No matter whether you’re watching March Madness in the stands, in Alaska or in Key West, you helped finance Indianapolis’ Lucas Oil Stadium, the site of the NCAA men’s Final Four. That’s because the bulk of the money used to build the indoor field that’s also home to the NFL’s Colts was raised tax-free, using $666 million in municipal bonds various Indiana agencies sold starting in 2005. Municipal bonds appeal to investors because the interest paid to those who buy the bonds is exempt from federal taxes. Muni bond buyers are usually high-tax-bracket people looking for ways to sidestep taxes, and in return cities and states get a way to fund essential services. Seen another way, however, providing tax-free income to the more fortunate is effectively a subsidy from the federal government that equals millions of dollars annually for a project the size of Lucas Oil.
In the case of Indianapolis, exactly how much federal tax exemptions subsidize the stadium is difficult to know. The Lucas Oil Stadium is financed through deals that are complex even by byzantine muni bond standards, consisting of various tranches of bonds issued by multiple authorities and mainly designed to pay a variable interest rate, rather than the more typical fixed rate established at the first sale of the bond. The complexity even caught out government officials: In the late 2000s Indiana authorities entered a deal with Wall Street to hedge against the risk of a rise in the interest rate they’d have to pay out to stadium bond holders. Instead, interest rates fell, and by 2015 it was clear the hedging deal was ill-conceived. That year, Indiana authorities paid Goldman Sachs $71 million to end the hedge, according to The Indianapolis Star. How did Indiana raise that money? Issuing new muni bonds. The end result is that today, 16 years after first issuing $666 million in bonds, the stadium still has $635 million of debt on taxpayers’ books, which will cost probably $450 million in interest payments through 2035, based on information in the latest annual report from Indiana Stadium and Finance Authority.
Lingering muni subsidies aren’t new. Taxpayers are still paying for the Hoosier Dome (later called the RCA Dome), the former home of the Colts and five NCAA basketball Final Fours—which was blown up in 2008. Some of the money originally issued in 1981 to build the now-extinct facility is still being paid off, having been refinanced inside larger bond issues floated in the 2000s to expand the convention center next to Lucas Oil Stadium onto the old dome’s site. How much? “It is not practical to allocate an exact debt amount to the RCA Dome,” a municipal authority told The Indianapolis Star in 2018. A year later, Indiana again refinanced some of the convention center debt that can be traced back through regulatory filings to the original 1981 financings.
The new date the Hoosier Dome will be paid off: 2039.
Sportico will be publishing one short business highlight every weekday (and on some weekend days) during the three-week NCAA tournament.
March 18: The NCAA’s Billion-Dollar Empire is Built on Basketball
March 19: How Much is an NCAA Tournament Win Worth?
March 20: Men’s vs. Women’s NCAA Tournament Money
March 21: Indexing the NCAA’s Corporate Sponsors
March 22: Largest Financial Mismatch Produces Biggest Upset
March 23: As Top Seeds Lose, Sportsbooks Win
March 24: #NotNCAAProperty Reaches Millions Online
March 25: Sidelined in 2020, TV Advertisers are Back in Force
March 26: Loyola’s Rambling Flutie Effect
March 27: Juwan Howard vs. Dawn Staley Money Matchup
March 28: The Other NCAA Men’s Tournament is a Profit Machine
March 29: UCLA, Under Armour Ignore Each Other During Run
March 30: Odd Start Times A Result of Cash Crunch
