Sears bankruptcy may turn arena naming rights into a naming wrong
The village of Hoffman Estates penned a $1.8 million deal to extend the arena’s naming rights just days before Sears’ bankruptcy filing.
A money-losing arena in Chicago’s northwest suburbs bears the name of a money-losing retail giant – at least for now.
Faced with looming debt payments and declining sales, Sears filed for Chapter 11 bankruptcy on Oct. 14. But just one week before the news, the village of Hoffman Estates agreed to a three-year, $1.8 million extension deal for the Sears Centre Arena’s naming rights. The arena has borne the retailer’s name since its opening in 2006.
Sears’ bankruptcy filing now threatens to jeopardize the agreement.
Under the new agreement, Sears will pay $600,000 annually to keep the original name and negotiated a “greater promotional presence” inside the 11,000-seat arena. Payments are due 15 months ahead of the period they cover. All payments due under the previous agreement have been fulfilled, according to Village Manager Jim Norris.
Following the news of the filing, the representative responsible for negotiating the new naming rights agreement informed arena General Manager Ben Gibbs that Sears intended to “move forward” with the agreement, according to the Daily Herald.
Uncertainty remains, as the Daily Herald notes, “The agreement likely will be among the contracts Sears lists as its obligations in bankruptcy proceedings.” In an Oct. 17 response, Norris added, “We will see what happens with the new [agreement] as the bankruptcy proceeds. We don’t know at this time if it will be listed.” If Sears moves forward with the agreement, the first payment would be due September 2019 and cover the period starting in December 2020, according to Norris.
This issue adds to a greater problem that has plagued the Sears Centre since its beginning: unprofitability.
The village-owned Sears Centre Arena has seen an average annual loss of $1.8 million since 2010. Moreover, the village of Hoffman Estates has transferred more than $10 million from its general fund to the arena since 2010, despite continuing claims of self-sufficiency.
A look at the village’s Comprehensive Annual Financial Reports reveals that Hoffman Estates has spent $87.6 million in operating expenses. The village spends on the Sears Centre as if it were a core service. In 2017, the arena accounted for 13 percent of village expenses – more than the village dedicated to highways and streets.
By masking much of the losses sustained by the arena, the village also hides a reality that has crept up from Springfield to Chicago – publicly financed entertainment venues are a drain on scarce taxpayer dollars.
Meanwhile, as pension obligations grow and state assistance weakens, Hoffman Estates residents have seen an increase in their property tax levy.
Though the future of the Sears Centre name is uncertain, one thing’s for sure: Hoffman Estates and other municipalities that subsidize unprofitable arenas would be better off leaving the sports and entertainment business to private hands.