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 The proposal, which surfaced on Monday, calls for $1.5 billion of
tax-exempt revenue bonds issued by the Metropolitan Pier and
Exposition Authority and the extension of existing so-called tourism
taxes on hotel rooms, rental cars, restaurant meals and airport taxi
rides to pay off the debt over 40 years. About $1.16 billion would
be used to raze part of the McCormick Place convention center to
make room for and build the museum and replace the lost exhibition
space.
Lucas, whose museum would showcase his collection of paintings,
illustrations and digital art, would contribute $743 million to
cover interest payments on the bonds, according to Richard Oldshue,
the authority's chief financial officer.
Illinois' fiscal and political woes, which pushed the credit ratings
on $3 billion of existing McCormick Place bonds into the
low-investment grade level of triple-B last year, could taint the
new bonds.
 "The market can’t trust the state to do the right thing and as such
they will levy a pretty significant penalty before buying these
bonds," said Nicholos Venditti, a portfolio manager at Thornburg
Investment Management in Santa Fe.
Illinois' fiscal 2016 budget impasse led to a technical default on
McCormick Place bonds last year because there was no state
appropriation to transfer tax revenue to the bond trustee for
required monthly debt service deposits.
Legislation appropriating the tax revenue subsequently passed,
ending the default.
John Miller, co-head of fixed income at Chicago-based Nuveen Asset
Management, said going forward, the state has no incentive not to
appropriate for McCormick Place bonds.
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"I don't think anybody could or should view a McCormick Place
renovation and a Lucas Museum as a partisan issue. It's an
opportunity," he said, adding that the taxes paying off current
bonds have been growing.
Still, Venditti questioned how the state could approve the museum
plan instead of tackling its growing public pension costs, a
structural budget deficit and the severe financial problems of the
Chicago Public Schools.
"If I lived in Chicago, this proposal would drive me insane," he
said.
The financing package, which includes money and a tax pledge for the
bonds by the state, requires approval from the Democrat-controlled
Illinois Legislature and Republican Governor Bruce Rauner.
(Reporting By Karen Pierog, additional reporting by Dave McKinney;
Editing by Bernard Orr)
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