The developer pitching a bond-financed stadium for a second-tier pro soccer team in Indianapolis says it would bring economic development to the area at no risk to the city or the state government.
Indy Eleven owner Ersal Ozdemir, who runs the development company Keystone Group, a major player in Indianapolis real estate, pitched lawmakers on Thursday on a public-private finance plan to fund a $150 million, 22,000-seat soccer stadium.
“This is a once-in-a-generation opportunity to secure a permanent home for soccer in Indiana," Ozdemir said in his testimony before the state Senate's finance committee. "We simply cannot continue this positive momentum without a world-class facility in Indiana."
Ozdemir hopes a new stadium will boost the Indy Eleven into Major League Soccer. The team currently plays in the second-tier USL Championship.
Under the legislation he seeks, the Marion County Capital Improvement Board would manage the income and sales tax revenues captured from new development around the proposed stadium. Revenue would back bonds to finance the construction of the new stadium, which would be owned by the city of Indianapolis.
State lawmakers were already looking at assisting with renovations to the Bankers Life Fieldhouse, the arena that is home to the city’s professional basketball team, the Indiana Pacers. The CIB leases the fieldhouse to the NBA team, and would do the same for the Eleven's stadium under Ozdemir's plan.
The soccer stadium would be enveloped by a $400 million private development called Eleven Park, which would include restaurants, shops, offices, apartments and a parking structure at a to-be-decided location.
The proposal would see $11 million annual cap on revenue collected in the first 12 years to pay for the bonds that would finance the construction. All other taxes collected would be returned to state under the proposal, Ozdemir told the committee on Thursday.
Ozdemir has pledged that his six-year-old franchise would pay for any shortfalls if the development does not generate enough taxes to cover the cost of the stadium.
The proposal, outlined in Senate Bill 543 authored by State Sen. Jack E. Sandlin, R-Indianapolis, would implement a series of permissions ultimately overseen by the state budget agency.
Sandlin has proposed SB 543 be amended into SB 7, a separate bill currently in front of the Senate appropriation committee that proposes to create a funding mechanism for upgrades sought by the Pacers in return for a 25-year commitment to stay in town.
SB 7 would raise $8 million to $8.5 million annually in taxes for the Marion County Capital Improvement Board from 2022 through 2041 for the Pacers' arena and the board's other venues. The Pacers' current deal expires in 2024.
The Indiana Convention Center would receive $138 million in renovations as part of a larger project in the works since last fall that would give downtown Indianapolis one of the nation's largest ballrooms, a 38-story hotel tower and 1,400 additional hotel rooms.
Under the terms being discussed, the city would direct $138 million from special taxing districts for a 300,000-square-foot expansion of the center on Pan Am Plaza, including the ballroom. A covered walkway over Capitol Avenue would connect that space to the main convention center.
Thomas Cook, chief of staff for Indianapolis Mayor Joe Hogsett, said they are deferring to state lawmakers on whether they think the bill fits within SB 7.
“At this point it would be premature to express support for the development itself since we are still learning about it,” Cook said.
“That being said we are supportive of the fiscal mechanism that are contained in the bill because they are established, proven mechanism that are taxpayer friendly and as it is currently written won’t have significant financial impact on SB 7 and the work that the CIB has prepared over the last several years for its fiscal vision for its existing facilities,” he said.
“This project is not asking for any new taxes and not a single appropriation from city or state government,” said Matt Bell, a spokesman for Indy Eleven. “We are asking you to allow us to work with local partners to create a new taxing district to help finance a publicly owned stadium with no risk to the state of Indiana.”
Bell said that if lawmakers approved the legislation, Keystone would then enter into negotiations with the city and CIB to determine who would issue the bonds but that the bonds would be guaranteed by the developer.
“We would bond against those revenue to construct the stadium,” said Bell. “The bond would be developer-backed, so there would be no risk on the city and no risk on the CIB.”
Moody’s noted in a 2016 report on stadium finance that public bonds guaranteed by a developer are still at risk of falling short of expectations.
“A government's credit quality can be weakened due to the reliance on demand-based and potentially volatile revenue streams, such as hotel, car rental and sales taxes, to repay any issued debt and fund game/event day related expenses, such as public safety and traffic control.” Moody’s said. “If these revenue sources are insufficient, the government might have to make up the shortfall from other revenue sources. The government might also use its general revenues for these purposes, which can divert funds away from other essential government services.”
Earlier this month, city council members wrote a letter to the Senate committee supporting the funding proposal.
Bell said that support also came from the chamber of commerce and mayors from around the state. “More than 2,000 emails have been sent to legislators and council member asking for your support of eleven park,” Bell told the Senate committee.
Sandlin said in that the development would create more than 1,500 permanent jobs and about 2,000 construction jobs. “This is an important economic development for the city of Indianapolis,” he said. “The ask from the state is not a general appropriation but a capture of sales and income tax.”
The committee did not vote on the bill. It will return for possible amendments and a vote on Feb. 21.
If the state approves the funding mechanism, Ozdemir would begin lining up development projects, various approvals from the City-County Council, pick a location and attempt to land a Major League Soccer franchise.
Sandlin said on Thursday he thinks the project would be a good fit south of Lucas Oil Stadium, home of the NFL's Indianapolis Colts. The Indy Eleven play there now.
Coupled with the redevelopment of the former General Motors stamping plant on the west bank, he thinks the soccer stadium could be a game changer. But he told the committee he has no inside track on where the project might locate.
“Despite premature media reports, Keystone Group remains in the evaluation phase with regards to the eventual site of Eleven Park,” wrote Eleven Park spokesperson Tim Phelps in a statement. “We are evaluating multiple sites in Indianapolis and have no further comment on any site that has previously been or is currently under consideration for Eleven Park.”
Last week, Fitch Ratings affirmed its AAA ratings on Indianapolis’ bonds based on assessed property tax value and unlimited tax general obligations. S&P Global Ratings rates the property tax-backed bonds AA-plus. Moody’s Investors Service rated the city’s GOs and city’s issuer rating Aaa. The outlook from all three rating agencies is stable.
Kroll Bond Rating Agency rates the city AA-plus. The outlook is positive.
