Chicago To Close Public Schools and Help Fund Basketball Arena for DePaul University

Economic Development vs. Supporting Education – An Urban Dilemma

DePaul University is a private sectarian university in Chicago which , horror upon horror, plays its basketball games in the suburbs before relatively sparse crowds (mainly because the team is not very good.)  DePaul and the city of Chicago would like the school to play its games in Chicago.  So there is a proposal for the school, and a quasi governmental agency that runs McCormack Place and the city to fund a new arena for the school in downtown Chicago.

DePaul University

A rendering of the proposed basketball arena for DePaul. Chicago has promised to pay $33 million of the $173 million cost.

In May, Mayor Rahm Emanuel and the university announced a proposal for a 10,000 seat, $173 million arena near McCormick Place, a convention center along the lakefront south of downtown. DePaul and the quasi-government agency that runs McCormick Place would chip in $70 million each for the publicly owned venture. The city’s tab would be $33 million, and that has created a bit of a stir.

Chicago of course is in dire financial straits and closing a large number of public schools in an attempt to consolidate education and reduce its budget deficit. (Exactly how DePaul has $70 million lying around to build a basketball arena is another question, but not one that is a particularly critical issue here.)   Helping to build a basketball arena for a private university seems like just a terrible idea.  But as usual, the issue is more complicated.  Chicago contends that this is part of economic development that will aid the city.

The city counters that calling the project only an investment in a basketball arena is shortsighted and incomplete. DePaul represents one piece of a $1.1 billion investment to boost tourism, a plan that includes adding amenities to McCormick Place, which has lost convention business to cities like Orlando and Las Vegas, and sprucing up Navy Pier, the state’s No. 1 tourist attraction, which is just north of downtown.

The arena is part of a goal to revitalize the South Loop neighborhood, and the project includes two hotels, new restaurants and areas for entertainment, and potentially a casino.

The arena would be an events center for concerts and conventions when DePaul is not playing, and the university has agreed to pay rent at $25,000 a game for men’s home dates and $7,500 for women’s games.

DePaul’s $70 million investment was needed, Tom Alexander, a city spokesman, said, because it would ensure that construction at Navy Pier and McCormick Place could proceed in tandem. “This is really a facility the entire city can use,” he said. “DePaul is helping facilitate it.”

Then there are the 10,000 construction and 3,800 permanent jobs that it would create, by the city’s math. The unemployment rate in the Chicago metro area is more than 9 percent.

“I would be safe to assume any city in the country would love to have these jobs and these types of announcements,” said Jorge Ramirez, the president of the Chicago Federation of Labor.

Are any of these promised economic development really going to happen?  Hard to say, cities and developers notoriously overestimate the public benefits of investment like this.  To argue that 10,000 construction jobs will be created is not credible.  And the construction jobs that are created will be temporary, short term and maybe even part time.

The solution here is to adopt what conservatives would propose if conservatives were true to their principles, which is to let market forces decide the issue.  In this situation the groups involved should form a corporation which will own and operate the arena, and borrow the funds for the city’s contribution amount with only the profits of the arena available to make the debt service payments.  If the proponents can convince the bond market that the project is viable great,  no problem.  If not, then why should the city get involved in a financial loser when it has so many other problems.

See, sometimes conservative principles are appropriate.  We just need principled conservatives to be present, which unfortunately is a harder proposition than borrowing money for a basketball arena for DePaul University.