Small Town Gets Big-League Debt with Stadium Deal

Small Town Gets Big-League Debt with Stadium Deal
June 21, 2012

Sean Parnell

Sean Parnell (sean@impactpolicymanagement.com) is president of Impact Policy Management (IPM), a... (read full bio)

While large cities tend to receive attention for big-league deals giving tax money to build stadiums for pro sports teams, small towns have also been stepping up to the plate to lure minor-league or second-tier professional sports teams.

Many of those small towns are losing big.

One is Bridgeview, Illinois, which is in dire financial straits because its taxpayer-owned soccer stadium has failed to generate the promised operational revenues and regional economic benefits that stadium backers had touted. The town built the stadium with $135 million in general-obligation bonds.

Taxes Up, Credit Rating Down

Barely six years after Toyota Park opened, Bridgeview’s 16,000 residents have seen the city’s property taxes nearly triple to repay the debt, and the city's credit rating has been slashed to nearly junk-bond status by ratings agency Standard & Poor’s. S&P noted in its report on Bridgeview, “The downgrade reflects the significant level of stress placed on the village’s finances by its underperforming soccer stadium.”

“The promises made by stadium backers were way too rosy,” said Brian Costin, director of government reform at the Illinois Policy institute. “If the prospects for the stadium were so positive, why should the taxpayers have had to pay anything at all?”

Costin also noted the downgrade means Bridgeview’s borrowing costs for other projects and operations such as road repair would be higher.

Mayor Steven Landek, who is also a Democrat state senator, strongly defends the city’s involvement in the stadium, however.

“The stadium made money the first few years, and will be self-sufficient once the economy recovers,” he said. He estimated the stadium this year would likely lose about $2 million.

Sweet Deal for Soccer Team

The stadium was built to bring Major League Soccer’s Chicago Fire to Bridgeview, a working-class community on Chicago’s South Side. In addition to being the home field for the Chicago Fire, Toyota Park also hosts the Chicago Bliss of the Lingerie Football League, an all-women’s short-field football team featuring scantily clad players. Other teams that have called Toyota Park home include the Chicago Machine (lacrosse) and Chicago Red Stars (women’s professional soccer). The Machine left in 2009 and the Red Stars in 2011 after playing the 2009-2010 season there.

The deal signed with the Fire allowed the team to keep much of the revenue generated from soccer games, leaving the city with reduced revenue opportunities to pay for operations and an annual debt service payment of $8,160,000. According to the stadium’s most recent audit for 2010, revenues of approximately $6.1 million were outpaced by more than $10.1 million in expenses, including the debt payment. That $4 million shortfall is nearly one-sixth of Bridgeview’s 2012 corporate fund budget, the most recent available.

Dubious Sales Tax Claim

A 2010 Chicago Tribune article titled “Bridgeview aims to build on success of Toyota Park” noted the city's sales tax revenue had increased since the stadium’s opening, and it cited a city official’s claim that “sales tax revenue attributed to the stadium jumped 8 percent between 2005 and 2007.” A brief review of sales tax data available at the Illinois Department of Revenue casts doubt on this claim, however.

According to state records, Bridgeview received approximately $7.602 million in sales taxes in 2005 and nearly $8.225 million in 2007, the second year the Fire played at Toyota Park, for an increase of roughly 8.2 percent. But breaking sales tax data down by month reveals that the April – October soccer season brought only an 8 percent increase in sales tax activity, whereas sales tax revenues climbed by 8.5 percent in the other five months -- indicating that whatever was driving increased sales tax revenues in Bridgeview likely had little to do with soccer.

Local officials still tout the economic benefits of the stadium. Mayor Landek cited a $23 million grant from the state for an underpass that he attributed to the stadium, and he noted games and concerts at the stadium provided several hundred people with part-time work to supplement their income.

Likewise, Village Trustee Norma Pinion said, “Toyota Park has been a big asset for us and as soon as the economy is better things will look better.”

Borrowing to Pay Interest

These views drew criticism from economist H. Woods Bowman, who specializes in municipal finance issues at DePaul University.

“The mayor’s statements are unsubstantiated and the village hasn’t been able to produce any economic projections or a business plan” to justify these rosy views, Bowman said.

He noted the situation should be alarming to taxpayers because the stadium isn’t covering its costs.

“They’ve had to borrow money to pay off money borrowed earlier to build the stadium, and that can’t go on forever," Bowman said.

Sean Parnell

Sean Parnell (sean@impactpolicymanagement.com) is president of Impact Policy Management (IPM), a... (read full bio)