Indians concerned about possible ticket tax

The Indianapolis Indians are a financial All Star. Not only does the AAA minor-league baseball franchise bring 600,000 people downtown each spring and summer, the team is profitable—it scored $1.23 million last year.

Some local officials wrestling with the Capital Improvement Board’s $37 million deficit think part of that profit should come into play. With a ticket-tax increase a distinct possibility, Indians officials aren’t waiting to state their case.

"We don’t think this problem has anything to do with us," Indians Chairman Max Schumacher told the team’s stockholders at their annual meeting Feb. 9. "There hasn’t been 5 cents spent by the Capital Improvement Board on Victory Field."

Quite the contrary, the Indians have been faithfully writing checks to city officials since the team moved into Victory Field in 1996. The Indians pay $500,000 annually in rent. Plus, the team covers operating expenses, which totaled $3.52 million in 2008. The Indians also have paid $2.1 million in ticket taxes since that tax was instituted in 1998 to help pay for Conseco Fieldhouse. The tax is assessed on events at not just the fieldhouse, but also the other two venues CIB owns: Victory Field and Lucas Oil Stadium.

By comparison, the Indiana Pacers pay $1 a year to rent the fieldhouse. The franchise pays the operating expenses but is likely to ask the city to assume all or part of that expense. The Indianapolis Colts pay $250,000 to play in Lucas Oil Stadium, which is operated and maintained by the city.

Still, local officials charged with solving CIB’s deficit aren’t taking a hands-off approach to the Indians.

"If we’re talking about a ticket tax, we’ll have to consider the Indians," said Sen. Luke Kenley, R-Noblesville, a key fiscal leader in the Legislature. "We need to consider Victory Field as a total part of this CIB situation, and it’s the CIB’s financial situation we’re trying to shore up. Everybody may have to give a little bit."

The General Assembly and the Indianapolis City-County Council likely will be called upon to approve various tax increases to help erase the deficit.

Schumacher isn’t sure how much more taxing his franchise can take. Heading into its first full season since the recession began, Indians season-ticket sales are down 5.5 percent. As phone-in ticket orders have dried up, Schumacher said, the franchise’s sales and marketing staff has had to be more aggressive than ever.

"This is the most severe economic downturn I’ve seen in my years with the Indians," said Schumacher, who joined the franchise in 1957. "We’ve worked very hard to maintain our costs and maintain low ticket prices. A ticket increase right now could be to the point where it turns families off."

Already, Indians officials are projecting profit to be off 20 percent this year, and team officials said an increased ticket tax would make that worse.

Major League Baseball takes another 6 percent of affiliated AAA minor-league teams’ ticket sales, and there’s discussion of increasing that sum, further troubling the Indians.

Tipping point

The franchise’s relatively robust profits could turn south in a hurry, sports business expert Richard Sheehan said.

"The impact [of a ticket tax increase] for the Indians is potentially sizable," said Sheehan, a University of Notre Dame economist and author of "Keeping Score: The Economics of Big-Time Sports."

"The business model for a minor-league franchise is much different than for a major-league team. A fan doesn’t say, ‘I could go to a Colts game or I could go to a movie.’ There’s a whole different set of entertainment alternatives a franchise like the Indians has to contend with."

Providing affordable family entertainment has been the primary platform for the Indians’ sales and marketing efforts for years.

"Their sales are going to be much more sensitive to price, even if it’s just a dollar," Sheehan said. "That’s why you’ve seen this franchise be very careful with ticket-price increases."

Indians ticket prices, which range from $9 to $13 for adults, haven’t increased in three seasons.

"We’ve learned, through fan surveys, that one of the very most important things to our fans is affordability," said Indians General Manager Cal Burleson. "Price point is key to our success."

CIB member Pat Early said no decisions have been made regarding the deficit, but he didn’t discount the notion of a ticket tax’s being implemented in time for the Indians’ 2009 season.

"We need a solution sooner rather than later," said Early, who was on CIB when it crafted the Victory Field deal with the Indians.

While Early and the other CIB members have yet to talk with the Indians, he said they’re sensitive to team officials’ concerns.

"Victory Field is a venue that is working for the city," Early said. "It’s a great asset. We have to solve our problems, but we don’t want to do anything to screw up the things that are working. That said, we have to solve these serious financial problems."

Fast pitching

The ticket tax got by Indians officials without notice when Conseco Fieldhouse was built, but team officials have lobbied against it ever since, Schumacher said.

"We were unique in that we bit off a lot of expense when we signed the deal for Victory Field, but we never anticipated we’d be taxed to pay for the other two venues," Schumacher said. "We don’t see the logic of Indians baseball fans’ paying a ticket tax due to problems with the CIB’s other venues."

The ticket tax was instituted at 5 percent to help pay for the fieldhouse. The tax was boosted to 6 percent in 2005 to help pay for Lucas Oil Stadium. Now, Indians officials fear the tax may go even higher.

Indians officials believe they are paying their fair share already. Including operations, capital expenditures and routine maintenance, the Indians have put well in excess of $40 million into Victory Field since it opened. The team has paid more than $8 million to the city in rent and ticket taxes.

Indians officials fought for the current lease deal due to their displeasure with the way city offi cials maintained their former home-Bush Stadium, which Schumacher said was plagued by plumbing, electrical, structural and other problems.

"We said, ‘Let us have all the money coming in, and we’ll take care of all the maintenance and operations cost,’" Schumacher said.

That strategy, he said, has paid off.

"We haven’t held back in the amount we’ve put into maintaining this facility," Schumacher said. "We have a lot of people tell us the place looks as good today as the day we opened here. We think that’s one thing that keeps fans coming back."

The Indians’ 20-year lease deal with CIB expires in 2016, and sports economists said city officials with an eye on the franchise’s profitable bottom line could seek a larger rental payment.

In the end, CIB’s need to meet its defi cit may trump the Indians’ plea for fairness.

"Absolutely, the Indians need to be part of the discussion and possibly they can be part of the solution," said Larry DeGaris, director of academic sports marketing programs at the University of Indianapolis. "At this point, it’s not about fairness; it’s about need."