Navy Pier has become a tourist attraction paid for by extra taxes that affect this area.

By Julie Sammarco

Why are restaurant meal taxes so high in certain parts of this area? Since 1991, a tax known as the “McPier tax” has been in play in selected areas to help pay for Navy Pier and McCormick Place facilities. This tax is one of the reasons why Chicago has some of the highest taxes in the nation, greater even than some European countries known for high taxes.

The tax has many parts and affects tourists and residents alike. According to Juan Ochoa, CEO of the Metropolitan Pier Exposition Authority (MPEA), the McPier tax includes a 6% fee on auto rentals in Cook County; a 2.5% tax on hotel/motel rooms in Chicago; a 1% tax on restaurant meals in the geographic area bounded by the Stevenson Expressway on the south, Ashland Avenue on the west, Diversey Avenue on the north, and the lakefront, as well as on meals served at O’Hare and Midway Airports; and a ground transportation fee from O’Hare to Midway. Taxis and limousines are charged a $2 departure fee, with airport and bus fees set at $9, $18 and $27 per vehicle, depending on capacity. In addition, the MPEA receives any tax revenue surplus from the Illinois Sports Facilities Authority.

The history behind this type of tax began in the late 1800s when spending summers at seaside amusement parks was in vogue in America, and municipalities started levying amusement taxes to pay for the facilities. Around the same time, urban planner Daniel Burnham came up with the idea of Navy Pier, which was supposed to be one of two City-owned piers extending into the lake to serve freight and passenger vessels. Navy Pier went into service in 1916 as Municipal Pier Number Two (with Number One being the pier that never was built).

During World War I, the Red Cross and the American military used Municipal Pier for training and operations. A decade later it was renamed “Navy Pier” in honor of those who worked, trained, and deployed from the pier. During World War II, the City leased the pier to the Navy, which used it as a training base for tens of thousands of sailors and pilots. After the war many of those and other servicemen took advantage of the G.I. Bill and enrolled in higher education and vocational training.

The University of Illinois at Chicago then set up shop at Navy Pier to handle the influx of new students. Eventually, the university outgrew its Navy Pier location and moved to the Near West Side. With the university and its students gone, and freight shipping largely relegated to trucks following the post-war transportation boom, Navy Pier had a hard time finding a purpose.

By 1975 the pier was in an advanced state of disrepair. With the enthusiasm brought on by the nation’s pending bicentennial celebrations, however, the City spent $7,200,000 rehabilitating the pier. The easternmost buildings were opened as exhibition halls and public spaces for festivals. The question of what to do with the rest of the space remained.

In 1989 Mayor Richard M. Daley and Governor James Thompson created the Metropolitan Pier Exposition Authority, or MPEA (a municipal corporation that is known these days as “McPier” because it also runs the McCormick Place convention center), to take over, rehabilitate, and run Navy Pier.

A 13-member board governs the MPEA, with the mayor appointing six and the governor choosing seven. The first order of business at McPier was renovating the pier. A $150 million bond was floated to pay for the renovation, with the money being paid back by increased taxes on tobacco products.

McPier later implemented more taxes, such as those mentioned above on auto rentals, hotel and motel rooms, airport transportation, and the special restaurant tax that affects much of this area, to help pay for Navy Pier and McCormick Place facilities, Ochoa said.

Many believe the restaurant tax in particular is unreasonable. “What they’re trying to do is export the tax burden onto tourists, but it hits many locals too,” said Steve Stanek, a research fellow at the Heartland Institute. “It doesn’t work, and it makes Chicago less competitive because it makes doing business in Chicago more expensive and harder. If I had to hold a convention and I had an option between Chicago and Orlando, I’d have to pick Orlando because I know [attendees] wouldn’t like to have to pay a huge bill for lunch and transportation.”

MPEA members feel they understand the pressures of the current economic situation, however. Ochoa said that McPier tax collections are flat compared to the previous year because of the economy. When tax collections fall $14 million short this year as projected, “the State of Illinois will make up the difference, not the taxpayers,” Ochoa said.

Despite the economy, there are no plans to eliminate this tax anytime soon. By contract, the MPEA cannot eliminate this tax until the $2.1 billion debt is paid off in 2042.