Chicago taxpayers could be on the hook for a $29 million shortfall in hotel tax revenues needed to retire Soldier Field renovation bonds thanks to the pandemic’s lingering impact on hotels.
For the second straight year, the Illinois Sports Facilities Authority doesn’t have enough money to repay $415 million in outstanding debt, most of it tied to the much-maligned renovation of Soldier Field completed long before the Bears agreed to purchase the shuttered site of Arlington International Racecourse, where they are may build a new stadium.
The reason for the shortfall is simple. Occupancy and room rates at Chicago hotels haven’t come close to rebounding to pre-pandemic levels, according to Michael Jacobson, president and CEO of the Illinois Hotel & Lodging Association.
For the week ending Feb. 19, 35.1% of Chicago’s hotel rooms were occupied, compared to 63% in both 2020 and 2019.
Stadium authority board members were informed of the hotel tax shortfall at Wednesday’s monthly meeting. It was first reported by the Bond Buyer.
“Omicron kind of brought us to a new low. We thought we were gonna be further along in the recovery than we are right now,” Jacobson said Friday.
“We still think that 2024 will be the year when we’ll be back to pre-pandemic levels. … What we’re gonna see this year is still a heavy reliance on leisure travel. “
The bonds that funded the $660 million stadium renovation are paid off with part of the city’s hotel tax — but that financing package also assumed hotel tax revenue would grow a rosy 5.5% a year.
When it doesn’t, Chicago taxpayers are supposed to make up the difference.
Last year, ISFA agreed to dip into reserves — and refinance $21.4 million in Soldier Field debt at an up-front cost of $468,000 — to spare Chicago taxpayers from covering the hotel tax shortfall. Such refinancing sometimes is called “scoop and toss,” since it scoops up debt and extends payments, tossing the obligation further into the future.
The question now is whether ISFA is willing to raid its reserves again and push off even more Soldier Field debt — and whether either maneuver would be fiscally responsible.
“ISFA has worked closely with its partners to shield the city from having any money withdrawn from its share of” state income taxes. This included “drawing down reserves and refinancing debt,” ISFA CEO Frank Bilecki was quoted as saying in a statement.
“Unfortunately, due to the impact of COVID, we anticipate a shortfall this year, which the city is responsible for covering. We will continue to work with the city and state to review all our options.”
Civic Federation President Laurence Msall favors a long-term fix.
“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 that time. Now, the state and city are in a much better place. The city has significant unallocated American Rescue Plan funds. And the state of Illinois has $3 billion,” Msall said.
The Illinois General Assembly needs to ease the “short-term financial pressure” on the stadium authority, then confront the long-term dilemma: While some parts of the Illinois economy are rebounding, the hospitality industry — which supports the stadium authority, McCormick Place and so much of the city budget — is not.
“What is the long-term plan for the next two years for hospitality-related entities that are reliant on a return to conventions, a return to hotels and in-person dining at the levels that we saw before?” Msall said.
The mayor’s office had no immediate comment.
Band-Aid measures would be particularly controversial, given the possible Bears move and the fact that debt payments on the Soldier Field renovation balloon over time — from $49.4 million in the fiscal year ending June 30 to $86.9 million in 2032.
Balloon payments were among changes made after the terrorist attacks of Sept. 11, 2001, as the travel industry ground to a halt.
To salvage the deal, then-Mayor Richard M. Daley pressured the Bears to permanently forfeit their right to sell corporate naming rights to Soldier Field and built in a two-year protection for Chicago taxpayers.
Under the original version, the state could keep a chunk of the city’s share of the state income tax whenever the Chicago hotel tax failed to grow at an annual rate of 5.5% — enough to retire $399 million in stadium bonds.
The new version was restructured — with interest payments deferred triggering those balloon amounts — to make a local tax bailout unnecessary for two years. That gave the airline, convention and tourism industries an opportunity to rebound from the devastating losses they suffered in the wake the terrorist attacks.
