2010 Lane Reports

McCormick Place Gets Reprieve from Losing Conventions, but Much Work Remains

The Lane Report, October 2010
Friday, October 1, 2010 9:00 am
by Marc J. Lane


New work rules and pricing plans at McCormick Place will make Chicago a more competitive convention destination. The General Assembly's sweeping reform measure, which took effect on Aug. 1, will cut labor costs by reducing crew sizes and overtime pay, give exhibitors the right to set up their own booths and allow shows to select less expensive, outside electrical and food-service contractors.

Already, major trade groups that had threatened to leave McCormick Place for more efficient, warmer venues in Las Vegas and Orlando have renewed their commitments to Chicago, and new shows are following their lead. One loyalist is the Assn. of Manufacturing Technology, whose biennial International Technology Show has been a mainstay in the city since 1947. (Its estimated that 92,000 attendees spent about $200 million here last month.) The association is expected to deliver 250,000 visitors and about $600 million in direct expenditures to the city and state when it returns to McCormick Place in 2012, 2014 and 2016, as it has agreed. Mayor Richard M. Daley has announced that five other trade shows also are staying put and that three new shows will soon sign on, representing hundreds of millions of dollars in local revenue and jobs.

But leaning on union workers and making the McCormick Place experience less painful won't be enough to keep Chicago's convention business thriving for long. We can count on an uptick in trade show defections unless the Metropolitan Pier and Exposition Authority, or McPier-which owns and operates both McCormick Place, the country's biggest convention facility, and Navy Pier, the Midwest's biggest tourist destination-starts running like a business.

Since 1991, the so-called McPier tax, totaling about $100 million a year, has been levied against auto rentals in Cook County, hotel stays in Chicago and meals served at the airports and at restaurants within a district bounded by the Stevenson Expressway, Ashland Avenue, Diversey Parkway and the lake. Yet despite the agency's extraordinary fiscal powers and its enormously valuable assets, it has been plagued by crushing debt and the unconscionable costs of patronage, cronyism and political shenanigans. No wonder McPier's tourism-related taxes, ratcheting up the city's retail sales tax rates to the highest level among the nation's largest cities, have been insufficient to meet its debt payments, forcing the state to cover the difference.

The law that cuts labor's power on the show floor seeks to ease McPier's debt burden by extending its payment schedule by 18 years, increasing the agency's bonding capacity and subsidizing McPier's operations for four years while it reinvents itself. As important, McPier's governance would be de-politicized.

McCormick Place's new rules give it a new lease on life. Let's hope McPier takes this second chance to become transparent, accountable and sustainable.

Marc J. Lane, a business and tax attorney and financial advisor, practices law at The Law Offices of Marc J. Lane, P.C. (www.MarcJLane.com) in Chicago.

Our October 2010 Lane Report was adapted from a column published in Crain's Chicago Business on September 27, 2010.  Reprinted with permission from Crain Communication Inc., Copyright 2010.

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