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Star: Experts say a Pacers move unlikely

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  • #1

    Star: Experts say a Pacers move unlikely

    Thought about putting this in the CIB thread, but this deals with the Elephant directly, so I figure it needs its own due.

    http://www.indystar.com/article/2010...-move-unlikely

    Experts say a Pacers move unlikely
    With few cities as possible new homes for NBA team, many wonder why Indy isn't playing hardball.

    By Francesca Jarosz
    Posted: May 19, 2010

    At the center of negotiations between the Indiana Pacers and the city lies an assumed possibility that the NBA franchise might leave Indianapolis.

    For team officials, who say they would not rule out any options even though moving the team is not their intent, that notion has provided sufficient leverage to draw the city into intense discussions over who should pick up the $15.4 million annual tab for operating Conseco Fieldhouse.

    For city leaders, who seem willing to take over the arena, it is a possibility that helps justify shifting Conseco's operating cost from the owner of the financially struggling team, Herb Simon, to the city's Capital Improvement Board. The board is funded primarily by taxes on food and beverage sales, hotel bookings and car rentals.

    Last week, the board highlighted the magnitude of that possibility by presenting a $30,000 study on the economic impact of the Pacers and the cost to the city should the team leave.

    And CIB President Ann Lathrop said the Pacers have estimated it costs them "in excess of $18 million" -- not $15.4 million -- to run the arena.
    But for all the importance a potential move has had in the talks, a critical question has gone mostly unaddressed: What are the chances the Pacers could move elsewhere?

    According to experts familiar with the business of sports, the answer -- overwhelmingly -- is that it's not likely.

    A limited number of cities that could offer the Pacers an enticing deal, coupled with the difficult conditions for small-market NBA teams, makes moving a tough prospect for many franchises. Add a complicated contract with the city and a team owner known for his loyalty to Indianapolis, and the potential of the Pacers packing up becomes that much slimmer.

    To some analysts, that raises another question echoed by many taxpayers:

    Why aren't city leaders driving a harder bargain with the team?

    City leaders say even a minuscule chance that the team could leave puts the city at risk of losing a huge economic engine. They point to Seattle, which lost its NBA franchise two years ago to Oklahoma City, as an example of an unexpected move that cost the city.

    And they dispute being easy negotiators. They have not presented a final offer, but so far, they have not caved to the Pacers' requests that the city write a check for Conseco operations. Instead, they've insisted that if they help, it will be in taking over the arena.

    "That's not what the Pacers came to us with," said Paul Okeson, a CIB member who has been involved in the negotiations. "If anything, I would argue we probably are being more stern than administrations and mayors of the past."

    The market

    Contributing to experts' doubts about a departure is that the Pacers have a deal in Indianapolis that could be hard to beat.

    They play in a public arena, rent-free, and get to keep all of the revenue from events at the building, which the team must pay to run.

    Still, there are impediments to their success here. A relatively small media market and corporate base mean less revenue for the team. And they have to compete with the Colts for fans and corporate sponsorships.
    But even with Indianapolis' shortcomings, many question whether the franchise could find a better arrangement.

    The cities not already served by the NBA are markets comparable to Indianapolis, said Marc Ganis, president of SportsCorp, a Chicago-based consulting firm that has advised NBA teams.

    The Oklahoma City franchise is an example that small markets can support a team, but most experts say that situation is the exception, and it's uncertain how Oklahoma City -- with a metro-area population of 1.2 million -- will fare over a longer period of time.

    Ganis said it's unclear whether any of the current contenders could provide things such as stadium accommodations, guaranteed ticket sales and locked-in sponsorships, which likely would be needed to attract the Pacers.

    "Markets not served by the NBA today all have question marks as to whether they'd be able to support an NBA team properly," he said. "A team does not relocate without having great certainty in the market to which it is going."

    Even cities that have been suggested as the most viable options bring their own challenges.

    Kansas City, Mo., with a metro-area population close to 2 million, has a new arena with no NBA tenant but has two professional sports teams to offer competition.

    Las Vegas has talked of building an arena, but some say a West Coast franchise such as California's Sacramento Kings have a better shot at locating there, especially since the Kings' owners have strong ties to Las Vegas: They own The Palms hotel and casino.

    Louisville, Ky., where an NBA-quality arena will open this fall, has a deal with the University of Louisville that would make sharing space with an NBA team less likely. Its metro-area population is similar to Oklahoma City's.

    All of those markets and others have the common problems of struggling municipal budgets and tough economic times, said Andrew Zimbalist, a sports economist at Smith College in Massachusetts. "The same stuff Indianapolis is confronting in terms of putting money into a team," he said, "those same obstacles would have to be overcome in any other city."

    The price tag

    Even if another city could overcome those challenges, other legal and financial factors could hinder a move.

    The Pacers can get out of their contract with the city -- but only if Simon not only moves the team, but also sells it.

    That point could be disputed in court, but the legal challenge would add a hurdle for Simon to relocate without selling.

    And if Simon were to attempt to sell the Pacers, experts say it would be tough.

    The Pacers have lost $200 million since Simon and his late brother, Mel, bought the franchise in 1983 for $11 million, team officials have said.

    Ganis said the NBA overall is projecting a $400 million loss this year, in large part because player salaries continue to skyrocket despite the economy.

    Given those sizable losses, it would require a daring investor to take on such a financial burden.

    "The Pacers are not joking they're losing a lot of money," said Larry DeGaris, a University of Indianapolis sports marketing associate professor. "There aren't too many buyers for a business that loses money."

    There's another financial disincentive, too: an estimated $50 million in fees a buyer would have to pay -- or Simon, if he attempted to keep the team and move it.

    First, there is a termination fee in the contract that is based on the team's sale price. Sports economists have estimated that price at $250 million to $300 million, minus taxes, closing fees and Simon's debt or personal investment in the team.

    The termination charge would be a percentage -- currently just less than half -- of that figure, and that percentage declines each year.

    The CIB estimated the fee to be $20 million if the team were to be sold next season, far less than some have assumed.

    Additionally, the NBA typically charges relocation costs. In the Sonics' move from Seattle to Oklahoma City, those costs were about $30 million.

    The link

    Perhaps the most telling factor in whether the team would move is Simon himself.

    Simon, 75, declined an interview for this story while negotiations continue, and Pacers spokesman Greg Schenkel also would not comment.
    But in an interview with The Indianapolis Star last month, Simon made his intentions for the team clear.

    "There has been no talk with anyone about selling this team," he said. "I'll continue to own this team."

    Those statements seem to reflect what many say is a long-standing commitment to the city -- and the team -- by Herb and Mel Simon. It was the Simons who swept in to save the Pacers when they were facing funding issues and relocation to Sacramento.

    The duo also have been credited with helping to save Downtown Indianapolis through the construction of the Circle Centre mall and the company's headquarters, as well as bolstering the community with philanthropic efforts.

    "It's (Simon) at the table," DeGaris said. "You have to look at (the Simons') history with the city."
    Come to the Dark Side -- There's cookies!
    Tags: None
  • #2
    Re: Star: Experts say a Pacers move unlikely

    The thing that frustrates me the most about the last paragraphs is the attitude it takes toward someone that has done some much for the city. It almost seems to be following a line of "Since Simon has so many ties here and has done so much for the city, take a hard line and screw 'em. For someone who doesn't have those ties [read: Irsay], give 'em whatever they want."

    Kind of backwards from what you would like to see, really.
    BillS

    A bird in the hand is worth two in the bush.
    Or throw in a first-round pick and flip it for a max-level point guard...

    Comment

    • #3
      Re: Star: Experts say a Pacers move unlikely

      So, it seems to me that another elephant is in the room that would not contradict anything we have heard so far that is not being mentioned, that being the possibility that Herb Simon is simply going as far as he can stand to before he simply gives up and shuts the franchise down entirely, and is trying to go as frugally as he feels he can going forward, because there are so many issues with the franchise from a financial and contractual standpoint that a sale is nearly impossible unless he basically gives it away for free except for being reimbursed the contractual penalties he will incur, which may not sit well with him. He may decide that he doesn't want to see anyone else take over the franchise and succeed with it where he ultimately could not.

      Comment

      • #4
        Re: Star: Experts say a Pacers move unlikely

        Originally posted by BillS View Post
        The thing that frustrates me the most about the last paragraphs is the attitude it takes toward someone that has done some much for the city. It almost seems to be following a line of "Since Simon has so many ties here and has done so much for the city, take a hard line and screw 'em. For someone who doesn't have those ties [read: Irsay], give 'em whatever they want."

        Kind of backwards from what you would like to see, really.
        I did not at all get the impression that was the author's intent, or especially the intent of the city.

        Comment

        • #5
          Re: Star: Experts say a Pacers move unlikely

          Originally posted by Brad8888 View Post
          So, it seems to me that another elephant is in the room that would not contradict anything we have heard so far that is not being mentioned, that being the possibility that Herb Simon is simply going as far as he can stand to before he simply gives up and shuts the franchise down entirely, and is trying to go as frugally as he feels he can going forward, because there are so many issues with the franchise from a financial and contractual standpoint that a sale is nearly impossible unless he basically gives it away for free except for being reimbursed the contractual penalties he will incur, which may not sit well with him. He may decide that he doesn't want to see anyone else take over the franchise and succeed with it where he ultimately could not.
          This is, of course, the possibility few talk about and that would probably not displease anyone in the NBA. It would save 25% of the perpetual fees to the Spirits, and the league would probably do better by having a brand-new expansion franchise somewhere rather than a move that carries the baggage of the Pacers.

          When you figure he has lost $200m over the life of a franchise valued (but not by an actual offer on the table) at $300m, there is a definite argument to be made for simply taking the loss.

          The other point of view is that going frugally at this time satisfies any number of possible future plans, including keeping the franchise going. It isn't like the monetary actions are going to harm the team at this stage. IF the Pacers are still here in 2011, THEN the actions taken with the extra cap space will be telling. Right now, though, it's just as easy to call it not throwing good money away for no reason.

          The only thing worse than Ron Artest hoisting an NBA trophy would be an adjacent headline announcing the folding of the Pacers.
          BillS

          A bird in the hand is worth two in the bush.
          Or throw in a first-round pick and flip it for a max-level point guard...

          Comment

          • #6
            Re: Star: Experts say a Pacers move unlikely

            Originally posted by BillS View Post
            This is, of course, the possibility few talk about and that would probably not displease anyone in the NBA. It would save 25% of the perpetual fees to the Spirits, and the league would probably do better by having a brand-new expansion franchise somewhere rather than a move that carries the baggage of the Pacers.

            When you figure he has lost $200m over the life of a franchise valued (but not by an actual offer on the table) at $300m, there is a definite argument to be made for simply taking the loss.

            The other point of view is that going frugally at this time satisfies any number of possible future plans, including keeping the franchise going. It isn't like the monetary actions are going to harm the team at this stage. IF the Pacers are still here in 2011, THEN the actions taken with the extra cap space will be telling. Right now, though, it's just as easy to call it not throwing good money away for no reason.

            The only thing worse than Ron Artest hoisting an NBA trophy would be an adjacent headline announcing the folding of the Pacers.
            Maybe the CIB and Pacers should approach the former Spirits owners estate(s) and see if they would be willing to "invest" in keeping this portion of their cash cow alive by allowing the Pacers to not pay as much, if anything, for a while to them in the interest of hopefully receiving payments from them in the future. I am sure that this is a relatively small drop in the bucket compared to the actual losses, but every little bit helps.

            As far as Artest hoisting an NBA trophy adjacent to a story of the Pacers folding, I suspect that this may almost be the only offseason that those two things could occur at once, and the Pacers appear, at least, to be committed to the upcoming season at this point, and I don't think that the Lakers will be quite as strong overall next year (just a hunch without anything to back that up).

            Otherwise, why would the Pacers even bother with the current negotiations? I would guess that they want to see what the new CBA ends up being and how that changes their overall outlook before making any decisions regarding any folding of the franchise. If the CBA negotiations don't yield major results in favor of the owners, I would suspect that the league will be contracted to fewer teams, with the Pacers, Hornets, Grizzlies, and Timberwolves being fairly likely candidates to fold, and the Bucks and Warriors possibly as well, with a Lebron-free Cleveland also in danger to an extent.

            The league would then have much stronger teams with higher quality play, and the wealthy teams would not have as much of an advantage talent wise as they currently do. I also would not be surprised to see a shortening of the season to reduce the wear and tear on the athletes and overall costs of medical care as well as travel expenses while attempting to charge a somewhat higher price per ticket to support the still outrageous player salaries.

            My head is starting to hurt, and my antidepressants are being overwhelmed by this post, so I think I will stop now...

            Comment

            • #7
              Re: Star: Experts say a Pacers move unlikely

              Brad and Bill are probably onto something.

              The future collective bargaining agreement is the big wildcard. The Pacers will be a profitable enterprise if player salaries can be brought down. Until then, they need to bleed as little as possible.

              They are at the short-term shutdown point, but the costs of shutting down (by selling or ending the franchise) are high. The best option is to keep the new Fieldhouse deal short-term and wait out the new CBA. If the team is going to succeed anywhere, the new CBA will be a big part of the reason. And if that is so, then it will benefit the team in Indianapolis as much as anywhere. If not, then perhaps league will be happy to let the team shut down.


              And I won't be here to see the day
              It all dries up and blows away
              I'd hang around just to see
              But they never had much use for me
              In Levelland. (James McMurtry)

              Comment

              • #8
                Re: Star: Experts say a Pacers move unlikely

                Pull some moves for other expiring contracts and if they're good enough to help us into the playoffs then we should negotiate an extension.

                What comes to my mind is Michael Redd for Troy and Mike.

                Although injury prone, he still has the potential to play like his regular self and the Bucks don't really have a spot for him anymore since they have Jennings who is similar to Redd in PG form.

                Comment

                • #9
                  Re: Star: Experts say a Pacers move unlikely

                  Minor nitpick......but can someone update the title to "Experts say a Pacers move to another City unlikely"

                  When I saw the title, given the time of year and the draft ending...instead of thinking that the Pacers won't likely move to another city ( for whatever reason )....I thought the Experts were saying that the Pacers wouldn't make a move ( as in a trade involving the Pick or anything ) after landing the 10th spot.
                  Ash from Army of Darkness: Good...Bad...I'm the guy with the gun.

                  Comment

                  • #10
                    Re: Star: Experts say a Pacers move unlikely

                    Originally posted by CableKC View Post
                    Minor nitpick......but can someone update the title to "Experts say a Pacers move to another City unlikely"

                    When I saw the title, given the time of year and the draft ending...instead of thinking that the Pacers won't likely move to another city ( for whatever reason )....I thought the Experts were saying that the Pacers wouldn't make a move ( as in a trade involving the Pick or anything ) after landing the 10th spot.
                    Woops.

                    Then this is great news.

                    Comment

                    • #11
                      Re: Star: Experts say a Pacers move unlikely

                      Originally posted by CableKC View Post
                      Minor nitpick......but can someone update the title to "Experts say a Pacers move to another City unlikely"

                      When I saw the title, given the time of year and the draft ending...instead of thinking that the Pacers won't likely move to another city ( for whatever reason )....I thought the Experts were saying that the Pacers wouldn't make a move ( as in a trade involving the Pick or anything ) after landing the 10th spot.
                      Title of the article. Blame them.
                      Come to the Dark Side -- There's cookies!

                      Comment

                      • #12
                        Re: Star: Experts say a Pacers move unlikely

                        This was the "print only" article that was the front page of the Sunday Indianapolis Star.
                        ...Still "flying casual"
                        @roaminggnome74

                        Comment

                        • #13
                          Re: Star: Experts say a Pacers move unlikely

                          I agree with the article in that the best thing we have going for us is Herb Simon himself and I seriously doubt he wants the team to move as long as he's alive. That would hurt his image in the city

                          Comment

                          • #14
                            Re: Star: Experts say a Pacers move unlikely

                            Originally posted by Putnam View Post
                            Can you please explain this concept a little more, including what we are seeing in this chart?

                            Thanks!
                            “Success is not final, failure is not fatal: it is the courage to continue that counts.” - Winston Churchill

                            “If you can't be a good example, then you'll just have to serve as a horrible warning.” - Catherine Aird

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                            • #15
                              Re: Star: Experts say a Pacers move unlikely

                              As a Seattle native, I would tell all of you to not listen to any expert.

                              The downsizing of a great franchise like the Sonics to a meager, unknown city like Oklahoma City and the process in which it was done (a raping and pillaging of the team within two years, and then they up and left) makes anyone vulnerable. Whatever the dictator Stern wants, he gets. If the Des Moines market looks good to Stern and wants to build a $400 million facility, he'll move your beloved Pacers there.

                              Seattle is a city of 3.3 million people and they moved our franchise to a city of 1.2 million. Anything in this f**ked up league is possible.

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