Indianapolis has been home to the Colts since the team's controversial move from Baltimore in 1984. The city built the Hoosier Dome (later renamed the RCA Dome) for $82 million to house the team, but by 1997, just 14 years later, Colts owner Jim Irsay was advocating for a new stadium to boost revenue and ensure the team's financial viability. This article explores the economic challenges and considerations of maintaining an NFL franchise in a mid-sized market like Indianapolis.
The RCA Dome, originally seating 63,000, was reduced to 57,900 after renovations in 1998 aimed at increasing the number of luxury suites—a move that paradoxically made it the smallest stadium in the NFL. Despite these enhancements, the Colts ranked 27th in revenue and 29th in franchise value among the 32 NFL teams in 2003. Jim Irsay highlighted the difficulty in generating sufficient revenue, given the team's expenses tied to the NFL's salary cap, which is influenced by league-wide revenue averages.
Irsay argued that a new stadium with more luxury suites and higher ticket prices was essential for the Colts' financial health. He pointed out the disparity in suite numbers compared to top-earning teams; for instance, the Washington Redskins had 280 suites at their stadium, significantly more than the 104 at the RCA Dome. In 2002, the Redskins' total revenue was $227 million, compared to the Colts' $137 million.
The Colts' lease at the RCA Dome was set to run until 2013, with provisions allowing the team to break the lease early if their revenues did not meet the NFL median. By 2002, the Colts were approximately $13 million short of this median, leading to Indianapolis taxpayers subsidizing the team by about $12 million annually. This arrangement underscores the financial burdens often placed on taxpayers to retain NFL franchises.
Over the past decade, 21 of the NFL's 32 teams have received new or renovated stadiums, often heavily financed by public funds. On average, these stadiums cost $323 million, with taxpayers typically covering 65% of the costs. This trend raises questions about the sustainability and fairness of public funding for private sports enterprises.
The critical question remains whether the central Indiana market can support the increased number of suites, higher ticket prices, and overall greater revenue needed to justify a new stadium. Historical data suggests that even with new facilities, teams like the Cincinnati Bengals did not see a significant increase in revenue, indicating that a new stadium is not a guaranteed financial remedy.
Before committing to a new stadium, it is crucial to assess whether there is adequate demand for Colts tickets, luxury suites, and box seats. The anecdotal experience of unsold tickets at a sold-out game suggests that simply building a new stadium may not be enough to boost revenue without a corresponding increase in fan engagement and broader economic support.
The decision to fund a new stadium with public money should be carefully weighed against the potential economic benefits and the preferences of the local community. It is essential for stakeholders, including taxpayers and fans, to critically assess whether the long-term benefits of a new stadium justify the substantial financial investment.
Learn more about NFL stadium financing and explore the economic impacts of sports franchises on local economies.
(Originally published on November 16, 2004, and updated with recent data and analysis.)
The Pitfalls of Government-Funded Stadiums: A Cautionary Tale from Indianapolis
In the late 20th century, Indianapolis undertook a bold but risky venture by constructing the RCA Dome, a massive stadium built on speculation without a guaranteed tenant. This $82 million investment, supported by a county-wide hospitality tax and a substantial grant from the Lilly Endowment, initially seemed like a visionary move. However, the stadium quickly became outdated, leading to calls for a new facility just over a decade later. This scenario underscores the complexities and potential pitfalls of government involvement in large-scale infrastructure projects aimed at boosting local economies through sports.
Serfs had it better
With our present taxation, you and I control less than 50 percent of what we earn, while a mere majority of our local, state and federal representatives – about 360 people – control more than 50 percent of our earnings.
Government schools vs. parents' rules
I usually hold up Indiana’s constitution for the libertarian principles that it embodies, such as individual liberty and self-responsibility. However, in the area of education, Indiana’s constitution is downright communitarian or, shall I say, socialistic.
