CHICAGO — Indianapolis and the Indiana Pacers are expected to sign a short-term lease to keep the team in town as talks continue over whether the city will take over paying $18 million in annual operating costs at the Conseco Fieldhouse, which the team has previously paid.

Last week, officials said it was likely the team would sign a new three-year lease in lieu of a long-term deal, in part because the team’s financial future is linked to the National Basketball Association’s collective bargaining agreement with the NBA Players Association. The players’ agreement expires next June.

The announcement comes before a Pacers-imposed deadline of June 30 to reach an agreement with the city or leave town.

The team has said for more than two years that it cannot afford the $18 million a year that it costs to run the 10-year old, $200 million city-owned fieldhouse.

But the Marion County Capital Improvement Board, which runs the city’s sports stadiums and convention center, has faced its own deficit until this year.

Taking over the operating costs for the Pacers would mean CIB was responsible for those costs on top of its existing obligation to pay for the stadium’s capital improvement projects and service on its outstanding debt.

“There have been discussions related to challenges the Pacers have had for quite some time, but there wasn’t much to negotiate with, given that we had no money,” said Ann Lathrop, the CIB’s president, who took the position in January. “We’ve been trying to get our financial picture in order,” she added. “The revenues have continued to decline up until recently with a little bit of an uptick here, but we’re cautious. It’s a slow recovery.”

The CIB’s fiscal improvements are due largely to a revenue package put together by the city and state last year. Among the new revenues are a 1% increase in the city’s hotel-motel tax and an expansion of the board’s Professional Sports Development Authority. The expansion allows the CIB to capture tax revenue from four hotels connected to the Indiana Convention Center. Together the two revenue sources are expected to generate an additional $11.5 million a year.

The state also loaned the CIB $9 million last year — interest payments begin in 2013 — and will provide loans to CIB in 2010 and 2011 on an as-needed basis.

For the first four months of the year, the CIB has generated $3.5 million of positive cash-flow compared to a loss of $1.9 million for the same period last year, said Dan Huge, the CIB’s chief financial officer.

“We’re starting to see the fruits of hard work from last year,” Huge said.

The CIB and Pacers continue to meet several times a week to hammer out a deal. Lathrop said an agreement could be reached any day.

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