Whether the Chicago Bears leave or not, taxpayers face mounting debt for Soldier Field – Chicago Tribune

While the Chicago Bears plan to build a new stadium, taxpayers are still waiting for the old one. A big bill is coming soon—and your primary payment method may not be enough.

Regardless, the team will go their own way recently acquired site in Arlington Heightspopulation is obliged to pay for 2003 renovation of Soldier Field, which was supposed to keep the team there.

Because of the refinancing and years of paying interest instead of principal, Soldier Field’s debt has grown from an original $399 million to $631 million, according to the Illinois Sports Facilities Authority, or ISFA, which manages the debt service. The growth of debt worries experts who are involved in the financing of stadiums.

“No sane person would agree to this deal,” said J. K. Bradbury, an economics professor at Kennesaw State University in Marietta, Georgia, who has studied the financing of sports stadiums.

Recently, due to the COVID pandemic, which has devastated travel and tourism, 2% of the total 17% city hotel tax that was supposed to be paid for the deal was not made. As a result, Chicago last year was forced to pay $27 million of its share of Illinois income taxes, which otherwise help pay for essential services such as road repairs and garbage collection.

With payouts set to rise to $55 million this fiscal year and $90 million by 2032, the bill is only going to mount, and there are real doubts about whether the hotel tax will be enough to pay for it. State officials estimate the hotel tax will fall roughly $10 million short this year, prompting the city to raise the tax again.

Regardless of the Bears’ home run in the years to come, the debt must be paid. While the team pays about $6.5 million in rent a year, that goes to the Chicago Park District, not to pay off bonds.

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When the bonds for the stadium were issued through the Illinois Sports Facilities Authority in 2001, they were “backloaded,” with most of the principal remaining due, so most of the early payments were interest. Then, when the bill was due to increase, the state refinanced the debt to push the larger payments forward.

By 2019, annual hotel tax revenues had roughly doubled to $52 million, and they were able to cover costs every year except 2011, when the city paid $111,000. But revenues plummeted during COVID, and the debt was refinanced again, with reserves spent to cover a $22 million shortfall in 2021.

Hotel tax revenues recovered last year to only $39 million. But about a third of hotel rooms remain empty. Occupancy rates aren’t expected to return to pre-pandemic levels until 2026, although higher room rates could make up the difference by then, said Michael Jacobson, president of the Illinois Hotel and Lodging Association.

As a result, Sara Wetmore, acting director of budget analyst The Civic Federation, said the Illinois Sports Facilities Authority could seek another debt restructuring next year, although an extension would require a change in state law.

If hotel tax revenue recovers to $52 million this year — which is unlikely — the 7% revenue growth that prevailed before the pandemic would be enough to cover the increase in charges. But both outgoing Mayor Laurie Lightfoot and former Mayor Rahm Emanuel have for years suggested looking for an alternative to the hotel tax.

Illinois lawmakers created Department of sports facilities in 1987 to build a new Comiskey Park for the Chicago White Sox, whose ownership threatened to move the team out of town. The state agency owns what is now called Guaranteed Rate Field and still owes about $51 million on it. The Sox pay about $2 million a year in rent.

The Soldier Field deal was brokered by Mayor Richard M. Daley, but the Emanuel and Lightfoot administrations increased the debt by refinancing it three times, in 2014, 2019 and 2021. The state and city pay $5 million a year into the fund, in addition to the hotel. tax Until the end of the deal, the total payout will rise to $743 million.

Lightfoot’s office stressed that the state is required by state law to reimburse the city of Chicago for the income tax it paid if hotel tax revenues increase enough to do so.

But Frank Bilecki, director of the Illinois Athletic Facilities Authority, said the payments have never been made and are highly unlikely in light of revenue lagging behind rising costs.

In addition to the current debt, Lightfoot also proposed a $2 billion plan to build a dome at Soldier Field to house the Bears, but could not find the funds to pay for it in the $16 billion budget.

As for the Bears, whose lease runs through 2033, they would have to pay $84 million fine when they leave in 2026. In a statement to the Tribune, the team noted that the state controlled how the bonds were issued and managed.

“The Bears have agreed to more than $200 million in upfront payments in addition to assuming all of the risk of overspending on public buildings that we do not manage,” the team said. “We also continue to pay one of the highest annual rents for an NFL team as a tenant at Soldier Field, totaling more than $118 million since 2003.

“Paying the bond debt is not the responsibility of the Bears and has never been dependent on the team playing home games at Soldier Field. Any suggestion that leads people to believe that the Bears are responsible for any portion of the bond repayments or that debt repayment is dependent on the team’s home games at Soldier Field is completely misleading.”

So what are the lessons to be learned from the financial disaster at Soldier Field?

The debt shows the need for independent scrutiny of government borrowing and more diverse sources of revenue, said Wetmore of The Civic Federation. She said that with a possible recession, the city may have difficulty generating additional hotel tax revenue.

From the perspective of hotel operators, Jacobson said, the situation shows the importance of promoting and restoring the tourism and conference industry.

Sports finance consultant Mark Ganis said payment delays are not typical for most stadiums.

“Financial engineering blew up in their faces,” he said. “It keeps the strip patronage going in the city.”

Many financial institutions have had a hand in issuing bonds to pay off the debt. Ambac Financial Group provides debt service reserve fund guarantee bonds and bond insurance on the 2001 original bonds. The state’s bond trustee is US Bank, with an annual fee of $21,800. But most of the cost comes from interest paid to bondholders, which include institutional investors such as pension funds, labor unions and other private and foreign investors.

Ganis believes the Bears’ plan for Arlington Heights is different because the team plans to pay for its own new stadium. The team is looking for public investment in surrounding infrastructure, such as roads and drainage, which are costs that municipalities often negotiate to help pay for any development.

– That’s reasonable, – said Ganis. “It’s a very different scenario than Soldier Field.”

Bradbury, the economist, disagreed. Stadiums usually don’t pay for themselves, he said. Whether it’s a hotel tax or tax breaks, he said, it’s a drag on other public investments.

“I think people need to remember that stadium subsidies are NEVER a good deal,” Bradbury wrote to the Tribune. “Proponents always promise big profits and then don’t apologize when they don’t happen. This happens again and again. Expecting a stadium to bring a windfall to the community is like expecting Charlie Brown to throw a football. This will not happen.”

rmccoppin@chicagotribune.com