Hotel taxes are how public financing of sports stadium construction for private companies gets done.\n\nHere’s how it works historically and in principle:\n\n1. The owner of a beloved sports team threatens to leave town if the city/county/state doesn’t build the team a new state-of-the-art facility.\n\n2. Politicians—facing tight budgets, no rx malady but craving private-industry allies and nervous about facing crazed sports fans—agree to pony up.\n\n3. Knowing that raising taxes on citizens for such a thing—especially when public schools and transit services and police forces face budget cuts—wouldn’t sit well with voters, see legislators introduce a new hotel tax to be paid by tourists who stay in local hotels and controlled by some freshly minted government sports facilities commission made up of appointees.\n\n4. The commission issues bonds for the stadium (backed by the government) and pays principal and interest and for ongoing stadium improvements using the hotel tax revenues, while operating outside of the workings of day-to-day, elected-official, as-the-founders-imagined-it-type government.\n\n5. The sports team gets their stadium, sports fans are psyched, taxpayers don’t seem to mind so much, and the politicians get to keep the whole dirty business at arms length: everybody’s happy!\n\nIn Chicago, the commission that manages the stadiums is called the Illinois Sports Facilities Authority. In practice, hotel taxes cover about 70% of the ISFAs expenses. Politicians rarely mention the $10 million in direct taxpayer subsidies that go to the ISFA every year, or that the city has to make up for any shortfalls in hotel tax revenue, but the hotel tax pays for the stadiums for the most part.\n\nHotel taxes provide an extra line of defense for the stadium-subsidy faithful. And they need it; because their first line of defense—sports stadiums provide a positive return on public investment—is pretty weak. Over twenty years of studies done by academic economists on the impact of sports stadiums on local economies have shown the effects to be negligible at best.\n\nThe second line of defense—that sports teams have a “feel good” effect on the population—is less easily measured. But even if there’s some truth to this, do sports teams create billions of dollars’ worth of happiness? I know you’re not supposed to put a price on it but jeez.\n\nAnd so there’s the fallback, the hotel tax. Here’s former mayor Richard M. Daley spelling it out for skeptics in a Sun-Times article justifying the Soldier Field renovation in 2000:*\n
[T]here are no local property tax or state tax dollars involved. The $587 million plan is funded with $200 million from the Chicago Bears and $387 million in existing city hotel taxes, which are paid primarily by out-of-state tourists and conventioneers.\n\nThe hotel tax…is controlled by the Illinois Sports Facilities Authority, and these dollars are only available for projects like this one.
\nThat first sentence is a half-truth. There are state and city tax dollars involved in propping up the ISFA and our sports teams (the $10 million annual subsidy) even if it’s true that there were no new state and city, non-hotel tax revenue thrown at the Soldier Field project.\n\nBut the key here is that hotel tax dollars \”are only available for projects like this one.” It’s a position taken by many a crafty politician before Daley and since. It’s used to deflect arguments from the more social-minded and disadvantaged members of the citizenry who criticize government officials for splashing hundreds of millions on fancy sports stadiums while municipal budgets get slashed, schools close, and poverty and income inequality increase.\n\nWhat the politicians don’t say is that the hotel tax is only available for sports stadiums because that’s the way politicians set it up when they invented it twenty-five years ago (at least in this state).\n\nSo a fair question is: Why can’t they invent a hotel tax to fix real problems in this city? How about get rid of the hotel tax that benefits the rich private-business owners and create one that benefits working people?\n\nHere’s the rationale: Through a 2-3% hotel tax our city’s goal will be to have the best-paid, best-educated, healthiest, and happiest tourist-industry workforce in the country. Aw heck, the world!\n\nRight away we’d issue bonds to pay for school improvements, because studies show that a top-notch public education system is the key to a skilled workforce and state prosperity.\n\nWe’ll use the tax revenues and annual subsidies to make sure that workers in the retail and service industries have full time employment and earn more than a living wage. They’ll only have to work one job, which will include benefits. They’ll be able to spend time with and take care of their families. They’ll enjoy better mental health—less worry and angst. During their paid vacations they’ll be able to afford to patronize the hotels, restaurants, museums, theaters, and arenas where they work.\n\nGood jobs would mean less worker turnover and more experience on the job.\n\nAnd tourists will want to come to Chicago again and again, because Chicago workers—knowledgeable, helpful, energetic—will be motivated to go the extra mile to make the experience extra-special.\n\nAnd if we don’t see a return on investment in the economics-sense, well, so what? We don’t see one when we build stadiums either.\n\nBut at least in this case, better jobs and better lives will create a more tangible kind of happiness for a greater number of people.\n\nAnd that’s the kind of happiness I’d say is priceless.\n\n \n\n \n\n*Richard M. Daley, \”Stadium plan protects taxpayers\” Chicago Sun-Times, December 4, 2000. Accessed via Chicago Public Library website.