Our analysis of the proposed DePaul Arena and Entertainment District concludes that the reports the Mayor’s Office is relying upon are riddled with inaccurate data and unreliable methodology and that the project presents a poor public investment.
— Alderman Scott Waguespack’s website, ward32.org
A new report from Alderman Scott Waguespack on the proposed McCormick Place Entertainment District, including a new “multipurpose” basketball arena for DePaul University, has a few curious twists.
But it’s a last ditch effort.
Last month the City Council approved $55 million in TIF financing for a new Marriott Hotel as part of the project. (The Metropolitan Pier and Exposition Authority, known as McPier, is also kicking in $103 milion in entertainment tax revenue to help DePaul build its arena.) On Wednesday the Council is set to approve zoning changes for the project, already approved by the Chicago Planning Commission and the council’s zoning committee.
The report reviews issues that have been aired in the media, including the vast overestimation of attendance at DePaul games. In a feasibility study conducted for McPier by the consulting firm HVS, annual attendance at DePaul games is projected at 152,000 — more than triple last season’s attendance of 44,000. Since DePaul games are projected to constitute 41 percent of annual attendance, that overreach skews all the estimates of event-related income, from ticket revenue to food sales.
“The financial projections touted by the [Rahm] Emanuel administration and McPier are inherently invalid,” the report concludes.
Projections also downplay the negative impacts on existing businesses. These include the UIC Pavilion, which is less than five miles away and, at 9,500 seats, is virtually the same size as the proposed DePaul arena, and the restaurant district nearby. And with the city proposing two additional McCormick Place hotels, it also includes hotels along Michigan Avenue, many of which depend on convention business.
Indeed, through the McPier entertainment tax, those hotels and restaurants are financing a project that will draw business away.
In other cities, an independent convention and visitors bureau might oppose such a project, said Waguespack’s chief of staff Paul Sajovec, who assisted with the report. But in Chicago, the relevant agency, Choose Chicago, is controlled by the mayor.
The report also notes that publicly-financed development projects like this customarily have huge cost overruns. It quotes one expert who says the public subsidies involved are often “significantly higher than popularly reported.”
In one twist, the report cites a decade-old study by McPier’s consultant, HVS, that challenges the notion that sports facilities work well in tandem with convention centers. That report was done on behalf of Madison Square Garden owners when the New York Jets wanted to build a domed stadium adjacent to the Javits Convention Center.
It found that event planners prefer working with flexible flat-floor space — a ballroom or dividable exhibit hall — over fixed-seat arenas. Sports facilities attached to convention centers host very few convention-related functions. And of 13 event planners interviewed, 11 said the possibility of a major sport or entertainment event at an adjacent facility occurring during their trade show would reduce the appeal of a convention center.
And there’s more: The author of the old HVS study was Sajovec, who worked for the consulting firm at the time.
He says the notion that sports facilities go with convention centers is a “zombie idea,” generally discredited throughout the industry, but trotted out whenever politicians want to justify public financing for a new stadium or arena.
Despite the aura of inevitability surrounding the project, “we think it still makes sense to put out the case that the project is not a good investment,” Sajovec said. “Maybe we can help the next city not fall into the same trap.”
So, just as Mayor Daley’s parking meter privatization fiasco steered other cities away from similar disasters, Mayor Emanuel’s new arena and hotel complex would be a drain on Chicago but a gift to the world.