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Saturday, August 16th, 2008

The Sustainability of Urban Amenities

This week’s Indianapolis Business Journal runs a great article on the need for significant upgrades to the IU natatorium and track and field stadium, as well as the Indianapolis Tennis Center. The natatorium and track were built in 1982 for the Pan Am Games and were state of the art facilities at that time. However, they’ve basically been allowed to decay since then, with the result that they need significant upgrades to retain the major events they currently host. What’s more, without these world class facilities, the sanctioning bodies that were key to the amateur sports strategy’s long term, sustainable competitive advantage may leave. IUPUI owns the facilities, but they are not core to the university’s mission and they do not have revenue streams to pay for maintenance.

This failure to maintain the legacies of the past has been something that has plagued Indianapolis, as well as other cities. Millions of dollars are invested to create state of the art buildings and landscapes, but then they are not maintained over time and eventually fall into decay. The visual blight that results is a major negative whose impression on visitors and locals cannot be overstated.

Here, for example, are two pictures showing the current state of Pan Am Plaza


What message do you think this was sending to the folks at GenCon this week? Or any other visitors who cross this plaza.

The city spent millions to redo the streetscapes around Circle Centre Mall when it opened, but look here what the railings around the flower beds on Washington St. look like today.


There’s nothing wrong with these plant beds a simple coat of paint wouldn’t fix. But there hasn’t been any money dedicated to this.

I could give many more examples. The newspaper boxes the city installed a few years back are mostly horribly rusted, for example.

This week the city held its grand opening for the brand new, very good Lucas Oil Stadium. But the city doesn’t even have the money budgeted to operate it yet, much less maintain it in a state of the art condition over the years.

One important lesson from this, something everybody in business knows, is that capital investments come with an operating tail and a depreciation tail. And that preventive maintenance today is the best way to avoid major repairs later. Unfortunately, all too often in the civic space the focus is on getting to the ribbon cutting, but beyond that the operations and maintenance are not priorities. In fact, government entities typically don’t even depreciate their capital stock on the operating budget side of their books. This is a major “shadow expense” that isn’t always well understood.

Fortunately, there are signs that local leaders understand this problem. The budget for the Indy Cultural Trail, for example, includes an endowment to pay for the trail’s maintenance. Without this, there is little doubt the trail would just be left to decay over time like everything else. The IMA’s Art and Nature Park also has an endowment component to sustain that park. Indeed, their entire institution operates off an endowment such that admission is free.

I think this is the model that ought to be followed. Before pulling the trigger to built a major public capital asset, leaders should make sure that revenue streams are available to pay the operations and maintenance. For things that involve public fundraising campaigns, the original fundraising goals should include an endowment amount to cover this. Now that perhaps isn’t going to cover the periodic “capital refresh” that you have to do when facilities reach end of life or major mid-point milestones (and perhaps the natatorium and such fall into this category). But for those some type of long range plan or map needs to be put in place. Again, just like the private sector – for example, condo associations who do reserve studies – does every day. Then you at least know when the major repairs are probably coming, and try to plan for them.

6 Comments
Topics: Sustainability
Cities: Indianapolis

6 Responses to “The Sustainability of Urban Amenities”

  1. thundermutt says:

    By and large, the issue is that the deferred maintenance often piles up so big for so long that the facility must go away.

    If folks need a new car, a new roof or a new driveway or a new sewer or water lateral, most don’t pay cash from their reserves. For major capital “refreshes”, most individuals borrow.

    I don’t have a big problem with the CIB or the City borrowing to do major updates on capital assets in midlife or nearing the end of their lives. (The Natatorium comes to mind.) Then that cost DOES get built in to the tax base in the form of debt service.

    I liked the suggestion in the newspaper article about creating a nonprofit entity to own and manage the facilities. Even better: use one of the existing entities, such as Indiana Sports Corp., Capital Improvement Board, or even Indianapolis Downtown, Inc. Probably an entity with bonding capacity and some measure of accountability to the Mayor, such as CIB, is the best choice. Or perhaps the Marion County Building Authority?

  2. thundermutt says:

    Above, I really meant to say the cost of borrowing “DOES get built into the ongoing government expenditure base, which is covered by tax revenue”.

  3. The Urbanophile says:

    thunder, I didn’t mean to suggest with that reserve study example that cities would actually build up a pre-funded cash reserve. But the concept of a long range view of the expected capital refresh cycle would be very helpful.

  4. thundermutt says:

    (gasp)

    You mean “world class facilities” don’t last forever?

  5. Anonymous says:

    Government never considers maintenance because they always intend to blind the masses with bright shiny objects to distract them from the decay that envelopes them. Maintenance is a nuts and bolts item that does not interest them. They would rather govern by crisis management anyway.

  6. CoryWilson says:

    IUPUI/DT Indy really need these facilties and it is imperative that they be well-maintained or replaced. IUPUI has a growing basketball program that needs better “digs.” A new gym is not unnecessary for that program.

    As a sports fan, I have watched a lot of the Olympic coverage the past week +. I can’t think of any other city, besides Beijing, that has been mentioned more than Indianapolis. That has EVERYTHING to do with so many of the governing bodies being based here. We got those groups because of our outstanding facilities and if we don’t keep them happy, another city will.

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