Chicago Assesses Financial Hit as Bears Mull Move to Suburbs
(Bloomberg) -- The Chicago Bears took a major step toward leaving their hometown on Wednesday with an agreement to buy a suburban horse-racing property, a move that a fiscal watchdog says threatens the tourism-reliant city’s finances.
Churchill Downs Inc. has agreed to sell a 326-acre property in Arlington Heights, Illinois, the site of Arlington International Racecourse, for $197.2 million to the National Football League team, according to a statement Wednesday.
The closing is expected to be in late 2022 or early 2023. The transaction isn’t a surprise but is still a concern for Chicago, which is still trying to claw back from the pandemic and economic downturn that’s slashed revenue from entertainment venues, hotels and restaurants.
“It’s another challenge” for Mayor Lori Lightfoot and her administration, Laurence Msall, the president of the Civic Federation, said in an interview. “This is a much longer-term issue than the immediate disruption of the pandemic and the reopening.”
Soldier Field, which opened in 1924, is the oldest stadium in the NFL. While the Bears have called it home since 1971, the Chicago Park District owns the property and leases and rents it to groups including the team. The park district already has been hurting financially from the pandemic. Revenue for the stadium plunged to $14.8 million in 2020 from an initial budget estimate of $40.2 million, according to bond documents.
Lightfoot, who’s trying to close a $733 million budget deficit, has said she remains open to working with the Bears but is trying to do what is best for the economic interests of taxpayers to generate revenue. The administration has cited contracts with the Chicago Fire soccer team and Soldier Field events such as the Shamrock Series, a football game between the University of Notre Dame and University of Wisconsin this month, as examples of the stadium’s appeal.
“We also have to make a business decision here in the city of Chicago,” Lightfoot told reporters. “I also need to make sure that first and foremost I am doing what’s best for the taxpayers.”
Bears President and Chief Executive Officer Ted Phillips called the finalization of the sale agreement “the critical next step” in the team’s exploration of the property and its potential.
“Much work remains to be completed, including working closely with the Village of Arlington Heights and surrounding communities, before we can close on this transaction,” Phillips said in a statement. “Our goal is to chart a path forward that allows our team to thrive on the field, Chicagoland to prosper from this endeavor, and the Bears organization to be ensured a strong future.”
S&P Global Ratings analysts Scott Nees and Jane Ridley said it’s unclear what toll a departure by the Bears would have on the city, which has a broad economy. They added that they see the potential to recover lost revenue at Soldier Field from other events. The direct fiscal effects on the district would be limited, they said in an interview Wednesday.
The Bears pay about $6.5 million annually in lease payments through an agreement that runs through 2033, and the district mainly benefits from parking fees at Bears events, according to S&P.
Msall said the issue is bigger than just revenue from the lease or finding replacement events. It’s difficult to see how the Bears relocating wouldn’t have a “negative impact” on the city’s tourism, marketing and reputation, he said. The issue also affects the state as the Illinois Sports Facilities Authority sold bonds years ago for Soldier Field’s renovation and then refinanced that debt, Msall said.
“If this is a win for Arlington Heights, there will be some loss to the city of Chicago financially and reputationally,” Msall said.
Amid the furor over the Bears, the Chicago Park District plans to issue $143.56 million in bonds the week of Oct. 5 for capital projects and refinancing.
“It would not be a positive for the credit if the Bears move to the suburbs, but it needs to be taken in context with the full amount of revenue coming into the park district,” said Dan Solender, director of tax-free fixed-income investments for Lord, Abbett & Co.
“While revenue growth is important to the credit outlook, the major focus for the park district has been dealing with their pensions,” he said.
The district’s pension fund declined with the 2020 actuarial valuation to 15.3%, and it is preparing for higher contributions in the coming few years, according to S&P. The funding level is “at distressed levels,” according to the ratings firm.
Lord Abbett holds Chicago debt as part of its $36 billion in muni assets, and its interest in the park district sale will depend on pricing, Solender said.
“The Bears taking this step is not a positive for the credit, but they still should be able to get a good market reception for their deal if they price it appropriately,” he said.
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