Chicago taxpayers have lost more than $1.1 million because of a shortfall in hotel tax dollars dedicated to the city-state agency that runs U.S. Cellular Field and financed the Soldier Field renovation, according to documents obtained this week by the Chicago News Cooperative.
Financial records from the Illinois Sports Facilities Authority show that the state docked City Hall's share of income tax revenue because the hotel tax no longer generates as much as needed. The state fronted $32 million to the agency during the fiscal year that ended on June 30, but the hotel tax revenue "was not adequate to fully repay the advance to the state," according to an independent audit presented last month to agency officials and obtained by the CNC through the state's Freedom of Information Act.
Because the city is responsible for any gap, Chicago received almost $1.11 million less from the state in income tax dollars than it would have been due, the records show. The agency's annual reports indicate that the shortfall marked the first time city taxpayers have been forced to cover such a hole.
The authority was created in 1988 to oversee the construction and operation of the White Sox stadium, and 10 years ago, it also issued almost $400 million in bonds to pay the public share of the $606 million cost for the reconstruction of Soldier Field. At the time, financial experts calculated that revenues from the 2 percent hotel tax would have to grow by an average of 5.5 percent a year over the next three decades to pay off the bonds.
Under the deal, the city would be obligated to cover any shortfalls that arise. Then-Mayor Richard M. Daley brushed aside concerns that robust growth would not be possible in the wake of the Sept. 11, 2001 terrorist attacks, which caused a drop in hotel tax revenues.
"I remain absolutely confident that taxpayers are not at risk for any part of this project," Daley said in late September 2001. "If I had any doubts, I would not proceed."
Agency officials also protested strongly when Fitch Ratings downgraded the bonds in 2009, noting that the hotel tax revenues always had been adequate to cover the debt payments.
But Fitch analysts wrote that debt payments were set to grow, while hotel tax revenues were not rising as fast as anticipated in the past decade.
The first-ever shortfall comes at a time when wholesale leadership changes have roiled the authority's seven-member board.
Gov. Pat Quinn and Mayor Rahm Emanuel have made new appointments to the authority's board of directors, and the mayor has given his assent to Quinn's selection of former Illinois Senate President Emil Jones as the board's new chairman.
The agency's executive director, Perri Irmer, was let go in April, but the selection of a permanent replacement still has not been announced.
Asked about the city's income-tax hit, Emanuel administration spokeswoman Kathleen Strand said in an email: "The mayor just appointed three new members to [the authority board] for their strong financial acumen and has tasked them with identifying what governance and financial reforms are needed to protect taxpayers. The mayor looks forward to working with the new board, as well as the governor and legislature, to ensure [the authority] is put on the right track."
Strand added that mayoral aides had considered the possibility of an authority shortfall that the city would have to cover when they recently crafted a 2012 budget plan to close a projected City Hall deficit of almost $636 million.
Agency officials have "from time to time" considered issuing new bonds and stretching the payoff period, but they never took such action, said James Thompson, who helped create the authority as governor and also served as its chairman and interim executive director until stepping down recently.
"The city wanted to do Soldier Field, and this is the price they are paying," Thompson told the CNC on Tuesday.
Authority spokesman Michael Alvarez declined comment.
The agency has come under criticism recently for building a new restaurant near U.S. Cellular Field and allowing the White Sox to reap the revenues from the stadium amenity.
But Thompson said the authority had no power to force the team to share the revenues from the restaurant. "That's the lease," he said. "It's been true for more than 25 years. We always built the restaurants in the stadium, and the White Sox always got the revenue."
Jones told Crain's Chicago Business last month that he wants to review the terms of the team's lease with the agency, which calls for lower rent payment than other major-league baseball teams owe to governments that are stadium landlords.
Thompson said he agreed that the White Sox received a favorable rent agreement, but he added that the long-term stadium deal was crafted at a time when the team's owners were threatening to leave the South Side to move to Florida.
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