POSTED: Apr 14, 2014 12:54 PM ET
UPDATED: Apr 14, 2014 11:59 PM ET
INDIANAPOLIS (AP) — The Pacers' biggest win so far this season came Monday - off the court.
One day after breaking out of a slump by beating Oklahoma City and hours before Miami rested its star players, essentially ceding the top seed in the East, the city's Capital Improvement Board approved a new deal that would help the Pacers stay financially competitive in one of the NBA's smallest markets.
In exchange for providing $164 million to pay for operating costs at Bankers Life Fieldhouse over the next 10 years, the Pacers agreed to extend a lease agreement that will keep them in Indy for up to 13 more seasons. Board members voted 8-0 in favor of the deal.
"This is a major factor helping us get on solid financial ground going forward," Pacers president Jim Morris said Monday.
It's not the first time the Pacers have sought public assistance.
Three years ago, team owner Herb Simon contended that he was losing money and could not continue to afford paying $15 million in annual operating costs. The CIB stepped in and agreed to spend up to $33.5 million through 2013.
Now the quasi-government agency that runs Bankers Life Fieldhouse, home of the city's NBA team and WNBA's Indiana Fever; Lucas Oil Stadium, home to the NFL's Colts, and the city's convention center will spend in excess of $10.8 million annually over the life of the deal. The contract runs for 10 years and includes three one-year extensions with the Pacers having the option for the first of those years. The last two will be mutually agreed upon.
In return, the Pacers have agreed to stay at Bankers Life Fieldhouse and will give city leaders the "right of first offer" in the event the 79-year-old Simon dies and his heirs attempt to sell the team. The provision means the city could designate a new potential owner and that person would be able to make the first offer on the team or could match an offer from someone else.
"With this agreement, one of our city's most important facilities will get some critical upgrades and continue to be home to some of our most amazing events," board president Ann Lathrop said after the vote.
Critics argue that Simon, who is estimated to be worth more than $1 billion according to Forbes magazine, should foot the bill and that city leaders should fix roads and find more money for its understaffed police department.
Mayor Greg Ballard contended the money in this deal couldn't be spent on those services anyway, though the new deal could create more money for those purposes.
"By law, this money can't go there anyway," he said. "It's Economics 101. You're trying to create more revenue for everything else. The assumption is that the pie is one size and that's not true at all. You're trying to expand the pie."
Simon has been frugal with his payroll. Larry Bird, the president of basketball operations, has made it clear Simon will not pay the NBA's luxury tax - the penalty for going substantially over the league's salary cap.
And the CIB investment should help the Pacers' bottom line. The deal calls for the board to pay:
- $3.7 million annually for fieldhouse operating expenses such as liability insurance, security and utilities;
- $7.1 million in reimbursements for management of the arena, a price that includes an annual 3 percent annual escalator clause:
- $26.6 million in capital improvements to "major systems" such as locker rooms, concession stands and seating;
- and half of the cost from the scoreboard the Pacers installed two years ago, taking over ownership at the end of the lease.
The Pacers and Fever are the primary tenants at Bankers Life, but the arena hosts up to 500 different events throughout the year - everything from Indiana state basketball championships to concerts and other shows, all of which experts say helps the city prosper.
But it's the Pacers who needed the most help, and Morris believes this deal will keep them more competitive for the long run.
"We're doing better," he said. "We've had 28 sellouts this year, our attendance is up 15 percent and our sponsorship is up. But we've had a tough 10 years and we've had substantial losses. We're making progress. For 10 or 11 years, we tried to find a way for the franchise to pay for the operating expenses of the building and we just couldn't."