A little number for a big deal

News reports like to awe us with big numbers. Millions of dollars in taxes and billions of dollars of development costs. The key number in a deal for the Bears to build a stadium in Arlington Heights might be much smaller, like say 0.09.

Both sides have stated they "want certainty" about future taxes. Unfortunately, reality seldom gives us certainty about the future, especially with a decadeslong time horizon. As recent years have taught us, inflation is one major uncertainty in financial planning. The Fed's long-term goal is for 2%. We are at about 3% coming down from much higher levels. IMHO, this risk should be shared.

What is a fair amount of taxes for the development to pay 23 years from now? How can our local governments determine this when the Bears will have control over what development takes place?

The Bears' key need is for help financing the upfront development costs. The local school districts' biggest concern is many years of costs without sufficient funding. This difference in time horizon creates an opportunity for both sides to get a good deal.

The deal I suggest is the Bears' payment-in-lieu-of-taxes be based on the valuation of their soon-to-be-vacant land. Payment would then increase 9% each year. Since 9% is significantly above expected inflation, it insures the taxpayers are not stuck with a bad deal for a long time. By year 23, this payment would approach the normal property tax for a billion-dollar development. At that time depending on inflation and actual development, the Bears might prefer the uncertainty of our normal property taxes over extending the deal.

With a deal of this structure, the rate of increase becomes the key variable for head-to-head negotiation. To make 9% more appealing to Bears fans, we might call this "the McMahon offer."

Lee Bennett

Palatine