'Worst-case' comes to pass: Hoffman Estates eyes takeover of Sears Centre

When the Sears Centre was proposed, Hoffman Estates officials acknowledged they'd have to take control of the arena if it didn't live up to expectations.

Now, less than three years after it opened with a Duran Duran concert, what was then called a worst-case scenario is likely to become reality.

Local officials confirmed Monday they're in talks to take over the $60 million, 11,000-seat arena off the Jane Addams Tollway at Route 59.

They call the move unwelcome but necessary to keep the facility open, and they vow to do everything possible to keep the taxpayers off the hook.

"This isn't good news," Mayor William McLeod acknowledged. But he said that with a different marketing and management strategy, the arena can be the asset it was intended and remain a linchpin for more new development.

Officials hope to reach a deal with private owners MadKatStep LLC by October and said the ball's in its court to "propose an exit strategy," McLeod said.

Though a steady stream of big-name acts and minor-league sports teams have played the arena, revenues haven't lived up to the village's hopes, and several teams that made the Sears Centre home have folded, the latest being Chicago Storm soccer and Chicago Shamrox lacrosse.

Village officials hope to do better by hiring a national arena management firm. McLeod said three of the biggest have already expressed interest.

The original 2005 agreement with the Ryan Cos. to build the Sears Centre gave the village the right to take over the arena from the construction giant if it defaults on a $50 million loan backed by Hoffman Estates taxpayers.

That hasn't happened, and owners have paid all operating expenses, arena Executive Director Jeff Bowen stressed.

But Ryan Cos., which owns 75 percent of the arena, is having an increasingly difficult time meeting its financial obligation and turned to the village, looking for relief after it meets its four-year debt-payment guarantee through 2010, Hoffman Estates officials said.

Ryan Cos. Midwest Division Chief Jeff Smith couldn't be reached for comment.

The other 25 percent is owned by Sears, which pays $1 million annually in a 10-year deal for the naming rights.

Owning the building would make the village responsible for the loan repayment bills, the first of which would likely come due in April 2011. Officials downplayed the possibility of a tax hike to pay for the loan.

"Give us some time to work on how we'll be able to do this," Village Manager James Norris said. "Our goal is for it not to go on the property tax bills, obviously." It would be wrong right now to say this would lead to a property tax increase, he said.

Village officials say the concept of the Sears Centre has always been to spur other development. They say outdoor superstore Cabela's and a recently greenlit off-track betting parlor wouldn't have happened without the arena.

The economy's downturn has slowed that: Jam Productions has junked plans to build an outdoor amphitheater nearby, and a hotel and water park development has stalled.

But allowing the Sears Centre to fail would "be a totally losing proposition," Trustee Karen Mills said.

Village officials and Bowen contend a lack of property tax bills for the arena would make it more viable.

Those who opposed the deal in the first place are skeptical.

One early opponent, Village Trustee Cary Collins, on Monday reiterated his doubt that the venue would ever fulfill expectations, saying they were "too good to be true" in the first place.

Harry Pappas of Rosemont's Allstate Arena, which is village-owned and a Sears Centre competitor, has been a longtime critic.

He called the Sears Centre "an undersized facility for the market to compete for the target acts," he said.

Steve Hyman, the Sears Centre's first director who was replaced by Bowen in 2007, said the village did its homework in planning for the arena.

But Hyman, now managing the Alerus Center in North Dakota, said the "bottom line is these buildings aren't often the golden goose they're portrayed to be."

Mark Rosentraub, a sports management professor at the University of Michigan, doesn't see the arena market improving for five years.

Arena problems aren't limited to Hoffman Estates, and publicly owned arenas are common, Rosentraub said. He pointed to ownership groups in Columbus, Ohio, and Indianapolis that are asking for government intervention to help their struggling venues. He said it's unfair to blame arena management.

"Did you really foresee the collapse of Citibank and AIG?" Rosentraub said. "Were you one of the 25 people who said the would happen?"

The Sears Centre feasibility study suggested success based on hosting 135 events a year. The arena hasn't reached that mark, averaging 92 events annually, according to Dan Guza, the arena's director of ticketing. Concerts drive the success of arenas, Rosentraub said.

For the most part the Sears Centre attracts crowds for music, with sold-out shows like The Killers and the Eagles. The arena just hasn't booked enough of them, village officials contend.

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