Economists question both Indiana and Illinois Bears stadium subsidies

The Indiana plan

Last week, Indiana Gov. Mike Braun signed a public financing plan similar to one that bankrolled most of the cost of Lucas Oil Stadium in Indianapolis, which the Colts have played in since 2008. Indiana would use a variety of revenue sources, such as food and beverage taxes and increased hotel taxes, to finance a new domed stadium that the Bears — who have long been leasing the publicly owned Soldier Field and are one of the few NFL franchises not to own its own stadium — would lease and be able to buy and own outright after paying off the debt.

A Northwest Indiana Stadium Authority would issue bonds to pay for a new stadium near Wolf Lake in Hammond and to build up the infrastructure in the area, such as to ensure the roads could handle the influx of more than 60,000 fans on game days. The Bears or other private investors would have to put up at least 50% of the projected $2 billion cost of the stadium. The team would have to commit to play in Hammond for a minimum of 35 years.

The bonds would be paid off through tax revenues generated in a stadium district, potential 1% food and beverage taxes in Lake and Porter counties and an increase of Lake County's innkeeper's tax to 10%, as well as a possible renegotiation of the lease of the Indiana Toll Road that bisects the bistate Wolf Lake and would bring many fans from across Chicagoland to the new stadium.

The Illinois plan

Illinois is considering a megaprojects bill the Bears have been lobbying for that would provide state and local tax incentives to projects that meet investment and hiring conditions. Any project of $100 million or more could have the assessed value frozen for 10 years at the value that was in effect before a megaproject designation, which the Bears are seeking for property tax certainty and concerns that the team's property tax bill could balloon as retail stores, restaurants, hotels, sportsbooks and other developments are built up around the stadium.

The Bears would only owe property taxes on the value of the land before improvements, and its purchases of building materials would also be exempt from state, county and local sales taxes.

Economists' reactions

"Neither of these proposals offer net benefits to taxpayers. I’d expect the Bears are nervous about leaving Illinois, so Illinois can offer a bit less than Indiana in subsidies," Ball State University Economist Michael Hicks said. "If this were a serious negotiation, it would’ve seen more legislative scrutiny."

The economic benefit of building a stadium that would host home games eight or nine times a year would be short-lived, Hicks said.

"The economic effect of intra-metro movement of the Bears is trivial on net. You’d see an enormous construction phase, but almost immeasurable net effect," he said. "The construction workers would be drawn from the existing workforce, and the workforce for the team would not relocate. Tax incentives would just be a gift to the team, not the community."

Indiana University Northwest Professor of Economics Anthony Sindone said neither the Indiana nor the Illinois plan made more sense than the other, from an economic perspective.

"Both plans will place a tax burden on people who have little if anything to do or benefit from a new stadium being built with public funding," he said. “The Indiana plan calls for creating a private-public partnership providing at least $1 billion in direct funding for infrastructure and bond financing. The Bears are said to have committed approximately $2 billion toward the partnership. Historically, these costs tend to exceed initial projections when the project is completed."

Indiana's stadium financing plan would increase taxes on residents and visitors who may never set foot in the new Bears stadium, Sindone said.

"Indiana will fund these expenditures through taxes on ticket sales, hospitality taxes, i.e., 1% increase in food and beverage taxes in Lake and Porter counties and a 10% increase in the innkeeper’s tax at hotels," he said. "These taxes will be paid by the residents of Lake and Porter counties regardless of their desire or ability to attend any of the Bears games or other events that might occur at the stadium."

Academic research has consistently shown that stadiums do not deliver the promised economic benefits and do not justify the public subsidies they receive, Sindone said.

"While I personally think that it would be cool to have the Bears move to Indiana, the return on the public investment tends to be much less than advertised," he said.

Purdue University Northwest Business Professor Pat Obi said Indiana was offering a more generous incentive to try to lure the Bears away.

"From an economic standpoint, the appeal of each plan depends on whether you place greater value on direct public investment to stimulate regional growth or on tax certainty to encourage private development," he said. "Indiana’s proposal is more aggressive in its use of public funding, while Illinois’s megaprojects bill relies primarily on property-tax freezes to incentivize the Bears to remain in the state."

Indiana is largely trying to use tax revenue that the stadium itself would generate to help pay off the debt for its construction, Obi said.

"Indiana’s approach follows a more traditional public-private partnership model, similar to the financing structure used for Lucas Oil Stadium in Indianapolis. This model typically draws on travel and tourism taxes, such as food and beverage taxes, lodging taxes and event-related taxes, to support stadium financing," he said. "To me, this approach is more sensible because it allows for careful projections of dedicated tax revenues and a clearer timeline for repaying any stadium-related debt. It also better captures the indirect and induced economic benefits, as well as the broader positive economic atmosphere, that a major project of this kind could generate for Northwest Indiana."