A new agreement with the Chicago Park District announced Wednesday will extend Lollapalooza's stay in Grant Park through at least 2021, while requiring the promoters to pay millions in annual city and county amusement taxes and state liquor taxes for the first time. Though it bolsters government revenue, the deal will likely mean that festivalgoers will pay more for tickets.

Lollapalooza's continued presence in Grant Park would provide an approximately $1 billion revenue boost for the local economy over the next decade, said parks spokesman Jessica Maxey-Faulkner.

"This is a good deal deal for the city and we felt it is the right thing to do," said Charlie Jones, a co-owner of Austin, Texas-based Lollapalooza promoters C3 Presents. "But it will affect ticket prices. There will be an increase. How much? To be determined. But it's been keeping me up at night."

Lollapalooza tickets in 2011 were $90 for a single day and $215 for a three-day pass to see more than 130 bands and artists on eight stages. The Lollapalooza lineup and ticket prices for this year are expected to be announced April 9.

"This is a big win for the taxpayers, hotels and restaurants, our cultural community and, inevitably, the local parks that will benefit from these new revenues," parks Supt. Michael Kelly said in a statement. "We appreciate C3's recognition of the changing scale and nature of this event and their willingness to re-structure the agreement."

When they originally contracted with the Park District to bring Lollapalooza to Grant Park in 2005, Jones and his partners were taking over a broken concert franchise that had faded from popularity in the 21st century after playing a crucial role in the early '90s emergence of alternative rock. Lollapalooza agreed to contribute a percentage of its revenue to the Parkways Foundation, a nonprofit dedicated to improving city parks. Over the first seven years of the festival's lakefront stay, nearly $11 million has been contributed to Chicago parks. In exchange, the promoters were exempted from city, county and state taxes. For its first three years, Lollapalooza was not profitable, Jones said.

As the festival began turning a profit in its fourth year and bringing in revenue of more than $20 million annually, the contract between the Park District and Lollapalooza has come under increasing scrutiny from elected officials. Last year's festival drew record attendance of 270,000, making it the largest music festival in America.

"It's clearly a success," Cook County Commissioner Bridget Gainer said earlier this year. "It's clearly something that doesn't need government assistance. If Lolla doesn't pay, then somebody else does."

Jones said the new deal has been in the works since last year. "We knew our tax-exempt status would change as the scale of the event changed," he said. "It's tough for (the Park District) to defend the original deal. The (success of the festival) greatly exceeded all our expectations."

Under the deal, a minimum $1.5 million annually will be contributed for park improvements, Maxey-Faulkner said. C3's annual percentage of net ticket sales to the park district will increase this year to 11 percent from 10.2 percent, escalating annually until it reaches 15 percent in 2021. The new deal is expected to increase total government revenue to $4.05 million in 2012, up from $2.7 million. By 2021, Maxey-Faulkner said, local governments will see a minimum of $5.3 million in revenue from the restructured Lollapalooza deal.

The deal also specifies that C3 must immediately pay the park district to repair any damage caused by the festival. Last year, damage caused by heavy rains and record crowds required more than two months of repair work that limited access to large portions of the park, with C3 footing the bill.

Not addressed specifically in the new contract was the issue of gate-crashing and fence-jumping, a major problem at last year's festival with hundreds entering illegally. Jones said he and the city are working to beef up security and fences to minimize the problem this year. "There will be sturdier and higher barriers" to discourage intruders, he said.

Inside the festival, stages will once again be reconfigured to alleviate bottlenecks. Last year, a massive tent near the main stage housed electronic-music artists and DJ's such as Skrillex to overflowing crowds. This year, the tent will likely be eliminated and the hugely popular electronic acts will be spread throughout the festival grounds, including at least one main-stage act, Jones said. Though the festival could potentially hold more people, "we'll stay where we are in terms of numbers," he said.

greg@gregkot.com