Soccer team and Chicago suburb end stadium deal that failed them both
Bridgeview, Illinois, will receive $65.5 million from Major League Soccer’s Chicago Fire to allow the team to escape a stadium lease that ultimately disappointed both parties.
The new deal will allow the Fire to move 13 miles to Chicago, where it expects the more central location to drive higher attendance.
The revised lease is expected to ease the village's balance-sheet pressures that stem from borrowing to finance SeatGeek Stadium, a 20,000-seat venue that opened in 2006.
S&P Global Ratings, which put the southwest Chicago suburb’s junk rating of BB-minus on CreditWatch with developing implications in May when the negotiations were first disclosed, did not have an immediate comment as its review is ongoing.
The revised memorandum of understanding the village announced Tuesday keeps the team's practice facility and youth development programs in Bridgeview, while freeing the Fire from an ironclad requirement to play its games in the suburban venue.
The team has been eyeing the 61,000-seat, Chicago Park District-owned Soldier Field, where the National Football League’s Chicago Bears play, according to published reports, as it looks for a permanent soccer-specific venue in the city.
Under the deal that must be finalized in the next 30 days, the team would make an upfront payment of $10 million with another $39 million paid out in annual $3 million increments through 2033 and then $2 million in 2034 with $9.5 million paid out in $559,000 installments through 2036, all totaling $60.5 million. Another $5 million would be paid to renovate and expand existing soccer facilities around the stadium.
The team’s current payment on its lease is about $1.5 million based on a profit-sharing formula that could grow or shrink based on attendance levels. The village faces some other revenue losses such as those tied to the stadium naming rights, with any loss in naming rights split between the village and team and capped at $3.8 million for the village.
Village financial advisor Dan Denys said any potential loss could be offset by new revenue as Bridgeview begins marketing the venue for events like concerts. Debt service on the $135 million 2005 issue is about $8 million annually on the $100 million that is still outstanding.
Rising debt costs have dogged the village of 16,000, driving tax increases and debt restructurings.
Bridgeview is still exploring its options, Denys said. “We are going to try to maximize the benefits to the village,” Denys said of the revised lease and new payments.
“Our objective is, one, to maintain the financial integrity of the village and meet our obligations and maintain at least a $4 million fund balance,” Denys said. That also includes a commitment not to again turn to scoop-and-toss debt restructurings as used in the past for near-term relief and hopes that the village can rebuild its credit rating.
“Two, we are striving to moderate the cost to taxpayers and this money affords us the opportunity to mitigate or moderate the costs to taxpayers,” Denys said.
General obligation debt service is slated to increase by $2 million to $3 million over the next four years before leveling out. The looming increases were expected to lead to further property tax hikes, so the revised lease deal could help offset the impact, Denys said. The village has about $260 million in debt, including $47 million of sales tax securitization bonds.
Denys said the village could seek to leverage the annual funding arrangement only if the overall interest rate savings provide a benefit. The village in 2017 followed Chicago’s lead in securitizing its state collected sales taxes. It pays a rate in the 5% range on those bonds as well as its taxable stadium bonds.
Fitch Ratings assigns a BB-plus issuer rating to the village and rated the securitization bonds BBB-plus. Fitch’s speculative grade issuer default rating reflects a “very high liability burden” that includes its bonded debt and pension liabilities that are at 61% of village personal income.
The Fire began playing at the 20,000-seat stadium in 2006 as part of a trend for MLS teams to build their own smaller venues to get out of large, shared multipurpose stadiums. Since then teams in Seattle and Atlanta have succeeded in filling larger central-city venues built for NFL football while teams in Minnesota, Portland, Oregon and Los Angeles have drawn well in smaller, soccer-specific urban stadiums. Chicago ranks last in attendance this season in the 24-team league, averaging less than 11,500 per game, according to Soccer Stadium Digest.
The stadium didn't drive development in Bridgeview, as village officials had hoped.
S&P does not rate the securitization bonds. S&P cut the village by four notches to junk in March 2017. “Should this scenario move forward, we will assess its effects on the village's creditworthiness and the overall settlement — specifically, the stadium and general fund operations and the village's debt and contingent liability profile," S&P analyst Blake Yocom said in the May report.