Hoffman Estates may need 2011 tax hike for Sears Centre

Hoffman Estates property owners may have to pony up a tax hike in 2011 to help the village pay off the Sears Centre loan, according to one trustee.

"We're still looking to raise the money without a levy increase," said Trustee Gary Pilafas, who chairs the village's arena committee.

The village doesn't need the tax increase right now.

The tax hike would be needed in 2011, the first year the village would be responsible for the annual $2.9 million loan repayment. No numbers have been crunched, Pilafas said, but there's a chance taxpayers could be asked to cover the full annual payment.

Over 22 years, the village could be on the hook for $88.4 million. The payments are due in April of each year, meaning if the levy were going to be increased, it would be toward the end of 2010.

Officials project it will cost $1.2 million to $1.9 million in 2010 to simply run the Sears Centre. The village has set aside $3 million in the 2010 budget for arena operations.

Ryan Companies used a village-backed $55 million loan in 2005 to build the 11,000-seat arena near I-90 and Route 59.

Ryan, a Minn.-based developer, set up a separate company to run the facility. Events haven't been as plentiful as predicted, and the Sears Centre posted a $512,000 operational loss in 2008.

Frustrated, Ryan is scheduled to walk away from the arena on Dec. 31, handing the deed to Hoffman Estates. The village has filed a foreclosure suit against Ryan to speed up the process so new operators can be in place on Jan. 1.

Meanwhile, Pilafas said the village will likely refinance the construction loan in 2015, which will cut the interest rate. That's crucial as the yearly repayments jump by $1 million to $3.9 million in 2017.

The village won't have to worry about making payments on the loan until 2011, as Ryan has pledged to cover the payment for 2010. There's also six years remaining on the naming rights contract with Sears Holding Corp. which nets $1 million per year through 2016. That money already goes toward the loan.

There's little optimism that the building will make money next year. Pilafas said none of the groups vying to run the arena were willing to say the Sears Centre would be profitable in 2010.

The village plans are to take half of the money collected from the food and beverage tax, estimated to be $875,000, and the full amount of the projected $350,000 entertainment tax.

It also will take $40,000 from the arena's portion of the village's sales tax, $1 million from the replacement fund and $730,000 from the "rainy day" fund.

"We're trying to target the taxes or the funds that don't draw from other village budgets that cover the essentials: Police, fire, public works, etc.," said Pilafas.

A deal with Philadelphia's Global Spectrum to run the facility could be reached on Monday. Global, a division of cable giant Comcast Spector, would get about $1.2 million to run the arena as well as a share of the building's profits, if there are any.

Global is slated to bring in Dennis Petrullo, who managed a facility in St. Louis, as the arena's new general manager.

Pilafas said there is $250,000 available that Global could use to go after big-name acts reluctant to perform at the arena. The facility has suffered from a bad reputation, and stiff competition from the Allstate Arena in Rosemont.

The budget also contains $400,000 to help train Global employees in their first three months at the Sears Centre.

The $650,000 from the two funds isn't guaranteed to be fully spent, hence the $1.2 to $1.9 million range village officials say it will cost to run the building.

Handling the arena is another complication in these tough economic times when the village has threatened to lay off police and firefighters.

Pilafas made assurances that the village has trimmed the Sears Centre budget similar to other departments. For example, Global will be working with a staff of about 16, compared to the 25 that worked in prior years.

Ryan at one time threatened to close the arena in the fall. Besides canceling events, it would have cost the village $7.6 million in various costs, Pilafas said. The village and Ryan compromised keeping the arena open, with the village helping Ryan with bills in exchange for keeping equipment like the playing turf and kitchen items.