Category: NFL

Chicago Bears execs presented the NFL with a stadium update yesterday, and what did they say, commissioner Roger Goodell?

“There was a specific update on the Bears on the two sites that are viable in the Bears’ mind,” he said. “That process is going on.”…

“I’ve spoken to the governor [of Illinois] recently and there’s a focus on getting something done, and there will be two viable options for the Bears to choose from,” he said.

That is definitely a specific update on … something. The two sites Bears owner George McCaskey is considering, in Arlington Heights, Illinois and Hammond, Indiana, will continue to be two sites that are options! Options the Bears can choose from!

Back in the world of actual news reporting, there’s still no indication of what if anything the state senate and house will pass in terms of the megaprojects tax break bill that Bears officials want before agreeing to an Arlington Heights stadium. The Illinois legislative session wraps up next week, and it seems likely that something will pass, but there’s no telling whether it’ll be the same something that McCaskey wants — let alone the additional subsidies the Bears owner wants as well.

With that in mind, Goodell’s statement seems like an attempt at momentum building, or at least momentum not destroying: The stadium talks are going according to plan, all will work out, there’s definitely nothing that’s a crisis or anything. It’s very possible that no one really knows what the Illinois legislature will do, and that also no one knows what Bears ownership will do if they don’t get everything they’ve demanded — up and move to Indiana, or take what they can get in Illinois? Past stadium games of chicken have gone both ways, it’s tough to predict unless you live in George McCaskey’s brain, assuming even he’s decided at this point. Leverage is hard!

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.