Wednesday, April 25, 2012

Details on renovation financing start to emerge

I'd like to think that some day, Wrigley Field will actually be renovated (or better yet, torn down).  And while it has been only 5 years since the Tribune Company first proposed, publicly, a major overhaul of the stadium, the process to actually get it done has seemed like it has taken 50 years to this point.

Today over at Crain Chicago Business, Greg Hinz, who has been more on top of this issue than just about anyone else, reported on some of the details to what the Cubs are looking at as far as a deal right now.

Here is a pretty simple run down of what the Cubs supposedly want:

  • The Ricketts family will pay $200 million to construct the mythical Triangle Building.
  • The state will issue about $150 million in bonds to pay for 50% of the reconstruction of Wrigley.
  • The Ricketts family will pay $150 million to pay for the other 50% of the reconstruction of Wrigley.

So the overall estimate for the actual renovation is $300 million right now.  One thing to take note of here is that that terms "reconstruction" and "rebuild" are being used.  This could be Hinz just being a little presumptuous here, or it could mean that this renovation is going to be a bit more extensive than I've been led to believe, which is good.

Now it has seemed that the Ricketts family has been unable or unwilling to pay much more than $200 to $250 million total for these projects.  Right now, with this proposal, the Ricketts family would be paying at least $100 million more than their original proposal made a year and a half ago.  How do they intend to pay for this?

Hinz make quick mention of this, but this actually has been described a bit more in detail a few weeks ago when Rahm Emanuel was going around saying that a deal was close to being done.  It looks like the plan is to relax the landmark status of Wrigley to allow a number of things to happen to increase revenues to help pay for this renovation including:

  • Increased signage around the ballpark and in the bleacher area
  • Closing off another street around the ballpark (probably Sheffield) during day games to allow more concessions and other money making ventures.  (Remember, Waveland is already closed off to traffic during games.)
But there is an interesting twist here that is actually related to the $150 million that the state will generate with the sale of bonds.  To pay off the bonds, the city and county would forfeit the first 6% of revenue growth from the amusement tax.  Basically, that means, for the short term, the number of dollars the city and county get from the amusement tax would remain relatively flat...Hinz says around $15 million...unless the revenue growth is over 6%.   

From what we understand in the matter, based on what Hinz said today and what we've seen previously, if the Cubs, who I believe are the biggest contributors to the amusement tax, have a revenue drop, they would make up part or all of the difference here as a guarantee that the governments involved continue to get at least the amount they had received in previous years.  But at the other end of it, and here is were the city, county and state might balk at this whole deal, if the amusement tax increase is over 6%, the Cubs would get 50% of the extra revenue.  

The Cubs will probably argue that since they are one of the biggest payers of the amusement tax, they should get a little bonus back from it since the significant increase in amusement tax revenue is likely to be due to an increase in Cubs ticket sales.  A renovated Wrigley Field, which the Cubs helped pay for would be the major contributing factor to that.  I would also imagine (but this isn't stated anywhere) that the revenue grab by the Cubs would also be justified as being needed for continuing minor work that the 100 year old ballpark will require on a yearly basis even after the renovation.  

The city, county and state are going to have a seriously hard time giving up that money.  I don't blame them.  And I would think that other local teams would be upset by this too.  If the White Sox have a really good year and their amusement tax payments increase significantly, that would, in turn, put money directly into the pockets of the Cubs...unless that 6% is only based on the amusement tax that the Cubs pay (but that is not stated anywhere).  

So what motivation does the city have for going along with this deal?  Well, as I stated a few weeks ago, the motivation likely came from the 2011 Cubs.  It is pretty much accepted as a fact that the Cubs, for the first time in a while, actually paid less in amusement tax last year because of a drop in attendance.  

Not only did the Cubs actual attendance drop, but the rooftop owners ended up paying less in amusement tax as well and probably had a larger percentage drop than the Cubs even had.  This combined with the dismal attendance the Sox had last year suddenly puts the amusement tax at risk.  An un-renovated Wrigley, regardless of how good or bad the team is, is going to stall out the amusement tax.  And if the team can't renovate the ballpark, they will have to move...and any number of communities in Cook County would love to give the Cubs some pretty nice deals on tax breaks and land to build a ballpark.  At that point, the amusement tax would be in big trouble.  This is a card the Ricketts foolishly has not played, which is good for public relations, but probably not good business.  (Don't you think Mark Cuban would be on the phone with Schaumburg right now?)  

The realization that in order for the amusement tax to remain a viable revenue generator for the city, Wrigley must be renovated has changed the minds of some politicians.  With that realization, the city will have to invest something into it.  

I'm not sure this money grab by the Cubs to siphon off part of the amusement tax increases will fly...and, honestly, I don't think it should...but it definitely appears that both sides are moving toward a compromise here meeting somewhere in the middle of what the Ricketts family had originally proposed in November of 2010.  

I know it is frustrating to see the ballpark crumbling while everyone tries to figure out how to pay for this thing, and it is frustrating to see that a private sports owner is going to get some form of public money to get their own building renovated, but this is the reality of the situation.  I don't expect a real solution to finally be approved for at least another year...especially since it appears the governor and the state legislature seem pretty opposed to anything regarding Wrigley Field at the moment.  

As sad as it sounds, that means we are probably not looking at a renovation to start until after the 2014 season at the earliest.