent of BRI. It was then that the top negotiators discussed the 50-50 concept, and while Stern sounded disappointed that it didn’t work, Silver was more frustrated.

“I am not going to get a good night sleep,” he said. “After this afternoon’s session, I would say I’m personally very disappointed. I thought that we should have continued negotiating today and I thought that there was potentially common ground on a 50-50 deal. I think it makes sense, it sounds like a partnership. There still would have been a lot of negotiating to do on the system elements, but I’m personally very disappointed.”

On what both sides stressed was an important day, the owners’ entire 11-man labor relations committee came to New York to meet with 11 players. They could still work something out before Monday’s deadline, but neither side sounded optimistic.

“Right now, we had our committees, we gave it a really good run, and it didn’t work,” Stern said. Hunter said the union would hold regional meetings with its players, set up workout centers and help in other ways. And many players — including Bryant, who has been in talks with an Italian team — will
have to decide if they want to explore playing overseas.

And without a deal, the battle could go to the courts. Hunter said the union would have to consider decertification, and on Tuesday a federal court judge scheduled a hearing for Nov. 2 to hear arguments in the league’s lawsuit against the players seeking a declaration that the lockout doesn’t violate antitrust
laws.

All things both sides hoped to avoid Tuesday.

“It wasn’t to be, and we don’t have any plans right now,” Stern said.

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Loss of Pacers season would deal blow to CIB, state revenue

Saturday, January 21st, 2012

Loss of Pacers season would deal blow to CIB, state revenue

Scott Olson , Anthony Schoetle October 11, 2011

Taxing bodies and downtown businesses are bracing for an economic body blow with the crushing impact of a Roy Hibbert pick now that cancellation of the Indiana Pacers’ entire 2011-2012 season is a real possibility.

NBA Commissioner David Stern canceled the first two weeks of the regular season on Monday—including the Pacers first seven games—after owners and players were unable to reach a new labor deal and end the lockout. Failure to reach a deal soon could emperil the entire season.

If that happens, the Capital Improvement Board might lose $1.5 million in food-and-beverage taxes, and the state could miss out on $3.5 million in Professional Sports Development Area funds, CIB Chief Financial Office Dan Huge said at Monday afternoon’s CIB meeting. The PSDA captures state sales tax
revenue generated by downtown venues, including Conseco Fieldhouse.

Huge did have some good news to report at Monday’s meeting. He said that through August, CIB is running $13 million over budget, largely because of improving tax revenue.

CIB’s proposed 2012 budget up for approval by the City-County Council on Oct. 17 is $77.5 million, up $4.4 million from this year.

Board member Michael McQuillen, who also is a City-County Councilor, doesn’t think the entire NBA season will be canceled. But if it is, he wants to ensure CIB is prepared to absorb the shortfall.

“I wouldn’t say the budget is rosy, but it’s solid,” he said. “I think [CIB is] doing a good enough job where the loss won’t be devastating, but $5 million [in CIB and state revenue] is $5 million.”

Life without a Pacers season has been on the minds of city leaders for several years, as team executives complained of multimillion-dollar losses and hinted that the franchise might need to move elsewhere.

In 2010, the CIB agreed to subsidize the Pacers’s operation of Conseco Fieldhouse to the tune of $33.5 million over three years. Some opponents of the funding argued that the team, founded here in 1967, should fold or move to another city if it couldn’t be financially viable on its own.

“I guess it’s a case of being careful what you wish for,” Mark Rosentraub, a former IUPUI dean who has written two books about professional sports operations, said in an August interview with IBJ. “If Indianapolis loses the Pacers even for a season, it won’t be at all good economically for the city.”

Losing the team for a year would wipe out about $55 million in economic activity, according to a 2010 study done by Chicago-based Hunden Strategic Partners for the CIB.

The impact would stem from less money being spent at restaurants, bars and hotels, as well as to decreases in the Pacers’ payroll and diminished tax revenue for units of government.

“There’s going to be a real economic hit, and we’re going to feel that pretty quickly once we start losing games,” CIB President Ann Lathrop said earlier this summer.

“This city is also going to lose out on some significant branding opportunities (through television broadcasts and media mentions) without the Pacers and I think a sense of community pride,” Lathrop added. “It’s a lot more than just money.”

Downtown businesses have been bracing for a financial hit for months, anticipating a shortened or eliminated 2011-2012 season.

“For us, it would be a huge loss,” said Troy Gregory, general manager of Mo’s, a steakhouse a block north of Conseco Fieldhouse, earlier this summer. “There are games, including those when the Pacers play teams like Miami, Chicago, Boston or Los Angeles, where we do at least as much business as we
would during a Colts home game.”

On big game nights, Gregory said revenue more than quadruples compared with a normal night.

“It would be a really big impact on us, and we’re far from alone,” Gregory said. “We’re hoping games don’t get canceled, but from what we hear, it doesn’t sound good.”

Downtown restaurant owners interviewed by IBJ estimated they each could lose as much as $500,000 without a Pacers season.

Parking lot operators also would take a big hit, with several around the arena saying they’d lose from $25,000 to $100,000 depending on the size of the lot and proximity to the arena, which dictates rates.

While hotels generally don’t see a lot of business from Pacers games, the Conrad does. The high-end hotel on Washington Street downtown has contracts with 23 of the NBA’s 29 teams that play here.

“It’s a good piece of business for us, and naturally, we’d hate to lose it,” said Greg Tinsley, the hotel’s general manager.

Tinsley said each team uses about 40 hotel rooms. The cancellation of an entire regular NBA season would cost the Conrad about 1,600 room nights. Though Tinsley wouldn’t say what the financial hit would be, it would likely be more than $500,000 after tallying room rates, meals and other charges.

The Pacers were scheduled to play 41 regular season home games and four pre-season games at Conseco Fieldhouse in the 2011-2012 season. So far, all preseason games have been canceled, as well as the Pacers’ first seven games.

Including its playoff games last year, the Pacers drew about 620,000 people through the turnstiles in the 2010-2011 season.

Regardless of how many games are canceled, the CIB in January will give the Pacers the second of three $10 million installments to offset Conseco Fieldhouse operating expenses. The payment is related to building expenses at Conseco Fieldhouse, not operating the team, Lathrop said.

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Lansdowne Park

Saturday, January 21st, 2012

Lansdowne Park

City followed Lansdowne critic’s advice in studying
redevelopment deal, lawyers tells judge

BY MOHAMMED ADAM, THE OTTAWA CITIZEN JUNE 29, 2011

OTTAWA — The City of Ottawa was so determined to conduct the redevelopment Lansdowne Park in an open, honest and transparent manner it followed the advice of one of the plan’s principal critics on how to evaluate the financial projections, an Ottawa court heard Wednesday.

Peter Doody, the lawyer who is appearing for the city, said that when Carleton University businessbprofessor Ian Lee told council in the winter of 2009 that the best course was to conduct anbindependent third party review of the financial projections of the Ottawa Sports and EntertainmentbGroup’s plan, city manager Kent Kirkpatrick took the advice to heart and acted on it.

Doody said Kirkpatrick asked the city’s auditor general who is an independent watchdog, to conduct such a review. The auditor general, in turn, asked Lee for advice on which firm to hire to help him.

Lee suggested the Chicago consulting firm Hunden Strategic Partners and they were hired, Doody said.

At the council meeting in question on Nov. 12, 2009, Lee was asked by former councillor Alex Cullen for advice on how to evaluate the finances. Lee responded that his criticism of council was that it had not hired a financial accounting firm from outside Ottawa, or even Canada, to do “full diligence” on the OSEG numbers.

“Let’s bring in an independent third party … accounting firm from the U.S., from New York City or San Francisco, or one of the big cities where there are a lot of capital projects, who can run through the numbers and give you an independent, arm-length, objective analysis so that you are not believing me, or you or some other critic,” transcripts of the city meeting show Lee as saying.

Doody said that’s exactly what happened and the auditor general used Hunden’s advice to help write a report that found the assumptions underpinning the financial projects to be sound. The Hunden report, like others that the auditor general receives, is confidential.

The Friends of Lansdowne, a citizens’ group opposed to the OSEG redevelopment plan, has taken the city to court alleging that it acted illegally on several grounds, including bad faith, providing illegal subsidies to OSEG and violating municipal and provincial law. The group wants the court to quash the Lansdowne Partnership Plan and have the city start the redevelopment again.

But Doody said the city’s action in response to Lee shows that it conducted itself properly, listened to a variety of views and suggestions and made its decision in good faith. There is no indication throughout the process that the city acted unlawfully or illegally, Doody said.

Doody’s theme on the second day of his submissions was of a democratically elected council performing its lawful duties. He argued that Justice Charles Hackland, who is hearing the case, should be wary of second-guessing it.

He said council, in its wisdom, had decided that the redevelopment of Lansdowne has to be linked with a CFL franchise to reduce the drain on the city’s finances.

Having made that decision, council proceeded to determine the best way to achieve its goal, and when OSEG made its proposal, he told the court, the city felt it had found the right partner.

The Friends of Lansdowne contend that the city stacked the deck in such a way that it disqualified other potential bidders, leaving the door open for OSEG. Doody rejected the argument that sole sourcing the project showed bad faith and was illegal. He said the law allows sole-sourcing in exceptional circumstances, and the Lansdowne redevelopment was one of those unique circumstances. He said it was not unreasonable for council, which wanted to redevelop Lansdowne and have a CFL team to pick OSEG because it fit the bill perfectly. It was “reasonable” Doody said, to conclude that only OSEG could do the job.

Doody also attempted to rebut a major criticism that the city may have withheld or hidden documents. He said under city policy, e-mails are kept by staff for 90 days and then deleted but the documents may still be held electronically in the system. But after 180 days they disappear. He said some of the records may have fallen victim to this policy. The problem, he said, is “endemic” and is not confined to the Lansdowne redevelopment.

The hearing continues and the judge has indicated he wants it to end Thursday.

© Copyright (c) The Ottawa Citizen

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Unusual North of South deal leaves taxpayers vulnerable

Thursday, January 19th, 2012

Unusual North of South deal leaves taxpayers vulnerable

Cory Schouten April 16, 2011

Proceeds from a refinancing of bonds that paid for road improvements near Lilly Technology Center will help fund North of South.

(IBJ Photo/ Perry Reichanadter)

The $156 million North of South project is a complicated, risky and potentially transformative bet on
downtown.

It’s also a no-brainer of a deal, at least for Buckingham Cos., the developer, and Eli Lilly and Co., which owns the 15 acres of surface parking lots set to be developed along South Street east of Delaware Street.

That’s because taxpayers—acting as the project’s bankers—are shouldering most of the risk in the no-bid deal, while the potential for a tangible profit rests squarely in private hands, a review of documents and interviews with people familiar with the project show.

Buckingham stands to cash in every step of the way, earning fees for all three of its divisions—development, construction and property management. And Lilly gains a new amenity for its corporate campus while cashing out of a 20-year-old arrangement with the city that required the company to make periodic payments on infrastructure bonds.

Taxpayers are putting up nearly every dollar used to build the apartment, hotel and retail project, chiefly by loaning $86 million raised from the sale of municipal bonds. All without the city’s landing any job commitments, charging the developer a spread above the city’s cost of capital as any banker would, or installing a mechanism for taxpayers to enjoy some upside if the deal succeeds.

The benefits to the city are a larger tax base, a plugged hole in the downtown streetscape, and a powerful employment driver for the corporate campuses that surround the property, city officials say.

They point to a study showing an estimated five-year economic impact for North of South of $350 million, and a conservative loan-to-value ratio of about 70 percent that gives taxpayers a good shot at recouping most of their investment.

Devil in the details

Several developers who spoke with IBJ on condition of anonymity and are generally supportive of public-private deals said the North of South arrangement upends the traditional risk-reward calculation for land development. They say any developer would have jumped at the deal the privately held Buckingham achieved.

“All the developer has is upside!” one said. “The taxpayer has all the risk.”

A 90-page project agreement provides insight into some of the risks. City officials declined to share the project agreement until they finalized the details and the City-County Council approved the plans in mid-March.

Buckingham, which has its headquarters at Ninth and Meridian streets downtown, broke ground on the project last month.

A few details found in the agreement and other documents:
• A $15 million cash contribution credited to Lilly is more complicated than it appears on the surface. Because Lilly’s Technology Center did not generate enough in property taxes to service the debt on a package of infrastructure improvements the city approved in the late 1980s, Lilly had to cover the shortfalls. Now, the city is paying back the pharmaceutical giant, and Lilly is reinvesting the proceeds in North of South.

The city also gives credit to Lilly for contributing the 15-acre site on which North of South will be built, valuing the property at $15 million. For tax purposes, though, the current assessed value of the 12 parcels set for development is $2 million.

• Buckingham is credited with a $7 million equity contribution. But that’s not money it put up. Rather, the sum represents the project’s development fees, which the company agreed to waive.

The company will be paid separately, out of municipal bond proceeds, for the project’s architecture and engineering costs and for construction management. Once North of South is complete, Buckingham will earn more cash by managing parts of the property. If the project revenue is insufficient to make debt payments, Buckingham will be on the hook for the first $6.9 million, backed by a personal guarantee from Buckingham CEO Brad Chambers.

• Buckingham could start cashing in profits from the project by selling individual components before taxpayers are paid back in full.

The hotel, office and apartment phases each are assigned a “base release price” at which the bonds for that portion are considered satisfied. For instance, the release price for an office component starts at about $2.4 million (and falls as payments are made on the bonds).

If the developer can sell that portion, it can pocket any profit above the release price.

A potential consequence of the arrangement is taxpayers could get stuck holding underperforming portions of the project while the developer cashes out of profitable ones.

Deron Kintner, executive director of the Indianapolis Bond Bank, said the city “increased the value” of various components to help guard against the risk.

“From Day One, when we started down this road, risk mitigation was of utmost importance to us,” he said.

• Taxpayers could be on the hook for building a multimillion-dollar parking structure for the adjacent WellPoint Inc. campus since the North of South project will remove some spaces and create more demand for existing ones.

The city is obligated to provide 2,000 free spaces to WellPoint as part of a 1997 agreement, expiring in 2012, that enticed the insurance giant to consolidate operations from the suburbs.

The North of South agreement suggests the city could pay Buckingham for use of some of the new spaces in the project or build a new garage at taxpayer expense. For reference, the North of South deal assigns a value of $12 million for its two parking garages and 800 total spaces.

Lilly is key

Lilly initially approached Buckingham in 2007 about putting together a redevelopment of the North of South properties.

The companies worked on the project for two years before approaching the city to request a $45 million subsidy to support it, Chambers said. City officials came back with an offer to act as a lender instead.

The decision came down to a philosophical question: Is it more prudent for the city to cap its exposure by investing a cash sum in a private development as it did with the JW Marriott and Conrad Indianapolis, or to put more money at risk for a chance to recover the full amount?

The city opted for the latter, giving Buckingham what amounts to a mortgage loan. Under the arrangement, after a two- to four-year period of construction and stabilization, the city will apply an estimated $2 million in property taxes and state income taxes on the North of South properties toward about $8 million in annual bond payments.

Buckingham will be responsible for paying the rest out of project revenue, Kintner said.

The city considered taking an equity stake but decided against clouding its role as lender, Kintner said.

He said the city would have had to contribute more to the project to earn equity.

Chambers noted his company’s equity in the deal is merely theoretical until taxpayers are paid back.

“We’ve got significant motivation and skin in the game to work hard on this project, and have for three years now,” he said in an interview. “We’re going to work very hard to make this successful. At the end of the day, the project and its merits are solid.”

Chambers said a successful deal would be “very profitable” for Buckingham, but he would not provide a number.

Kintner said it doesn’t matter how much Buckingham profits on the deal as long as the city gets a new amenity and taxpayers are paid back. The project simply would not have worked if the developers had to tap private credit markets.

“Our goal was to protect the city’s interest and to see the project built and financed in a way that’s most advantageous to the city,” Kintner said. “Buckingham is no less at risk than other developers who have borrowed to put money in projects—they borrowed $97 million; there’s an inherent risk in that.”

Public and private?

The city sold about $98 million in bonds to finance the project and will kick in another $9 million for infrastructure improvements. Add in a $6 million state grant, and taxpayers are on the hook for about $113 million.

The bonds will generate $86 million for the project itself; the rest will cover fees and pre-paid interest for the time North of South is under construction.

City officials say the big public investment helped leverage $37 million in private contributions to the project by Lilly and Buckingham, though that figure includes the city’s payment to Lilly and the $7 million equity awarded to Buckingham in lieu of development fees.

The plans call for 320 apartments, a 157-room conference hotel, 40,000 square feet of retail or office space, and 800 parking spaces. An $18 million YMCA branch also is planned, but its financing is separate from the city-supported deal.

“These are amenities a lot of corporations move to the suburbs to chase,” said Scott Travis, Buckingham’s senior development executive.

But Melina Kennedy, the presumptive Democratic challenger to Republican Mayor Greg Ballard, was surprised the incentive package didn’t come with any job-creation commitments or an opportunity for taxpayers to earn some return alongside the developer if the project succeeds.

“Certainly, the actual development itself will be positive for downtown, but I believe some of the negotiating on the city’s behalf wasn’t as aggressive as it should have been to protect the taxpayers,” she said.

One protection the authors of the plan included was hiring locally based Keystone Construction Corp. as the city’s agent in the deal to watch over Buckingham. Regions Bank, meanwhile, is administering the loan on the city’s behalf.

“The city is acting as the bank on this project—taking on roughly the entire project in terms of risk financing,” Kennedy said. “If it fails, it will be on the city’s shoulders.”

The flip side is, if North of South succeeds, the city gains an asset that could attract more young professionals and make downtown more walkable, said former real estate broker and developer Gus Miller, who now works for a pension fund adviser.

He sees it as a prudent gamble to keep up the momentum that appeared in a recent study of U.S. Census data: Between 2000 and 2009, downtown Indianapolis saw an 83-percent rise in the number of college educated residents ages 25 to 34.

And it helps when the risk involves a 27-year-old developer that manages more than 18,000 apartment units and has built 5,000 of its own. Buckingham also owns The Ambassador and Harness Factory Lofts apartment buildings downtown, and is developing The Avenue, a $25 million apartment and retail projectalong Indiana Avenue.

“We beat up people for pushing these kinds of things through,” Miller said of North of South. “You can build all kinds of sewers and roads, but at the end of the day, people like to live in communities. [The deal] is unorthodox, but we have to take risks to move forward as a community.”

Paying old debts

The North of South deal also settles a 20-year-old agreement between Lilly and the city that went expensively wrong for taxpayers.

City officials agreed in 1989 to vacate a portion of Kentucky Avenue and spend $36 million to widen surrounding roads to accommodate an expansion of the Lilly Technology Center.

The city sold bonds backed by property tax revenue on the property, but starting in 1997—thanks in part to a new round of abatements, Kintner said—the bond payments due exceeded the property tax payments, triggering an agreement for Lilly to cover the shortfall.

Lilly paid about $13 million toward the bond payments over the years, and would have been entitled to reimbursement from the city of the remaining balance after the original bonds were retired in 2020.

Instead, as part of North of South, the city opted to refinance the debt, paying off the remaining $15 million balance (including interest) owed to Lilly and forgiving the requirement that the company cover any shortfalls in bond payments. In exchange, Lilly agreed to reinvest the entire sum in North of South.

The upshot: Twenty years after building $36 million in road improvements, the city still owes $44 million. And it will continue making payments until 2024, unless a future mayor opts to refinance again.

Kintner doesn’t see a problem with taking 33 years to pay for road improvements since, he says, the point of municipal borrowing is to fund improvements with a long life.

In fact, Kintner said refinancing the bonds and paying Lilly now saves taxpayers $20 million. That’s because the city replaced bonds accruing interest at about 6 percent with new bonds at 3.5 percent.

Promises kept?

The 1989 agreement said Lilly was entitled to reimbursement only if it invested at least $168 million in improvements at its Technology Center along Harding Street. The company told the city in a March 1998 letter that its investments at the facility since Jan. 1, 1989, had totaled $357 million.

In 1999, the company announced a 10-year, $1 billion expansion in Indianapolis, a commitment Lilly spokesman Ed Sagebiel says the company also has met.

Yet during the North of South negotiations, Lilly was “doing cartwheels” to rid itself of its guarantee to cover bond payment shortfalls on the Harding Street project, Kintner said.

David Lewis, Lilly’s vice president of taxes, said the company hadn’t anticipated it would ever need to make the payments. He said “nothing comes to mind” on why the property taxes came up short of covering the bond payments.

“Assessed values used in the forecast and the ultimate values were different,” he said.

So did the city get enough in return for releasing Lilly from its obligation to backstop the bond payments?

“We negotiated with them for quite some time,” Kintner said. “Instead of a bonus to executives, they agreed to reinvest it into downtown.”

The payments between the city and Lilly seem murky to Christopher Steele, an economic development and site-selection consultant and president of Massachusetts-based CWS Consulting Group.

Steele applauds local governments that find creative ways to partner with developers after “sober reflection” to attain “broader public goals.”

But Steele, who reviewed the documents at IBJ’s request, described the agreements as “poorly negotiated.” He can’t quite understand how, if a company doesn’t pay enough property taxes to cover the bonds for its own infrastructure improvements, the city could wind up in arrears.

“There are very good and effective ways of structuring incentive and tax programs to build a strong and mutually reinforcing situation between company and community,” Steele said. “This is not one of them.”

He described the commitment that Lilly reinvest the proceeds in the North of South project as “trying to make a very bad deal better.”

Misplaced priorities?

Taxpayers are being fleeced, plain and simple, for a project that offers no clear benefit to the public, said Julia Vaughn, policy director for the government watchdog Common Cause Indiana.

If North of South really were such a certain success, the developers should have been willing to part with some of their own money to help finance it, she said.

“It really shows what the city’s priorities are,” Vaughn said. “We’re going to help out a private developer and one of the largest pharmaceutical companies in the world, yet we’ve got a second-rate public transport system, infrastructure is falling apart, neighborhoods have so many needs. But apparently the checkbook is open if you’re the right corporate citizen.”

The arrangement sounds like the deal between the city and the Indianapolis Colts that paved the way for Lucas Oil Stadium, said Gary Welsh, author of the cantankerous political blog Advance Indiana.

The city under former Mayor Bart Peterson credited the Colts with contributing about $100 million toward the stadium, but the claim was disingenuous at best: The team had simply agreed to waive the lease-termination fee on the RCA Dome in exchange for a state-of-the-art new stadium.

Welsh’s problem with deals like North of South is that they prevent property taxes collected downtown from going to anything other than new downtown projects, to the detriment of neighborhoods and schools.

“They always make those deals so complicated, deliberately so, to confuse people and make it seem like money is coming out of someone’s pocket that it really isn’t,” Welsh said.

But for Buckingham and Lilly, North of South makes perfect sense.

“It’s the deal of a lifetime,” said one local developer who would have bid on the project if given the opportunity. “I can’t imagine there would ever be anything like this again.”

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