McHenry County Blog

Former Illinois Bell and Ameritech Director of Corporate Planning Joseph L. Daleiden who also served as Economic Advisor to the  Executive Office of the White House, Office of Management and the Budget during the Carter Administration, prepared the following report about the viability of Lakewood’s proposed SportsPlex. He did it after examining the SportsPlex’ application for bonding underwriting to the Upper Illinois River Valley Development Authority.

In his preface to the report, he wrote,

In my position with Ameritech I reviewed plans for acquisitions and major business ventures. Although quite often proposal estimates appeared exaggerated and few won my support, I never saw a proposal more half-baked and poorly prepared than the Lakewood Sports complex.

Part – 3 Financials

A rendering of the main building of the proposed McHenry County SportsPlex

1. The estimates in the report are inconsistent and the tables contradict the text.

For example, page 5 states “The goal is activation by maximizing the more than 800,000 visits to the center per year by spectator (sic) and 300,000 plus athletic visits.”

However, by adding up the estimated visits in the accompanying tables (upon which the revenue estimates are based, the athletic visits amount to 777,100 and spectators account for only 432,000 visits. Moreover, in the section on revenue from sponsorships, the study assumes 1.5 million spectators annually.

Layout of ballfields at the SportsPlex planned for Lakewood.

2. Recall from the demographic information, the actual market within ten miles is a population of only 160,000 compared to the average population within the ten miles of the sports centers they reviewed was 530,000 Even including all of McHenry County the population is only about 350,000.

3. What is the basis for the estimates of visits? There are no studies or surveys to support the data provided. They appear to be pulled out of thin air.

4. Less than ½ the estimated revenues come from fees for athletes and spectators. Over half (56%) of the revenues are expected to come from retail, concessions, restaurants and “admissions.” But the admission revenue is already included in the spectator fees, hence it is counted twice

5. The detailed assumptions provided for outdoor sports amounts to $3.7 million annually, only 21% of the estimated $17 million revenue for the first full year of operation. Although half the total athletic and spectator visits are due to soccer – 756,000 (69%) of the 1.1 million visit estimate – soccer revenues amount to only about $1 million in revenue.

6. The alternative sports including BMX, Moto Cross, Obstacle Course and Skateboard account for another $1.4 million of outdoor revenue. Not only does this estimate not take into consideration that the huge Elgin complex about ten miles away already attracts 50,000 BMX riders each year for its tournaments thus taking this market, but it is questionable that such facilities may not be included in the Sportsplex construction estimates.

7. The indoor sports revenue is estimated at $3.3 million but no breakdown of the sports generating this revenue is provided. Another number pulled out of thin air?

Conclusion

SportsPlex plans for road improvements on Rt. 176, Rt. 14 and Pleasant Valley Road. Click to enlarge.

The estimates for the Sportsplex are

• inconsistent,
• riddled with errors, and
• wildly optimistic with no empirical support.

The proposal seems so unprofessional and naïve that I can’t imagine any knowledgeable financial analyst giving this proposal a second thought.

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Part 1 covers demographics.
Part 2 compares the proposal with other SportsPlexes.

Former Illinois Bell and Ameritech Director of Corporate Planning Joseph L. Daleiden, who also served as Economic Advisor to the Executive Office of the White House, Office of Management and the Budget during the Carter Administration, prepared the following report about the viability of Lakewood’s proposed SportsPlex after examining the group’s application for bonding approval by the Upper Illinois River Valley Development Authority.

In today’s analysis, Daleiden looks at how well other sports complexes have done, pointing out,

“There are no data to suggest that any of the sports complexes are making a profit!!!”

Part 2 – Comparisons with other Sport Complexes

In the presentation to the Lakewood Village Board, the promoters of the SportsPlex showed this image of how night lighting would appear.

There is little information on the relevant markets for other sports parks such as the population within the 10 and 20 mile areas, the income distribution of the population within the area, and the actual annual revenues, costs and profitability.

Moreover, in at least some locations with favorable weather year round, the entire number of playing fields might be available for most or all of the year.

Hence, the comparisons are of no value.

Preseentatio of the reasons "Opportunites Exist."

A review of several other sport parks facilities in the Chicago area reveals that although they are located in markets of far greater population densities, the only one that appears to be running in the black is located in Barrington, one of the wealthiest communities in the nation.

The comparisons with other sports complexes supplied in the study are useless since virtually no significant financial data are provided.  Profitability data is mentioned for only three operations.

• Tuma  in Marion, Iowa is a 110 acre operation that generated total revenue of $33,000 with expenses of $120,000!


A drawing of the proposed SportsPlex restaurant.

• Elgin is a huge 407 acre facility with revenue from operations of only $380,000!
• The 600 acre National Sports Center in Blaine, Minn. generates approximately $5 million dollars in revenue.
• The study states that 163 acre South Germantown Recreational Park in Boyds Maryland generally operates at a loss.

There are no data to suggest that any of the sports complexes are making a profit!!! (Emphasis in the original.)

As for the estimates of general revenue impact on the area surrounding the sports, complexes, if they are anything like most estimates provided by Chamber of Commerce’s, they are not wildly optimistic with no hard data to support them.

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The concluding section will be published Sunday.  Part 1 is here. Here is Part 3 about finanicals.

Former Illinois Bell and Ameritech Director of Corporate Planning Joseph L. Daleiden, who also served as Economic Advisor to the Executive Office of the White House, Office of Management and the Budget during the Carter Administration, prepared a report about the viability of Lakewood’s proposed SportsPlex as presented in an application to the Upper Illinois River Valley Development Authority. It will run in three parts.

In his cover message, Daleiden, wrote,

“…my critique of the proposed Lakewood Sportsplex based on their feasibility study submitted to the Upper Illinois River Valley Development Authority (UIRVDA) .

“As you can see the proposal was, if not a scam, an amateurish, ill-conceived plan filled with errors, unverified assumptions and seems devoid of any substantive research.

“That the request for $18 million federal stimulus money was approved by both the McHenry County Board and then UIRVDA is classic example why, as a rule, governmental bodies should not subsidize business ventures. (Some day I’ll write about my trip to Cleveland to visit a sweet potato chip entrepreneur as the Budget Bureau guy with the Small Business Administration budget. I reached the same conclusion as Mr. Daleiden mentions above. Government officials have little clue what businesses will succeed and which will fail.)

“They simply are unable to do the adequate due diligence that a bank or other financial lenders can do (at least theoretically) on a request for a loan or the issuance of bonds.”

Critique of the Crystal Lake Youth Sports Complex Feasibility Analysis submitted to the Upper Illinois River Valley Development Authority

Part 1 -  Demographics

1. Sportsplex estimates are miscalculated and misleading

McHenry County Board audience members who opposed the granting of Federal Stimulus bonding authoity to the SportsPlex were asked to raise their hands before the vote. Click to enlarge.

Page 2 of the report estimates “the total youth population of McHenry County between ages of four and 18 is 98,217″ and that roughly 50% are involved in at least one sport.  However, on page 3 it states McHenry County has “45,217 youth aged children of which 22,133 are involved in athletics in McHenry County”  Is this obvious contradiction representative of sloppy analysis?

The report then refers to the “second layer of population to use the facility is men and woman between ages of 25-45″ (for some reason ignoring those between 19 and 25) as 192,468, They go on to state, “This population group as evidenced by US census information has 36%  regular competitive athletics each week. This allows for another 55,000 who will use this facility.”

This statement certainly does not reflect census data and is 50% overstated. The correct census data calculated from The US Census Bureau 2005-2009 American Community Survey 5 – Year Estimates for Illinois  (S0101)  – including the 19-25 age group – is 132,207, still about 60,000 less than the Sportsplex estimate.

Signs opposed to the SportsPlex are throughout the neighborhood.

Even worse, these estimates are completely misleading for the following reasons:

1. McHenry County as a whole is not the relevant market. On page 15 the report states that “leagues are targeted primarily towards a constituency within a 20 miles areas with the majority coming from the local (ten miles) population.”  Moreover, the 20 mile circle would significantly overlap with the Elgin sports complex (which is already losing money despite a far denser population area.
2. 

   The palm card for former McHenry County Board member John Jung is hanging on the mailbox of a neighbor of the SportsPlex. Jung made a comeback, running first. He defeated Lake in the Hills Democrat James Kennedy and ran ahead of his running mate Tina Hill of Woodstock. Both voted to approve the SportsPlex bonds.

   The report assumes that all persons involved in sports are part of the market, whereas the census estimates of the percent of persons involved in sports includes all sports including track and field, football, swimming, hockey, tennis, golf, bowling, weightlifting, wrestling, bicycling, even simply walking for exercise and fishing. The proper estimates of potential persons in the Sportsplex would include only those persons involved in sports offered by the Sportsplex as calculated below.

3. The vast majority of school-aged athletes use the facilities supplied by schools and  park districts. The same is true of adults who have access to park district softball and soccer fields throughout McHenry County. Why would people travel substantial distances and pay high fees to participate in sports with low cost public facilities nearby?

2. A more realistic estimate of the relevant market would be calculated as follows:

1. Total population in McHenry County within ten miles of facility              160,000
   (To this could be added some portion of population within
   20 miles taking into consideration the large overlap with the
   Elgin sports facility but should exclude the number of seniors
   in Sun City)
2. Percent of population in the 10 to 19 age group
   (including ages 4-9 is absurd)                                                               27%
3. Total of 10-19 age group    (1 x 2)                                                                 43,200
4. The Census Bureau’s estimates that over 90% of children are involved
   in some sport. But the number involved in baseball, softball
   and soccer is about 40%                                                                         40%
5. Total age 10 to 19  (3 x 4)                                                                                17,200
6. Percent of population  in 20-40 age group                                               36.5%
7. Number in 20-40 age group   (1 x 6)                                                           58,400
8. Percent in 20-40 age group playing baseball, softball or soccer                                       6%
9. Total 20- 40 age group playing baseball, softball and soccer (7 x 8)                3,500
10. Total market  (5 + 9)                                                                                       20,700
11. Per cent that have access to school or park facilities during                      90 -100% ? Percent that are willing to pay $1500 to $3000 per year to use                         NA
12. Percent that are willing to pay $1500 to $3000 per year to use facilities instead of existing school and park facilities
    for far less cost                                                                                                                NA

Conclusion: even if we included some portion of those living in the 10-20 mile radius, the maximum size of the market for the relevant sports is perhaps 30,000 children and adults, virtually all of which have access to school and local Park District facilities, including dozens of soccer and baseball fields which are at present under utilized. Although in winter an indoor park offers a unique advantage, it is severely limited by the number of games that can be played on one field.

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Parts 2 Saturday and Part 3 Sunday.