Convention shutdown costs city and state $233.8 million in tax revenue, McPier board told
McCormick Place held its last convention on March 6, 2020. Since then, the losses have been staggering: 230 canceled events that would have drawn 3.4 million attendees and a lost economic impact of $3 billion.
The pandemic-induced shutdown of Chicago conventions has already cost the city and state $233.8 million in lost tax revenue and the red ink at McCormick Place will keep piling up until fiscal 2024, the Metropolitan Pier and Exposition Authority board was told Tuesday.
McCormick Place held its last convention on March 6, 2020. Since then, losses have been staggering: 230 canceled events that would have drawn 3.4 million attendees; 2.2 million lost hotel room nights; $3.05 billion in lost economic impact; and $233.8 million in lost state and city taxes.
Even with widespread distribution of the coronavirus vaccine, Illinois remains stuck in Phase 4 of Gov. J.B. Pritzker’s gradual reopening plan, which limits large gatherings to half of capacity or 50 people — whichever is less.
That helps explain why Chief Financial Officer Jason Bormann convinced the board to approve a revised three-year financial plan that rather conservatively assumes McCormick Place will not return to full capacity until fiscal 2024.
Instead, the plan calls for a more gradual ramp-up: 25% in the first quarter of fiscal 2022, which starts in July; 50% capacity in the second and third quarters; 75% capacity in the fourth quarter and for all of the 2023 fiscal year, before hitting 100% in July 2023, the start of the 2024 fiscal year.
With conventions and trade shows on hold and hotel rooms empty, the McPier Authority had no choice but to use the state as its financial backstop.
The $15.2 million “unreimbursed draw-down” of state sales tax revenue was the first since the 2008 recession.
That earlier siphoning of state sales tax revenue was not fully reimbursed until July 2018.
If tourism taxes rebound, Bormann said the revised budget outlines a plan to “repay the state fully” and “completely replenish” $30 million in McCormick Place reserves by 2023. Even if the recovery is delayed, the state will be fully reimbursed “by 2025 at the latest,” he said.
As bleak as the situation seems, it could have been worse.
In September, 2020, the Metropolitan Pier and Exposition Authority refinanced $118.4 million in 2021 expansion project bond debt service, the maximum amount allowed by law.
“Despite its efforts, the decline in tax revenues primarily due to closures and partial closures of hotels and restaurants will result in an unavoidable draw on state sales taxes of approximately $15.2 million,” Bormann said.
“Had MPEA not taken the proactive steps of refinancing all allowable fiscal 2021 debt service, the state sales tax draw would have been nearly $130 million.”
Debt refinancing wasn’t the only measure to slash McPier’s expenses.
Within weeks of the stay-at-home shutdown triggered by the coronavirus pandemic, McPierembarked on an aggressive cost-cutting plan.
“Unfortunately, this plan required layoffs or full furloughs for more than 80% of the workforce and mandatory partial furloughs for the remaining workforce,” Bormann said.
Board Chairman Jeffrey Bethke branded the revenue forecast “pretty conservative, which is a good thing.”
“Hopefully, we’re in a much better position come fourth quarter of this year and beyond. That we can achieve something closer to 100 percent capacity before 2024,” said Bethke, chairman and CEO of Ingenuity Advertising.
He credited McPier Authority CEO Larita Clark and her leadership team for doing an “amazing job to keep costs in line while also still recognizing that we’ve got human beings” impacted by their difficult decisions.
“The balance of that expense management has been, just about perfect to my observation,” Bethke said.
Before the Illinois General Assembly wraps up its spring session, Clark said she’s “still hopeful” about winning approval for a $15 million operating plan if McCormick Place is cleared to reopen in July and “up to $40 million if, for some reason, we cannot open until January or if we have to close.
“We also asked to reinstate the incentive fund, which is … up to $15 million. We can use that to be on a level playing field with our competition across the country and probably across the world to gain and retain clients,” Clark said.
McCormick Place general manager David Casten told the board the NBC television show, “Chicago Med” would film again this week in the McCormick Place West building since Cinespace, the West Side film studio where the show and “Chicago P.D.” are filmed, is “at full capacity.”
“We’ve also been working with Cinespace executives on trying to market our Lakeside Center upper level hall for soundstage availability for pilots, films, swing sets, other kind of filming that is occurring in Chicago,” Casten said.
“Chicago is going through quite a renaissance right now in the filming industry,” he said. “ ... So those executives agreed to market our space. We have availability through the summer — until the 31st of August. And they will be sharing that information with executives in Los Angeles.”