Hotel tax revenue is missing $29 million; Chicago taxpayers may have to make up difference on Soldier Field bonds
Chicago taxpayers could be responsible for a $29 million shortfall in hotel tax revenue needed to retire Soldier Field’s renovation obligations thanks to the lingering impact of the pandemic on hotels.
For the second year in a row, the Illinois Sports Facilities Authority doesn’t have enough money to pay off $415 million in debt, most of it related to the much-maligned renovation of Soldier Field, completed long before the Bears agreed to take over. buying the closed site of Arlington International Racetrack, where they are located, could build a new stadium.
The reason for the shortfall is simple. According to Michael Jacobson, president and CEO of the Illinois Hotel & Lodging Association, occupancy and room rates at Chicago hotels are far from rebounding to pre-pandemic levels.
For the week ending Feb. 19, 35.1% of Chicago hotel rooms were occupied, compared to 63% in 2020 and 2019.
Stadium board members were briefed on the hotel tax shortfall at Wednesday’s monthly meeting. It was first reported by the bond buyer.
“Omicron kind of took us to a new low. We thought we were going to be further into the recovery than we are right now,” Jacobson said on Friday.
“We still think 2024 will be the year we get back to pre-pandemic levels. … What we’re going to see this year is still a heavy reliance on leisure travel.”
The bonds that funded the $660 million stadium renovation are being repaid with a portion of the city’s hotel tax — but that financing plan also assumed that hotel tax revenue would grow 5.5% annually.
When it doesn’t, Chicago taxpayers are expected to make up the difference.
Last year, ISFA agreed to dip into reserves — and refinance $21.4 million of Soldier Field’s debt at an initial cost of $468,000 — to spare Chicago taxpayers from covering the shortfall. to earn hotel tax. Such refinancing is sometimes referred to as a “scoop and toss” because it picks up debt and extends payments, projecting the obligation farther into the future.
The question now is whether the ISFA is ready to plunder its reserves again and push Soldier Field’s debt even further – and whether either move would be financially responsible.
“ISFA has worked closely with its partners to prevent the city from having money taken from it” of state income taxes. This included “drawdown of reserves and refinancing of debt,” ISFA CEO Frank Biecki was quoted in a statement as saying.
“Unfortunately, due to the impact of COVID, we are anticipating a revenue shortfall this year, which the city is responsible for covering. We will continue to work with the city and state to review all of our options. »
Civic Federation President Laurence Msall favors a long-term solution.
“The worst idea would be to do another scoop-and-toss. The only justification for last year’s scoop and toss was that the state and city didn’t have the resources at the time. Now the state and the city are in a much better place. The city has significant unallocated US bailout funds. And the state of Illinois has $3 billion,” Msall said.
The Illinois General Assembly must ease the “short-term financial strain” on the stadium authority, then address the long-term dilemma: As parts of Illinois’ economy rebound, industry hotelier – which supports the stadium authority, McCormick Place and much of the city budget is not.
“What’s the long-term plan for the next two years for hospitality-related entities that depend on a return to conventions, a return to hotels, and in-person dining at the levels we’ve seen before?” said Msall.
City Hall had no immediate comment.
The band-aid measures would be particularly controversial, given the Bears’ possible move and the fact that debt payments on the Soldier Field renovation are swelling over time — from $49.4 million in the fiscal year. ending June 30 at $86.9 million in 2032.
Lump sum payments were part of the changes made after the terrorist attacks of September 11, 2001, when the travel industry came to a standstill.
To salvage the deal, then-Mayor Richard M. Daley pressured the Bears to permanently waive their right to sell the corporate naming rights to Soldier Field and built in protection. two years for Chicago taxpayers.
In the original version, the state could retain a portion of the city’s share of state income tax whenever Chicago’s hotel tax did not increase at an annual rate of 5.5% , enough to withdraw $399 million in stadium bonds.
The new version has been restructured – with deferred interest payments triggering those balloon amounts – to make a two-year local tax bailout unnecessary. This has given the airline, convention and tourism industries an opportunity to rebound from the devastating losses suffered as a result of the terrorist attacks.