CHICAGO - The Metropolitan Pier and Exposition Authority in Chicago is still reviewing tax collection figures for fiscal 2008, which ended last week, but officials expect revenues may have fallen short of what was needed to fully cover debt service payments, triggering the need to tap the state sales tax backup.
MPEA officials at a board meeting last month estimated the deficit in tourism-related tax collections that are pledged to repay the bonds at $6.5 million, but a spokeswoman yesterday said the final numbers are still being calculated. "Our expectation is that we will need to tap the state sales tax, but we won't know for sure for a couple days," she said.
The authority, also known as MetPier, has warned state lawmakers for years that it would eventually need the help of the sales tax backup pledge to help cover an accelerating debt service payment schedule. To prevent that it has sought to win passage of legislation that would allow it to restructure a chunk of its $2.1 billion debt portfolio.
Legislation proposed during the most recent spring session of the Illinois General Assembly would have allowed the MPEA to extend the final maturity of its debt by six years to 2048, raise its debt ceiling by $350 million to $2.5 billion, and increase the pledged level of sales taxes in the later years of the debt service schedule to $350 million from $275 million. The additional $350 million borrowing capacity would finance construction of a new tower, parking facility, and other improvements at the convention center's hotel.
The plan cleared the Senate but never came up for a vote in the House before lawmakers adjourned in late May. The legislation fell by the wayside along with a capital budget as lawmakers focused their attention on passing an operating budget amid an ongoing feud between Gov. Rod Blagojevich and House Speaker Michael Madigan of Chicago.
MPEA officials said yesterday they would try again with the same legislation during the annual fall veto session to stem the future need for state sales tax revenues - a backup pledge the General Assembly had granted MetPier as a credit enhancement.
The restructuring would give the MPEA more breathing room over the long term, allowing for a better match between expected growth in tourism tax collections and the debt service schedule. It has been squeezed by the slump in tourism revenues following the 2001 terrorist attacks. And though strong growth has returned, it's not enough to catch up with the tight debt service schedule that was established with the agency's $1.5 billion issue in 2002 that financed a major expansion of the convention center.
The 2002 deal relied heavily on premium securities to raise more cash up front and used a back-loaded amortization structure so as to fit into MetPier's existing bond portfolio without the need for any tax increases. It was an aggressive schedule built around existing debt repayment and was considered viable given historical growth of the taxes at an average of 5.5%.
If collections hadn't declined so severely after 9/11, the authority believes the taxes would have kept pace. Officials believe the restructuring provides the best solution that would allow the taxes on hotels, restaurants, car rentals and airport taxi rides created to cover MPEA debt to service it adequately.
MetPier collected $110.2 million from its tourism taxes in fiscal 2007, just enough to cover debt service. It needed $125.5 million to fully cover fiscal 2008 payments, including its most recent one owed in mid June.
Bond covenants were set up so that in each of the first eight months of the fiscal year an amount sufficient to cover debt service for the year is transferred from a state pool of tourism and sales tax funds. The MPEA has always previously returned any sales tax dollars to the fund after closing its books on the fiscal year, so the use of sales taxes this year would mark a first.