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City for Sale 

Mayor Daley's wheeling and dealing could leave Chicago taxpayers on the hook for decades to come.

While we've all been riveted by Governor Blagojevich's alleged plans to sell Barack Obama's Senate seat to the highest bidder—and his subsequent decision to give it to charity—Mayor Daley has been busy making his own deals, mortgaging the city to balance the budget and win the Olympics.

The most recent wave started with the privatization of Midway Airport, approved 49-0 by the City Council on October 8. That's the one where the city agreed to lease Midway for 99 years to a consortium of investors, for a net of about $1 billion—if you don't deduct the hundreds of millions it will cost the city to pay for the airport's police and fire protection for the last several decades of the deal, after the $225 million set aside from the sale for that stuff runs out. Think of it as getting money now to lose money later.

Next Mayor Daley moved on to his $1.2 billion parking meter lease deal, which the council approved on December 4 by a vote of 40 to 5. I found it a little curious that Daley was so eager to get rid of the one operation the city's really good at.

More than a fourth of the money was designated for a "rainy day fund"; I'm guessing Daley plans to use some of it on the Olympics. And the rest? When Daley privatized the Skyway back in 2004, he said it would be "fiscally irresponsible" to lease assets to pay off regular operating deficits. But now he says he intends to spend at least $325 million from the parking meter deal to help control the city's near-term anticipated deficits. He's also promised to plow $400 million into an interest-bearing account to offset the loss of the $20 million the city had been collecting annually from meters. But if the city doubled meter rates, as the new operator has promised to do in the next five years, revenues would climb too. And since interest rates are falling, it's almost certain the city will have less money to work with than if it had kept the meters. Scott Waguespack, alderman of the 32nd Ward, estimated that they'd be worth at least $4 billion over the 75-year term of the lease.

Then there was the Michael Reese deal, approved 47-0 in the City Council on December 17. Daley unveiled this proposal in July, when he told reporters the city intended to borrow $85 million to buy the 37-acre hospital site from Medline Industries, the current owner. Medline would then—follow me now—make a $20 million "charitable contribution" to cover the cost of demolishing the hospital and cleaning up the site. Sounding a little like one of those old Celozzi-Ettleson Chevrolet ads, Daley and planning commissioner Arnold Randall assured us that the deal would cost taxpayers nothing: Unnamed developers were lined up to purchase the property for the full $85 million so they could build as many as 7,500 units of housing, which would be set aside for about 15,000 athletes during the Olympics. The developers could then sell them off later at a profit. But the deal would go through even if Chicago didn't get the Olympics, Daley and Randall said, because apparently it was just too good for any sensible developer to pass up.

It seemed the city had discovered the secret that has eluded so many other great deal makers: how to buy something without spending any money. "This is a very creative financing solution," Randall told reporters.

The City Council was set to approve the deal—and by the way, I don't think Brezhnev got as much support from the politburo as Daley gets from the council these days—when estimates for the cleanup came in at well over $20 million. The administration hit the brakes, and the city and Medline returned to the table. After about four months, they announced what's supposedly an even better deal for taxpayers. Instead of $85 million, the city would borrow $86 million, and Medline would hike its charitable contribution to at least $27.5 million.

But little has really changed from the first deal, at least as far as taxpayers are concerned. It's still a speculative real estate deal, and if things don't go just right, the city—in other words, taxpayers—could be saddled with all or part of the loan.

Medline is making less money on the sale, sure. But it's still making plenty. It bought Reese for just $24 million in 2004.

And can we please stop calling it a "charitable contribution"? It's not as though the Medline folks said to themselves, "Hmm, what great cause can we contribute to? There are hungry people and diseases that need to be eradicated... I know—we'll give $27.5 million to Chicago 2016!"

The emphasis on the donation is sleight of hand. The real issue, which you could well miss for all the distracting details, is not whether the city's getting a good price, but whether buying this property makes sense in light of Chicago's many pressing needs.

Moreover, the mayor has not explained how the city—which is apparently not astute enough to operate parking meters—has suddenly developed the expertise to successfully develop real estate. Based on the ongoing debacle at Block 37, the downtown parcel that's still not fully developed after 20 years and over $100 million in public funds, I'd say the opposite is true.

Yet our aldermen think it's a dandy idea. At their December 17 meeting, Second Ward alderman Robert Fioretti echoed Daley's line that it was a good deal even "if we don't get the Olympics." The Third Ward's Pat Dowell called it "a great real estate deal." In words that will undoubtedly come back to haunt her, the 46th Ward's Helen Shiller said: "There are no scenarios that I can imagine where we can lose on it." And the 50th Ward's Berny Stone declared that the city couldn't have gotten a "better deal with a gun."

Well, actually, the city did sort of have a gun, since once they announced their intention to buy the property, there really was no one else Medline could sell to. We made them an offer they couldn't refuse.

Still, get ready for sticker shock: now it turns out that the land won't be ready to be developed until the city coughs up untold additional millions—in taxpayers' dollars—to build roads, sewers, and other infrastructure, according to Chicago 2016 executive director Lori Healey.

Healey, who used to be the mayor's chief of staff and before that his planning commissioner, dropped that bombshell at the January 12 meeting of the City Council's finance committee. The money, she noted, would come from an as-of-yet undesignated tax increment financing district, probably carved out of the existing Bronzeville TIF.

Just in case you forgot, TIFs divert property taxes meant for funding parks, schools, and other public bodies into a slush fund that Mayor Daley controls. So, essentially, we're taking money intended for schoolkids and giving it to condo developers.

On January 13, the City Council unanimously signed off on an ordinance giving Chicago 2016 the authority to oversee the development of the Reese site, including spending all of whatever money goes into whatever TIF district ends up getting created for it. Oddly enough, the aldermen made no orations—pro or con—after finance committee chair Ed Burke brought the proposal up for consideration. "Like the good old Peggy Lee song, is that all there is?" Burke wisecracked.

After the meeting Randall told reporters he was leaving his post as planning commissioner to take a job with Chicago 2016, where he'll be the director of "neighborhood legacies"—that is, whatever crumbs the committee comes up with to pacify the neighborhoods that will be turned upside down by the Olympics. I can't say that I blame him—Chicago 2016 seems to be running the city anyway. If the trend continues it won't be long before the City Council is working for it too. Officially, I mean.v

Ben Joravsky discusses his columns weekly with journalist Dave Glowacz at mrradio.org/theworks. And for even more Joravsky, see our blog Clout City.

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