Category: economic impact studies

In the midst of all the Chicago Bears stadium drama, in which team owners are still requesting around $1 billion in infrastructure spending and tax breaks, Illinois state representative Kam Buckner has quietly introduced the Stadium Transparency and Responsible Spending (STARS) Act, which would require that any sports construction or renovation projects costing the public more than $25 million:

• Have its subsidy agreement posted online for at least 30 days before it can be enacted.
• Receive a “neutral cost-benefit analysis of the agreement” by the state Commission on Government Forecasting and Accountability, with the cost footed by the sports franchise seeking the subsidy.
• Hold at least two public hearings in the affected community.
• Reimburse in full all public schools, public libraries, or public fire, police, or emergency service for any loss of property taxes as a result of the deal.
• Contain a clawback provision where the sports franchise must repay all subsidies, plus 5% annual compounded interest, if it relocates or fails to meet its stated community or economic commitments.
• Provide annual reports on the number of jobs created, tax revenue generated, and community benefits delivered.

Can it pass? Who knows! Front Office Sports reports that Buckner “intends for this to be at least the start of a broader conversation around the stadium financing,” which makes it sound like more like points to be haggled over than the likely final form of any legislation. But that’s still a start, especially given how often sports projects get rushed through the approval process without much public oversight. And there’s nothing stopping other states from modeling similar legislation on Buckner’s bill — hint, hint, legislators in other 49 states.

Arlington Heights yesterday released not one but two economic impact reports on the village’s proposed Chicago Bears stadium: One commissioned by the team and carried out by consultants HR&A, and one commissioned by the village and carried out by consultants Hunden Partners. (There’s also a FAQ explaining the two reports.) Such reports do not have a glorious history, so how do these stack up?

HR&A’s Bears-commissioned report first:

• “As part of this analysis, HR&A worked closely with CSL International, a feasibility, business planning, and consulting firm specializing in sports and entertainment, to estimate the impacts of a Super Bowl in Arlington Heights as well as understand the economic benefits realized from major non-recurring events that Chicagoland currently does not host.“ CSL’s brand isn’t exactly “understanding” things, so we’re off to a bad start already.
• HR&A projects $10.9 billion in “one-time statewide economic impacts,” which just means that the project would involve building several billion dollars worth of stuff, plus a multiplier for when construction workers go and buy other stuff. Some of this spending would presumably involve things like steel that’s bought from out of state; HR&A doesn’t give any indication of how it calculated this number, though, so no way of knowing if this number is overblown or by how much.
• After the initial construction outlay, HR&A projects “$1.3 billion in net annual statewide economic impact and close to 9,000 permanent jobs” from the ongoing operations of the stadium and its surrounding development, resulting in $69.1 million a year in net new tax revenues for the state, county, and city. “Net” implies that this is spending that wouldn’t take place without the project — but there’s no indication that HR&A subtracted out spending that would be shifted from elsewhere in the state to the Arlington Heights site. Unless Bears ownership plans on spontaneously generating new Illinoisans, at least some of the spending at the new project will inevitably be cannibalized from elsewhere in the state.
• As for costs, “the Bears are seeking public funding for $855 million needed for district infrastructure,” notes HR&A, for such things as new highway ramps and moving a Metra commuter rail line. No funding source at all is given for this, but put next to those billions of dollars in projected revenues, $855 million is mere pocket change, right?
• Hosting a Super Bowl, reports HR&A, “would generate an additional $570 million in statewide economic impact and support close to 3,800 permanent jobs” — that’s right, permanent jobs from a one-week, one-time event, sure would like a methodology footnote on that one, but sadly none is forthcoming.

That’s all pretty sad, but also pretty par for the course for what a consultant like HR&A will typically put together for a client like the Bears: Add up all the money that may change hands at a stadium project, slap on a multiplier, and print impressively large numbers in impressively large type. But what about the village’s hired hands, did they do any better?

• Hunden’s report is just a three-page summary, so its findings are even more abbreviated than HR&A’s: The stadium project would “support” 5,400+ full-time equivalent jobs and $510.1 million in “net new tax impact” ($15.1m per year) over 40 years. Once again, there’s no indication of whether these numbers account for spending that would substitute for other spending that would take place without the stadium project — not to mention the opportunity cost of losing out on any spending that might take place if the old Arlington Park racetrack were redeveloped for something else.
• Then there’s this amazing chart on projected uses for a stadium, which starts with the remarkable claim that an NFL stadium would host 370 “events” a year, then wayyyyy at the bottom specifies what most of those events would actually consist of:

The FAQ, meanwhile, adds even more caveats:

• What about the added costs that would come with providing schools, police, fire, roads, and all the other stuff that a whole new mini-city would require? “Does this report include the impacts on Village services and infrastructure costs? No, it does not. Additional studies will consider the cost of Village services and infrastructure.”
• Likewise, the reports don’t attempt to estimate the cost of “megaproject” property tax breaks that the Bears are demanding from a so-far-uninterested state legislature, but don’t worry, that isn’t real money: “A Megaproject Bill does not exempt large-scale developers from paying taxes, give State money to private business, nor cost the State government any money.” While all this is technically true — the Bears developers wouldn’t be completely exempt from paying taxes, they would just get a large break on their tax bill, and the public money provided would come out of the village’s and county’s treasuries, not the state’s — the implication that this would present no cost to taxpayers is false.

All of these funny numbers matter a whole lot, and not just for PR purposes: The FAQ specifies that “The Village has always stated that it will not approve the project unless there is a net fiscal benefit — meaning the Village’s new revenues must exceed new expenses,” so how the costs and benefits of the project are calculated is hugely important. Unfortunately, the two consulting reports are pretty much useless for that: Asked for comment after looking them over, sports economist J.C. Bradbury called them “an incomprehensible mess of motivated nonsense.” If it’s the kind of nonsense that will potentially land them more than a billion dollars in new transportation infrastructure and tax breaks, though, the Bears owners will no doubt consider it consulting fees well spent.