Corporate welfare (continued)

The other day I went on and on about the state of Illinois' plan to buy and renovate Wrigley Field. Yeah, they're not gonna use tax dollars to fund the restoration of Wrigley Field. Think again. Yesteday in Fran Spielman's column the former Guv decided the plan should include tax dollars:

"If restoration includes things for the neighborhood -- like parking -- then using tax dollars for that would not be inappropriate," said former Gov. James R. Thompson, chairman of the Illinois Sports Facilities Authority, the state agency that built U.S. Cellular Field and could acquire and renovate Wrigley."

LMAO. How quickly these politicians change their tune.

Thompson is just waiting for Zell to name his price:

Referring to Zell, Thompson said, "He's the seller. I'm waiting for him to tell me what he wants for Wrigley Field. Then we can say 'yes' or 'no.' . . . The less the ballpark costs, the more resources [from future rent and naming rights] we could use for restoration."

Thompson said Wrigley "desperately needs restoration," but he won't know how much it would cost or how it would be financed until the Cubs' new owners decide how far they want to go and until architects and engineers do an inspection of the stadium.

Not surprising, Thompson believes that the Cubs new owners (wink, wink: John Canning and Andy McKenna) should benefit from the ISFA:

"Didn't the U.S. Cellular Field deal help the White Sox? Didn't the Soldier Field deal help the Bears? Didn't the United Center deal help the Bulls and Blackhawks? Why leave the Cubs out?" the former governor said. "I think ISFA should own Wrigley Field and restore it."

Zell has talked about selling the naming rights to Wrigley to generate millions for stadium renovations. But Thompson predicted that a naming rights deal would not be nearly so lucrative. There would be a "strong push to keep the name Wrigley Field" attached to the new corporate moniker, diminishing the value of such a sponsorship, he said.

There so all of you worried about the name of Wrigley Field can feel good.

Any way you slice this deal the taxpayers of Illinois are going to get screwed. There is no reason for the state of Illinois to buy this decaying ballpark and fix it up so these corporate suits can benefit from the deal.

Stay tuned...

Corporate welfare

Last week it was revealed that the State of Illinois (which cannot figure out how to tie it's own shoes) was considering the idea of buying Wrigley Field. Of course, it was said that no tax money would be used, yada, yada, yada... When politicians say things like this, I wait for the other shoe to drop and the real story to come out. I think alot of the story came out earlier this week in Fran Spielman's Sun-Times report from City Hall:

The 1 percent tax on downtown restaurant meals that helped expand McCormick Place could move north to the area surrounding Wrigley Field to finance either renovation of the landmark stadium or improvements in the neighborhood, officials said Monday.

In the article the Cubs current caretaker Crane Kenney says:

"The city and state could say, 'Let's leave Wrigley Field as is.' But to the extent they do want to make improvements -- and we believe there's a real need for that -- they have talked about a variety of ways, including extending the food and beverage tax to include the Wrigley Field area. Those monies would go to support bonds issued for renovation," he said.

He also states that this is just one of several ideas for the old ballpark. Making me suspicious that this is simply leverage.

But Kenney stressed that having the authority that built U.S. Cellular Field acquire and renovate Wrigley was just "one of eight transactions" the Tribune Co. was reviewing. The other seven involve "private transactions" involving groups that would purchase the stadium and lease it back to the Cubs.

"It's an idea more than anything else. It may go nowhere. We're not even in the bottom of the first inning," Kenney said.

I suggested a week ago that this was a leverage move by Sam Zell so he can get a premium for the team and ballpark. I still believe some of that. I think most owners would want control of the historic ballpark. Apparently I am wrong on John Canning and his group. This from Michael Sneed's column last week:

Tipsville II . . .
Hmmm. Here's a little dugout dirt.

• • To wit: Sneed hears rumbles the John Canning group, which is vying to buy the Chicago Cubs and includes Tribune insiders like Andy McKenna, were well briefed about the possible sale of Wrigley Field to the state -- and may have been trying to push it along because it would benefit them as possible future owners of the Cubs.

• • Isn't it true other groups vying for the Cubs had to wait to hear about it in the News? Questions. Questions.

When you start to connect the dots it looks like this is just another form of the corporate welfare system that baseball owners have benefited from over the past 20 years in town after town. Yeah the team is owned by billionaires and the players are millionaires, but the taxpayers should pay for the stadium. LMAO. Makes perfect sense.

Yesterday Sam Zell fresh off his pulling off the Tribune Deal stated this about the sale of Wrigley Field to the state of Illinois:

"We believe that transaction, when completely vetted, is very beneficial for the city of Chicago, is very beneficial for the Cubs, and for the future of a Major League Baseball team in this city," Zell said. "[Illinois Gov. Rod Blagojevich] originally approached us on this. We studied it; we thought it was an interesting concept. We started meeting with [Chicago Mayor Richard Daley's] people on it. We'll see where that goes."

In the best interest of the city? WTF. Yeah, this deal is in the best interest of Sam Zell and the next ownership group. Think about this, Sam Zell buys the Tribune. His first order of business is selling the Cubs. Playing in a decaying ballpark this club is not worth nearly as much as if they were playing in a brand new remodeled Wrigley Field.

Enter Cub fan and dumbass Governor Rod Blagojevich. Blago it seems has more interest in the Cubs than he does in his current job and his responsibilities to the taxpayers of Illinois. Blago proposes that the state finance a "$350 million" (wink, wink. you can't get a stop light at Clark and Waveland for under $half a million. How are you gonna rebuild the grandstand for $350 mill?). So once Blago proposes this, you can't blame Zell for being interested. Suddenly he could sell the Cubs at a premium because he has a ballpark renovation in place that will be financed by the state. You can't fault Canning and McKenna because they won't have to pay for the new stadium. You CAN fault any politician in Springfield that thinks this is a good idea.

Study after study has shown that publicly financed stadiums do not benefit the taxpayers. Back in 2003 the DC Fiscal Policy Institute released this study as their Mayor tried to attract an MLB team to the District of Columbia:

Publicly financed stadiums do not pay for themselves. A study of 25 stadiums built between 1978 and 1992 found that none of them generated a net increase in tax revenue for the host city. Even Baltimore’s Camden Yards, which is considered a highly successful stadium, is a net loser for the state.

As a matter of fact according to the 2003 book Public Dollars, Private Stadiums: The Battle over Building Sports Stadiums it has become accepted that stadiums provide little economic benefit to the communities they serve:

Nevertheless, there has lately been a noticeable shift away from economic promises and toward promises of social benefits. We believe this is not just random but reflects conscious strategic decisions by stadium proponents in each city. Proponents have realized that the path to publicly financed stadiums will be less problematic if they downplay the tangible economic benefits and accentuate the intangible social goods that might accompany stadiums. But like the existence and strength of local growth coalitions just discussed, these decisions are largely patterned by the unique structural landscape of each city. Stadium advocates certainly have some discretion about which strategies to employ, but certain cities lend themselves to making certain arguments about why it is in the community's best interest to build new sports stadiums with public dollars.

Contrary to what the owners will tell you, these billionaires can actually fund their own ballparks. In September 2006 a blog by U of I College of Law students published this:

A study done just two years ago contends that sports franchises can build their own stadiums without public subsidizes. [17]. The study reported that teams could recover half the construction costs within five years, and the entire cost within twelve years. [18]. Furthermore, within twenty years, a franchise’s revenues from the stadium could exceed construction costs by $100 million and $200 million in thirty years. [19]. Under this scenario, not only does the team get its new stadium, but the team has a continuous revenue stream that does not subject taxpayers to the burden of covering the stadium’s costs. Thus, if sports stadiums are really supposed to provide a boost to the economy, then they should do it without first imposing costs upon the community.

So what is going on here is Zell and Canning are using the state for their own welfare. While I am in full agreement that the Wrigley Field grandstand needs to be rebuilt, I cannot in any way shape or form say that it would be alright for the state of Illinois to foot the bill. Rebuilding the grandstand should be the responsibility of the new owner. They can finance it however they want. Sell the naming rights, advertising, or $15 beers in the bleachers. Whatever. Just not with taxpayer dollars.

I am not always on the same page as Hizhonor. But for his part, I have to give Mayor Daley some credit for his take on the whole idea:

“We can’t even get any money for the CTA and they’re worried about the Chicago Cubs? They’ve made money every year. It’s very profitable and some way, we’re supposed to bail them out? I’ve never heard [of that] . . . I don’t think they’re leaving. They just increased the price of tickets,” Daley said.

“We have a crisis at the CTA right now. It’s hard to believe . . . that people are now talking about taxpayers helping out the Cubs. The Cubs are not gonna move. It’s a gold mine. . . . If you’re gonna start holding this issue over the heads of passengers of the CTA and this crisis we’re in and they want to start talking about whether or not taxpayers are gonna buy [Wrigley Field] — that’s hard to believe.

Ahhhh, has there ever been a more sensible yet corrupt politician than Daley? For all of his faults when he says things like that, it's hard not to agree.

Back to the Zell/Canning/Blago plan. The plan behind the whole idea is that the state will take over Wrigley Field for $1 and be responsible for the upgrades including a new grandstand. Because you can count on the state of Illinois to do things right! Take a look at the crumbling CTA system.

Remember 'no tax dollars will be used'. Former Governor Jim Thompson who heads up the stadium authority tells us that's the plan, for now:

The former governor acknowledged that "there would have to be neighborhood improvements along with restoration of the stadium."

But he said, "For the moment, I'm not looking at taxes. I'm looking at non-tax revenue" like the tax increment financing scheme now being used to bankroll a new $1 billion Yankee Stadium on a park across the street from the House that Ruth Built.

Spoken like a true politician: "For the moment".

Maybe Blago's wife can get her hand into the cookie jar. At this point nothing would surprise me.

it is done: zell closes tribco deal

read on:

Taking on the CEO's role as well as chairman, Zell made clear he won't hesitate to make sweeping changes at the media conglomerate even though he has no previous experience in the industry.

He signaled he has no immediate asset sales in mind at the company that owns 23 television stations and nine daily newspapers, including the Los Angeles Times and the Chicago Tribune, although the Chicago Cubs baseball team and Wrigley Field are to be auctioned off by July.

color me impressed. zell managed to restructure the deal enough to entice his bankers forward, getting them to float the remainder of the necessary tribune company debt -- and he did it in the face of extraordinary pressure in credit markets. it's a deal i didn't think would be done -- nor did the marketplace, which left a hefty discount to zell's equity bid until the last couple days -- and a testament to zell's immense clout.

the changes are on already, as ccd pointed out -- see ya, denny fitz! -- and now the path is clear for the bid submission process for the ballclub to really get rolling. good luck, john canning!

FitzSimons resigns from Tribune

Over the last few years we have lost nearly all of the people that we used to bitch about on this site on a regular basis. First it was Andy MacPhail, next Dusty Baker, today we can add Tribune front-man Dennis FitzSimons to this list. (Jim Hendry better have that resume updated)

Following a favorable FCC Ruling on Wednesday:

In the end, the most important thing the FCC may have done for newspapers is grant waivers for the 42 existing newspaper-broadcast combinations, relieving them of concerns they one day might have to divest and removing a potential hurdle to sales.

Chicago-based Tribune, owner of The Times and KTLA Channel 5, received waivers last month from the rule to close its $8.2-billion deal to go private. Waiting for FCC approval delayed the deal and had threatened to prevent the company from closing by the end of the year until Tribune and its political allies successfully pushed the FCC to act.

The takeover by Sam Zell is even closer to a reality. Dennis FitzSimons saw the writing on the wall and turned in his resignation on Wednesday. The Chicago Tribune is reporting the Zell is expected to take the Chief Executive spot:

Zell is expected to become chief executive, according to a source close to Tribune. A source at Tribune would not confirm that. A spokeswoman for Zell could not be reached.

These moves, just send us closer to the day the Chicago Cubs are not owned by the Tribune. Hallelujah!

One thing of note. Look at the amount of cash FitzSimons takes away from the company he nearly ran into the ground:

According to public documents, FitzSimons will leave the company with $38.3 million in severance and stock holdings accumulated over a 25-year career with the company.

Tribune Report: State could buy Wrigley Fd.

More news on the upcoming Cubs sale in this mornings news. The $1 billion mark continues to be floated. This from Bloomberg:

The sale may fetch more than $1 billion, according to John Puchalla, an analyst at Moody's Investors Service. Tribune reiterated today its going-private buyout will close by year-end, in a deal that will leave it with about $12 billion in debt.

You have to hand it to Sam Zell. The scare tactic that he might sell Wrigley Field seperately from the Cubs might work to get a premium on both. According to this mornings Chicago Tribune the state of Illinois is discussing buying the historic ballpark.

City and state officials have had discussions with Cubs executives about possibly selling historic Wrigley Field to a state government entity that currently owns and operates the White Sox's home, U.S. Cellular Field, sources close to the Cubs told the Tribune.

The talks with state and city officials centered on selling the 93-year-old facility to the Illinois Sports Facilities Authority, the government unit the Illinois General Assembly created in 1987 for the purpose of building new Comiskey Park, now U.S. Cellular Field.

Now as an Illinois taxpayer, what I wondered how the hell would they pay for it?

It is unclear how the state and ISFA would raise funds for such a purchase, which would fetch hundreds of millions of dollars if consummated. One possible way the state could underwrite a purchase, or pay for major renovations to the ballpark that any buyer would have to fund, would be to sell naming rights to the park, according to sources with knowledge of the discussions. These sources said that even if naming rights were sold, the park likely still would retain the name Wrigley Field as well.

This all seems rather far-fetched to me. In a day where Springfield can't get a transit bill through they can buy a ballpark? What? Hmmmmmmmmm. I guess anything is possible.

tribune puts a timeframe on the cubs sale

not to horn in on the ecstasy of kosuke fukudome, but a bit of news is out relating to the eventual divorce of the chicago cubs from the tribune company.

Tribune Co., the country's second-largest newspaper publisher, said Wednesday it anticipates closing on the sale of the Chicago Cubs baseball team as well as its stake in Comcast SportsNet Chicago during the first half of next year.

The sale of the Chicago Cubs was a condition that needed to be met in order for Tribune to be taken private in an $8.2 billion buyout led by real estate magnate Sam Zell.

Tribune said it also expects to complete the sale of the Cubs' Wrigley Field and related property during the same period.

Tribune put the Cubs and Wrigley Field up for sale in April, with the company's 25 percent interest in Comcast SportNet Chicago included in the package. The company has not disclosed a buyer....

it's still too early to talk about sam zell's purchase of tribune in the past tense, but if it goes through then this is the plan.

tribco stock is trading this morning around $32, still about 6% shy of zell's takeover price.

a step toward finalizing the tribune buyout

tribco will sweeten the deal for sam zell's nervous bankers by contributing $500mm of its own cash on hand.

Tribune said it has told the lead arrangers of its second-step financing that it intends to use up to $500 million of its cash to cut its bridge loan commitment to $1.6 billion from the original amount of $2.1 billion.

Many investors had expressed concern that Tribune's large debt load would jeopardize real estate mogul Sam Zell's plan to take the company private in deal valued at $8.2 billion, or $34 per share. The financing of the transaction involves the creation of an employee stock program that would incur a massive amount of debt, and for several months, the stock has traded well below Zell's offer price as shareholders fretted that the buyout would fall apart.

trib shares jumped 8% to $32 on the news, closing the deal arbitrage gap to 6.3%.

but the deal is still a headscratcher for many, as offered by the wall street journal.

Deal Journal has covered hundreds of mergers and acquisitions. We can't recall one that was publicly contingent on the receipt of a solvency opinion.

Until now: Sam Zell's planned buyout of Tribune Co.

The requirement gives us some pause on the same day Tribune's shares rose $2.31 to $32 on the New York Stock Exchange, inching closer to the $34-a-share takeover price offered in Mr. Zell's exotic employee-stock ownership takeover plan.

Solvency opinions typically are used in highly leveraged financial transactions, to test -- surprise -- a company's continuing solvency.

They are designed as a legal protection for board members against the concept of "fraudulent conveyance." This is a term most often used in bankruptcy court, in situations where assets are cash or are disbursed in a way that is deemed unfair to creditors.

These opinions are notoriously easy to obtain, and people close to the deal say they expect Tribune to pass the test without problem. Still, the fact that it exists is instructive of the nature of the deal.

When the original solvency opinion was granted on May 9, company advisers Valuation Research Corp. estimated Tribune's fiscal 2008 earnings before interest, taxes, depreciation and amortization would be $1.42 billion, according to SEC filings.

Current fiscal 2008 analyst estimates -- about seven months later -- show a mean projection of $1.076 billion, according to Factset, or 24% lower.

Tribune has improved its cash position beyond its original projections, says one person familiar with the deal. That should well make up for any shortcomings in the near term.

Still, it is worth remembering just how thin Tribune's operating cushion is as it embarks on its journey with Mr. Zell.

the deal looks much closer to being done today than it did monday. but that may not be the best news in the world for tribune's investors. following the last time we talked about this, i said:

maybe the best way to state it is this: IF the deal goes through, i suspect the involved banks will probably lose money, the debt investors in tribune will almost definitely lose money, and tribune itself (either as a whole or in parts) becomes a fine candidate for future bankruptcy proceedings.

i'm clearly not alone in that opinion.

Developing story: McDonough to resign

In a sign of the uncertainty that surrounds the future of the Chicago National League franchise, ESPN Radio 1000's Bruce Levine is reporting that Cub President John McDonough will resign from his post with the Northsiders to get this...take the same post with your Chicago Black Hawks.

Folks, they are starting to bail from this sinking Tribune ship. McDonough did a great job building the brand that is the Chicago Cubs. His one season as President was a success. I'd chalk this up as a good move for Rocky Wirtz and company.

Now we wait and see what the next move is at Clark and Addison.

UPDATE 9:27--Here's a link to the Tribune story. This is a fun part of the story:

With an uncertain future of new Cubs ownership and the marketing challenge of a lifetime to restore the Hawks to their former place in Chicago sports, the move could be attractive to McDonough. He was in charge of marketing the Cubs before taking over as president, helping the team regularly fill Wrigley Field despite subpar performances on the field.

UPDATE 9:57--Who would have thunk it? There are Hawks message boards! Take a look here at the excitement surrounding this move by Rocky Wirtz. Honestly I stopped following the Hawks and the NHL in the mid-90's so all of this interweb stuff is new to me, there might even be a Hawks blog or two out there. I can't be bothered to look that deep. I am interested to hear what our Hawk fans John Dooley and Newman have to say about this move from the westside perspectice. Think McDonough's gonna revive the life of that little jingle: "Here come the Hawks!"


UPDATE 10:13--Over at ACB, Maddog has the Crane Kenney (above) taking over the Club President role. So the man behind the curtain, is now front and center for a little while anyways.

OFFICIAL RELEASE: Below is the official release from the Cubs regarding the departure of John McDonough.

CHICAGO -- The Chicago Cubs today announced John McDonough resigned as president of the Chicago Cubs to accept a position as president of the Chicago Blackhawks. Crane Kenney, to whom McDonough reported, will continue overseeing Cubs operations until the sale of the team is completed. General Manager Jim Hendry will continue to lead baseball operations.

"The Cubs congratulate John McDonough on his new position," Kenney said. "In his time as team president, John helped the club take an important step toward our ultimate goal - bringing a championship to the greatest fans in baseball."

"John's contributions to the Cubs for the past 24 years have been tremendous," said Dennis FitzSimons, Tribune Company chairman and chief executive officer. "His marketing innovations will be an enduring legacy for Cubs fans. We wish him well in his new role with the Blackhawks."

McDonough received a multi-year contract to head the Blackhawks.

"It has been a privilege to be associated with the Chicago Cubs and to be identified with one of the greatest franchises in all of sports," McDonough said. "Cubs fans truly deserve a World Series Championship and I hope they realize it in 2008."

Kenney has been associated with the Cubs for 14 years, first as legal counsel and for the past five years as the Tribune executive responsible for Cubs operations. "We will not let the ownership transition distract us from our primary goal: to see a championship come to the Chicago Cubs in 2008," Kenney said. "Tribune's commitment through an expanded payroll and additional capital for Wrigley Field evidences the continued focus on taking the next step for Cubs fans.

"Jim Hendry has a well-constructed plan in place and is already working to strengthen our roster for 2008. We also have a new, multi-million dollar playing surface ready to welcome our team on Opening Day."

McDonough joined the Cubs from the Chicago Sting in 1983. He was promoted to vice president of marketing and broadcasting in 1991 and was named a senior vice president in 2004 before assuming the role of club president on October 1, 2006.