Category: Chicago Bears

Two weeks after megaprojects property tax break bill lead sponsor Bill Cunningham said that the Illinois state senate was “going to take our time with this” and “getting it right is more important than getting it done quickly,” the senate is continuing to (tries to think of football metaphor) run down the clock (nailed it!):

The legislation has stalled in the Senate over concerns about whether its property tax relief provisions are meaningful for area school districts and residents.

“One of the subject areas we’re spending time on is the property tax relief element. There are some details there that we’re working through and that work will go on through next week,” state Sen. Bill Cunningham, a Chicago Democrat involved in stadium-related negotiations with the Bears, said Thursday.

“Property tax relief” here means, you will recall, taking half of the payments in lieu of property tax the Bears and other developers would make instead of property tax payments — at a vastly reduced rate — and putting them in a fund to provide property tax rebates to regular people. Since this money would be getting diverted from the local taxing district, which could then be forced to raise property taxes to cover the difference, it’s a pretty dumb example of robbing Peter to pay Paul; it would also only provide an estimated $1.29 per homeowner, which is leaving legislators unenthused. (Cunningham said the senate is “seeing if there’s a way we can boost that number, or if we can better target the property tax relief to make it more meaningful,” which sounds suspiciously like “we’re hoping to find a math where numbers add up different.”)

A bigger concern than how to slice off a piece of tax-break pie that’s bigger than the entire pie, meanwhile, is whether subsidizing a Bears stadium would create of cascade of tax breaks for other future projects as well. Under the megaprojects bill, notes Good Jobs First research director Amanda Kass, any project costing at least $100 million to build would be eligible to pay reduced PILOTs:

The use of tax increment financing, or TIF, across Illinois has already poked holes in the property tax base by tucking away billions into special funds that can only be spent within certain geographic boundaries.

“Creating this program is going to poke even more holes in that Swiss cheese,” Kass said, noting the legislation also limits how much local governments can tap into growing property values and pays relatively little back for property tax relief.

How much would those budget holes cost Illinois? There’s no way to say, because we have no idea how many $100 million-plus projects would tap the megaprojects benefit, or how big a tax break each would receive. If the Bears project in Arlington Heights could hit $2 billion in tax breaks, then it’s pretty reasonable to worry that the total megaprojects bill cost to taxpayers could end up in the billions of dollars, or even the tens of billions.

(And before someone raises this point: Yes, these would be projects built on properties not currently generating a lot of tax revenue, so government receipts wouldn’t actually go down by that amount. But costs of providing roads and schools and police and fire services, etc., would go up, and there would be less new tax money coming in to pay for it. Plus, if these are projects that developers would have chosen to build somewhere in the state anyway, but are happily taking a huge tax break for if offered, then that is indeed money it’s costing Illinois taxpayers. For more on this, see: Madison, Oscar.)

There is a hard deadline for the senate to decide on a megaprojects bill — it is set to adjourn on May 31, and still needs to work out a bunch of other stuff before then including an entire state budget — though if it doesn’t act, or doesn’t act in a way that makes Bears execs happy, it’ll be up to team leaders to decide whether they really want to move to Indiana, or if they’d rather take more time to hash out something in Illinois. The Tampa Bay Rays blinked, maybe it’ll be a trend, only one way to find out!

Gov. JB Pritzker’s hurry-up offense notwithstanding, Illinois state senate leaders appear to be in no rush to act on the megaprojects tax break bill that Chicago Bears execs say they need by the end of May in order not to follow through on threats to move to Indiana. Even the bill’s lead senate sponsor, Bill Cunningham, said yesterday that “we’re going to take our time with this” and “getting it right is more important than getting it done quickly.” Cunningham didn’t specify what “getting it right” would look like, but he did say he’ll look at the 9% amusement tax surcharge that Bears officials say needs to be removed before they’ll accept an Arlington Heights stadium plan.

A bit about that amusement tax: When I first reported on it Monday, I assumed that it would be a tax on tickets to stadium events, something I noted that economists say would “almost entirely end up coming out of team owners’ pockets.” Further reporting, however, indicates that it would actually be a sales tax surcharge on restaurants, bars, and venues in the surrounding stadium district, not on anything at the stadium itself. (The bill itself describes a “visitor investment surcharge upon all admission and charges from transactions at places of business located within the STAR bond district,” which is actually a different thing from a megaprojects district, but Bears execs are still acting like it would apply to them.)

Why does it matter which particular fan spending gets taxed? As economist J.C. Bradbury explains in his upcoming book on sports subsidy deals “This One Will Be Different,” taxing tickets is effectively the same as raising ticket prices, something that largely ends up coming out of team owners’ pockets because it prevents them from keeping as much of the proceeds for themselves as they would otherwise. Taxing sales in the surrounding area, though, captures lots of spending that may have nothing to do with the stadium itself, and so risks siphoning off tax revenue that could otherwise go to pay for government services.

And at the risk of getting out over my economic skis — this part isn’t from Bradbury — there’s also a significant difference in the way ticket price setting works from how local sports bars choose what to charge for drinks. Ticket sales have virtually no marginal cost: If you sell an extra 10,000 seats, you don’t have to produce more football for those additional fans. (Though you may end up hiring a few more game-day ushers and concession workers.) This means that team owners already set prices at whatever will maximize their ticket revenue, and since the addition of a ticket tax won’t change that price point, they’ll have to eat the ticket tax in order to keep the overall price the same.

Sales of things like meals in a stadium district, meanwhile, do have marginal costs, since you have to pay for ingredients, chefs, servers, and so on. This makes the economic calculus different, since dining establishments might be willing to charge more in total to cover a tax surcharge, even if it means driving away some customers, to keep their margins intact. So unlike a ticket tax, a stadium district sales tax surcharge— though it’s still arguably better than siphoning off revenue from existing taxes, as in a tax increment district — is far less of a soak-the-owners measure.

Anyway, all this may be moot, as it looks like the senate may just strip the amusement tax provision. Cunningham even suggested that it could all be a sort of typo, and that it was really “intended for a downstate STAR bonds project” elsewhere in the bill — which would be a major oopsie by the state house if true, but legislators have done dumber things.

Bears leadership, meanwhile, has remained unspecific about exactly what it wants to see (and not see) in a bill, releasing a statement that said only that “additional amendments are necessary to make the Arlington Heights site feasible for our stadium project.” This almost certainly means removing the amusement tax, and likely adding in state infrastructure spending as well, something that could add close to $1 billion more to a potential $2 billion in “megaproject” property tax breaks. Plus it would make all development projects valued at more than $100 million eligible for tax breaks, potentially costing local Illinois governments billions more in the future. At least the senate is going to take its time figuring this out — though if “take our time” turns out to mostly mean figuring out how to strip any state house amendments that the Bears owners don’t like and adding in new ones that they do, it might not end up being such a good thing for Illinois taxpayers.

Elsewhere in arbitrary deadlines, Illinois Gov. JB Pritzker is suddenly all about meeting them now that Chicago Bears execs have threatened to move the team to Indiana. In response to team officials wanting even more concessions in the state megaprojects bill that could already give them $2 billion in tax breaks, the governor said Friday:

“I can tell you that there is a need for speed here. We need to move somewhat expeditiously. I realize the Senate has some to work to do and there will be amendments, no doubt about it,” Pritzker said.

Pritzker didn’t totally hold a gun to his own head and threaten to shoot: He also noted that there’s no way to be sure that the Bears would go ahead and move to Indiana just because they don’t get everything they want in an Illinois stadium subsidy bill. Though the governor then added, “Having said that, if there is not true progress that gets made, if it isn’t obvious to people that the Senate is moving in the right direction, I think that will make it challenging,” which is absolutely trying to light a fire under the state legislature to give the bad man what he wants or he may take your team away.

One of the main stumbling blocks is a 9% amusement tax added in the Illinois House version of the bill, which Bears officials are vehemently opposed to. As well you might think they would be: As covered here previously, ticket taxes almost entirely end up coming out of team owners’ pockets, so this would force Bears owner George McCaskey to cover a larger share of any stadium construction cost.*  Pritzker now thinks this would be a bad thing, or at least a thing that would make it “challenging” to get Bears officials to agree to a deal, despite insisting that “the Bears want to be in Illinois.” Remember when Pritzker was insisting that Illinois wouldn’t even consider helping build a new stadium until McCaskey first paid off the remaining debt on Soldier Field? He sure doesn’t want you to!

*CORRECTION: The entertainment tax is apparently a sales tax surcharge on the surrounding district, not the stadium itself, which would be far less of a hit to the Bears owners’ wallets; I’ll explain in greater detail in a later post. Sorry for the error, I was unable to find the legislation language and was going by unclear media reports.

The Illinois House yesterday voted 78-32 to pass the “megaprojects” bill that Chicago Bears execs have long been seeking to provide as much as $2 billion in tax breaks for a new stadium district development in Arlington Heights. (Side note: You’ve got to love the latest rendering that features a stadium with the words “Welcome to Stadium” over the entrance.) And bill sponsor Kam Buckner has provided some explanation of how the final version of the bill would also provide his promised “property tax relief” to local residents who don’t own an NFL team:

The latest proposal would put 50% of special PILOT payments into a property tax relief fund that would then be divided 60% toward property tax rebates for homeowners in the district where the megaproject is located, and 40% into the Illinois Property Tax Relief Fund.

So the Bears would still be saving a massive amount of money by paying less in PILOTs than they normally would in property taxes, but some of those PILOTs would now be diverted into a fund to reduce the amount of property taxes that others pay. Except that normally these payments would go to the local school district, so if they instead go to refund other Illinoisans’ property taxes, then either the schools will be left without enough money — something the local teachers union is already worried about — or property taxes in the rest of the district will have to rise to compensate, which kind of defeats the purpose of providing property tax relief.

The bill still needs to be voted on by the Illinois state senate, so maybe we’ll get some clarity before then on how this property tax perpetual-motion machine is supposed to work. Or maybe Buckner can explain it better, let’s see:

“This is about making Illinois competitive, but in a way that keeps people in the center and focus of this,” Buckner said. “Just because someone builds a bridge and someone is the first person to cross that bridge, doesn’t mean that bridge is built for them.”

Nope, time to look elsewhere for clarity! Illinois senate, you’re up.

UPDATE: The Bears owners have responded to the House passage of the tax break by saying they still want more on top of this, in the form of that $855 million in state “infrastructure” money they keep talking about. You get one chance at leverage, may as well ask for everything you can.

With Chicago Bears ownership’s demand for what could be $2 billion in property tax breaks for a new stadium development in Arlington Heights stalling because Illinois legislators don’t really see how it benefits them or their constituents to give $2 billion to Bears ownership, State Rep. Kam Buckner of Chicago has a new idea to get the bill unstuck: What if Illinois still gave the Bears their property tax break, but gave everyone else one too?

“It’ll do something that the state has not done, that other states have not done in megaprojects legislation. It’ll actually consider how these things should be able to help regular taxpayers as well,” Buckner said. “I’m finding a way to bake [in] some property tax relief for homeowners across the state.”

Buckner said the measure will look at what a special incentive payment looks like for communities, and how a portion of that must go to property tax relief efforts, “both for folks affected in the immediate area, and for folks around the state.”

“To me, it has to be more than a token,” Buckner said.

That’s clear as mud, and while it may change the optics of the stadium subsidy bill — something for everyone! — it doesn’t really change the economics of it: Bears owner George McCaskey would still get to negotiate a lower property tax rate for his stadium project, while other property owners in the state would get some unspecified cuts in tax rates. Adding property tax “relief,” though, would just blow an equal sized hole in local budgets, so Illinois governments would either have to raise other taxes to compensate or cut spending on other services, meaning taxpayers would effectively be taking money from one pocket to put it in another.

And speaking of blowing holes in budgets, the Illinois Federation of Teachers has noticed that property taxes currently go to fund schools, and taking untold billions out of that funding stream could be, you know, bad for schools and other taxpayers alike.

The Illinois Federation of Teachers, led by [Chicago Teachers Union] president Stacy Davis Gates, sent a memo to Illinois legislative leaders on April 15 asking them to support a millionaires’ tax, but pouring cold water on Bears megaprojects legislation.

“Our union has serious concerns about the impact of the bill,” the letter reads. “The legislation risks shifting additional property tax burden onto residents in and around megaprojects.”

The Illinois House is back in session today through Thursday, then off until May 5 — and the NFL and Bears execs are threatening that if a tax subsidy bill (and possibly state infrastructure spending as well) doesn’t get done by then, they’ll pull the trigger on accepting Indiana’s maybe $4 billion offer for a stadium in Hammond. Whether this is true or just an idle threat to squeeze more money out of Illinois remains unknown, but it’s certainly getting Illinois officials to scramble, even if a majority aren’t necessarily on board yet. A House vote on the megaprojects bill could come tomorrow, but almost certainly won’t unless it has a shot at passage; watch the legislative calendar closely for tea leaves.

ESPN football writer Adam Schefter, who loves his unnamed NFL sources, was back at it yesterday with this tweet about the Chicago Bears and their stadium situation:

None of this really needed to be cited to NFL insiders, since Bears exec Kevin Warren already said basically the same thing last week. (Though it did get Schefter’s name in the national media a lot as a “senior NFL Insider,” if that floats his boat.) What does any of it actually mean, though, if anything?

Most sports team move threats, historically, are bluffs. That’s not because team owners are pathological liars — not all of them, anyway — but because threats are so easy to levy, there’s virtually no cost to them: If you hint that your team is going to move without a new stadium, and then come back the next year and repeat the exact same threat, it’s not like anybody’s going to call you on it. And better yet, if you can get local elected officials to issue relocation warnings by proxy, no one can even connect you with the threat in the first place.

In the Bears case, all this “Illinois is on the clock or else we’ll move the team to Indiana” should make one thing eminently clear: Bears owner George McCaskey would rather not move his team to Indiana. If he did, he’d already have accepted that state’s $4 billion-ish stadium subsidy offer, because there’s no way Illinois is ever going to match it. If Bears leadership is still dangling the hope of reconciliation before the Illinois legislature, it can only because he is hoping state officials will enrich their offer for an Arlington Heights stadium, and he can stay in his preferred state while getting Illinois taxpayers to cover part of his new stadium bill.

(Another thought: It’s possible that part of the message NFL officials mean to send via Schefter is that a new stadium in Chicago is 100% off the table — even if Chicago Mayor Brandon Johnson wants to insist otherwise — and so Chicago-area legislators should get over their upset at the Bears leaving the city proper and rally around legislation to at least keep the team in the state.)

How much money will Illinois have to come up with to turn McCaskey’s head? That’s unknown: He clearly wants the state to pass the “megaprojects” bill that could give him up to $2 billion in property tax breaks; it remains to be seen whether he’ll also hold out for the $855 million in infrastructure spending that Bears management previously floated. If McCaskey doesn’t get what he wants by the time the Illinois legislature adjourns in May, he’ll have to decide whether to take Indiana’s offer or send Warren to pull a David Samson and go back with one more “this time, we’re really moving if you do give us what you want” threat. Playing chicken is hard — though when the choice is between which multibillion-dollar check to accept, maybe not all that hard.