|By Mary Beth Schneider and Bill Ruthhart,
The Indianapolis StarMcClatchy-Tribune Regional News
Oct. 22, 2009--Wanted: Cleaning crew to sweep up financial mess at Indianapolis sports and convention arenas. Experience at pinching pennies a plus.
Indianapolis is investigating hiring a private firm to handle the financial headache of operating Lucas Oil Stadium and the Indiana Convention Center, and potentially Conseco Fieldhouse.
The city has issued a "request for information and qualifications," shopping for a firm that thinks it can run the facilities cheaper and better than the Capital Improvement Board.
Paul Okeson, chief of staff to Mayor Greg Ballard, said the city doesn't know whether it will, in the end, privatize the management of the facilities.
But, he said, there's only one way to find out: Ask.
"We issued the RFI for the sincere and honest purpose of maybe there's something out there we're not thinking of that someone could present to us that would save us a significant amount of money in operating these facilities."
The result, he said, could be private management of the facilities; private-management assistance to continued CIB management; or no change at all.
"It could be anything," he said. "We're obligated on behalf of the taxpayer to see if there's a way to do this and create some efficiencies or gain a significant amount of savings."
The city's request comes at a time when cities have increasingly turned to private firms to operate their large convention centers, arenas and stadiums.
"I'm hearing a lot more about this issue now," said Leonard Gilroy, who as director of government reform at Los Angeles-based Reason Foundation produces an annual report on privatization.
"There's been a renewal, a reinvigoration of privatizing these kinds of facilities because of the obvious fiscal crises going on at the state and local level throughout the country."
Ballard's decision to test the privatization waters means Indianapolis could follow in the footsteps of cities such as Chicago, Houston and Phoenix that have relied on private operators to run public facilities.
The city's request asks interested firms to respond by 4 p.m. Nov. 24. Depending on what officials receive in that initial round, a formal "request for proposal" -- in which companies could bid for management of the facilities -- would be issued by the city Dec. 7, with responses due Jan. 8.
CIB President Bob Grand referred questions about the move to the mayor's office but said: "The city is going out independently to look at and do the review of the operations, which they want to do. And I have no problem with that."
He said that the board, since he took over after Ballard's 2007 election, laid out the financial realities and has now "solved almost all the problems."
"Now I think they want an independent review which is, 'Are we better off to have a private management do this, or (have) the staff and people who have operated over there for years done a good job?' " Grand said.
The proposal includes that the city is "interested in opportunities that will enable it to identify operational efficiencies and cost savings for the facilities, build relationships with strategic partners, maximize usage of the (convention center and stadium,) evaluate potential economies of scale in facilities operations management, and enter into a multi-year agreement with one or more respondents for the operation and management of the facilities."
While the proposal primarily focuses on the Indiana Convention Center and Lucas Oil Stadium, which are managed by the CIB, it potentially could include Conseco Fieldhouse, which is operated by the Indiana Pacers.
The Pacers have told the city the team can't continue to cover the fieldhouse's $15 million annual expense. No one from the Pacers was available Wednesday to discuss the potential privatization.
The city's request for information states that there is "every possibility that the current operator of Conseco Fieldhouse will cooperate" in finding ways to cut costs and enhance the use of that arena.
How to keep the operations of the sports and convention facilities in the black has been a major topic at both ends of Market Street, with the mayor and council on the east end and the governor and legislature on the west end tossing around this financial hot potato.
Ballard and the CIB went to the General Assembly for help earlier this year when it projected a $47 million deficit for 2010.
The mayor offered $12 million in cuts to the CIB's budget while seeking an additional $32 million in revenue -- $12 million from increases to the city's hotel, auto rental and admissions taxes; $10 million from an expansion of the city's sports development taxing district; $9 million in state loans during three years; and $1 million from licensing fees at Downtown parking garages.
Gov. Mitch Daniels instead pushed a plan that required $25 million in spending cuts, citing a pair of independent reviews that he said showed the CIB could achieve more savings in running the convention center and Lucas Oil Stadium.
Ultimately, the legislature sided with Daniels, giving the city only the immediate authority to raise the hotel tax and delaying any votes by the City-County Council to raise auto rental and admissions taxes until 2013. It also granted the city $8 million from an expanded sports development district, $4 million in debt service savings and a three-year, $27 million state loan.
The CIB, however, recently determined it may be able to forgo that loan after making several budget cuts and resolving a complicated debt insurance issue.
SMG, an international firm that operates privatized convention centers, stadiums and arenas, conducted one of the two independent reviews Daniels ordered.
In its review, SMG compared the CIB's operation of Lucas Oil and the convention center with the operations of Houston's Reliant Stadium and convention center. SMG runs Reliant and handles some operations of Houston's convention center.
In the comparison, SMG concluded that Indianapolis spent nearly $13 million more than Houston to run the similarly sized facilities.
Privatizing facilities like Lucas Oil and the convention center certainly isn't a new concept. But what is unusual about Indianapolis' request is that it includes multiple facilities.
"I have not seen the bundling of facilities like this request, but it is very smart because it adds value," said Gilroy, the privatization expert. "Blending them together like this creates more bang for the buck, because there are more savings, economies of scale and cost efficiencies an operator can find."
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