Two years ago, projections of a $47 million annual deficit sent Indianapolis’ sports and convention board begging for help.
Now a financial turnaround — aided by boosted tax revenue and ongoing cost-cutting measures — has left the Capital Improvement Board flush with cash reserves and a budget well into the black. A report released Monday shows that as of November, in the most recent figures available, the CIB’s budget for 2010 was running an $11.5 million surplus
The CIB’s budget had forecast a $5.2 million deficit by that point — meaning, officials say, that the board’s financial position is actually $16.7 million better than expected.
For CIB officials, who have come under fire for giving millions to the Indiana Pacers and other controversial decisions, the prospect of financial stability, at last, brings relief.
“I feel like we’re in a position to self-determine what the future looks like,” CIB President Ann Lathrop said, adding that a strategic plan is in the offing this year. “(Gaining) stability is probably the biggest change we’ve had.”
The CIB operates the Indiana Convention Center and the city’s professional sports facilities.
Perhaps the strongest indication of its financial strength is its cash reserves, which stand at $62 million, according to Dan Huge,
the CIB’s chief financial officer. In May 2009, reserves had fallen to $26 million, their lowest recent level.
But don’t expect to see any money returned to taxpayers.
Huge and Lathrop said their lesson from the crisis is that the CIB’s heavy reliance on hotel and food and beverage taxes — which take a hit during a recession — requires deeper reserves. That will help ensure a strong bond rating for the CIB’s debt, they said.
Lathrop said 40 percent to 50 percent of the operating budget — set at $73 million in 2011 — is the new minimum she hopes to maintain in reserves. The excess in there now is needed for upcoming expenses and to guard against uncertainty, she said.
“It’s important to remember that our revenue is basically at 2007 levels,” Lathrop said.
The increase in reserves — and the rapidly improved financial picture last year — comes with a caveat.
Food and beverage tax receipts and admission taxes beat projections last year as the economy began improving and cost-saving moves continued. But a large chunk of the improved financial position was due to unplanned sources of money, which accounted for about $6 million of $9 million in excess revenue through November. The CIB had planned for $75.9 million in revenue.
The CIB received $2 million in delayed sports district tax revenue from the state. And the city provided the first $4 million installment of $8 million in property tax proceeds from an economic development fund that will be provided annually to offset most of the CIB’s support for the Indianapolis Convention&Visitors Association.
Since November, the board has received the second $4 million installment from the city. It also recently received a $9 million loan from the state that was part of a rescue package approved by state legislators during the 2009 session.
The 2009 legislative package expanded the sports district, which provides tax revenue, and authorized a 1 percentage point increase in the hotel tax for the CIB.
At the same time, the CIB slashed expenses, laid off employees and reduced executive staff salaries. Some repairs have been put off for a year or two, an effort that continued this year, along with trimming spending on supplies.
Lathrop said CIB officials opted to take the state’s loan last month at a low interest rate to provide more budget cushioning.
Two years ago, the CIB’s crisis was spurred by several factors. The board was scrambling for a way to cover a $20 million deficit to run the recently opened Lucas Oil Stadium. Unanticipated loan and insurance obligations brought on by the world financial crisis hit the CIB with $43 million in costs.
And there was the prospect of the Pacers bolting town unless the CIB agreed to help pay for operating Conseco Fieldhouse.
Last summer, the CIB agreed to pay the Pacers $30 million, split evenly over three years. The first $10 million installment was paid in July, and the second is due this month. The CIB also agreed to spend $3.5 million on improvements to Conseco.
City-County Councilman Brian Mahern, a Democrat and a frequent critic of CIB spending decisions, said he was “happy that the CIB is doing better.”
“One does have to wonder about the reliability of forecasting when you see that wide of a swing,” he said. “It’s difficult to hear that the CIB is running surpluses when we still don’t have a long-term solution for libraries.”
Some observers have expressed doubt that the CIB’s situation two years ago was really so perilous, but Lathrop disagrees.
“We came clean with what we found and the challenges we were facing,” Lathrop said. “The sky was falling, quite frankly. It was not an exaggeration at all.”
Cost-cutting continued throughout 2010, Huge said. Through November, operating expenses were $51.1 million, or $6.6 million under budget. The CIB had spent an additional $22.4 million on its debt obligations.
The austerity has given the CIB breathing room to begin taking on some capital projects and repairs it had put off. Last month, the board approved spending $2.6 million to replace carpeting in the older part of the convention center so that it matches floor coverings in an expansion that opens this month.