Mayor Rahm Emanuel’s administration signed off on an elaborate financial shell game that obscured payment of $55 million for renovations at Navy Pier with tax dollars reserved to fight urban blight, records show.
The bookkeeping jiujitsu appears to violate the spirit, if not the letter, of the controversial tax-increment financing program, which critics say has been widely abused and not used for its intended purpose of spurring development in or near economically disadvantaged neighborhoods.
A joint investigation by the Better Government Association and Crain’s Chicago Business finds that the administration began filtering the money in 2014 through a hotel project at McCormick Place, capitalizing on its Near South Side location as a rationale for tapping funds reserved for struggling communities.
Emails and internal documents obtained through the Freedom of Information Act show that officials at the city as well as the governing body of the lakefront convention complex knew the planned 1,205-room Marriott didn’t need the financing. But they also knew that Navy Pier, 3 miles away and a vast distance from any urban blight, did.
* It’s a long and involved story, but Ben Joravsky breaks it down…
In the case of South Loop TIF deals, the mayor swore up and down he was spending $55 million in TIF dollars on the arena/hotel project at 22nd and Michigan. But thanks to Crain’s and the BGA, we now know the money was diverted to pay for Navy Pier renovations. So it’s a diversion of a diversion. Impressive! I’m not sure Mayor Daley the Younger even tried that—and he pioneered this scam. […]
Surprisingly, state and city officials were up front about the apparent switcheroo—at least in the e-mails they wrote to each other. James Reilly, the former CEO of MPEA—its board is appointed in equal parts by the mayor and the governor—acknowledged the unorthodox transaction in a July 12, 2013, e-mail, one of many Chase and Ecker secured via Freedom of Information Act request: “There is a somewhat complicated series of cash flow issues that we need to get a handle on between the City, MPEA and [Navy Pier] with regard to the Tiff [sic] funds that will come from the City to MPEA to reimburse MPEA for the purchase of the land for the [hotel and basketball arena] which in turn will enable MPEA to grant $55M to [Navy Pier] for its reconstruction project.” […]
Wait, there’s more. In October 2014, Richard Oldshue, MPEA’s chief financial officer, sent the following message in an e-mail to Mark Jarmer, an aide to Illinois house speaker Michael Madigan: “None of this TIF money comes to MPEA as incentive or otherwise. The City is aggregating balances from various existing [TIF] districts as they become available to transfer funds to MPEA which we transfer in full to [Navy Pier]. We don’t keep any.” […]
Dowell says she’ll insist the City Council hold hearings on the deal. That would be helpful—as the council never actually held a hearing on whether to spend the $55 million in the first place. In July 2013, two weeks after Reilly wrote the aforementioned e-mail, Emanuel hammered the deal through on a voice vote—most aldermen didn’t know about it until after the vote was taken. We now know why the mayor wanted to keep it a secret.
* David Reifman, a commissioner of the Chicago Department of Planning & Development, and Lori Healey, chief executive officer of the Metropolitan Pier & Exposition Authority, respond…
By failing to understand the typical approach to how the city expends TIF funds, the authors of this article have created unnecessary confusion and overshadowed the significant public benefits that the Elevate Chicago initiative has achieved. We are writing to set the record straight.
In short, no TIF funds were diverted to Navy Pier.
First and foremost, it’s important to understand the city contributed $55 million toward the $498 million overall hotel project cost as a reimbursement to the Metropolitan Pier & Exposition Authority, not as an upfront payment. This approach protected the public’s interest by only allowing the expenditure of TIF funds after eligible expenses were complete. MPEA advanced the funds for these reimbursable costs through its own sources. Only after MPEA made these upfront payments did the city reimburse it, and the city’s payments were applied only to certified TIF eligible costs related to the hotel and for no other purpose.
It is also important to remember that all of the projects mentioned in the article were announced together in May 2013 as Elevate Chicago, a unified and targeted $1.1 billion investment in Chicago’s tourism and convention infrastructure. Elevate Chicago included Wintrust Arena, the Marriott Marquis Chicago, a privately funded smaller hotel, streetscape work and the first phase of Navy Pier renovations. This was widely reported in 2013.
In sum, MPEA advanced all of the funds for the hotel project, some of which were later reimbursed by the city. Only once MPEA received reimbursement from the city did it have sufficient funds to support other Elevate Chicago projects, including a capital investment in the improvement of Navy Pier, which it owns.