Governor Signs Bill Approving $937 Million Of Bonds for Chicago Convention Center
CHICAGO - Gov. Jim Edgar of Illinois yesterday signed a bill authorizing a $937 million bond issue to finance expansion of the McCormick Place convention center in Chicago, and requests for qualifications could go out to underwriters as early as next week.
The legislation, which included the creation of new taxes and bond authority for the expansion, was passed by the Illinois General Assembly in July.
John Schmidt, chairman of the Metropolitan Pier and Exposition Authority, which will issue the bonds for the project, said senior underwriters could be selected by late October and co-managers sometime after that. He added that it is possible the deal could be broken up into two or more issues.
Under the new law, the bonds cannot be issued until after July 1, 1992 - the date the new taxes go into effect. Mr. Schmidt said the authority wants to put together a financing package so the bonds could be issued "as soon as possible" after that date.
Mr. Schmidt added that firms will be asked for their ideas on hedging interest-rate risk through the use of forwards and other vehicles.
"We want to look at every idea to get the best financing package," he said.
Interest among firms is expected to be high for underwriting the expansion project, which is one of the largest municipal bond-financed deals in Midwestern history.
The special obligation revenue bonds will be backed by a 1% charge on restaurant meals in a special taxing district in downtown Chicago; a 6% tax on automobile rentals in Cook County; a 2.5% tax on hotel rooms in Chicago; and per-ride fees of 75 cents to $1 on taxi, limousine, and bus trips to and from the city's two airports. If the new taxes do not provide enough money for debt service, the legislation calls for a portion of the state sales tax to be used to make the payments and provide additional security.
The authority has estimated that revenues from the new taxes will raise $53 million in 1993, climb to $93 million by 2004, and remain at that level through 2021, when the 30-year bonds would mature.
At a bill-signing ceremony at the convention center, Gov. Edgar said he was confident that the financing package was solid and the state sales tax would never have to be used for debt service payments.
"The people who will be paying for McCormick Place are the people who are going to benefit from McCormick Place," the governor said.
The law does anticipate a legal challenge to the 1% tax on restaurant meals, and it bars using funds raised by that tax until the issue has been resolved in court. McCormick Place officials have said they consider the legal challenge a formality and that it was not a serious legal issue.
Chicago Mayor Richard Daley, whose aides strongly lobbied for the bill in the closing days of the state's legislative session, said the project will give the city an economic shot-in-the-arm.
"We are creating jobs for the whole construction industry," Mayor Daley said. "This is a great opportunity for the people in the City of Chicago."
Jim Reilly, the authority's chief executive officer, estimated that the one-million-square-foot expansion will create 11,600 permanent jobs and have an annual economic impact of $1.6 billion on the Chicago region.
Mr. Reilly added that preliminary design work on the $987 million expansion project is now under way. Ground breaking is scheduled for 1993, and the project should be completed by 1996, he said.