County Board President Toni Preckwinkle said Monday she has the nine votes she needs to impose a 1 percent hotel tax and plans to forge ahead with a Friday roll call, despite concerns the new levy would kill the golden goose that is Chicago’s convention and tourism industry.
Preckwinkle said she and Mayor Rahm Emanuel “don’t always agree.” But she does share the mayor’s view that a Chicago hotel industry in the midst of a construction boom is resilient enough to withstand that 1 percent, $31 million-a-year tax — even though it would bring the total hotel room tax to a whopping 17.4 percent. That’s compared to 12 percent for Las Vegas and 12.5 percent for Orlando, Chicago’s two biggest rivals for convention business.
“This is a very modest increase. Very modest. A dollar-a-night on a motel stay. Three or four dollars a night on a stay at the Four Seasons. I don’t think that’s going to discourage anybody from coming to Chicago, nor considering Chicago as the site of a convention,” Preckwinkle said, with six of the County Board’s 17 commissioners standing alongside her.
The Illinois Hotel and Lodging Association, the Illinois Restaurant Association and the Chicagoland Chamber of Commerce beg to differ.
The argued that the hotel tax could be the final nail in Chicago’s convention and tourism coffin after an avalanche of tax increases pushed through by Emanuel and Preckwinkle to solve their respective pension crises.
They include: Emanuel’s $588 million property tax increase and Preckwinkle’s decision to reinstate the penny sales tax increase she campaigned against.
Further complicating the issue is a $7 million cut at the convention and tourism agency now known as Choose Chicago and costly local mandates, like the increase in Chicago’s minimum wage to $13-an-hour by 2019.
Next year was shaping up to be a difficult year for hotels anyway; conventions long ago were steering clear because it was supposed to be the year Chicago played host to the 2016 Summer Olympic Games.
“When you take into account the $588 million property tax increase, which is going to increase property taxes for a hotel by…over $10 million in a year . . . Businesses are going to pay predominantly more than homeowners. Then, you add on the sales tax increase, these numbers start to add up,” said Michael Reever, vice-president of government relations for the Chicagoland Chamber of Commerce.
“Choose Chicago . . . has a $7 million hold and freeze on their funding. They had to end their Chicago Epic campaign early in the summer. They closed their international offices in Canada and Mexico. They laid off 28 employees. We’re already making it more difficult for tourism and conventions business to come to Chicago. This only makes it more difficult.”
Pat Donelly, general manager of the Hyatt Regency Chicago, said it’s a “myth” that hotel business is booming.
“This year is the first year since 2008 that we’re back to the 2008 average room price. It’s taken us that long a time to catch up,” Donnelly said.
“My hotel just completed $200 million in renovations. We’re about to do another $40 million for next year. But, with all of these added costs, we’re mostly going to put a hold on our $40 million of renovations, which will directly affect the trades by about $25 million in salaries for workers. . . . Costs add up to us not spending that money. That money is gone.”
Illinois Restaurant Association President Sam Toia accused the county of “actively finding ways to making visiting, touring and dining in the Chicago area even less affordable and appealing” to travelers and conventioneers.
“It all adds up to fewer people dining in restaurants and job losses in the restaurant and hotel industry. Our employees will see their hours cut due to a decrease in the number of diners because it will look more appealing to travel to do business in Las Vegas, Atlanta or Orlando,”Toia said.
Preckwinkle turned to the hotel tax after a mini-rebellion on the County Board forced her to abandon her preferred alternative: to extend the county’s 3 percent amusement tax to cable television and other recreational activities, such as bowling and golf.
County Commissioner Richard Boykin signed onto the hotel tax only after Preckwinkle agreed to resurrect her failed, four-year-old plan to tax ammunition sales.
“I’m a practical person. . . . Gun violence is, in my opinion, the No. 1 issue confronting us. It’s an issue that I’ve worked on since I’ve been here. I’m pleased to also say that the president is concerned about this issue,” Boykin said.
“I couldn’t have supported the amusement tax because it would impact seniors on fixed incomes. Too many people would be hard-hit in my district. The hotel-motel tax is a different story. . . . We can’t always say no. This is the least impactful tax on the residents that I represent.”
Preckwinkle added: “We have a world-class trauma center at Stroger Hospital. You know why? Because so many people get shot and killed in Cook County. . . . It reflects the terrible level of gun violence that we have in the county. And we’re going to use some of that bullet tax money to contribute to our public safety and public health costs.”
The business leaders opposed to the hotel tax were flanked by County Commissioners Tim Schneider, Bridget Gainer and John Fritchey. All three favor across-the-board spending cuts.
Preckwinkle laughed off that simplistic view.
“You can’t just say to your mortgage company, ‘I’m gonna reduce my mortgage payment by one percent.’ You can’t just say, ‘I’m gonna pay one percent on my auto loan.’ . . . We have about three-quarters of our budget where we can’t cut because they’re fixed costs,” she said.
“If you look at the $1.3 billion that’s flexible in terms of spending, we’d have to make cuts that would amount to 200 or 300 jobs and would severely impact the public safety arena. We’d lose public defenders. We’d lose state’s attorneys. And we’d lose others in the public safety arena that would have a real impact on our ability to deliver services.”
County Commissioner John Daley, chairman of the County’s Board’s Finance Committee, noted that 80 percent of the county budget is personnel and 80 percent of that work force is unionized.
“These contracts passed 16-1. So the members who are asking to cut voted for the union contracts knowing you would have to commit this money in future years,” Daley said.
“When you vote against an increase and take the money, that to me is hypocritical.”