During the past few months, Sam Zell, the new owner of the Chicago Tribune and the Chicago Cubs, has been working furiously to sell the Chicago Cubs for $1 billion.  As a White Sox fan, it kills me to admit it, but the Cubs have a phenomenal national following.  Now, anyone who has attended a baseball game at Wrigley Field has to admit that the aura and mystique of Wrigley Field are awesome.  During the 2007 season, the attendance for Cubs home games was 3,252,462 (sold out!).

With ticket prices ranging from $18 to $80, the ticket revenues must have been around $130 million.  The team had the eighth highest payroll in the league of $99 million.  Adding in revenue from food and beverage, parking, broadcast rights, licensing, etc., makes the team appear to be a financial success.

So why does Sam Zell want to sell Wrigley Field separate from the team?  The logical conclusion must be that the stadium detracts from the value of the team.  The Cook County Assessor has valued Wrigley Field at $21 million.  This is a minor amount compared to the suggested selling price of $1 billion.

So why sell Wrigley Field?  If you have been to a Chicago Cubs home game, you know why – the physical condition of Wrigley Field is clearly substandard for a Major League sports stadium.  So, anyone buying the team knows that a major renovation to the tune of $400 million will be required.  Financing $400 million would require annual debt service of $40 million.  On top of the debt service, the property taxes could increase from $1.1 million per year to $20 million.  How can anyone afford this?

Clearly the team cannot afford this type of expenditure with the revenues outlined above.  So, similar to most single purpose sports stadiums in the U.S., a public/private partnership must be forged.

In the coming weeks, I am sure we will hear many proposals on how to pay for the stadium renovation.  The most talked about solution involves public financing through the Illinois Sports Finance Authority, resulting in lower borrowing costs ($10 million annual savings) and the elimination of property taxes (if done correctly).  However, the $30 million annual debt service would still need to be met.  Suggestions to service the debt have included the sale of naming rights, team lease payments, and increased sales taxes.  Maybe this could work.

How should the renovation of Wrigley Field be accomplished?

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No information on this blog is intended as legal, tax or accounting advice. It therefore cannot be relied upon or interpreted as such advice. You should instead contact a TPC Professional if you are seeking guidance about any such issues.

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