Owner's rep: Sears Centre should've belonged to Hoffman from the start

The original ownership plan for the Sears Centre was a mistake, the head of the arena's current ownership group said Tuesday.

"Almost every other facility in the country is owned publicly and doesn't pay real estate taxes," Ryan Cos. Midwest President Jeff Smith said.

Ryan Cos., which owns a 75 percent stake in the $60 million facility, is in negotiations with Hoffman Estates officials for the village to take over the struggling arena. The Sears Centre opened in 2006 thanks to a $50 million loan from the village. Smith hopes to reach an agreement allowing the village control by the fall.

In his first interview since village officials revealed the negotiations, Smith said the arena had been "just crushed by the economy." An audit obtained by the Daily Herald shows the facility lost $512,635 in 2008.

Ryan Cos. made cash calls to partners in the nationwide developer in order to raise funds to pay their bills on time, Smith said. He said there was no major breaking point that prompted negotiations, which were initiated to ensure the building's long-term survival.

"We don't have the luxury to hang around for several years," he said. "This was outside of our core business; we tried it, and it didn't work."

He did point to some positives. "We have had major successes as part of the venture. We created a world-class facility in a great setting."

Smith couldn't say why the Ryan Cos. had agreed to private ownership in 2005, but he did cite changes in the entertainment industry, including fewer performers going on tour, as reasons for the current situation. There's no bitterness, he added.

"We fully intended for this to be a success for the village and us, and it didn't turn out that way," he said.

Publicly-owned competitors, like the Allstate Arena in Rosemont, are exempt from paying property taxes, while the Sears Centre paid $1.8 million in property taxes in 2007, according to Cook County records. This created an unfair playing field in the battle to draw big-time shows, Smith said.

Because the project is in the tax-increment financing district created to get Sears to move its corporate headquarters to Hoffman Estates, only $3,381 in property taxes from the Sears Centre were distributed to taxing bodies in 2007, county records show. In a TIF, additional property tax revenue from development is used to pay for some of the development costs.

The Sears TIF is scheduled to expire in 2012, at which point Elgin Area Unit School District 46 and other taxing bodies would have received much more revenue. But they will no longer receive any property taxes from the arena after the village takes over.

The property tax take would rise if the village's plans for an entertainment district around Sears Centre in the Prairie Stone Business Park materialized. But proposals for an outdoor music amphitheater and an indoor water park are stalled by problems getting loans in today's credit environment.

Ryan Cos. and the village knew four years ago if the arena floundered, the village could take over, as the original contract ceded control if their was a default on loan payments. The village is looking at three promoters with national ties to manage the venue and lure more concerts.

"Again, in hindsight, we probably could have brought a third party in, which is exactly what we just recommended to the village," Smith said.