INDIANAPOLIS — If the State Budget Committee approves a complicated and optimistic tax revenue diversion plan to pay for construction of a new soccer stadium in downtown Indianapolis, and if Major League Soccer grants an as-yet-unidentified ownership group the franchise rights to such a team, and if that ownership group can come up with roughly $750 million to bring the world’s game to central Indiana, a leading sports venue financing analyst says there’s likely no way the stadium will ever return dollar-for-dollar on the public investment it took to build out the site.
”The deals go bad when the public investment is really big because the benefits from the projects from an economic, from an urban development, from a social point of view simply don’t pay back in a really significant way,” said Dr. Judith Grant Long, Associate Professor of Sports Management at the University of Michigan. “And there’s literally thirty years of research examining every possible angle on this equation, and it’s just really difficult for any significant public investment in a sports venue to get pay back. It can get pay back a little bit, but it never gets pay back in full.”
Indianapolis Mayor Joe Hogsett has floated a plan for the city to build a $220 million soccer stadium at the site of the current Indy Heliport in the southeast corner of downtown. The soccer team’s ownership would be responsible for 20% of the cost.
Hogsett’s plan, still pending at the Statehouse, would cobble together the tax revenues from more than a dozen anticipated downtown development sites over the next thirty years to pay off the construction bonds.
The revenues generated in the Professional Sports Development Area projects would revert to the construction payoff but leave the general city budget and school districts empty-handed.
”You’re taking incremental property tax revenues from a certain set of properties around the venue and using them to pay off the construction bonds, which is commonly served up to the public as, ‘Oh, the venue will pay for itself,’ or ‘the public contribution will pay for itself,'” Long said. “But in fact, there is a real impact on the school districts and other major users of those property tax funds.”
Some of those diverted property and income tax revenues would be generated from projects such as the Bottleworks District and Stutz Building, which are already underway.
Others are in the planning pipeline, such as the Old City Hall project, which is yet to begin construction.
Still others, such as the anticipated redevelopment of the former Marion County Jail, aren’t even on paper yet or projected to return revenues until 2029.
A study commissioned by the mayor’s office estimates the developments will result in $3.3 billion in investment overall with other vacant properties and surface parking lots ripe for development to add to the PSDA revenue coffers.
Long said studies show such a strategy is optimistic or the results coincidental.
”It’s very difficult to prove causality,” Long said. “It’s very difficult ultimately to prove that the location or the provision of a sports venue in a specific location is what’s creating the environment for new private investment. This linkage that a lot of folks, in particular stadium proponents, like to create between the venue and incentivizing adjacent development, when we look at the research, it doesn’t bear out as being hugely significant.”
Long said new developments associated with the stadium site may merely cannibalize other existing businesses. She added that the soccer fans may spend their attendance dollars on the new franchise while ignoring Indy’s existing teams and sports.
”If you build a hotel downtown near your new MLS stadium, or you build new bars and restaurants and so forth near your new MLS stadium, the same substitution effect occurs,” Long said. “You’re not creating, through an MLS stadium, demand for a new hotel outside of the existing hotel demand in Indianapolis.”
The city’s study estimates near-sellouts at the proposed 20,000-seat soccer stadium beginning in 2028.
“The fans are gonna be choosing to not go to a Pacers game, they’re gonna be choosing to not go to a Fever game, so this is called substitution,” said Long, “And it’s one of the reasons why we don’t see tremendous economic benefits from a new sports venue because the folks who live in Indianapolis only have a certain amount of disposable income every year, and if they now have the MLS to choose from, they’re gonna have to choose to not do something else.”
Long said what is harder to quantify are the intangibles — the enhancement of the city’s major league sports reputation, Indy’s national image and the social cohesion that comes from the civic pride of rallying around a professional team with the word “Indianapolis” emblazoned across its jerseys.
”This could really work with the Indianapolis sporting strategy, which has always been an important part of economic development in Indianapolis,” said Long. ”I think Indianapolis is pretty well-established on the map, certainly on the sporting map of this country, so I think the incremental brand build from the MLS venue is not necessarily going to be huge, but having an MLS team is something Indianapolis could chase given its market size where there are some other major league sports that aren’t as good as a fit that the market size might not support, so an MLS team is probably a good strategy.
”It could generate activity during the summer months, in particular.”
