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As many as 7,000 people working in Chicago’s tourism industry could lose their jobs by the end of Q2 2016 if Illinois Governor Bruce Rauner doesn’t free up funding earmarked for Choose Chicago‘s tourism promotion efforts.
Republican Governor Rauner, who entered office in January, and the state’s Democrat-led General Assembly were unable to agree on a 2015/16 fiscal state budget earlier this year, which froze funding for all of Illinois’ 40-plus tourism bureaus beginning July 1.
State funding makes up about 40% of Choose Chicago’s annual operating budget.
Right now, over $6 million is sitting in an account that is statutorily mandated for tourism promotion. Because the Governor’s Office has suspended that account indefinitely, Choose Chicago was forced to eliminate 28 staff positions last week and close its sales offices in Canada and Mexico effective December 30.
In July, the bureau shut down its Epic Chicago summer advertising campaign two months earlier than scheduled, to save around $250,000 in media buys, and the development of its upcoming winter campaign is in jeopardy. Choose Chicago also cancelled all inbound and outbound foreign sales and PR trips.
According to Don Welsh, president and CEO of Choose Chicago, he says the budget impasse could cost between 5,000-7,000 jobs in the city’s tourism sector by Q2 2016 if the impasse is still unresolved in December.
“In the state of Illinois, there’s a statute mandating that the money that goes to fund Choose Chicago, which is money that is collected by the hotels, is earmarked specifically for the usage of promoting tourism in Chicago,” explains Welsh. “The fact is, we’re not funded by the general fund. Our funds cannot be used for anything other than their intended purposes.”
Since July, Welsh and his team have engaged key government officials to highlight the bureau’s performance over the last five years in an effort to show what’s at stake here. Those officials include Governor Rauner, Illinois House Speaker Michael Madigan, Illinois Senate President John Cullerton, Illinois Senate Minority Leader Christine Radogno, and Illinois House Minority Leader Jim Durkin.
First and foremost, Choose Chicago says that it generates $25 in local and state taxes for every $1 invested in the bureau. Choose Chicago also presented the following data:
- Since 2011, total visitation to Chicago increased 15% to 50.17 million domestic and overseas visitors in 2014. Chicago joins New York City and Orlando as the only three U.S. cities to exceed 50 million annual visitors.
- Tourism spending increased by $12 billion to $14.1 billion since 2011.
- Total tax revenue has increased by $159 million to a record $885 million. At its current pace, total tax revenue is expected to surpass the $1 billion mark within the next three years.
- Chicago hotel room demand reached historic levels during the last 17 months in a row, while outpacing national growth in all key performance indicators.
- Tourism-related employment since 2011 has increased 6% to 136,000 jobs.
“You’d have to be a fool to look at this data and not recognize the contributions we’ve made to the local and state economy,” suggests Welsh. “For every dollar we receive from the state of Illinois, we turn around and give them 25-to-1 net ROI. The tourism tax collected in Chicago represents over 50% of the total tax collection in the entire state.”
Political Horse Trading, Chicago Style
Different than most other states, the Illinois state government collects and distributes all bed tax revenue. In the case of Chicago, the state disperses the funds allocated for Choose Chicago to the Metropolitan Pier & Exposition Authority (MPEA), which owns Chicago’s Navy Pier and McCormick Place Convention Center. MPEA then distributes those funds to Choose Chicago, along with additional funds that MPEA itself collects from its tax receipts dedicated for the bureau’s marketing efforts.
Here is the breakdown of Choose Chicago’s 2015 budgeted revenues, totaling $30.2 million.
- Total State Funds: $12,022,500 (39.8% of budget)
- Total MPEA Funds: $9,170,425
- Total City Funds: $4,606,600
- Total Private Funds: $4,403,525
According to Welsh, the irony of the situation is that Rauner, Madigan and Cullerton are all strong advocates for tourism development and promotion. Rauner actually hired Welsh five years ago, and worked alongside Mayor Rahm Emanuel to create Choose Chicago.
“Furthermore, Speaker Madigan and President Cullerton were the people who actually drove the change for all the labor reforms here a few years ago,” says Welsh. “So it’s interesting when we sit down and review our performance records, in the case of all three elected officials, they are the people who helped make them happen. They endorse tourism as a significant economic and jobs driver. Unfortunately, we seem to be in the middle of this political stalemate.”
To aid its advocacy efforts, the bureau rolled out a Choose Chicago State Funding Toolkit and an email petition and letter writing campaign in June to crowdsource support. To date, over 7,000 letters have been sent to Governor Rauner and the Illinois General Assembly, submitted by both the general public and industry people such as Jonathan Tisch, chairman of Loews Hotels.
“Jon Tisch spent $400 million on the opening of the Loews here, and he sent a respectful letter to the Governor saying, “Governor, I made this investment in Chicago with an understanding that the entity that’s been booking conventions, meetings and leisure tourism, both domestically and internationally, will be appropriately funded to continue to do their work,'” reports Welsh. “We’ve also got restaurateurs saying, ‘Governor, I’ve just put every dollar I have in my life’s savings into this restaurant. I need for that organization to be allowed to do its job.'”
Impasse Impact on Meetings & Conventions
To date, Choose Chicago has laid off only one person on the meetings side due to the budget impasse. You don’t mess with meetings in Chicago.
The McCormick Place Convention Center, referred to as “the building,” is the largest convention facility in America. And in July, Mayor Emanuel and MPEA CEO Lori Healey joined Marriott International CEO Arne Sorenson to break ground on the massive 1,206-room Marriott Marquis Chicago.
The hotel is going to be an anchor tenant of the new McCormick Place Entertainment District.
“Our ability to execute in the convention space right now is not impacted for the most part,” says Welsh. “We need to convey to a meeting planner, either who’s got a meeting booked or who’s considering Chicago, there’s no change in what we’ve always done. We’ll be there to book the meeting. We’ll be there to service them. However, when you’re going through these challenges, companies are in tune with what’s taking place in your community. They know when there’s harmony within governments and cities.”
Chicago is notorious for a lack of harmony between its governments and cities. Four of Illinois’ last seven Governors were imprisoned.
However, Welsh says a lot has been accomplished in the last five years to strengthen the relationships between Choose Chicago and Chicago’s private sector, which he hopes isn’t overshadowed by the budget wrangling at the state level.
“We’ve been complimented the past few years, that between the building, the hotel community and Choose Chicago, that we’re sort of seen as one,” says Welsh. “In some cases that hasn’t been perceived in the past in Chicago. So we don’t want to do anything that’s ever going to potentially recreate that perception, where those critical unities are not working as one single unit.”