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The Capital Improvement Board of Marion County voted Friday to commit up to $70 million to the construction of the Signia by Hilton hotel at downtown’s Pan Am Plaza after recent bids for portions of the city-owned project came in over budget.
The cost of the 37-story hotel is now expected to be about $571 million, a 14% increase from the original maximum price of $501 million that city of Indianapolis officials had anticipated. The board is managing the project on behalf of Mayor Joe Hogsett’s administration, alongside the development of an addition to the Indiana Convention Center that will be connected to the 814-room hotel.
The approval, which passed by a vote of 7-0, authorizes board staff to work with the city of Indianapolis to amend the pair’s interlocal project agreement passed in 2023 in order for the CIB to contribute the extra cash with a promise of future repayment by the city.
The planned contribution from the board is its only direct financial appropriation for the hotel portion of the project, with the remainder being financed through municipal bonds taken out by the city, which are secured against the property’s future revenue.
The CIB operates the convention center and manages several other sports-related facilities downtown including Lucas Oil Stadium and Victory Field.
Andy Mallon, executive director of the board, told IBJ the additional funds for the project were needed because of higher-than-expected bids for key components of the hotel, including HVAC, electrical and other mechanical work.
He said while the total overage is expected to come in around $65 million to $67 million after further negotiation, the current extra tab is $70 million. In fact, the extra cost previously surpassed $70 million, but Mallon said the development team was able to reduce costs through the removal of unnecessary components, a process that is still ongoing. He declined to share the overage cost originally faced on the project.
While board staff will continue working with general contractor AECOM Hunt to reduce costs, the additional cash will allow for the fulfillment of all bids currently awaiting approval, as well as provide flexibility for future overages down the road, such as with furniture or equipment for the property.
Mallon said a strong 2024, when the board brought in $50 million more than had been anticipated, gives it the financial flexibility to be involved in the project.
“You face these sorts of problems every time you build something, where you’ve got to ‘value engineer,’ and do what you can to find the funding you need to finish the project,” Mallon said. “So, I don’t think it’s too much of a surprise, and it’s unfortunate in some sense. But the timing is good for us, because we’re coming off a really, really strong bounce out of the pandemic, a bigger bounce than … in other cities.”
All in, the cost of the redevelopment of Pan Am Plaza is expected to be about $780 million, with the 143,500-square-foot convention center addition cost covered through bonds backed by the city’s consolidated tax-increment financing district.
The CIB will lease the convention center expansion and the skywalk connecting it to the rest of the massive facility from the city upon completion of the project, but expects to sub-lease the additional ballroom space to Hilton, which is also managing the Signia.
The board plans to use cash from its reserve fund of more than $125 million to pay for its contribution to the hotel.
The contribution won’t cut into the contingencies built into the project budget, including $13 million for Indianapolis-based Hunt and the city and CIB for project management, he said.
The CIB expects to recoup its costs on the project through long-term amendment to its interlocal agreement for the project. The change, which has not been finalized, would have the city pay the board 14% of its net revenue on the hotel annually. That would only take effect after the entirety of debt had been paid off on the construction bonds.
The hotel is expected to generate about $30 million to $50 million in revenue annually, according to a feasibility study on the project obtained by IBJ.
The city would also include the CIB as a partner on any future sale of the property, with the board receiving 14% of the net proceeds. The tool, commonly called shared appreciation when used with private sector partners, generally allows the city to get a cut of a sale or refinancing for its role in a project. In this case, the CIB would be getting its own cut.
The CIB’s Mallon said the board-contributed funds won’t be made available immediately, and will instead be put into an escrow account that will have scheduled dispersals. Mallon and other CIB officials must also finish the amendment to the interlocal agreement, which in turn would require approval from the city’s Metropolitan Development Commission. The amendment would not require approval from the City-County Council.
Both Mallon and city officials said while the added costs were frustrating, there have been no regrets about the decision to take over the project from Indianapolis-based developer Kite Realty Group Trust after the firm encountered numerous challenges with interest rates on the project. The hotel, which is just over one-quarter finished (and 25 days ahead of schedule) is still expected to open in autumn 2026.
Mallon said the approval of the additional funding allows the project to continue without delays. He said delays would take momentum away from the project while the city and CIB worked with contractors to try and reduce costs. Even then, he said, it’s possible that any savings achieved through reduced bid prices would be offset by having to re-bid several construction packages.
“It’s just not practical to think that we could delay it and see if anything gets better, because things aren’t getting better,” he said. “The construction environment and market in Indianapolis is speeding up, it’s not slowing down.”
Dan Parker, chief deputy mayor, said he has “full confidence” in the CIB’s ability to complete the Signia project. He and other proponents of the city’s tourism industry consider the project a lynchpin for bringing more events and conventions to the city.
“We have full confidence that today’s action helps get the Signia delivered on time, which is critical,” he said, adding that while the project is further complicated by the highers costs, it’s a worthwhile investment for both the city and the board. “It’s a great problem to have, but I think it shows how strong our economy here is in Indianapolis and central Indiana—the state of the construction industry is a clear sign that we have a strong economy.”
The project has already been credited with helping the city secure long-term commitments from several major long-term conventions such as the National FFA, FDIC and Gen Con. The city has also said that it has helped land pledges for other big events from Alcoholics Anonymous and numerous groups tied to the medical field.
Mallon said the city and CIB plan to continue watching developments on the federal level that could otherwise affect costs for the hotel project moving forward, including tariffs.
He said he expects areas that might be affected, such as furniture and fixtures for the interior work on the hotel, will be accounted for by bid respondents as part of their total costs. He said the city and CIB “haven’t gotten that far” when it comes to making contingencies for potential increased costs the project could incur from changing economic conditions.
“I can’t make plans based on the kind of volatility we’re seeing out of Washington, D.C.,” Mallon said.
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This is what happens when Government gets involved.
This would have happened no matter what. With the economic uncertainty created by the current administration, I think they’re luckily costs only increased 14%.
Are we “winning” yet?
Swell. I would prefer to get the potholes filled.
Call your local legislator who refuses to do anything about the funding issues.
If legislators in the nine county area worked together they could fix the issue. Being more loyal to their party is the issue.
Which politician’s brother-in-law is the contractor with the overage? How many of the contractors donated to Hogsett’s reelection? Always seems like there’s a hidden backstory… We need an Indianapolis DOGE.
Oh…. You mean a billionaire that just runs rough shod over our elected representatives, while our elected representatives just roll over and play dead? That kind of DOGE?
I would much rather have some say in what gets cut and what gets funded. Otherwise it defeats the reason for having a represenative democracy.
Shocker! The city/county has no business investing in a hotel!!
1) Who funds the city of Indianapolis?
2) Who funds the CIB?
The CIB provides the funding to be reimbursed by the city? LOL!
3) How many years will it take to pay the bonds off?
Talk about a cluster!!
Such rationalized reasons and excuses. We all knew this was going to be a Billion Dollar project from the beginning.
The hotel is needed because we’ve promised it to several conventions that said we needed to expand.
The problems stem from going with Kite Realty Group, who never did find the money for this hotel. If they had the money, or if the city had decided to move forward when interest rates were low, it would be a different story.
JOE B. is a deal makes financial sense, then the money is there. If Kite could not find the money, I have to imagine the deal didn’t make financial sense. Fairly simple.
It’s anything but fairly simple. What’s the economic impact of losing (say) Gen Con, PRI, FFA, and the firefighter convention?
People scream up and down that Indianapolis needs to do things to compete with other cities. We’re a convention city, and this expansion allows the city to keep key conventions we have been hosting, host bigger conventions, and host multiple smaller conventions at the same time.
If you want Indianapolis to get out of the convention business, that’s fine. Just articulate the alternative. It’s quite valid to hold the positions that “the city needed to do this project” and “the city needed to execute on this project better”.
I think you mean the debt service economy.
JOE B. I was just referring to a private developer making financial sense of a deal or not. As far as that point is concerned, its fairly simple. I did not say anything more.
I so agree. We definitely need the DOGE here to research the CIB. So we can stop wasting so much money!
And why was the CIB board elected again? They have done nothing but spend our tax dollars unnecessarily.
Oh…. You mean a billionaire that just runs rough shod over our elected representatives, while our elected representatives just roll over and play dead? That kind of DOGE?
I would much rather have some say in what gets cut and what gets funded. Otherwise it defeats the reason for having a represenative democracy.
Bid low, increase price later. Sounds about right. Who was surprised?
Will be even higher when tariffs hit the supply costs.
Glad I moved to Florida
We are, too. Glad that YOU moved, that is.
no GMP contract? liquidated damages?
can you share the construction agreement Mickey.
This will be a great case study for undergrads in construction, engineering, finance and real estate.
And folks complained when the Hoosier Dome was built. And Lucas. And Bankers. And every other project that has been built in this city since at least 1970. And yet, they got built, the city grew, and non-residents actually wanted to come here. And big events drew more people to move here, and for businesses to stay here and move here.
Really folks try to develop a time line longer than the next year. These are long term improvements for the city. As noted, this hotel and Convention Center expansion are need to keep some very lucrative conventions coming here. The economic impact of those events in terms of sales taxes, and revenue for all kinds of businesses, and showing off the city to businesses looking to expand or find a new home, is incredible.
Of course, there is the Naptown option…Indy, the cornfield with a few lights. But I don’t think anyone really wants to return to those days…
Add ten more floors and make them apartments. Downtown apartment market here has been strong for decades (strong,
meaning vacancy rate of less-than 10 percent) and will continue to be. Can recover the extra costs over years of rentals.
Our government does not need to get into the hotel business. Complete overreach.
Managing the budget for a high-rise construction project is no small task and requires an Experienced Board with Engineering, Construction and Management experience. None of the Capital Improvement Board (CIB) Members have Construction Engineering and Construction experience to the scale of the Signia Hotel based on their BIO’s. With approximately 1/3 of the steel structure in place and cost overruns totally $70M, alarms should of gone off in the CIB, requesting a Financial Review of the entire effort by an independent third party engineering firm (with demonstrable credentials), to gain an understanding what the total financial exposure is to the City and the areas of concern including recommended corrective action. The odds that this will be the only additional investment to complete the Construction of the Signia Hotel is “zero” percent. The statement “… recent bids for portions of the city-owned project came in over budget ….” demonstrates the Plan and Budget, which are the backbone of any construction project, was flawed and lacked the details including contingencies to deal with unknowns at the time the Plan and Cost were compiled. What is a top reason why Construction Projects do not meet expectations, require major adjustments to scope, incur material cost and schedule over runs, it starts at the beginning with inaccurate/incomplete budgets including associated costs, lack of cost controls, weak inexperienced management and inexperienced oversight Boards. Since we are only a year plus into a multi-year project with cost variances approaching 14%, the CIB needs to hire an experienced engineering firm to review the project and pro-actively report to the CIB in a public session their findings and recommendations. The CIB needs to retain this independent firm to perform monthly and quarterly reviews and report their findings and recommendations to the CIB until the Project receives Certificate of Occupancy.