Wednesday, March 11

Pacer Situation Looking Awfully Familiar to Sonic Fans


History, consider yourself repeated.

An NBA team playing in a publicly funded arena about one decade old and with a 40-year history, is threatening that the lease under which they are playing is just not cutting it anymore, and while they don’t want to leave …

Stop me if you’ve heard this all before.

Except this time, the words are uttered not from Seattle, but from the heartland of basketball, Indiana. As in the home of Hoosiers, Larry Bird, and Bob Knight.

It’s the standard woe-is-me routine deftly practiced by all professional sports owners, but some of the declarations from the Pacers would stagger even the staunchest NBA supporters. Among them:

- The team has lost money in 26 of the 28 seasons Herb Simon has owned them
- Included in those 26 money-losing seasons is the year Indiana advanced to the NBA Finals before losing to the Lakers
- The team has lost money in nine of the ten seasons it has spent in Conseco Fieldhouse
- The current tab is $200 million in losses since Simons bought the club in 1983

Why is this coming out now? Well, as part of their lease with the city for the Fieldhouse, the Pacers are able to renegotiate the contract during a small window which, naturally, is right now. In other words, there’s no time to waste, and Mr. Simon really hates to bring this up, and he’s a good corporate citizen, and he loves Indianapolis, but that $15 million the Pacers are obligated to spend every year to operate Conseco? Yeah, that’s too much to handle.

Of course, it should also be pointed out that the Pacers are estimated to be worth $300 million, or $289 million more than when Mr. Simon bought them more than two decades ago, but who’s counting? (Actually, the Pacers are, and they dispute that number. They claim the team’s losses exceed whatever “golden egg” of a sale would net them. They wouldn’t say what they’re worth, or provide evidence as to why Forbes magazine’s estimate is faulty, but they did cross their hearts and hoped to die.)

Not everyone is buying what Mr. Simon is selling, though. Acccording to information from Forbes Magazine, the team actually made money for six consecutive seasons, ending in 2006 when the Pacers were a disaster both on and off the court. (And by the way, what the heck happened in 1999? Was Indiana writing down the debt on Vern Fleming’s leisure suits?*). The Pacers, naturally, refute Forbes’ calculations, although they refused to provide any evidence beyond their own words to back up their argument.

While on the topic of charts, I’d also like to take issue with the graphic the Star presented as a sidebar to the story, listing the Pacers’ annual salary expenditures. This is the chart here:

Pacers' Player Expenses

The ostensible reason for putting this artwork with the story is to buttress the Pacers’ argument that escalating player salaries are to blame for the team’s dire financial situation. Taken by itself, the chart is fine, but when you look at the statement accompanying it, it becomes a joke.

“PLAYER EXPENSES This price tag, which includes benefits and bonuses, is the second-highest in the 10 years the Pacers have played at Conseco Fieldhouse.”

Think about it for a minute – do you see why that statement is so wrong? It’s called inflation, people! To compare 2008 numbers with 1999 numbers without any adjustment for inflation that’s … well, that’s just dumb. In fact, if you adjust for inflation, there are at least four instances in the past ten years when the Pacers have spent more money on player salaries than this year. See below:

Pacers' Player Expenses, With Inflation

Of course, that doesn’t jive with Mr. Simon's assertions about how woeful his current predicament is, but that’s to be expected from someone in his position, although it does help his other argument about how crappy his annual financial situation is. I’m just surprised that no one at the Star thought to run that chart by someone in the Business section.

But enough bemoaning the Star, and back to the Pacers.

If you’ve lived through the Sonics’ situation you know that extortion is the name of the game in these encounters, and the Pacers are certainly armed and ready to do battle in that sort of contest. In fact, they even have a former Seattle resident on hand to lead the parade.
“I've seen it, I lived it for 18 months in Seattle and it was painful,” Don Welsh, a 40-year resident of Seattle and now the President of the Indianapolis Convention and Visitors Association told WTHR-TV. “Losing a basketball team strips away some of the fabric of a city and Seattle is still mourning the loss. I'm hopeful it won't get that point here.”

And, of course, the requisite comments about what would become of Conseco should the Pacers leave town were flowing fast and furious, with one official asking, “What would you rather have, the Pacers or cat shows?”

That argument is one that we hear in Seattle as well, and I think it deserves further examination. Follow along with me, please, as we explore the methodology:

1. Team and city co-exist in harmony with older arena which perfectly suits the needs of both
2. Team grows tired of arena, demands new one
3. City balks, as existing arena is more than satisfactory for other, non-basketball activities
4. Team threatens to leave
5. City gives in, builds new arena, demolishes old arena
6. Team and city co-exist in harmony with new arena
7. Team grows tired of new arena/lease, demands new one
8. City realizes that because it is still on the hook for new arena, it can’t afford to lose its major tenant
9. City and team try to squeeze more money from taxpayers

Am I missing anything here? Essentially, by forcing the city to build a new arena, the team has painted the city into a corner and essentially given themselves the ultimate trump card in perpetuity, as the city desperately needs the team so that it may continue to pay down the debt on an arena it never needed but the team demanded.

Sickening, right? And yet, it’s the exact same situation in Indianapolis as it is in Seattle. Because Seattle rebuilt KeyArena, it is obligated to have a team fill it up with nightly activities, or else KeyArena becomes a giant white elephant with cat shows. Because Indianapolis built Conseco Fieldhouse, it is obligated to have a team fill it up with nightly activities, or else Conseco becomes a giant white elephant with cat shows.

More sickening still, digest what Simon has said, that the Pacers have lost money in 26 of 28 seasons. Is that really possible? 26 of 28 is 93%, meaning that for the past three decades the Pacers are more effective at losing money than the best free throw shooters in history have been at making free throws. Ask yourself, do you really believe that Herb Simon would own a business which was better at losing money than Rick Barry was at making free throws?

And is it possible in a year when the Pacers advanced to the NBA Finals, playing more than a dozen home playoff games to sell out crowds, and all the accompanying merchandise, concession, and parking sales, etc, etc, that this team lost money? Did that really happen?

There are two answers. Yes, it did, in which case the NBA is a horrible investment for both Mr. Simon and the city of Indianapolis, because if the Pacers can’t even make money with an NBA Finals appearance and a new stadium to boot, well, they must be an investment of which only Bernie Madoff would be proud.

Or, no, it did not, and Mr. Simon is flat-out distorting the truth to advance his case for concessions from the city.

Take your pick.

[*-Obviously, the deficit in '99 was due to the lockout. Like David Stern, I guess I had tried to block that year out of my mind.]

14 comments:

Paul Merrill said...

Two words: Vern Fleming.

Anonymous said...

And by the way, what the heck happened in 1999?

Lockout.

Chris said...

Hehe, looks like our pal Aubrey McClendon is in some more trouble.

http://news.moneycentral.msn.com/ticker/article.aspx?Feed=MW&Date=20090310&ID=9683985&Symbol=CHK

Karma's a bitch ain't it Aubrey? Here's to hoping you end up taking in the ***.

Marcus P said...

I say that the Pacers will relocate and I hope its Seattle . I would love to see a team there again.

MarkJacksonShimmey said...

As a life long Pacers fan, I won't be sad to see the Pacers go. Here's the real kicker. If the team has truly lost money in the past 26 of 28 years, why now? Why, all of the sudden, do the losses seem to matter? Did they not matter in the 22nd year? The 15th year?

Bottom line is professional sports hold cities hostage. I'm all for seeing them go, and I'm a die hard Pacer supporter.

GrantS said...

GrantS

Anonymous said...

Simon is probably lying. It's not possible losing all those money. Sounds like a tactic to scare the city.

nuss said...

The bizarre aspect of all of this is that my two favorite NBA teams in history have been the Sonics and the Pacers. Those mid-90s Pacers/Larry Brown teams were just wonderful and my nomination for best team not to win a title (non-Sonics division, anyways). AD and DD, Reggie, Jackson, McKey, Fleming, Smits ... just a great combination of talent.

Tommy G. said...

Here's a dead serious proposal:

Tear down the NBA and start over from scratch.

Seriously.

Once we get this year long lockout over with, let's get a HARD salary cap in place, put a COMPREHENSIVE revenue sharing plan in place, and then follow that with contraction, relocation, and dispersal drafts.

That's how we solve the problem and the NBA shouldn't come back until they get it right.

boombaby said...

If you wouldn't be sad to see the Pacers go, then how the heck can you call yourself a die-hard Pacers fan?

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