Can Indiana pay for a Bears stadium? Analysts ask how it will pay its debt as some residents balk at new taxes.

A buyer should beware of a Bentley on sale for half price, says public finance analyst Geoffrey Propheter. So should the public on a sports stadium, Propheter says.

“With sports facilities, few lawmakers ever ask what’s behind the curtain,” Propheter, an associate professor at the University of Colorado Denver, told the Tribune. “They are so in love with what they see that they ignore what they can’t see.”

In February, Indiana lawmakers approved a plan to spend up to $1 billion to build an enclosed stadium in Hammond for the Chicago Bears. The team pledged to pay $2 billion toward building the stadium, and would then lease the site but collect all of the operating revenue.

But whether the planned taxes in the legislation would be enough to pay off the construction cost is highly uncertain, some analysts say. Just as whether the Bears will move to Indiana depends on whether Illinois will make a better offer, the financing of the Hammond site depends on a lot of unknowns. Chief among them, Propheter said, is the ultimate cost of buying land, building and maintaining a stadium and the lost opportunity of what else could be done with the money if it didn’t go toward the stadium.

A fiscal analysis by the state’s Legislative Services Agency did not address the costs, but estimated the proceeds for the stadium from a slew of proposed taxes in the legislation.

A 1% food and beverage tax in Lake and Porter counties could generate an estimated total of at least $12 million to $18 million annually, legislative Chief Economist Randhir Jha estimated. A 5% increase to double Lake County’s innkeeper’s tax could collect at least $5 million annually.

An admissions tax of 12% of the ticket price for events at the stadium could bring in around $12 million a year.

A northwest Indiana Professional Sports Development Area (PSDA) for the stadium, parking and training facilities could collect sales and use tax, individual income tax, and the food and beverage tax in Lake County and Hammond. The legislative analysis gave no estimate of the revenue, but projected it to be less than the $16 million generated by a similar area around Lucas Oil Stadium, which includes two other sports facilities and a convention center in Indianapolis that Hammond doesn’t have.

A northwest Indiana Stadium Development District within Hammond but outside the PSDA would collect increases in property tax, income tax and sales tax. Revenue from similar tax zones in the state vary significantly, from minimal to more than $10 million annually.

So, in a best-case scenario, adding up the maximum tax revenue estimates comes out to about $45 million. If the sports development area collects another $10 million, that comes to $55 million a year — which would be about $5 million short of what is needed, two economists predicted.

Propheter and professor Deborah Carroll, director of the Government Finance Research Center at the University of Illinois Chicago, calculated that a 30-year bond of $1 billion would require annual debt service payments ranging from $60 million to $62 million.

Asked if the state could pay its debt, Carroll told the Tribune that she didn’t think Indiana would move forward unless its leaders thought it could do so — but such projections tend to be rosier than what pans out.

“If any of those assumptions fail to materialize,” she wrote in an email to the Tribune, “the reality can drastically change the financial scenario.”

On the positive side, she said, the payments don’t depend solely on any single source, and some will be paid by people going to the stadium from out-of-state — though she doubted many people would stay overnight.

Warning flags include great uncertainty over what revenues will actually come from those sources, especially development around the stadium, which is expected to include a hotel, restaurants and bars.

“And what happens if the revenue falls short?” Carroll asked. “I assume that’s where the broader tax sources unrelated to the stadium come into play, which would increase the tax burden for Indiana residents.”

Finally, Carroll wondered, “What other events might draw the necessary crowds? And will enough people attend those events? These are really important questions considering there are only a handful of home football games each season.”

Asked to analyze the deal, Dan Close, head of municipal finance at the global investment manager Nuveen, said there were too many unknowns.

Whether Indiana can pay the debt depends largely on tax revenues in the yet-to-be-defined Sports Development Area (SDA), he told the Tribune.

The specifics of any financing, Close wrote, “are highly uncertain and dependent upon future economic development around the stadium.”

In Illinois, Gov. JB Pritzker has said the state won’t pay to build a stadium for the Bears, but as with other developments, would pay for infrastructure costs like roads and sewers, estimated at $855 million at their previously proposed site in Arlington Heights. That’s where the team owns property for a proposed multiuse site, but team officials say they need a property tax deal.

A consultant for the Bears projected that a $2 billion stadium in Arlington Heights would create 33,000 construction jobs, 9,000 permanent jobs, $1 billion in annual economic impact and state tax revenues of almost $1.3 billion over 40 years.

Economists generally are skeptical of such projections and of public financing for sports stadiums, saying they are a bad deal for taxpayers. The Illinois proposal to let the Bears and other developers negotiate their property taxes for big projects would have been a direct property tax cut for corporations that other residents would pay for, according to an analysis by the non-profit Good Jobs First and the Institute on Taxation and Economic Policy.

While Illinois lawmakers failed to act on that proposal, the Bears said they were advancing their stadium plans in Indiana. The team initially looked at a site on Lost Marsh Golf Course near Wolf Lake, but recently it has also taken soil tests at Wolf Lake Terminals, a nearby 83-acre site on the west side of the I-90 Indiana Toll Road. The property contains 21 million gallons of tank storage for food oils, petrochemicals, de-icers and other chemicals, and is near Dover Chemical Corp., a large NIPSCO electrical substation and protected wetlands.

“We have an excellent option already in place and continue to assess additional parcels of land in the Wolf Lake region to ensure we place the stadium and mixed-use district in the very best location to serve all of Chicagoland,” the team said in a statement.

Despite uncertainty over the outcome, Indiana lawmakers passed the law to build the stadium with overwhelming bipartisan support and remain hopeful it will come to fruition.

Asked for comment, Indiana House Speaker Todd Huston said in a statement that local elected officials and residents of Lake and Porter counties have been very supportive.

“This project will be a catalyst for growth across the entire northwest Indiana corridor, creating jobs, attracting new residents and businesses, boosting tourism and generating new revenue that will benefit the region and taxpayers for generations to come,” Huston said. “I’m optimistic about getting this project across the finish line and continuing to work with local officials and residents to bring this transformative opportunity to northwest Indiana.”

Further complicating matters, some Porter County officials oppose the 1% food and beverage tax there.

County Commissioner Jim Biggs said when he asks residents if they want to pay the tax, “The answer is almost 100% — not no, but, hell no.”

Council President Andy Vásquez blamed his primary election defeat this spring largely on his support for the stadium tax. In the long run, he believes, the tax would be worth the jobs and economic development it would create for the region — just as the steel industry spurred development across the region, not just one county. Still, he said, with much of the council membership due to change with November’s election, the council would not vote on the matter until next year so sitting members could be held accountable.

Indiana Gov. Mike Braun told WFYI last week said that Porter County opposition is “tangential” and won’t make a difference in the end, except to keep the county out of decision-making over economic development.

Still, the Republican candidate succeeding Vásquez, Porter County Plan Commissioner Craig Kenworthy, made his position clear on social media: “No new taxes for Lake County projects!”

As for economists’ warnings that stadiums cost more than they deliver, Illinois taxpayers can relate to that experience with Soldier Field. It was remodeled in 2003, but left many fans underwhelmed, team officials disappointed enough to want to leave and taxpayers with a debt still at about $467 million.