Metropolitan Pier and Exposition Authority bond rating affirmed at AA- with stable outlook

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MPEA bond rating AA- stable

Highlights

KBRA affirmed the Metropolitan Pier and Exosition Authority McCormick Place Expansion Bonds' AA- long-term rating with a stable outlook, citing a security package backed by a range of dedicated local taxes and state sales tax support.
The bonds benefit from a maximum $300 million annual draw on state sales tax receipts, rising to $450 million in 2036, and state sales tax base coverage exceeding 25 times maximum debt service.
Constraints include cyclical risk in authority tax revenues, potential need for continued restructuring, and vulnerabilities related to the appropriation-dependent payment mechanism and state action delays.

Bond backing and credit support structure

As reported by Kroll Bond Rating Agency, the long-term AA- rating on Metropolitan Pier and Exposition Authority, Illinois, McCormick Place Expansion Project Bonds is affirmed and the outlook remains stable.

The bonds are backed by Authority Tax revenues, including a 1% food and beverage tax in Chicago's central business district and at Chicago-Midway and Chicago-O'Hare international airports, a 2.5% hotel tax collected citywide, a 6% rental car tax across Cook County, and airport ground transportation departure taxes at the two airports.

The security package also includes a maximum draw of $300 million on state sales tax receipts, rising to $450 million in 2036. Those state sales tax receipts are subject to a prior lien on Illinois' outstanding Build Illinois Bonds and are used to cover shortfalls in authority tax revenue.

Revenue risks and implications for Illinois financing

KBRA says the credit benefits from state sales tax support that offsets the cyclical nature of authority tax revenues, as well as strong state non-impairment language and a statewide sales tax base that provides more than 25 times coverage of maximum permissible debt service. The agency also points to state appropriation actions supporting MPEA as evidence of McCormick Place's importance to the regional and state economy.

At the same time, the agency highlights several constraints, including the cyclical sensitivity of authority tax revenues and the possibility that matching those revenues to annual debt service while limiting use of state sales tax support may require continued debt restructuring. KBRA also notes the appropriation-dependent payment mechanism remains vulnerable, citing the absence of timely state action in 2015.

For a higher rating, KBRA indicates authority tax revenues would need to grow enough to provide ample debt service coverage without relying on state sales tax draws or periodic restructuring. For a downgrade, the agency identifies a failure by the state to appropriate debt service funds or weaker authority tax performance that increases reliance on state resources as key risks.

Our earlier article on TIAA’s $2 billion surplus notes due 2056 explained that the issue received an aa long-term credit rating with a stable outlook. We noted that proceeds were intended for general corporate purposes and could partly support Nuveen’s planned cash acquisition of Schroders, with the transaction expected to lift TIAA’s adjusted leverage on a pro-forma basis.

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