McPier gets new line of credit in state budget bill – Tourism News

on Jul12

11 July 2017 | 4:45 pm

The agency that operates McCormick Place will be able to pile on to its massive debt load thanks to the state’s long-awaited budget.

Built into legislation that passed last week is a $293 million increase in the bonding capacity for the Metropolitan Pier & Exposition Authority. The agency maxed out its borrowing limit two years ago.

Despite a gargantuan long-term debt burden that totaled $3.7 billion as of June 2016,‚Äč McPier officials plan to take advantage of the new line of credit immediately to change the way they pay for the 1,205-room Marriott Marquis hotel going up on the Near South Side convention campus.

The agency plans to sell the bonds “as soon as possible” and will use $250 million of the proceeds to repay its construction loan for the Marriott, said McPier Chief Financial Officer Larita Clark.

That’s a change from the current structure, under which hotel revenue would pay off the loan. Using bond proceeds instead will allow McPier to do what it wants with revenue from the hotel, which it projects will net the agency $26 million over the next three years. The hotel is set to open next month.

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In return for extra bonding capacity, McPier agreed, beginning next year, to forgo the annual $15 million state incentive fund it has used to recruit and subsidize trade shows. McPier plans to use the remaining $43 million in expected new bond proceeds to pay off the rest of the roughly $42 million it owes the state for covering debt service it couldn’t pay during Great Recession, Clark said.

McPier had been paying off that debt to Illinois since 2010 by evenly splitting with the state any surplus in its annual tax revenue beyond what it needed to meet its debt obligations.

“We think this is an example of good government. We’re trying our best to be as self-sufficient as we can as an authority,” Clark said.

The legislation marks McPier’s second attempt in two years to increase its bonding authority. Gov. Bruce Rauner vetoed a similar bill last year on the grounds that it would put the state on the hook for more debt that McPier might not be able to cover in an economic downturn. State sales tax proceeds are used to cover McPier debt shortfalls.

In an attempt to address that concern, the recent bill included the creation of a new MPEA Reserve Fund to be used at the state’s disposal. Moving forward, McPier’s entire annual tax revenue surplus will be put into the fund instead of just half. That is designed to build up reserves for the state to tap in lieu of sales tax revenue in the event of another debt shortfall.

McPier has also sought to take on more debt to help it address a variety of development and maintenance projects on its expanding campus, which it now calls McCormick Square.

CEO Lori Healey said earlier this year that the convention campus has $550 million in deferred maintenance to address across the convention center campus. Almost $300 million of that is at the antiquated Lakeside Center building across Lake Shore Drive, including a roof replacement that McPier estimates will cost close to $40 million.



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