The $660 million in bonds that funded Soldier Field’s renovation are paid off with city hotel tax revenue — but it was assumed that revenue would grow 5.5% a year. If not, Chicago taxpayers are supposed to make up the difference.
The Illinois Sports Facilities Authority has agreed to scoop-and-toss $21.4 million in debt used to renovate Soldier Field to let beleaguered Chicago taxpayers off the hook.
The bonds that funded the $660 million Soldier Field 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.
That happened only once before, in 2011 — to the tune of $185,000. Mayor Rahm Emanuel complained then that Chicago taxpayers are “not an ATM” machine. He dumped three stadium authority board members, including Richard M. Daley’s nephew.
The ATM machine was about to be turned on again to an even greater degree, thanks to the devastating impact the coronavirus pandemic has had on Chicago hotels.
That’s why a stadium authority board now led by mayoral appointee Leslie Darling rode to the rescue this week — by refinancing $21.4 million in Soldier Field bonds, despite the stadium authority’s junk-bond rating.
That pushes off the debt at an up-front cost of $468,000.
“During the most recent legislative session, the City worked closely with the ISFA board as well as the Governor’s office to grant ISFA much-needed refinancing authority and appropriate up to $20 million to address the [2021 fiscal year] shortfall resulting from the precipitous decline in hotel tax revenues during the pandemic that is projected to impact the City’s budget in [the 2021 fiscal year] and beyond,” Chicago’s Chief Financial Officer Jennie Huang Bennett was quoted as saying in a statement.
“Over the course of the pandemic, hotel tax revenues declined 75-90%, creating a one-time, once in a century event that required this adjustment. We appreciate the collaboration from all involved to make this a reality.”
Maria Saldana, ISFA’s general counsel, did not return repeated phone calls or text messages. Attorney Leslie Darling, the mayoral appointee now serving as chair of the stadium authority, could not be reached.
Last fall, the Chicago Sun-Times sounded the alarm about an ill-timed diversion of the city’s share of state income tax revenues to retire $430 million in outstanding Soldier Field debt.
At the time, Bennett said she believed it could be avoided, telegraphing the refinancing that occurred this week.
“If the State does not have enough to cover the state advance, which is the first line of defense in hotel revenue shortfall, then a debt restructuring would prevent such shortfall from hitting the City or the State,” Bennett said then.
Last month, hotel occupancy rates were “hovering in the high 20% range,” according to Michael Jacobson, president of the Illinois Hotel Lodging Association.
That was a “vast improvement” from the single-digits of a year ago, but well below occupancy rates “in the 70’s” Chicago hotels normally enjoy in the days and weeks leading up to Memorial Day.
The Westin River North reopened last month. The Sheraton Grand follows suit next week. The Palmer House Hilton, still mired in bankruptcy, plans to reopen later this month, Jacobson has said.
He’s urging Mayor Lori Lightfoot to earmark $75 million in new federal relief to help hotels that have “gone a year without a penny of revenue” staff up for a full reopening.
Soldier Field bonds are due to expire in 2032, but payments over time. In the current fiscal year, ending June 30, the debt service payment is $46.5 million. It’s $49.4 million in 2022, and continues to increase gradually until balloon payments at the end: $66.5 million in 2030, $81.7 million in 2031 and $86.9 million in 2032.
Those 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.