Chicago’s New DePaul Arena Proposal And Estimating The Economic Impact Of Stadiums

Proposed Chicago arena at McCormick Place (Credit: NBC Chicago)

Chicago officials want to put more than $100 million in public tax money toward a new arena near the city’s McCormick Place convention center that would become the primary home of DePaul University’s men’s basketball team. And to sell the project that was widely panned by Chicagoans upon its release, the city has produced an economic benefit study touting the benefits the arena will bring.

According to the study, the arena will generate $251 million each year in gross economic activity and $108 million in “net recurring annual impact.” But those numbers are unlikely to materialize, because they are based on wildly inflated ticket sales projections that DePaul’s basketball team will almost surely fail to reach. The study assumes that DePaul will average 9,500 fans per game for 16 home games each year, which isn’t a huge increase from the 7,938 the school says it drew on average last season. The number of fans who actually attended games, though, would have to more than triple to meet that projection, as Crain’s Chicago Business reports:

Attendance at Blue Demons home games in suburban Rosemont has averaged around 2,900 over the past three years, according to Allstate Arena ticket records obtained by Crain’s. That’s about 35 percent of the school’s reported numbers and 30 percent of what McPier officials are projecting for the new arena. […]

This past season, the official average number of fans that went to DePaul home games at Allstate Arena was even lower: 2,610 based on the Ticketmaster scan system, which tracks exactly how many people come inside.

For a team that won just 30 of its 94 games over the last three seasons, hasn’t made an NCAA Tournament appearance since 2004, and hasn’t even played in the National Invitational Tournament (NIT) since 2007, expecting attendance to triple simply because of a new arena is quite an assumption — one that has about as much chance of coming true as the Blue Demons have of taking home an NCAA Tournament championship next year.

Chicago Mayor Rahm Emanuel and other arena proponents are pushing the project as a growth engine for McCormick Place and the surrounding area. But studies have shown that arenas remain an ineffective way of growing local economies, and they rarely live up to the promise of impact studies like this one. The rule of thumb for judging actual arena impact is to divide whatever figure proponents generate by 10, according to sports economist Victor Matheson, and that will likely at least hold true in Chicago, because the study’s assumption is that 9,500 people will spend money on tickets, food, merchandise, and hotel rooms in and around the arena. If only 2,900 people are showing up, though, the actual revenues will obviously fall far short of the impact study’s projections. And that doesn’t account for its other flaws, including the fact that many of the attendees would be light-spending DePaul students or Chicagoans who are simply spending money in a different part of the city than they would have otherwise.

That isn’t to say there would be no economic impact from a new arena at McCormick Place, at least once the $125 million cost to taxpayers is taken out of the equation (the impact study, to its credit, didn’t make the common-but-dubious claim that the arena would pay for itself). But impact studies like this one have become an effective tool in advancing arena projects while hiding the true costs from taxpayers, who across the country are paying $10 billion more than forecast on stadiums and arenas even as the benefits promised by those studies rarely materialize and force cities and states to cut public services to keep up their payments. And in the end, the studies do little more than help arena and stadium proponents avoid the honest debate that such large-scale commitments of taxpayer dollars demand but rarely ever get.