State Agency's Plan to Buy Wrigley Field Stumbles Again

State Agency's Plan to Buy Wrigley Field Stumbles Again
July 1, 2008

Worries about violating Major League Baseball rules--and probably bigger worries about violating Internal Revenue Service rules--apparently have killed the latest proposal for an Illinois agency to buy Wrigley Field, home of the Chicago Cubs Major League Baseball team.

Tribune Co. and Cubs owner Sam Zell rejected a second offer from the state in May.

Former Illinois governor James Thompson (R) has been trying to acquire Wrigley Field for the Illinois Sports Facilities Authority (ISFA), a state agency Thompson serves as chairman. Although ISFA has been tight-lipped concerning the deals, some of the basic facts are known.

Early this year Thompson proposed a state buyout in which he insisted no tax dollars or state bonds would be at stake. He said team lease payments and the sale of partial naming rights would cover the cost of buying the ballpark. However, after evading questions about hundreds of millions of dollars more that would be needed for renovation of the aging ballpark, Thompson suggested a plan to divert future sales tax revenues in the surrounding neighborhood to pay for renovations.



City Opposed Taxes

Overwhelming opposition to the use of tax dollars, including from Chicago Mayor Richard M. Daley (D), killed that idea. Thompson returned with a new purchase proposal for more than $400 million. As with previous negotiations, there would not have been a tax increase to fund the buyout. Instead, a new financing method, called equity seat rights, would have funded the purchase. Equity seat rights involves selling seats individually, like condominiums.

Chicago business leader Lou Weisbach, who has applied for a patent on the equity seat rights idea, has been one of the main proponents of the notion. But as Zell's Chicago Tribune reported, Zell and Cubs Chairman Crane Kenney worried the plan would violate IRS codes and rules established by Major League Baseball.

Some people have speculated Zell's rejection of the equity seats idea has spelled the end of talks regarding a sale of the ballpark to the state, but that's not true.

"At this stage, negotiations are still ongoing," said Matt Royse, a spokesperson for ISFA.
Nevertheless, the pressure is on.

Zell needs to sell both the Cubs and Wrigley Field to pay down some of the $13 billion debt left over from his highly leveraged buyout last year of Tribune Co., which owns the Cubs. However, some financial pressure recently was released when Zell announced the sale of the Tribune's Newsday newspaper in Long Island, New York for $650 million.



Private Buyer More Likely

Nonetheless, there is now a higher likelihood Wrigley Field will be sold to a private entity instead of the state. If such a deal were to go through, Wrigley would be one of only two stadiums in MLB that have not been heavily financed by regional governments.

Allen Sanderson, an economics professor at The University of Chicago who specializes in sports economics, explained there are practical reasons for this prevalence of public financing, virtually all of which benefit team owners more than the public.

"The team owner doesn't usually want to own the facility because it loses money," Sanderson said.
Furthermore, there is a general belief that government charges lower rent as compared to what private owners would charge.

"The state is far less likely to think of a sale like this as an investment, or to think of maximizing profit and minimizing costs," the way a private owner would, Sanderson said.

In a May 27 news conference, Illinois Gov. Rod Blagojevich (D) said, "I am determined to do everything that I can to make sure that the Cubs stay at Wrigley Field, no matter who the new owner might be. And if ISFA is not the way to go, there are other ways, and we're working on some of those other ways."



Not a Government Function

As the state continues to wrangle with its own budget issues, others wonder why so much effort has been put toward having a government agency acquire the stadium.

"Entertainment is not a core function of government," noted Greg Blankenship, president of the Illinois Policy Institute, a free market research organization. "As an asset built for entertainment, Wrigley Field is always going to be better off in private hands."

Referring to a long string of political scandals involving Chicago city officials and employees, Blankenship added, "Given the state of affairs in Chicago, at the very least it will be an honest operation if left in private hands."


Liam Rinehart (liam.e.rinehart@gmail.com) is a policy associate at the Illinois Policy Institute, a nonpartisan policy research organization.