McHenry County Blog

Economics Research Associates staffers Richard Starr and David Stone sent a February 26, 2008, introductory letter to McHenry County College President Walt Packard.

It asserts they will expound on the “reasonableness and achievability” in something they allege is a 3rd party analysis of the baseball stadium and Health, Wellness and Athletic Center proposal.

However, the ERA analysts admit no market analysis exists to show that using characteristics of Camden, New Jersey, and Fargo, North Dakota, baseball stadiums are even a tiny bit reasonable.

Remember geometry?

Accept the assumption, even if they are false assumptions, and everything flows from them.

With the wrong premises, logic will lead to incorrect conclusions.

It happened in city X, in city Y, so it could happen in Crystal Lake.

And when the bonds can’t be repaid, the board members will say,

In ERA’s initial 3rd party review, the authors talked about projected attendance in terms of “capture rate.”

On page 9 of the first review, it says ERA recommends further verification of the projected 52.3% capture rate.

I can’t even find the term in the second report.

So what is a “capture rate?”

If the population of the market area is 300,000, a 50% capture rate would mean than annual attendance is estimated to be 150,000.

The first report

“..assumes the team will achieve capture rates comparable to the highest captures in the Frontier and Northern Leagues.”

There is no reference to “capture rate” in the second report, but it is still a relevant concept.

The first report puts it in terms of the market place, but the second ignores the market.

Five teams in Chicago market have capture rates ranging from 5.9% to 52.6%, according to page 9 of the first report.

When you take the market out, use of the terms “reasonable and achievable” in nonsensical. Just because it is reasonable and achievable somewhere else doesn’t mean it will happen in Crystal Lake.

In ballpark feasibility studies, all revenue streams flow from attendance.

ERA looks at other teams, but, as ERA points out, “It is not known if the other teams’ reported figures represent paid or actual attendance.”

Remember, it is common practice for teams to give away tickets as promotional items.

So, ERA is reporting unaudited numbers. No one, except maybe the investors, look at gate receipts.

Take ERA’s minor league attendance figures with a grain of salt, maybe piles of salt the size that should have been stockpiled for this winter.

Likewise, ERA’s comments on audience attendance growth from year to year need to be closely examined.

In the last paragraph on page 6, ERA states,

“The assumed 30 percent attendance growth over the first five years…is fairly aggressive, but achievable, particularly considering the relatively low projected attendance rate for 2009.”

What team has achieved that attendance growth rate without expanding its stadium?

River City’s Rascals, located in suburban St. Louis on the Missouri side of the river, had a stadium built specifically for the Frontier League team. It has been around the longest.

River City’s average daily attendance in the first year (1999) was 3,611. In 2007, the comparable figure was, 2,095. (The 2007 figure is right in the table on page 5.)

That’s a 42% decrease.

So, where’s the growth found?

How does this fit into the “reasonableness and achievability” predicted by Economics Research Associates?

It doesn’t.

It isn’t even mentioned.

Let’s examine three of the Frontier League teams that ERA considers comparables. Look at the attendance figures for 2005, 2006 and 2007 on page 5.

Not one team cited in the ERA report is shown growing at the rate projected by MCC baseball promoter Pete Heitman.

It’s not even close. No wonder the table isn’t lined up so one can easily figure that out.

Here are daily attendance figures for 2005, 2006 and 2007 for three of the teams listed.

Suburban St. Louis Gateway Grizzles went from

3,619 to
4,235, then decreased to
4,086.

In Washington, PA, Wild Things attendance for the three years were essentially flat:

3,197
3,251
3,317

Suburban St. Louis River City Rascals:

2,379
2,387
2,095

Obviously none increased 5% a year over the two-year period.

How about Rockford?

That’s close by.

You should know that a new stadium for Rockford was financed completely with private money, opening in 2006.

One would assume that the incentive not to lose money (or make money) would be stronger for entrepreneurs than for elected officials. Elected officials, of course, can keep coming back to the taxpayers to get non-referendum taxes; investors can’t…or maybe they can, if they are Pete Heitman.

Average daily attendance that first year in the new stadium was 2,463, higher than 2,065, an increase of 398 per game.

The stadium cost $7 million. It cost $17,588 to garner each new fan (on a daily basis).

The second year in the new stadium, attendance did not go up much—twelve fans per game.

In any event, that’s not support for an increase of 5% per year by Heitman…

Let alone EquityOne’s Mark Houser’s forecast a 10% increase in attendance during its second year. (See page 5.)

At least Rockford’s new stadium was financed completely with private money.

They weren’t using other people’s money, like the MCC team.

No wonder ERA didn’t emphasize Rockford’s problem.

There is no example of any team anywhere (unless major, major capital improvements have been put in) that has the attendance growth and, therefore, the revenue growth as sustainable as the promoters’ plan suggests.

Taxpayers have a 20-year repayment obligation, so why do the ERA consultants concentrate on the first five years’ performance, which history shows are a team’s best years?

Why has ERA ignored the next 15 years?

ERA does conclude,

“…we would not expect for this to continue indefinitely, as attendance would stabilize and potentially decrease (after the five-year projection period). This would directly affect the growth of team and facility revenues” (see top of page 7).

Heitman has attendance increases every year for 25 years, a minimum of 5% per year.

ERA hints that a 5% attendance increase is unrealistic–even as soon as the 6th year–but refuses to point out how this will negatively affect the ability to repay the bonds…which it will.

In fact, ERA doesn’t address anything beyond fifth year as far as financing goes, other than to say that attendance might decrease (see top of page 7).

Internet fantasy baseball would cheaper and probably as much fun.

More tomorrow and the days to follow.
= = = = =
Senior Economics Research Associates staffer Richard Starr appears on top. Below is associate David Stone.

Below, baseball promoter Pete Heitman appears above his buddy Mark Houser in the pictures in this article.

Economics Research Associates staffers Richard Starr and David Stone sent a February 26, 2008, introductory letter to McHenry County College President Walt Packard.

It asserts they will expound on the “reasonableness and achievability” in something they allege is a 3rd party analysis of the baseball stadium and Health, Wellness and Athletic Center proposal.

However, the ERA analysts admit no market analysis exists to show that using characteristics of Camden, New Jersey, and Fargo, North Dakota, baseball stadiums are even a tiny bit reasonable.

Remember geometry?

Accept the assumption, even if they are false assumptions, and everything flows from them.

With the wrong premises, logic will lead to incorrect conclusions.

It happened in city X, in city Y, so it could happen in Crystal Lake.

And when the bonds can’t be repaid, the board members will say,

In ERA’s initial 3rd party review, the authors talked about projected attendance in terms of “capture rate.”

On page 9 of the first review, it says ERA recommends further verification of the projected 52.3% capture rate.

I can’t even find the term in the second report.

So what is a “capture rate?”

If the population of the market area is 300,000, a 50% capture rate would mean than annual attendance is estimated to be 150,000.

The first report

“..assumes the team will achieve capture rates comparable to the highest captures in the Frontier and Northern Leagues.”

There is no reference to “capture rate” in the second report, but it is still a relevant concept.

The first report puts it in terms of the market place, but the second ignores the market.

Five teams in Chicago market have capture rates ranging from 5.9% to 52.6%, according to page 9 of the first report.

When you take the market out, use of the terms “reasonable and achievable” in nonsensical. Just because it is reasonable and achievable somewhere else doesn’t mean it will happen in Crystal Lake.

In ballpark feasibility studies, all revenue streams flow from attendance.

ERA looks at other teams, but, as ERA points out, “It is not known if the other teams’ reported figures represent paid or actual attendance.”

Remember, it is common practice for teams to give away tickets as promotional items.

So, ERA is reporting unaudited numbers. No one, except maybe the investors, look at gate receipts.

Take ERA’s minor league attendance figures with a grain of salt, maybe piles of salt the size that should have been stockpiled for this winter.

Likewise, ERA’s comments on audience attendance growth from year to year need to be closely examined.

In the last paragraph on page 6, ERA states,

“The assumed 30 percent attendance growth over the first five years…is fairly aggressive, but achievable, particularly considering the relatively low projected attendance rate for 2009.”

What team has achieved that attendance growth rate without expanding its stadium?

River City’s Rascals, located in suburban St. Louis on the Missouri side of the river, had a stadium built specifically for the Frontier League team. It has been around the longest.

River City’s average daily attendance in the first year (1999) was 3,611. In 2007, the comparable figure was, 2,095. (The 2007 figure is right in the table on page 5.)

That’s a 42% decrease.

So, where’s the growth found?

How does this fit into the “reasonableness and achievability” predicted by Economics Research Associates?

It doesn’t.

It isn’t even mentioned.

Let’s examine three of the Frontier League teams that ERA considers comparables. Look at the attendance figures for 2005, 2006 and 2007 on page 5.

Not one team cited in the ERA report is shown growing at the rate projected by MCC baseball promoter Pete Heitman.

It’s not even close. No wonder the table isn’t lined up so one can easily figure that out.

Here are daily attendance figures for 2005, 2006 and 2007 for three of the teams listed.

Suburban St. Louis Gateway Grizzles went from

3,619 to
4,235, then decreased to
4,086.

In Washington, PA, Wild Things attendance for the three years were essentially flat:

3,197
3,251
3,317

Suburban St. Louis River City Rascals:

2,379
2,387
2,095

Obviously none increased 5% a year over the two-year period.

How about Rockford?

That’s close by.

You should know that a new stadium for Rockford was financed completely with private money, opening in 2006.

One would assume that the incentive not to lose money (or make money) would be stronger for entrepreneurs than for elected officials. Elected officials, of course, can keep coming back to the taxpayers to get non-referendum taxes; investors can’t…or maybe they can, if they are Pete Heitman.

Average daily attendance that first year in the new stadium was 2,463, higher than 2,065, an increase of 398 per game.

The stadium cost $7 million. It cost $17,588 to garner each new fan (on a daily basis).

The second year in the new stadium, attendance did not go up much—twelve fans per game.

In any event, that’s not support for an increase of 5% per year by Heitman…

Let alone EquityOne’s Mark Houser’s forecast a 10% increase in attendance during its second year. (See page 5.)

At least Rockford’s new stadium was financed completely with private money.

They weren’t using other people’s money, like the MCC team.

No wonder ERA didn’t emphasize Rockford’s problem.

There is no example of any team anywhere (unless major, major capital improvements have been put in) that has the attendance growth and, therefore, the revenue growth as sustainable as the promoters’ plan suggests.

Taxpayers have a 20-year repayment obligation, so why do the ERA consultants concentrate on the first five years’ performance, which history shows are a team’s best years?

Why has ERA ignored the next 15 years?

ERA does conclude,

“…we would not expect for this to continue indefinitely, as attendance would stabilize and potentially decrease (after the five-year projection period). This would directly affect the growth of team and facility revenues” (see top of page 7).

Heitman has attendance increases every year for 25 years, a minimum of 5% per year.

ERA hints that a 5% attendance increase is unrealistic–even as soon as the 6th year–but refuses to point out how this will negatively affect the ability to repay the bonds…which it will.

In fact, ERA doesn’t address anything beyond fifth year as far as financing goes, other than to say that attendance might decrease (see top of page 7).

Internet fantasy baseball would cheaper and probably as much fun.

More tomorrow and the days to follow.
= = = = =
Senior Economics Research Associates staffer Richard Starr appears on top. Below is associate David Stone.

Below, baseball promoter Pete Heitman appears above his buddy Mark Houser in the pictures in this article.

“If you fund it, they will come,” is the first sentence in the article that popped up from a search engine yesterday entitled,

Naturally, the McHenry County College Board’s 4-vote majority’s insistence in subsidizing baseball promoter Pete Heitman’s minor league baseball scheme to make money for investors, which he refuses to identify, led me to read the story by John Estus.

The article in NewsOK, the internet version of the Oklahomian, has more links than I have ever seen in a newspaper web site story.

But the Oklahoma City Council is being straightforward.

It is asking for a 15-month sales tax hike to raise the $121 million for stadium improvements to lure the Seattle SuperSopnics southeast.

Nothing like the non-referendum bonds that the MCC board passed 7-0 without any voluntary public notice before three members–Scott Summers, Donna Kurtz and Frances Glosson–saw the light.

“That’s really a step the public and the people should be happy about. The power is in their hands. In a lot of places, they would be able to railroad it through without having some sort referendum where the public actually would get to vote,”

CNBC sports business reporter Darren Rovell told the Oklahomian.

In an indirect quote he also noted that voiding a public vote often happens in cities where opposition is expected.

The Oklahomian points out that supporters of the plan point to intangible benefits that a sports team brings an area.

Sounds like the pitch Economic Research Associates’ pitchman Richard Starr made to the MCC board after the Crystal Lake City Planning and Zoning Board and the City Council turned thumbs down.

Rovell points out the opponents’ rebuttal to such non-quantifiable benefits:

”…the only reason why the proponents put out these intangible statements like this is because they have to find some way to fill up the gap where the math doesn’t make sense.”

The article looks at how the Dallas Cowboys couldn’t get what they wanted in Dallas, but succeeded in gaining voter approval for $75 million less in suburban Arlington.

It also tells how Memphis built a basketball stadium with revenue bonds to be paid back by ticket holders.

A similar financing scheme is being touted by the MCC board majority.

= = = = =
In front of the vending machine at McHenry County College is minor league baseball team promoter Pete Heitman. Economics Research Associates spokesman Richard Starr points to the MCC mission statement etched in glass in the MCC board room.

“If you fund it, they will come,” is the first sentence in the article that popped up from a search engine yesterday entitled,

Naturally, the McHenry County College Board’s 4-vote majority’s insistence in subsidizing baseball promoter Pete Heitman’s minor league baseball scheme to make money for investors, which he refuses to identify, led me to read the story by John Estus.

The article in NewsOK, the internet version of the Oklahomian, has more links than I have ever seen in a newspaper web site story.

But the Oklahoma City Council is being straightforward.

It is asking for a 15-month sales tax hike to raise the $121 million for stadium improvements to lure the Seattle SuperSopnics southeast.

Nothing like the non-referendum bonds that the MCC board passed 7-0 without any voluntary public notice before three members–Scott Summers, Donna Kurtz and Frances Glosson–saw the light.

“That’s really a step the public and the people should be happy about. The power is in their hands. In a lot of places, they would be able to railroad it through without having some sort referendum where the public actually would get to vote,”

CNBC sports business reporter Darren Rovell told the Oklahomian.

In an indirect quote he also noted that voiding a public vote often happens in cities where opposition is expected.

The Oklahomian points out that supporters of the plan point to intangible benefits that a sports team brings an area.

Sounds like the pitch Economic Research Associates’ pitchman Richard Starr made to the MCC board after the Crystal Lake City Planning and Zoning Board and the City Council turned thumbs down.

Rovell points out the opponents’ rebuttal to such non-quantifiable benefits:

”…the only reason why the proponents put out these intangible statements like this is because they have to find some way to fill up the gap where the math doesn’t make sense.”

The article looks at how the Dallas Cowboys couldn’t get what they wanted in Dallas, but succeeded in gaining voter approval for $75 million less in suburban Arlington.

It also tells how Memphis built a basketball stadium with revenue bonds to be paid back by ticket holders.

A similar financing scheme is being touted by the MCC board majority.

= = = = =
In front of the vending machine at McHenry County College is minor league baseball team promoter Pete Heitman. Economics Research Associates spokesman Richard Starr points to the MCC mission statement etched in glass in the MCC board room.

In the category of “If a tree falls in the forest and no one hears it, did it make a noise?” comes last Thursday night’s McHenry County College Board meeting motion to declare the baseball stadium proposal dead.

Then again, the Northwest Herald didn’t report on the devastating 3rd party analysis of the baseball promoter’s predicted revenues and expenses and I know that exists, even though McHenry County Blog is the only source that wrote a story.

Declaring the contract with the baseball promoter a nullity may not have been exactly Scott Summers’ motion, but that was its goal.

Summers pointed out that since Crystal Lake re-zoning approval for the Health, Wellness and Athletic Complex (or baseball stadium, as I have referred to its most prominent part) was one of the terms of the contract with baseball promoter Pete Heitman had failed that the contract does not exist and the board should declare it a dead. Fellow censured board member Donna Kurtz seconded the motion.

Summers argued that purchase of the 57 adjacent acres between the current college property and the train tracks should be considered on its own merits.

In any event, three MCC board members—Summers, Donna Kurtz and Frances Glosson—voted together. McHenry County Blog first noticed the position switch on November 15th.

Newly elected MCC Board President George Lowe, Barbara Walters, Carol Larson and Mary Miller outvoted them.

But, there were fireworks, expression of anger, hostility and, as one observer put it, “denial” during the discussion.

Kurtz and Glosson argued for an objective 3rd party review of Heitman’s financial projections.

Lowe suggested (maybe that is too mild a word because another source said at one point Lowe “shouted” at one of the baseball stadium dissenters) that Kurtz should have read her board packet (about the baseball stadium) the first time.

Crystal Lake CPA Miller argued that the board did a good job, looking at the buildings, as well as the numbers.

Summers pointed out that those who stand to make money on the project could not be expected to be objective.

Larson explained that she did not see any conflict, that this was a public-private partnership in which the goal was to make money.

Kurtz’ retort pointed out that it wasn’t much of a partnership, with the private investors putting up $25,000 and the college the rest of the rest of the required $25 or more million.

My sources tell me that President Walt Packard tried to interpret the appearance of the Economics Research Associates as proposing to do a more “thorough” analysis.

That is, as I have reported in a fair amount of detail, not an accurate representation of what ERA’s presentation was about.

ERA was there pitching an entirely different role, telling college board members that it could put together a partnership to get the project off and running.

ERA’s Richard Starr made a sales pitch to make the baseball stadium happen, plain and simple.

Erv LeCoque’s report of the withdrawal of a $1 million scholarship pledge was disputed by President Packard.

= = = = =
None of the pictures were taken at the meeting. The article is based on notes from two observers. Scott Summers is on the upper left with Pete Heitman on the upper left. A map of the Gilger property is below Heitman’s head shot. George Lowe is below Summers and Mary Miller is under Heitman. Carol Larson is on the left below those two. Donna Kurtz is on the right. Economics Research Associates spokesman Richard Starr is beneath Larson. Walt Packard is on the bottom right.

In the category of “If a tree falls in the forest and no one hears it, did it make a noise?” comes last Thursday night’s McHenry County College Board meeting motion to declare the baseball stadium proposal dead.

Then again, the Northwest Herald didn’t report on the devastating 3rd party analysis of the baseball promoter’s predicted revenues and expenses and I know that exists, even though McHenry County Blog is the only source that wrote a story.

Declaring the contract with the baseball promoter a nullity may not have been exactly Scott Summers’ motion, but that was its goal.

Summers pointed out that since Crystal Lake re-zoning approval for the Health, Wellness and Athletic Complex (or baseball stadium, as I have referred to its most prominent part) was one of the terms of the contract with baseball promoter Pete Heitman had failed that the contract does not exist and the board should declare it a dead. Fellow censured board member Donna Kurtz seconded the motion.

Summers argued that purchase of the 57 adjacent acres between the current college property and the train tracks should be considered on its own merits.

In any event, three MCC board members—Summers, Donna Kurtz and Frances Glosson—voted together. McHenry County Blog first noticed the position switch on November 15th.

Newly elected MCC Board President George Lowe, Barbara Walters, Carol Larson and Mary Miller outvoted them.

But, there were fireworks, expression of anger, hostility and, as one observer put it, “denial” during the discussion.

Kurtz and Glosson argued for an objective 3rd party review of Heitman’s financial projections.

Lowe suggested (maybe that is too mild a word because another source said at one point Lowe “shouted” at one of the baseball stadium dissenters) that Kurtz should have read her board packet (about the baseball stadium) the first time.

Crystal Lake CPA Miller argued that the board did a good job, looking at the buildings, as well as the numbers.

Summers pointed out that those who stand to make money on the project could not be expected to be objective.

Larson explained that she did not see any conflict, that this was a public-private partnership in which the goal was to make money.

Kurtz’ retort pointed out that it wasn’t much of a partnership, with the private investors putting up $25,000 and the college the rest of the rest of the required $25 or more million.

My sources tell me that President Walt Packard tried to interpret the appearance of the Economics Research Associates as proposing to do a more “thorough” analysis.

That is, as I have reported in a fair amount of detail, not an accurate representation of what ERA’s presentation was about.

ERA was there pitching an entirely different role, telling college board members that it could put together a partnership to get the project off and running.

ERA’s Richard Starr made a sales pitch to make the baseball stadium happen, plain and simple.

Erv LeCoque’s report of the withdrawal of a $1 million scholarship pledge was disputed by President Packard.

= = = = =
None of the pictures were taken at the meeting. The article is based on notes from two observers. Scott Summers is on the upper left with Pete Heitman on the upper left. A map of the Gilger property is below Heitman’s head shot. George Lowe is below Summers and Mary Miller is under Heitman. Carol Larson is on the left below those two. Donna Kurtz is on the right. Economics Research Associates spokesman Richard Starr is beneath Larson. Walt Packard is on the bottom right.

McHenry’s Steve Stanek shared two email attempts to persuade the Northwest Herald to provide balanced coverage on McHenry County College’s attempt to put a baseball stadium in Crystal Lake.

In the first, sent on November 21st, Stanek finds an issue paper written by MCC consultant Economics Research Associates. At the last board meeting, ERA tried to expand its role from 3rd party reviewer to baseball stadium promoter. The email is to Group Editor Chris Krug.

Mr. Krug:

This is from the March 19, 2006 Boston Globe article on the foolishness of sports facilities subsidies to which I sent you a link last week:

ACCORDING TO [Vanderbilt University economist John] Siegfried, there’s a remarkable agreement on these points. In economics, he says, ”with most empirical issues there’s lots of debate. Does the minimum wage cause unemployment? There’s lots of debate about that issue. Here there’s no debate.” Even the consulting firm ERA put out an issue paper, back in 1995, cautioning against ”over- blown claims of the economic value of major league sports teams” and concluding that, ”Compared with more traditional public investments of scarce economic development dollars. . .sports facilities are a rather poor investment.”

First note that we have a Vanderbilt University economist saying “there’s no debate” on the public funding of sports facilities. The overwhelming consensus of liberal, conservative and libertarian economists and public policy researchers is that public funding of sports facilities is terrible economic and public policy.

Second, note that we have Economics Research Associates (MCC’s consultant) acknowledg- ing sports facilities are a poor investment of public funds. Yet according to your own newspaper, the ERA rep a few days ago apparently tried to suggest to the MCC board ways to save the sports stadium (no doubt in hopes of collecting a fee). ERA is engaging in “rent seeking,” as is Mark Houser and his baseball stadium associates.

Rent seeking is the term economists use to describe businesses, groups and individuals who use government to give themselves certain advantages. (Here is a good definition for you from Auburn University.) This can happen through government contracts, direct subsidies, regulations that hinder competitors or hurt consumers, etc.

They often cast their rent seeking in t erms of “public-private partnership” or some such thing, but the main aim is to get government to give them advantages and assume risks.

Public benefit is often the excuse that is used to justify rent seeking, even in the face of clear evidence that the rent seekers’ private gain will come at the public’s expense (through higher taxes, higher prices for goods and services, slower economic growth in other areas, etc.).

Businesspeople who engage in rent seeking, and government officials who aid them, often call it “economic development.” They do this even though economists overwhelmingly conclude there likely will be no net economic gain, as in the case of subsidized sports facilities.

Motorola in the mid-1990s engaged in rent seeking, receiving taxpayer “incentives” worth well over $50 million (in inflation-adjusted dollars) for the cell phone plant in Harvard. (This does not include several million dollars of road work done at Motorola’s request after the plant opened.) Have those incentives created the promised number of jobs? Generated the promised tax revenues? Sparked the promised ancillary development? No, no, and no.

Given this sorry record and the cheerleading the Northwest Herald did for the Motorola plant subsidies, I would expect the newspaper to be more circumspect about this whole stadium/entertainment issue.

Maybe it would help to bar executives at your newspaper from serving on the board of the county’s economic development corporation. This way perhaps the newspaper would take a more clear-eyed and balanced look at such issues.

Regards,

Steve Stanek

= = = = =

Northwest Herald Group Editor Chris Krug is seen top left.

Economics Research Associates spokesman Richard Starr is seen trying to tie a baseball stadium into McHenry County College’s mission statement, which is etched in the glass panel. Earlier his firm submitted a devastating 3rd party review of the Equity One feasibility study.

At the bottom are two views of the now underutilized Motorola campus in Harvard. In the bottom photo, note that the driveway was blocked by gates when I took this photograph in early October of 2006.

McHenry’s Steve Stanek shared two email attempts to persuade the Northwest Herald to provide balanced coverage on McHenry County College’s attempt to put a baseball stadium in Crystal Lake.

In the first, sent on November 21st, Stanek finds an issue paper written by MCC consultant Economics Research Associates. At the last board meeting, ERA tried to expand its role from 3rd party reviewer to baseball stadium promoter. The email is to Group Editor Chris Krug.

Mr. Krug:

This is from the March 19, 2006 Boston Globe article on the foolishness of sports facilities subsidies to which I sent you a link last week:

ACCORDING TO [Vanderbilt University economist John] Siegfried, there’s a remarkable agreement on these points. In economics, he says, ”with most empirical issues there’s lots of debate. Does the minimum wage cause unemployment? There’s lots of debate about that issue. Here there’s no debate.” Even the consulting firm ERA put out an issue paper, back in 1995, cautioning against ”over- blown claims of the economic value of major league sports teams” and concluding that, ”Compared with more traditional public investments of scarce economic development dollars. . .sports facilities are a rather poor investment.”

First note that we have a Vanderbilt University economist saying “there’s no debate” on the public funding of sports facilities. The overwhelming consensus of liberal, conservative and libertarian economists and public policy researchers is that public funding of sports facilities is terrible economic and public policy.

Second, note that we have Economics Research Associates (MCC’s consultant) acknowledg- ing sports facilities are a poor investment of public funds. Yet according to your own newspaper, the ERA rep a few days ago apparently tried to suggest to the MCC board ways to save the sports stadium (no doubt in hopes of collecting a fee). ERA is engaging in “rent seeking,” as is Mark Houser and his baseball stadium associates.

Rent seeking is the term economists use to describe businesses, groups and individuals who use government to give themselves certain advantages. (Here is a good definition for you from Auburn University.) This can happen through government contracts, direct subsidies, regulations that hinder competitors or hurt consumers, etc.

They often cast their rent seeking in t erms of “public-private partnership” or some such thing, but the main aim is to get government to give them advantages and assume risks.

Public benefit is often the excuse that is used to justify rent seeking, even in the face of clear evidence that the rent seekers’ private gain will come at the public’s expense (through higher taxes, higher prices for goods and services, slower economic growth in other areas, etc.).

Businesspeople who engage in rent seeking, and government officials who aid them, often call it “economic development.” They do this even though economists overwhelmingly conclude there likely will be no net economic gain, as in the case of subsidized sports facilities.

Motorola in the mid-1990s engaged in rent seeking, receiving taxpayer “incentives” worth well over $50 million (in inflation-adjusted dollars) for the cell phone plant in Harvard. (This does not include several million dollars of road work done at Motorola’s request after the plant opened.) Have those incentives created the promised number of jobs? Generated the promised tax revenues? Sparked the promised ancillary development? No, no, and no.

Given this sorry record and the cheerleading the Northwest Herald did for the Motorola plant subsidies, I would expect the newspaper to be more circumspect about this whole stadium/entertainment issue.

Maybe it would help to bar executives at your newspaper from serving on the board of the county’s economic development corporation. This way perhaps the newspaper would take a more clear-eyed and balanced look at such issues.

Regards,

Steve Stanek

= = = = =

Northwest Herald Group Editor Chris Krug is seen top left.

Economics Research Associates spokesman Richard Starr is seen trying to tie a baseball stadium into McHenry County College’s mission statement, which is etched in the glass panel. Earlier his firm submitted a devastating 3rd party review of the Equity One feasibility study.

At the bottom are two views of the now underutilized Motorola campus in Harvard. In the bottom photo, note that the driveway was blocked by gates when I took this photograph in early October of 2006.

Guess I was wrong as to why Richard Starr and David Stone of Economic Research Associates came to the McHenry County College Board meeting.

Starr said he had been invited by MCC President Walt Packard.

Since ERA did the devastating analysis of Mark Houser’s Equity One’s feasibility study of the baseball stadium, I figured the board majority was going to ask for a re-do.

You know, something that would make it look like a baseball stadium could pay for itself.

But, no.

The presentation by Starr was more a sales pitch on how ERA could gather partners together and make the stadium work. Partners like the real estate industry, the hospitals, the county, a city, etc.

“You have a complicated situation here because you’re on your own,” Starr said.

Then he quoted one of the senior members of the firm:

”Whoever benefits pays.
“Whoever pays benefits.”

He said ERA tries to merge interests to see “how can all (the players) benefit.

“You have a great market and there should be a lot of people interested in making it a better place to live…We do market research.”

But Starr still wanted to include not just the hard financial benefits of the project, but the unquantifiable “quality of life” benefits.

“How can (a community) be more competitive?” he asked, pointing to “sports facilities” as something that could cause a community to stand out from its neighbors and cause “someone to move there.”

So, I’d have to conclude that Starr and associate David Stone were in salesman mode, not analyst mode.

They seemed to be pitching for the job that EquityOne got. McHenry County College has committed to paying Houser’s firm $470,000 and untold amounts to the two firms he selected—Cornerstone Architects and FCL Builders.

And, the firm of Economic Research Associates is probably a good deal more qualified for putting together something that would work than Equity One.

It’s founding principals created the “world’s biggest carnival” for Walt Disney and have planned all of the other Disney theme parks.

Just to give you an idea of what ERA might bring to the table, Starr suggested out in the hall to reporters that apartments could be built along the edges of the ball field. They would make great seats for the few nights a year when games were played and, if a nightclub were nearby, they would be attractive to young singles.

Starr echoed the enthusiasm Crystal Lake Mayor Aaron Shepley had for the townhouses in the Barton Stream subdivision annexed across Route 14 from MCC. Shepley thought they would appeal to students.

Starr just put a more interesting twist on it.

Maybe Huntley can incorporate that idea into its plan for a baseball stadium.

Or maybe Barton Stream’s developer will change his plan to include a baseball stadium.

I still think any stadium should be put in a mined out gravel pit.

ERA’s Stone did mention “3rd party analysis. We are good at making interesting things boring…The bottom line for us is generally the bottom line.”

= = = = =
All the photos but the one on the bottom right are of Richard Starr of Economics Research Associates. On the bottom right is ERA’s David Stone.

Guess I was wrong as to why Richard Starr and David Stone of Economic Research Associates came to the McHenry County College Board meeting.

Starr said he had been invited by MCC President Walt Packard.

Since ERA did the devastating analysis of Mark Houser’s Equity One’s feasibility study of the baseball stadium, I figured the board majority was going to ask for a re-do.

You know, something that would make it look like a baseball stadium could pay for itself.

But, no.

The presentation by Starr was more a sales pitch on how ERA could gather partners together and make the stadium work. Partners like the real estate industry, the hospitals, the county, a city, etc.

“You have a complicated situation here because you’re on your own,” Starr said.

Then he quoted one of the senior members of the firm:

”Whoever benefits pays.
“Whoever pays benefits.”

He said ERA tries to merge interests to see “how can all (the players) benefit.

“You have a great market and there should be a lot of people interested in making it a better place to live…We do market research.”

But Starr still wanted to include not just the hard financial benefits of the project, but the unquantifiable “quality of life” benefits.

“How can (a community) be more competitive?” he asked, pointing to “sports facilities” as something that could cause a community to stand out from its neighbors and cause “someone to move there.”

So, I’d have to conclude that Starr and associate David Stone were in salesman mode, not analyst mode.

They seemed to be pitching for the job that EquityOne got. McHenry County College has committed to paying Houser’s firm $470,000 and untold amounts to the two firms he selected—Cornerstone Architects and FCL Builders.

And, the firm of Economic Research Associates is probably a good deal more qualified for putting together something that would work than Equity One.

It’s founding principals created the “world’s biggest carnival” for Walt Disney and have planned all of the other Disney theme parks.

Just to give you an idea of what ERA might bring to the table, Starr suggested out in the hall to reporters that apartments could be built along the edges of the ball field. They would make great seats for the few nights a year when games were played and, if a nightclub were nearby, they would be attractive to young singles.

Starr echoed the enthusiasm Crystal Lake Mayor Aaron Shepley had for the townhouses in the Barton Stream subdivision annexed across Route 14 from MCC. Shepley thought they would appeal to students.

Starr just put a more interesting twist on it.

Maybe Huntley can incorporate that idea into its plan for a baseball stadium.

Or maybe Barton Stream’s developer will change his plan to include a baseball stadium.

I still think any stadium should be put in a mined out gravel pit.

ERA’s Stone did mention “3rd party analysis. We are good at making interesting things boring…The bottom line for us is generally the bottom line.”

= = = = =
All the photos but the one on the bottom right are of Richard Starr of Economics Research Associates. On the bottom right is ERA’s David Stone.