Red Eye Chicago, the free daily started a few years back by the Chicago Tribune to appeal to young people who don’t read newspapers, has an article out today griping that the Ricketts family is demanding public money for the Cubs‘ Wrigley Field when they charge a lot for tickets and the team sucks. Which is sort of a strange argument — would public stadiums subsidies be more acceptable if the Cubs were finishing in first place? (I almost wrote “winning the World Series,” but let’s try to keep some grip on reality here.)
Still, there’s a kernel of logic to thoughts like this that’s worth following:
The Rickettses can create those jobs by swallowing their pride and hitting up their parents for a loan, much like thousands of us have had to do to pay the bills. It’s not like dear old dad can’t afford it—he is the billionaire founder of Ameritrade, after all, and wanted to spend tens of millions on a superPAC to unseat President Obama.
Again, if Joe Ricketts were a mere millionaire, it’d wouldn’t be any more or less worthwhile for Chicago taxpayers to hand his kids public money to upgrade their private ballpark. But what about the corollary question: Why don’t the Ricketts younguns just ask their dad for a loan?
The answer, presumably, is that he wouldn’t see it as a good investment: It’s unlikely that a renovated Wrigley is going to produce enough new cash to pay off $150 million in subsidies (let alone the $300 million that the city could actually be asked to pony up). Which means the only way Chicago would earn its money back would be by increasing the amount of money spent in the city enough to generate $300 million worth of new tax revenues.
Wrigley wouldn’t be getting more seats, and it already sells out all the damn time, so forget about more foot traffic. The only way to get more money spent, then, is to have each fan spending more on average — which means either raising those $95 bleacher ticket prices even higher, or getting fans to spend even more on souvenirs and food and such on each visit.
$300 million in present value over 30 years is going to be about $20 million a year. The sales tax in Chicago is 9.5%. This means that assuming three million fans per year, each Cubs fan would have to spend an extra $70 at every game in order for the city to earn back its investment.
There are some nuances I’m not covering here — in particular, increased ticket prices are subject to the 12% amusement tax, not the 9.5% sales tax, and a renovated Wrigley would likely pay a couple million more per year in property taxes as well — but even if you’re expecting an extra $40 or $50 per fan, that’s a hefty chunk of change. The alternative, of course, is that fans won’t be spending that much, and Chicago taxpayers will simply take a bath. Assuming, that is, that Rahm Emanuel ever decides to take Tom Ricketts’ calls again.
Well, they’d better come up with a plan other than needing fans to spend $50 + per visit. I just had the privilege to visit Wrigley to watch my Sox play there for just the second time. While I thrilled to the atmosphere and the beauty of the structure I did not spend a dime. So they’re already down $50 and renovation hasn’t started yet.
Erika,
Boston
Erika, have you seen any figures on how per-fan spending has changed in Boston since the Fenway renovations? It’s a pretty comparable scenario, except for the part about winning two World Series.
It is not just that every fan has to spend $70 extra dollars (or $40). One “nuance” makes it much worse. It is the fan has to magically create that money from out of nothing (or at least outside the city limits of Chicago). I know Neil mentions this a lot but it gets pretty consistently missed (avoided?) by pro stadia people. People will spend that $70/$40 dollars at an Ethiopian restaurant in Wrigleyville or at some other store in Chicago or buy some loved one something nice or whatever if Wrigley was less fancified and people had to shell out more.
It is pretty simple; the entire pro stadia argument usually rests on a set of poorly reasoned regional economic arguments. A development’s marginal spending is not what is spent on the new thing but what is newly created in the given geography/tax base or in greater productivity. Chicago is pretty big and there is some new money (even then you are mostly taking away from a far away business) but mostly other businesses will be hurt.
So we’re counting on Cubs fans to drink more to get our money back? Is that even possible?
Chicagoans, contact the mayors office. You might tell Rahm that in the midst of all this talk about subsidizing a wealthy family in Wilmette for a stadium renovation in Lakeview, you couldn’t help but notice that 90% of CPS teachers have authorized a strike over funding and a NYT article today about a 38% spike in the murder rate.
Floormaster: Yes, substitution effects make it worse. Given the number of Wrigley-goers who are tourists, probably not as much worse as in some cities, but it’s still a significant negative factor.
Also, now I want to go to Mama Desta’s.
Floormaster-
Wait you mean to tell me that a Wrigley renovation isn’t going to cause Best Buy to rise it wages in the suburbs? That united isn’t going to just transfer a bunch of extra staff to Ohare and Midway because of it? Heretic!
next thing you know you are going to tell me that $1 of spending on extra fire stations doesn’t return $10 in increased tax revenue!
I used to love going to Mama Desta’s after a Cubs game. The place was always empty after games so it was relaxing even if thousands of people walked by. They were (have not been there in about 3 years) a good example of a business that was hurt by sporting events (some of the bars nearby not so much).
Also, my experience (admittedly I have not lived in Chicago in 12 years and stop going to Wrigley annually 2 years ago) at Wrigley is the tourism angle is exaggerated. There are tourists but most of them I used to run into were not tourists to see the Cubs or Wrigley (their decision to visit Chicago was usually work or lure of the big buildings/city/shoulders/lake) but were at Wrigley because it was something to do.
Floormaster- Mama Desta’s is closed. I can’t tell from your comment if you knew that. When you get back to Chicago, try Ethiopian Diamond a few miles north on Broadway.
Most likely Mama Desta’s closed because it catered to the tourist crowd, not the hardcore baseball crowd. Let’s face it, the only way that Mama Desta’s would have succeeded is if they opened in a Chicago suburb and advertised home cooking for the weary traveler. Of course, they would have to be close to the interstate.
As for $70 in new spending at Wrigley? The only way they got that is if they cancelled out the Astros plans to move to the American League in 2013 and move to the AL in 2014. That way, they would be able to get the NL farewell season in 2013 and then be able to play in their first season in the AL in 2014. Other than that, the Cubs should think about cutting prices at the refreshment stand.
From the online reviews, it looks like Mama Desta’s closed because they had gone down in quality and there were better, cheaper places a mile north on Broadway. Though I bet they could have hung on if they’d gotten $300 million for renovations.
Neil
I know enough about business to know that location matters. What I don’t know is what the Mama Desta’s business plan said, but they committed suicide by locating the business near Wrigley and expecting the tourist to come in after ballgames. It would have been better if they were located near an Interstate exit like I said. The postgame crowd is looking for someplace to relax after the game, especially if they use public transportation, and they are most likely looking for a sportsbar where they could spend time with their buddies. Translation, they could have used a name that is more inviting to Cubs fans. Mama Desta’s screams home cooking so the fans avoid that place. Three Hundred million for renovations wouldn’t have helped unless Mama Desta’s is transformed into the “Last Out Sportsbar.”
the cubs have not sold out as much as you think.. they had their first sell-out on opening day, they did not sell out until boston and new york came town. Also thir are alot of empty seats, such as sat, they annouced 37,000 tickets sold(41,000 seats.) when you walked and looked around it had to be a crowd of 25,00 or less..