The Interim Board of the Metropolitan Pier and Exposition Authority (MPEA) today announced historic, far-reaching recommendations meant to cut costs for Chicago’s McCormick Place customers and preserve thousands of Illinois jobs. The Illinois General Assembly created the seven-member MPEA Interim Board to conduct comprehensive analysis of operations at the municipal agency, which owns and operates McCormick Place and Navy Pier.
By streamlining operations at the convention center, the recommendations are daring but essential, said John S. Gates, Jr., chairman of the MPEA Interim Board.
“The recommendations are bold, but they are necessary to put customers first and to keep Chicago the premier destination for conventions and trade shows,” Gates added. “The Interim Board urgently recommends substantive changes meant to retain and create jobs, while staying competitive in the industry.”
Many of the Interim Board’s recommendations closely mirror legislative reforms outlined in HB 4900, which has the endorsement of both Illinois Gov. Pat Quinn and Chicago Mayor Richard M. Daley.
The Interim Board addressed five critical areas of reform including Labor Relations and Exhibitor Rights; Focus One (MPEA’s in-house electrical provider) and Food Services; Debt Restructuring; Sales and Marketing; and Governance.
The board recommended restructuring the MPEA capital debt and eliminating a projected draw against the State’s sales tax of approximately $40 million. MPEA recommends directing $20 to $25 million of that amount to MPEA’s annual operating fund. Labor would be re-organized, under the recommendations, in three units including Move-In/Move-Out, Assemble/Disassemble and Electrical/Production, and MPEA would be given the right to review and verify contractor billing statements to ensure labor costs are accurately represented and passed through to shows and exhibitors. The ability to make show labor public employees of MPEA was also recommended. It would give the Authority the ability to renegotiate all show labor contracts and make a fresh start to reform work rules and jurisdictions. Strikes would be prohibited.
Recommendations by the board also provide “exhibitor rights” similar to what customers experience in other convention centers; close Focus One and get out of the utility service business, leaving customers to bid such functions to outside electrical contractors; and cancel the existing food services contract and prepare a new request for proposals on the fixed fee for food service, allowing MPEA to control pricing, quality and reduce the profit margin to zero. The board suggested allowing exhibitors to order packaged food from restaurants and other outside vendors.
Finally, the last recommendation includes the need to achieve a higher level of sales effectiveness and accountability by redirecting any convention-related marketing funds from the state or city to the MPEA. The MPEA would then develop a sales and marketing effort exclusively focused on attracting business to McCormick Place.
The Interim Board did not make any recommendations on governance.
“These changes could enhance Chicago’s ability to win and retain convention and tradeshow business,” said Gates. “But I want to be clear the Interim Board is not recommending new taxes or operating subsidies for McCormick Place. Its approach is to reallocate projected savings from debt restructuring to cut costs to customers and balance the MPEA budget.”
The findings and the recommendations of the MPEA Interim Board were informed by independent analyses by Price Waterhouse Cooper and CH Johnson and Associates bench marking performance and operations against competing venues and providing an in-depth review of our financial structure.
Moving forward, the Interim Board plans to continue to implement cost savings by scaling back the use of the Lakeside Center and structuring operations more economically including security, property management, Focus One and food services. It also plans to realize more savings in the central office and to continue to develop the revenue potentials of the Lakeside Center, the McCormick Place Hyatt Hotel and the Energy Center.
In addition, the Interim Board plans to conduct a strategic analysis of Navy Pier to develop the venue within the next three to five years as a major international tourist destination and to generate new revenue.
Conventions and trade shows at McCormick Place are a vital economic resource for Illinois, generating more than 65,000 jobs and $8 billion in economic impact for the city and state.
A Joint House/Senate Committee on McCormick Place will now review the Interim Board’s recommendations before issuing its report to the General Assembly.