The details of Isaac Carothers's recent guilty plea—how the former alderman accepted about $40,000 in home improvements from a developer in return for pushing a zoning change through the City Council—have already been splashed across the front pages.
But what hasn't been reported is the role played by our old friend, Mr. TIF.
To help Calvin Boender build Galewood Yards, a residential and commercial complex on the west side, Carothers not only put his muscle behind the zoning change but used his influence to get $5.3 million in property tax money funneled to Boender and his partners.
The property in question is about 65 acres of vacant industrial land around Central Avenue just north of North. Years ago it was a rail yard, but by the 1990s the railroad was out of business and most of the land was unused.
Initially the issue facing Mayor Daley and his planners was finding the best way to develop it. The owners, CMC Heartland LLP, wanted to change the zoning so they could put in a residential and commercial development, which would bring them the most money.
But Daley wanted a manufacturer or some other firm that would create high-paying jobs, and after he applied some pressure Heartland agreed to reserve the property for industrial use. "The company's change of heart became apparent after a meeting its executives had in May with Terry Teele, Mayor Daley's deputy chief of staff," the Sun-Times's David Roeder reported in July of 1999. "Participants said Teele delivered a strong message that Daley favors industrial development."
The problem was how to make it financially attractive enough to lure in a developer—which brings us to tax increment financing, or TIF.
In the spring of 1999, officials in Daley's planning department proposed the Galewood-Armitage TIF District, which would run roughly from Fullerton south to Bloomingdale and from Cicero west to Nashville.
If you've been following what TIF does, you understand that this essentially meant that any new property taxes raised within these boundaries would be sent into a bank account controlled primarily by Mayor Daley. In this case, he apparently intended to help subsidize the cost of developing factories and warehouses.
On May 11, 1999, the proposed TIF district came before the Community Development Commission, the board of mayoral appointees that signs off on new TIF districts and proposed projects within them. A planner for the city started the hearing by running through a history of the area, talking at length about how it once was home to industrial giants such as Archer Daniels Midland, Zenith Electronics, and other companies that had either relocated or closed.
Just so there were no doubts, the city planners made it clear that they wanted the land developed for industrial use and that they thought it would be counterproductive to build residential units there. "The highest and best use for this land is industrial because of the existing industrial uses," a city planner testified, according to transcripts. "This plan, of course, does not change the underlying zoning; rather, it would prohibit the use of TIF funds for uses other than what is indicated in the proposed land use plan."
On hand to back the proposed TIF district was Alderman Carothers, who seconded the mayor's call for industrial development. "We all know that it is important for us to retain industry in the city," Carothers said, "and for me personally to retain industry and jobs within the confines of my ward."
The CDC unanimously recommended that the City Council approve the TIF district, and on July 7, 1999, the council did just that, passing an ordinance with language specifying that the area "be redeveloped primarily for industrial use." Then, on July 21, just two weeks after the council acted, Heartland issued a press release announcing its intentions of working "closely with Mayor Daley" to create "a modern, state-of-the-art industrial park."
A year later Heartland sold the land to Boender and his partners. No problem—at the time Boender told city officials he would plow ahead with an industrial development, according to news accounts at the time.
But by 2004 he had changed his mind and was pressing to have the land rezoned so he could put a residential development on it.
City planners stood their ground. As they saw it, it wasn't their fault Boender was having trouble developing the land for industrial use. He'd known when he bought it that the city had made it the centerpiece of a TIF district that was setting aside up to $83 million to help bring in good industrial jobs. As planning commissioner Denise Casalino told reporters, "We can't just be a city of Target stores and residences."
But Boender went back door, enlisting the aid of Carothers, 37th Ward alderman Emma Mitts, and Congressman Luis Gutierrez to woo Mayor Daley. Gutierrez went so far as to write a personal note to the mayor, asking "for any support you can give him [Boender] at this time," the Tribune later reported.
Eventually Mayor Daley changed his mind too—or at least his planning department did. Department officials OK'd a compromise: the land east of Central Avenue would be rezoned so Boender and his partners could construct a 14-screen movie theater and 187 single-family and multifamily residences.
The land west of Central remained zoned for industrial use. The city would then give $5.3 million in TIF funds over the next several years to the General Laborer's District Council of Chicago and Vicinity—a collection of laborers' unions—so they could buy the land for that price from Boender and build a training center there. The center wouldn't actually manufacture anything, but at least it would teach students how to manufacture things so that if anybody ever built any more factories they could get hired to work in them.
On March 14, 2006, the CDC approved the deal. Carothers was on hand to praise it. This time around there was no grandiose talk of restoring the area's industrial magnificence—no recollections about Archer Midland or Zenith or the great rail yards that had come and gone. The deal sailed on through to the City Council, which unanimously approved it on June 28, 2006. As the Sun-Times later noted, 14th Ward alderman and finance committee chairman Ed Burke didn't recuse himself from the vote despite some potential conflicts of interest—his law firm had previously worked for Boender on at least 14 tax appeals and his wife, Illinois Supreme Court justice Anne Burke, had received thousands of dollars in campaign contributions from the developer. But Burke said there was no conflict since the TIF subsidy was technically going to the unions.
Whoever was getting the actual money, it certainly helped Boender and his partners. They ended up selling the land on the east side of Central—the portion that could be used for residential and commercial development—for at least $6 million, according to Carothers's 2009 indictment. Single-family houses, townhomes, condominiums, and a movie theater eventually went up on the property. On the west side of the land the union built its training facility.
So in the end no industrial jobs were created with the property tax dollars from the Galewood-Armitage TIF District. And Boender and his partners, who'd bought the whole 65-acre parcel for $6.9 million, got to sell it off for a total of at least $11.3 million—of which $5.3 million came from the generous taxpayers of Chicago.
In 2008, the Tribune broke the story about how Gutierrez's letter and Carothers's behind-the-scenes lobbying helped convince Daley to change the zoning east of Central.
And on May 28, 2009, U.S. Attorney Patrick Fitzgerald indicted Carothers and Boender on federal fraud and bribery charges. The indictment focused on efforts by Carothers to get the City Council to change the zoning in exchange for work on his west-side home. The indictment makes no mention of the TIF. Maybe this stuff is too complicated for even the feds to try to explain.
On Monday, February 1, more than ten years after the TIF district was created, Carothers pleaded guilty to bribery and tax fraud charges to get for a 28-month prison sentence. For those keeping track, he's the 29th alderman to be convicted since 1972. His own father, former 28th Ward alderman William Carothers, was sentenced to three years in prison for trying to extract about $32,500 worth of remodeling work at his ward office from a contractor who needed city permits to work on an expansion of Bethany Hospital.
Boender maintains his innocence. His trial is set to start March 8.
In his comments to the press Fitzgerald said Carothers's plea agreement sends a message to other officials in Chicago who might be thinking of betraying the public trust through shakedowns and bribery.
That's great. But what about our $5.3 million?
The city's official position is that all's well that ends well since it gave the money to the laborers' unions and not directly to Boender—even though the unions simply turned around and used it to buy the property from Boender.
He may be going to jail, but I still think Carothers came out better than the taxpayers on this baby. According to his plea agreement, he got a bunch of goodies for taking care of Boender's needs, including skybox tickets to at least one White Sox playoff game and $40,000 in home improvements, including a fresh paint job, new exterior doors, and a central air conditioning system.
We the taxpayers got the $5.3 million bill.
Ben Joravsky discusses his reporting weekly with journalist Dave Glowacz at mrradio.org/theworks.