Sears Centre shining for Hoffman Estates
The management at the Sears Centre is outperforming expectations since taking over the Hoffman Estates arena in January, and one trustee said a property-tax hike won't be needed to pay for the arena.
Global Spectrum's approach in running the 11,000-seat arena off I-90 and Route 59 impressed the village board so much it approved a three-year deal with the company. The pact applies retroactively, going from January 2010 through December 2012, and includes a two-year option for the village. The company had been working with a temporary agreement.
Village officials said watching Global for the past five months convinced them it was the right company to manage the arena. They'll pay the company $132,000 per year plus performance incentives.
"We wanted to make sure we could get the best deal we could get," Mayor William McLeod said.
The arena hasn't made a profit since opening in 2006, and its first owners, Minnesota-based Ryan Cos., walked away from the project last year and left the village with the building's deed and responsibility for payment of the construction loan.
The loan could cost the village $88.4 million over 22 years with inflation. That's a $3.9 million annual payment, with $1 million per year from naming rights going toward the figure. That contract with Sears expires in 2015.
The Ryan Cos. lost $10.8 million in 2007 and $5.1 million in 2009. That's including payment of property taxes and the loan. Global predicted in December the arena would lose $1.2 million this year.
But well-attended shows, including Elton John and Hillsong United, have officials revising that figure to a $950,000 loss. That figure doesn't include property taxes, as village-owned buildings are exempt. The village has submitted paperwork to Cook County to petition for tax-exempt status.
The whittled-down debt has convinced Trustee Gary Pilafas that a property tax increase won't be needed to pay for the Sears Centre. Pilafas said a tax increase was a possibility in December.
"I don't see that as something we're worried about," Pilafas said.
Global Senior Vice President Frank Russo said the permanent agreement will allow the company to hire a full-time marketing specialist and other staffers at the arena. He expects continued success with improved customer service.
"That something we think that leads to repeat business," Russo said.
Global receives only the base fee of $132,000 for 2010. The base fee increases in subsequent years based on the rate of inflation.
In 2011, Global gets the base fee plus payments based on revenue generated for the arena, specifically reducing the building's debt. Global would earn a 10 percent of the village's operating cost of the arena if debt were cut by $250,000 from a total debt of $750,000. Global's cut of the operational costs would rise to 20 percent if debt is reduced under $750,000. The village estimated operating the building in 2010 would cost $1.2 million to $1.9 million.
If the building turned a profit, Global would receive 30 percent of profits, limited to $500,000. If profits exceed $500,000 Global would receive 20 percent of that figure. The village will use any profits toward repayment of the loan.
"We would be ecstatic if that happened," Pilafas said.
Global is a division of Philadelphia-based Comcast Spectacor, which also owns the Philadelphia Flyers, the Blackhawks' foes in the Stanley Cup Finals.
Arena: Trustee says property tax increase unnecessary