Wednesday, April 4, 2012

It's been a let's talk about a rich owner asking for money.

Paying for the renovation? Here we go again.

The Sun-Times (and since, the Tribune) has been reporting since yesterday that a deal between the city and the Cubs to finance renovations to Wrigley Field is nearing completion.

The Sun-Times updated the story a little while ago to say that a source has told them that the deal will likely include using some portion of the amusement tax, which was part of the initial plan that the Ricketts family had proposed in November of 2010.

Overall, I thought the initial deal was a relatively fair one...especially since the Cubs (via the Cubs fans) have been paying the amusement tax for a couple decades now and have contributed more to that tax than anyone else without seeing any benefits from it.

The initial plan was immediately panned by almost everyone but Al Yellon and myself (ugh!) and was obviously not sold very well to anyone including those who needed to vote on the measure in the city and the state.

I'm not completely sold that the amusement tax will actually be used here. The plan was originally said to be a "non-starter" by new mayor, Rahm Emanual. It does not seem like Rahm to back track from a statement like that.

If indeed amusement tax funds are used, then some pretty good explaining will need to be done to sell this to the public. The Sun-Times story states that the Cubs have added a guarantee to their amusement tax payments that would help insure the city against any reduction in revenues from things like a drop in attendance. I suppose that is a starter, but I don't think it really does much to really settle the situation.

Adding TIF district around Wrigley would seem to be a more logical choice for this as it will affect the people who most directly benefit from Wrigley Field.

None of this, though, really resolves the issue here that the Cubs are asking the government, or more precisely, the Illinois Sports Facilities Authority, for $200 to $300 million to rebuild the stadium. That money will need to be generated through the sale of government backed bonds that the ISFA has the authority to sell. The State of Illinois is still in a pretty nasty budget crunch...perhaps even worse than it was when the initial deal was proposed so nothing has really changed.

So the few people that actually support this idea have these two statements that they always use: This was how the Soldier Field nightmare was financed and his was how Comiskey Park (US Cellular) was financed. Here is the problem...both Soldier Field and Comiskey Park are publicly owned buildings. Wrigley Field is not. Wrigley belongs to the Ricketts family. What's in it for the public if they finance the renovations? The promises never live up to the realities when building stadiums. Yes, Wrigley Field and the Cubs are a large economic engine in the city of Chicago that brings in millions, perhaps tens of millions, of dollars to the local economy every year. To lend $200 million or more to a private company to help it expand its profits is a pretty hard sell in days like these.

But what might have changed in the last 18 months that might have made some people a little more receptive to this deal? Well, I'd like to offer this possibility...the 2011 Chicago Cubs and Jim Hendry. Attendance dropped significantly last year, and the Cubs had a hard time selling some of their more expensive seats. The result is that revenues from ticket sales dropped and, more importantly, the amount of money the Cubs paid in amusement tax also dropped. I don't know all the details of the amusement tax and how that money is distributed, but I do know the city gets a nice chunk of change from the amusement tax every year and that amount is based off the surplus after the bond funds are properly financed. The city likely received less money from the amusement tax from the 2011 season and that probably didn't help with an already horribly tight budget.

To maintain the health of the amusement tax revenues, it is in the best interest of the city and all involved to help the Cubs maintain their attendance. Without that renovation, believe it or not, attendance will not regain the levels we saw between 2004 and 2009. That has nothing to do with how to pay for the's just a fact that everyone should agree to...Wrigley must be renovated or revenues will drop.

Should the Ricketts family be paying for all of this? Throwing in the cost for the mythical Triangle Building, the cost of the entire renovation project is going to run anywhere between $400 million and $600 million. (This of course means it is going to cost $600 million because these types of project never run at budget.)

I still say that the Ricketts family royally screwed up when they bought the team. I believe they allowed their love of the Cubs and of Wrigley Field to blind them as to the true nature of the work that needed to be done to the ballpark. I think they went into this thinking "oh, this season we can put a new restaurant in, and next season we'll put in a new section in the bleachers with a new scoreboard, and the year after that, we'll add a new bathroom."

The reality was, and the Tribune knew this and tried to sell the ballpark because of this, Wrigley needs to be gutted and rebuilt.

People keep stating the Fenway model as to what should be done to Wrigley. That really isn't the case. Now I haven't been to Fenway since the renovations there took place, but if we are talking about $200 to $300 million for a renovation (and doubling that amount if you add the Triangle Building) that will take place over 3 or 4 years, I’m pretty sure the project that is being discussed is quite a bit more significant than the renovations done to Fenway over the last 10 years.

Heck, I'm still not convinced that it is the right move for the Cubs to play at Wrigley while these renovations take place. I don't really see how a simple rehab of the current structure solves many of the problems the stadium has. But that gets into a discussion for another time.

The point here is that the Ricketts family probably expected to pay about $30 million a year to maintain and upgrade the stadium. After one year of owning the team, they decided that wasn't nearly enough...and they were right.

What else we know is that the Ricketts family doesn't have $400 to $600 million in cash on hand at the moment. Perhaps they could go back to daddy and ask for more money...but I don't think they'll get it. We also know that, for 2 reasons, the Ricketts family cannot take out a loan for this. First, the Cubs are already over the allowed debt limit that Major League Baseball allows a team to have. Assuming they have the money to pay for half the renovation, that would mean the Cubs would have to finance a minimum of $200 million of the renovations which is added to the $450 million (probably slightly less now) that they currently owe from the purchase of the team. After seeing the debt problems that the Mets, Dodgers and Rangers have had to endure, there is no way that baseball will allow the Ricketts family to increase their debt amount by 50%. The other reason they can't do this is because it is unlikely that the Ricketts family will actually get a loan for $200 million from any bank. Things have probably eased up a bit since the financial crisis hit, but it is still not all that easy to get a loan of any type right now.

So what should be done? I still say that the initial deal proposed in 2010, while it had some flaws to it, wasn't that that bad. The stigma of this being a public financing of the stadium will still hold true. The Cubs need a deal, the city needs a deal, and the businesses around Wrigley need a deal. As much as it pains me to know that Cubs fans more than anyone else have paid for Comiskey Park and Soldier Field, I think the amusement tax plan needs to be dismissed for a plan that affects people who more directly benefit from Wrigley. The Ricketts family should pay the $300 million for the renovation and then sell personal seat licenses to finance a majority of the triangle building, with a TIF district created around Wrigley to pay for the rest over time. If more money is still required, they should sell the stupid naming rights for the stadium to Boeing or something.


Opening day is tomorrow. I'll try to get there early and take some pictures of some of the changes around the ballpark.