Last week, Crain’s Chicago Business had a good article discussing the financial issues that the city is facing with the current Bears stadium. Even though the Bears are trying to scam another city into paying for a new stadium, their current one continues to cost the city of Chicago millions of dollars. Basically, the city is running out of money to pay for contractual upgrades to the stadium along with continuing to fund debt payments.
In the past, the city has used hotel taxes to pay for upgrades and debt payments. But presently, the city is short about $9 million dollars. This number includes the $5 million dollars that the city gets yearly from the state of Illinois.
But it gets worse. The debt payments are going to start rising substantially over the coming years. Over the next two decades, the city will see their yearly debt payments go from $53.5 million in 2023 to over $90 million in 2032. It has gotten so bad that the Illinois Sports Facilities Authority will likely need to ask for a five-year pause in debt payments, so the city can catch up financially.
“ISFA sees an additional five years as needed to smooth out a steeply rising debt service schedule, but that would require state approval. While the structure would remain in place, the city and state would be refunded for their $5 million subsidies” – Bond Buyer, 05/18/23
Why is the city paying this money to the stadium? What happens if the city can’t pay through hotel taxes? This started about 20 years ago when the Bears were talking about relocating yet again because of stadium issues. The city caved in gave them $415 million for substantial upgrades.
Thankfully, proponents of this deal claimed that these upgrades would allow the Bears to “generate much more income” and so many other things that never even remotely materialized.
“It’s going to bring economic development, it’s going to bring jobs, it’s going to bring $140 million for minority- and women-owned businesses” – Bears President Ted Phillips, 09/26/01
But included in this deal was language that essentially forces the city to pay up if the hotel taxes are not enough. The bill also allowed for the team to demand upgrades on things not remotely necessary. Like when the Bears wanted to upgrade their video boards which were not broken, and it cost the city about $7 million.
Now, as the Bears tout their financial awesomeness to anyone willing to build them a new stadium, the city of Chicago sits with $743 million dollars in debt. Does anyone look at this deal and wish that they were in the city of Chicago’s shoes? Apparently, one city does. That is the only explanation that I can come up with when I see a story about a city near Chicago discussing whether they should take “anticipated property-tax revenue from schools and (give) it to the (Bears)”
Furthermore, when are cities and states going to learn not to rely on hotel taxes as their saving grace with sports stadiums? In 2018, 11 NFL facilities, 5 MLB stadiums, 3 NBA arenas, and 1 NHL arena were funded by hotel taxes. Since 2018, a number of new cities have also used hotel taxes as their funding source for a new sports home, like the Tennessee Titans this year.
But few cities are seeing any actual financial success using this model for paying down arena, ballpark and stadium debt. Much like Chicago, Cleveland has had quite the history of trying to pay for their new sports homes using hotel tax revenues. Today, Cleveland uses sin tax revenues (just in case you didn’t know, a sin tax is a tax on specific goods and services due to their perception to be harmful or costly to society) to pay for their 3 professional teams newest arena, ballpark, and stadium.
They don’t use hotel tax revenues anymore because even though city officials were proclaiming publicly about the sports homes being an economic windfall, the actual hotels were seeing zero effect from them.
“(Cleveland)’s Convention and Visitors Bureau was supposed to pay back part of their loan through extra tax revenues supposedly earned from increased hotel taxes caused by the presence of new stadiums. But a lengthy negotiation ensued over this issue, with the hoteliers arguing that they were not making any money from the new ballpark and arena, despite all the public pronouncements of economic windfall” – Public Dollars, Private Stadiums: The Battle over Building Sports Stadiums Paperback, 2003
Several years ago, New Mexico spent $72 million of public money on a new ballpark for their minor league team. It was financed through a 2% increase in hotel taxes added to guests at local hotels. Even though the city proclaimed that the ballpark “would begin reimbursing (to) its general fund” right away, it did not. Fast-forward to today and the finances are not any better.
I know this is slightly off-topic but when it comes to hotel taxes and sports, I always think of the Florida Panthers. In the late 1990s, residents of Broward County in Florida, gave the team over $200 million dollars to build a new arena and start playing in their city. It was financed entirely through an increase in hotel taxes.
Years later, in 2014, the Panthers gave Broward County a 57-page proposal that they came up with on their own. It is frankly one of the most one-sided offers that I have ever seen by a professional sports team.
The proposal asked for:
- The county to give them $80 million dollars from hotel tax revenues over the next 14 years.
- The county to buy and develop 22 acres of land near the Arena and turn it into a casino-hotel.
- Instead of the team being charged $4.5 million annually for debt purposes, the county could now pay for that expense.
- The county to give the team $500,000 per year for arena maintenance.
- The county to start a $7.5 million maintenance fund.
- Instead of the team, the county to be responsible for an annual $1 million property insurance fee.
- Instead of the team, the county to be responsible for any debts related to the arena.
- The team be allowed to change the profit-sharing agreement with the county so that all changes will now favor the team…no really, every change the Panthers requested benefitted the team and not the county.
“The Panthers, in their new proposal for Broward County, altered language that would “make it more difficult for the public to receive a share of the profits at the publicly owned BB&T Center,” according to an examination of the proposal by the Sun Sentinel” – Sporting News, 03/18/14
But, here is what the Panthers said that they would do. The team will pay $500,000 every year for tourism to the city. Sure, the team was already doing this, but still, that is wonderful!
The Panthers saw the error of their ways and came back with a second proposal. This time, the Panthers would ask for the same amount from the city while not giving any more of their own funds. Again, this is what happened outside a few slight changes that made no difference financially speaking.
Eventually, the Panthers got some money like they always do.