INTRODUCTION

For the past 17 seasons, the Indianapolis Colts have called the RCA Dome home. Since departing Baltimore on a snowy night in February of 1984 the Colts have been a source of pride for the city once known as “Naptown”. Prior to the arrival of NFL Football in Indianapolis, we had the Indiana Pacers as our only major league sports team and the biggest auto race in the world each year. The Pacers were mired in mediocrity. Attendance was poor and there was talk the team would have to fold or be moved to another city. The Colts brought civil pride and membership into the exclusive club of cities with NFL franchises.

An NFL game is an event that is unique in sports. As opposed to Major League Baseball, the National Basketball Association or the National Hockey League, its teams play only once per week during the season. Sure NASCAR races once each week, and they are “events”, but the races are held at different track each week. The NFL schedule allows for the team to play 8 games each season at their home stadium. On Sunday’s and Monday nights in the fall and early winter, the NFL games dominate sports headlines and highlight shows such as SportsCenter.

Anyone who has been to a Colts or any other NFL game knows how much fun it is and if you’ve been to the RCA Dome when the Colts are playing well and winning, then you know how charged the atmosphere is.

Now the Colts ownership have come to the conclusion the RCA Dome no longer meets their needs. Financially, they claim, they simply do not have a large enough stadium. There are not enough of the luxury suites that bring in large amounts of revenue. Not enough club seating that places a premium on the best seats. Not enough regular seating to generate enough revenue to make owning an NFL franchise as lucrative as it should be.

To meet their needs the team has decided that a new, 82,000 seat, open-air stadium needs to be built. A new stadium will allow the team to sell more luxury suites, club seats and more tickets, thus allowing them to compete financially with the larger market teams.

But there are issues that must be explored before the Colts and the city of Indianapolis decide to proceed with the construction of a new football palace. Attendance over the past 17 years, costs of building and financing and weather are some major concerns when contemplating a new stadium, especially one outdoors in Indianapolis. Those issues will be the focus of our report. We will look at costs of other stadiums that have been built recently and how those costs were covered. We will look at attendance at Colts games since their arrival in Indianapolis and project what those numbers could mean in a new, larger stadium. And we will look at the weather in Indianapolis during the months of September through January (the NFL season).

After presenting our findings, we will make our recommendations on whether or not we feel the Colts should proceed with their new stadium proposal.

The convention center opened in 1972 at a cost of $26.1 million. In 1984, an expansion added the 60,200 seat Dome and two exhibit halls. The entire expansion was completed at a cost of $94.8 million. The RCA Dome, which opened as the Hoosier Dome cost $77.5 million. In 1999 renovations to the Dome were completed at an additional cost of $20 million.

The Indiana Convention Center and the RCA Dome is managed by the Capital Improvement Board of Managers, which was created in 1965 by the Indiana General Assembly and empowered to finance and manage capital improvements.

Revenue bonds sold in May 1991 financed the cost of convention center renovations and refinanced the current debt. The facility receives only excise taxes to pay off revenue bonds. Excise taxes are hotel/motel tax, food and beverage tax, professional sports admissions tax and cigarette tax. These taxes are still in place today.

Since 1992 the United States has opened 10 new NFL stadiums, the following list is a chronological order of the opening of these stadiums.

In 1992, Atlanta opened the 71,228-seat Georgia Dome for a cost of $214 million. Financed by industrial revenue bonds that are guaranteed by a private letter of credit. Debt service is paid with dedicated revenue without taxpayer risk. Dedicated revenue is generated from stadium operations, leasing executive suites, club seats and a portion of hotel/motel tax.

In 1995, a $135 million renovation of the Gator Bowl, renamed Alltel Stadium became home to the Jacksonville Jaguars. 90% of its cost was paid by the city of Jacksonville. With $49 million G.O. bonds paid from the general fund, $2 million annual state sales tax rebate and $1.25 per ticket surcharge. Additional infrastructure cost of $28 million is paid from a 2% lodging tax.

The Trans World Dome opened in St. Louis during 1995 at a cost of $260 million. 100% of its cost is from the taxpayers. 50% paid by the State from the general fund, 25% paid by the County from 3.5% lodging tax and 25% paid by the City from convention center revenue.

Ericsson Stadium in Charlotte, North Carolina opened without a burden on taxpayers, $187 million privately funded through the sale of permanent seat licenses. This stadium seats 72,250 patrons in the open air.

78,600 seats are in the large Jack Kent Cooke Stadium near Washington D.C. The Washington Redskins financed this stadium themselves and paid a mere $90 million. Infrastructure cost of $70.5 million is paid from the Highway Trust Fund.

In 1998, Baltimore built the 69,300-seat, open-air PSINet Stadium for $210 million and this is paid with tax exempt and taxable bonds.

That same year Raymond James Stadium in Tampa Bay opened for $169 million and seats 65,000 in the open-air. The stadium is funded with community investment bonds.

1999 saw the opening of Cleveland Browns Stadium by Cleveland Ohio welcoming their football team back to town. City, state, county, Regional Transit Authority, Cleveland Tomorrow and the Cleveland Browns to cover the $290 million price tag, made contributions. This open-air stadium seats 72,000.

The Tennessee Titans also got to play in their new open-air stadium during 1999. The Adelphia Coliseum, funded by bonds and permanent seat licenses, cost $165 million.

2000 was the year Cincinnati’s Paul Brown Stadium opened for a whopping $450 million. This open-air stadium seats 70,000 and is paid with state bonds. The state of Ohio will pay a maximum share of $60.4 million.

At present there are 5 new stadiums starting construction and should open in the next couple of years. Look for new stadiums in Denver, New England, Pittsburgh, Seattle and Detroit.

Ray Keating, Chief Economist for the Small Business Survival Committee in his informal survey of taxpayer-funded sports stadiums found that from 1990 to 2000, 10 new NFL stadiums cost taxpayers a total of $2.68 Billion in inflation-adjusted 2000 estimated dollars. In 2001 and 2002, $2.1 billion will build six new NFL stadiums, at a cost to taxpayers of $1.2 billion.

“Football teams and leagues are just like any other businesses,” continues Keating. “If certain teams have a rough time competing against others due to different markets or stadiums, that’s a problem for team owners and league officials to resolve. Taxpayers should not be asked to bail them out.”

So what about the economic benefits that are supposed to come to neighborhoods surrounding those stadiums? Keating insists those benefits will be small – and certainly not enough to offset the damage caused by higher taxes.

“While a few businesses around a new stadium might see some benefits, that is generally offset by the net negative for businesses elsewhere,” Keating writes. “In addition, all businesses and individuals suffer from higher taxes tied to football subsidies.”

Industry experts estimate that more than $7 billion will be spent on new facilities for professional sports teams before 2006. Most of this $7 billion will come from public sources. The federal government sets up subsidies that allow state and local governments to issue tax-exempt bonds to help finance sports facilities. Tax exemption lowers interest on debt and so reduces the amount that cities and teams must pay for a stadium. Since 1975, the interest rate reduction has varied between 2.4 and 4.5 percentage points. Assuming a differential of 3 percentage points, the discounted present value loss in federal taxes for a $225 million stadium is about $70 million.

Most large cities are willing to spend big to attract or keep a major league franchise. But a city need not be among the nation’s biggest to win a national competition for a team, as shown by the NBA’s Utah Jazz’s Delta Center in Salt Lake City and the NFL’s Houston Oilers’ new football stadium in Nashville.

· People who attend games or work for the team generate new spending in the community, expanding local employment.

· A team attracts tourist and companies to the host city, further increasing local spending and jobs.

· All this new spending has a “multiplier effect” as increased local income causes still more new spending and job creation.

According to The Brookings Review, these arguments contain bad economic reasoning that leads to overstatement of the benefits of a stadium. Economic growth takes place when a community’s resources, people, capital investments, and natural resources like land become more productive. Increased productivity can arise in two ways: from economically beneficial specialization by the community for the purpose of trading with other regions or from local value added that is higher than other uses of local workers, land, and investments.

Building a stadium is good for the local economy only if a stadium is the most productive way to make capital investments and use its workers.

At Oriole Park, about a third of the crowd at every game comes from outside the Baltimore area. Baltimore’s “baseball exports” are enhanced because it is 40 miles from the nation’s capital, which has no major league baseball team. Even so, the net gain to Baltimore’s economy in terms of new jobs and incremental tax revenues is only about $3 million a year. Baltimore has an investment in Oriole Park of $200 million, about 67 years to recover the investment.

Promotional studies estimate that the local annual economic impact of the Denver Broncos was nearly $120 million; another estimated that the combined annual economic benefit of Cincinnati’s Bengals and Reds was $245 million.

Brookings disregards these claims and feels that these promotional studies overstate the economic impact of a facility because they confuse gross and net economic effects. Most spending inside a stadium is a substitute for other local recreational spending, such as movies and restaurants. Similarly, most tax collections inside a stadium are substitutes: as other entertainment businesses decline, tax collections from them fall.

Leagues maximize their members’ profits by keeping the number of franchises below the number of cities that could support a team. To attract teams, cities must compete through a bidding war, whereby each bids its willingness to pay to have a team, not the amount necessary to make a team viable.

Sometimes referred to as monopoly leagues, leagues convert cities’ willingness to pay for a team into an opportunity for teams to extract revenues. The tendency of sports teams to seek new homes has been intensified by new stadium technology. The rather ordinary cookie-cutter, multipurpose facility of the 1960s and 1970s has given way to the elaborate, single-sport facility that features numerous new revenue opportunities: luxury suites, club boxes, elaborate concessions, catering, signage, advertising, theme activities, and even bars, restaurants, and apartments with a view of the field. A new facility now can add $30 million annually to a team’s revenues for a few years after the stadium opens.

ATTENDANCE

Since the Colts are looking to increase seating capacity nearly 50% we thought it important to look at the attendance figures for the team since their arrival in Indianapolis in 1984.

For the 1984 through 1998 seasons, the Hoosier/RCA Dome had a seating capacity of 60,200. Following the 1998 season, the Dome was reconfigured to its current capacity of 56,100. This reconfiguration was done to add luxury suites and a club seating area in the lower level between the 40-yard lines to increase revenues.

Let us look deeper into the actual attendance figures where, over the course of 17 seasons some trends have developed.

Since the team arrived in Indianapolis, their overall record has been 114 wins and 157 losses. A winning percentage of 42. Their home field record is 66 wins and 70 losses. That translates into a 48.5 winning percentage. Not stellar numbers, but not the worst in the league.

We can see the team has a mediocre record but how does that translate into fans? In 1984, their inaugural season in Indianapolis, the Colts drew 481,305 fans. Be it the newness of NFL Football in town or just curiosity, this will turn out to be the teams’ largest season attendance by percentage. The team turned in a dismal 4-12 record, but the crowds remained steady throughout the season. The following year, the team was only able to muster one more win and attendance began to suffer. In fact, the last game of the 1984 (first season) season drew a capacity crowd (a crowd of 100% or more) and it was not until November 8, 1987 that the team once again had the dome filled. The 1985 season started with 6 home games that all achieved greater than 99% capacity. By game 7, however the 60,200-seat dome hosted 56,740 fans and by the last home game of the season, the figure dropped to 55,818. At this point it looks like the newness and curiosity had worn off and fans would not continue attending games if the team was not winning.

Those who have been around the sports scene for a long period of time know that this city is notoriously fickle and the fans will not come out to see a losing team. For example, the NBA’s Indiana Pacers suffered with poor attendance for many years before Larry Brown became head coach and made them a perennial playoff team.

The Colts 1986 season had the dome host 59,012 fans for the home opener. That figure represented 98% capacity. It would be the largest crowd of the season. By the seventh home game of the season, only 47,950 fans showed up. It was the first time the team failed to fill at least 80% of the dome. For the season, attendance was down to 91.9% of capacity. The team finished the season a dismal 3-13 and was 1-7 at home. It was becoming obvious Indianapolis would not fill the stadium unless the Colts were winning.

A work stoppage during the 1987 season produced some interesting results. For the season, attendance was down to 90.7% of capacity. This could be attributed to a game played at the Dome with replacement players that drew only 34,927 fans. However, the team was winning and would go on to capture the AFC Eastern Conference crown. In fact, more than the posted capacity of 60,200 attended three of the last 4 games. Proof that the people of Indianapolis would support the team if they were winning.

The Colts did not make the playoffs the following 2 years despite finishing 2^nd in the AFC East. Their 9-7 mark in 1988 and 8-8 for the 1989 campaign were enough to keep the fans coming back. Reversing a trend that started after their first year in town, attendance figures actually rose. The 90.7% low point of season attendance for the 1987 season rose to 97.2% for the 1988 season. Figures remained relatively stable for 1989.

Those trends would not carry over into the 1990’s. The team began a decline that was again reflected at the box office. A 7-9 record in 1990, followed by a 1-15 mark in 1991, saw ticket sales drop well below the previous low mark of 90.7% set in the strike year of 1987. By the end of the 1992 season, one in which the team actually played a little better claiming a 9-7 record, the season attendance was down to 81.4% of capacity for the season. During the 1990 through 1992 seasons, only four games brought in more than 59,000 fans. Two of those games were against the Miami Dolphins who always draw well, the Denver Broncos and the Chicago Bears, who have many fans in central Indiana from prior to the Colts arrival.

The 9-7 record from 1992 did help the 1993 campaign. Attendance rose to 84.7% of capacity for the season. Unfortunately, the Colts failed to hold up their end of the bargain and posted a 4-12 mark. As expected, attendance dropped again for the following season. For the 1994 season attendance sagged to 82.3% of capacity. That season the Colts improved their record to 8-8.

The 1995 season predictably saw an increase in attendance to 91.49%. And for once the Colts didn’t disappoint! The team finished the season with a 9-7 record, but more importantly, made the playoffs as a wild card team and made a nice run just missing the Super Bowl. For whatever reasons, though, the fans did not come flooding back to the dome. In fact, the 1996 season attendance figures dropped slightly to 90.9% of capacity. The team finished with a 9-7 record again and again made the playoffs, but were promptly beaten.

Two straight seasons in the playoffs seemed to pay off in 1997, as attendance rose to 93.7% of capacity. The team, however, was once again on a down turn. Despite the support from the home fans, the team limped home with a 3-13 record. For 1998, attendance again suffered, dropping back to 91.6% of capacity. The team once again finished 3-13.

After the 1998 season, the Colts used money from the city and from the dome naming rights deal with RCA to reconfigure the stadium. Seating was decreased to 56,127 and revenues were increased due to the addition of more luxury suites and club seating. Ticket prices were raised at faster pace than ever before since they had come to Indianapolis from Baltimore. In fact going into this season, tickets for seats outside of the 30 yard-lines and in the lower level have risen from $26 per ticket in 1984 to $65 per ticket this year. That represents a 150% increase.

With the lower capacity goals, the team has been able to sell out every game the past 2 years and the no shows are almost non-existent. On the other hand, the team has posted records of 13-3 and 10-6 for the 1999 and 2000 seasons respectively. Those records should encourage attendance.

The reality, however, is more likely that the team will continue to suffer through seasons of mediocrity as well as prosperity.

What does that mean in relation to building a new stadium that will hold nearly 50% more than the RCA Dome? If attendance drops to 90% the number of empty seats in an 82,000 seat stadium would be 8,200. If attendance dropped to the lowest level of 81% like the 1992 season. There would be more than 15,000 empty seats. Those numbers in the current configuration would only be 5,600 and 10,200 respectively. If the team continues to win at it’s current pace, it may still be over ambitious to think the team will draw more than 80,000 fans to games in late November and December. If the team fails to win at it’s current clip, the new stadium’s attendance percentages will make the lowest figures from the Dome look good.

Keep in mind that the rules in the NFL today promote parity and so-called dynasties such as the Steelers of the 1970’s, the Forty-Niners of the 1980’s and the Cowboys of the 1990’s will not be able to form. With salary cap restrictions, it get’s harder to keep your players together, therefore, harder to win year in and year out.

Based on these observations and the attendance figures over 17 years, the Colts should strongly consider whether a larger stadium would actually generate their desired revenue.

Finally, when making a move from an indoor to an outdoor stadium, you must take weather and climate into account. The weather in Indianapolis could not be considered severe, but it is far from perfect.

The NFL season starts in September and runs through the Super Bowl, which will be played on the first Sunday in February from now on.

The weather in September is very nice. Average high temperatures of 78 degrees and lows average 56 degrees.

From there, however, decreasing temperatures and increasing precipitation are the norm. The average high temperature in October is 64 degrees, by November the number has dropped to 50. December highs average only 37, while January falls to 32. The low temperatures for those months are 42, 32, 21 and 15 degrees respectively.

Precipitation also becomes a factor in autumn. From an average monthly amount in September of 2.87 inches, precipitation rises to 3.34 inches per month by December.

Snowfall, while not a major problem in October with an average monthly amount of just .4 inches can become troubling as the season wears on. November snowfall amounts are 2.6 inches, Decembers’ are 6.8 inches and January, while getting less rain, averages 9.2 inches of snow per month.

Keep in mind these are norms developed over 100 years of weather record keeping. They are averages, which almost without fail don’t tell the whole story. Anyone who attended the Colts games last season can remember the torrential downpours on the Sunday of the first game of the season. Once again on September 25^th, we were hit with a deluge prior to the Monday night game. By the time of the Monday night game in December, temperatures dropped to zero, with wind chills of minus 10 degrees. The game on Christmas Eve saw more temperatures in single digits and there was 8 inches of snow on the ground.

Now do these numbers mean that fans won’t come out in the cold or wet to watch games? The fans in Green Bay, Chicago, Buffalo and Cleveland watch their teams outside. Their climates are more severe than ours. Yes, the Colts will still draw fans if an outdoor stadium is built. And some fans feel it would rid the stadium of the casual “fan”. The more likely scenario is that a great many fans will sell their tickets to the November, December and January games because of the weather. Eventually this will lead to an erosion of the season ticket holder base and more empty seats.

We have taken a look at how some of the new stadiums are being financed. We have also looked at attendance at the RCA Dome over the past 17 years. And finally we studied weather patterns during the NFL season for Indianapolis. Some conclusions have become apparent.

Cities and teams generally have to work together for new stadiums to be built. Costs of these structures can be greater than $450 million such as the case in Cincinnati. Those numbers will only increase as time goes by.

In many NFL cities, municipal bonds have been sold to help raise the capital necessary for the construction of new stadiums. Another way cities have raised funds for construction of stadiums is to raise sales tax percentages. Indianapolis did this in the early 1980’s when money was needed for construction of the RCA Dome. Another popular way to raise capital is by taxing items usually used by visitors to the city. Excise taxes on hotel and motel rooms, car rentals and event tickets have been enacted to help raise revenue.

What has become apparent is that communities are willing to have these bonds and “user” taxes raised as long as they do not become too invasive. Property and income taxes seem to be off limits for lawmakers trying to help teams fund building projects.

And what of the people who neither go see the Colts or care anything about them? Should they be subject to these higher sales taxes? Studies have been done telling us how much of an economic impact having an NFL franchise can have. However, for each of those studies there seems to be another study refuting the findings and claiming the economic impact is not as great as stated.

But the fact remains that we do have a stadium that is not quite 20 years old. Economically, one must look at the loss of revenue for that facility if the Colts move to another stadium. What other events will leave the RCA Dome in lieu of a new stadium? Some events such as the NCAA Final Four will have to remain indoors.

And are there other uses for a new outdoor stadium in Indianapolis? The Colts currently use the dome for 10 games during the season, possibly more if they make the playoffs, and one or 2 days for a mini camp and open house in the spring. Those events would move to the new facility. Major League Baseball seems to have grown beyond its limits of marketability. Also the owners of the Major League franchises in Cincinnati, Chicago, Detroit and St. Louis are not likely to approve a team in Indianapolis due to their proximity to the fans here.

The XFL, an upstart, low-budget football league started by wrestling promoter and television network NBC seemed doomed after their first week. As for outdoor concerts, perhaps a couple of bigger name acts could possibly play in a large outdoor arena, but more likely would play at the Verizon Wireless Amphitheatre formerly known as Deer Creek.

So in essence, the Colts would have exclusive use of the new facility. Depending on their contribution to the funding of the project is the crux of the issue. It should be remembered that this is a franchise that moved from Baltimore because the city would not build them a new stadium.

Our research of the attendance at the RCA Dome since the Colts arrived here revealed what is very typical of the city of Indianapolis. If the Colts win, the fans come to the stadium; if they lose, the fans do not come to the stadium.

If winning and losing are the deciding factor in attendance, then what does that mean to a city of 650,000 citizens and am 82,000-seat stadium? As stated, the Colts have never surpassed their first season in town in attendance. A new stadium, if built this year and ready for the start of the upcoming season may have an impact like 1984 in attendance. Most people like new stadiums. A great many people will come out to see the team as much for the facility as for the Colts. But the data we have shows that the newness will wear off and if the team is not performing well, the fans will not go to the games.

So it may be over simplistic to think that attendance is only affected by the teams’ performance, but the numbers seem to bear this out.

Weather in Indiana is always a hot topic. From too hot to too cold, from too wet to too dry, there always seems to be plenty of weather to talk about. Judging from the weather statistics we compiled, Indianapolis in autumn can be just about anything. September is usually very moderate and well suited to football outside. After that, though, it can range from pleasant to awful. One fact is that we do have quite a bit of precipitation during the autumn. Anyone who has sat outside for any event in the rain knows how miserable it can be. On top of that, it’s just not healthy.

Another factor with the weather is the temperature drop as winter approaches. Sure there are colder cities with NFL teams. The difference is that those cities have had teams for long periods of time and have always had outdoor football stadiums. Call it spoiled, but Indianapolis has grown used to the comfortable confines of the RCA Dome.

Minneapolis, home of the NFL’s Vikings, used to have an outdoor stadium. In the early 1980’s the Hubert H. Humphrey Metrodome was opened and became the new home for the Vikings. With an aging domed stadium very similar to the RCA Dome the team wants a new outdoor stadium. There are many opponents to going back outdoors in the Minneapolis-St. Paul area.

The Detroit Lions once played outdoors at Tiger Stadium. In the late 1970’s the Pontiac Silverdome was opened in Pontiac, MI. The team is now preparing to build a new stadium and is moving to Auburn Hills, MI where the NBA’s Detroit Pistons play. The difference is that the new stadium for the Lions will be indoors.

We have concluded that cities with NFL teams are eager to keep their teams in town rather than have them move. Indianapolis is unique in the fact that the Colts had been an established franchise in Baltimore for many years. When the team relocated to Indianapolis, they were essentially given a brand new stadium, land for a practice facility and offices, tax breaks and were guaranteed revenue that equaled a sold out crowd for 5 years.

Now the team wants a new stadium and it is our recommendation that the team pay for at least 75% of those costs. We feel the city will be willing to help make a new stadium possible, but since Indianapolis gave the Colts the RCA Dome to play in at no cost to the team, then the Colts should not expect the city of Indianapolis to pay even half of the costs of a new stadium. Especially considering that the RCA Dome is not even 20 years old.

The Colts are considering a new stadium that will seat more than 80,000 people. We feel that figure is too high. Based on attendance since the Colts arrived in Indianapolis, the capacity of a new stadium should not exceed 70,000. Even this figure may be too high. The Colts are filling the Dome in its current configuration of just over 56,000. They were rarely able to sell out when capacity was more than 60,000. Based on those numbers, a new stadium should be 65,000 at maximum.

Other new stadiums have capacities between 65,000 and 78,000. Keep in mind that those that are on the higher end of that scale are in cities much larger than Indianapolis, such as Atlanta and Washington DC.

The Colts are indicating that the new stadium should be outdoors. This we find rather intriguing. Indianapolis’ weather during the NFL season can be summed up in one word: unstable. For a team who’s fans have become accustomed to watching football in a climate controlled environment, a move outside may have a negative effect on attendance. Something the Colts certainly could not afford if they were to build a larger stadium.

To summarize our recommendations to the Colts: First, be prepared to pay a large percentage of the costs. Don’t expect the city to buy you another new stadium. Second, keep attendance at a reasonable level of no more than 70,000 or better yet, 65,000. And finally, build a stadium with a retractable roof similar to SkyDome in Toronto so the fans can enjoy the pleasant weather we usually have in September, and can be comfortable when it is rainy or cold. Costs for such stadiums is high, but if the Colts want to stay in Indianapolis and keep attendance up, then these recommendations will be in their best interest.

DO THE INDIANAPOLIS COLTS AND THE CITY OF INDIANAPOLIS NEED A NEW FOOTBALL STADIUM?

ATTENDANCE