Fitch upgrades Illinois Sports Facilities Authority to investment grade

Fitch Ratings has raised the Illinois Sports Facilities Authority’s bonds to investment grade, bumping the authority’s rating two notches to BBB from BB-plus, with a rating outlook of stable. 

The ISFA issued bonds for Guaranteed Rate Field, home of the Major League Baseball Chicago White Sox, and Soldier Field, home, at least for now, of the NFL Chicago Bears. It had about $416 million of debt outstanding as of this fall, mostly from the Soldier Field renovation in 2003. 

Wednesday’s upgrade follows one from S&P Global Ratings this August which saw the ISFA’s rating go to BBB-plus from BBB-minus. Both ratings agencies cited the recovery in hotel tax revenues, among other factors, in their upgrades.

Illinois Sports Facilities Authority bonds — which financed the makeover of Soldier Field in Chicago, home of the NFL Bears — were upgraded to investment grade by Fitch Ratings.

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Fitch Senior Director and Head of U.S. State Ratings Eric Kim said the timing of Fitch’s upgrade was “based on a range of different factors,” including the ISFA’s 2023 disclosure statement, posted in late November, detailing 2023 collections and data on the first few months of hotel tax collection in fiscal year 2024.

In an upcoming full rating report on the ISFA, Fitch notes that the 5% hotel tax — 60% of which is available to the Illinois Sports Facilities Fund for debt service — recovered strongly from pandemic declines; 2022 collections more than doubled from their 2021 slump; and growth increased to $259.2 million in 2023, 5% above 2019’s peak of $247 million. 

“Fiscal 2023 actual collections were 24% ahead of the state’s fiscal 2023 budget estimate,” the full report adds. “Illinois’ enacted fiscal 2024 budget anticipates a much more modest pace of growth this year, just over 1%. Through November, the state’s department of revenue reports total hotel tax collections… were up just over 3% YOY.”

The ISFA’s bonds are state tax-supported and backed by a pledge of and first lien on monies appropriated to the bond trustee from the ISFF. The state contribution includes the hotel tax revenue; a $5 million annual subsidy taken from the hotel tax; and a $5 million subsidy from part of the state’s local government distributive fund.

In its analysis, Fitch observed that the coverage from state hotel tax collections, while improving, “remains somewhat narrow.” Nonetheless, the agency concluded that hotel tax revenues offer an “adequate cushion for debt service coverage.”

Fitch said it expects modest tax revenue growth in the months ahead, subject to state and national economic conditions.

Fitch caps its rating at one notch below Illinois’ issuer default rating of A-minus. The ISFA’s bonds do not depend on stadium activity for repayment, and Kim said stadium activity has never factored into Fitch’s rating.

The Bears are trying to develop a new stadium in the suburbs, or perhaps next to Soldier Field, and there have been published reports that the White Sox want a new stadium — either in the area or out of state — when their lease ends later in the decade.

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