On the surface, the city's recent proposal to give a real estate consortium roughly $51 million to develop the old central post office looks like another unwarranted handout to the rich and well connected. But in fact this is one of the few tax increment financing deals that actually makes some sense--which just goes to show you how demented the program has become.
Vacant since 1996, when the post office moved its distribution center, the 17-story, 2.5-million-square-foot limestone edifice just west of the Loop sits on the bank of the Chicago River with the Eisenhower Expressway shooting through its belly. The city thought it had a deal for the building in 1999, when a group of developers planned to convert the 1932 art deco structure into a hotel, loft condos, and offices. But that fell through when the economy weakened after 9/11.
Since then, other proposals have come and gone, but no one seems to know what to do with the property. The city can't demolish it without enraging preservationists (not that this would necessarily stand in its way). And no public institution has been willing to take over the mammoth building, which covers two city blocks.
So on May 8 the Community Development Commission, the body that oversees TIFs, recommended that the city fund a new but similar plan, giving Walton Street Capital LLC $51 million in property tax dollars to convert the old post office into office space, a luxury hotel, and condos. The proposal now moves to the City Council, where approval is expected.
For Walton, headed by real estate mogul Neil G. Bluhm, the deal's a no-brainer. The federal postal service is selling the property for ten dollars and kicking in another $9 million to yank out the asbestos. The city's $51 million will cover about 17 percent of total construction costs, including the demolition of 800,000 square feet Walton has no use for.
Normally I'd be howling about the diversion of taxes to developers to build a bunch of condos--as if Chicago needs any more of those. But in this case it's not so much a diversion as a conversion: the federally owned post office pays no property taxes to begin with. If the handout enables Walton to put formerly tax-exempt land on the property tax rolls, it's a gain for the public.
Trouble is, property taxes from the new hotel and condos won't be going to the schools and parks but to the Canal-Congress TIF, adding millions to one of Mayor Daley's forever-expanding slush funds for years to come. I wouldn't be so concerned if park or school district officials were at the bargaining table demanding that property taxes generated by the post office development be sent their way as soon as the city's subsidy is recouped. But as they usually do with TIF deals, school and park officials are passively going along with the project for fear of upsetting Mayor Daley.
Surprisingly, the CDC, usually a docile bunch, showed some scrappiness at the hearing a few weeks back. Commissioner Rafael Leon asked why Walton was only setting aside 15 of 300 units for affordable housing, a number far below the city's 20 percent set-aside requirement on TIF-funded deals. Raphael Dawson, a Walton principal, said that's all the company could afford to build. Then a city planner reminded Leon that the developers were also contributing $4.5 million to the city's low-income housing fund. That donation puts the firm in compliance with even the new, supposedly tougher set-aside ordinance passed by the City Council less than a week later.
Another commissioner, Anne Kostiner, raised the touchy subject of the infamous Block 37 deal. In the 1980s the city spent about $40 million buying up all the property on the block bounded by Randolph and Washington and State and Dearborn. It then paid to demolish the existing buildings and sold the land to FJV Venture, a development firm led by Bluhm and Judd Malkin, for about $12.6 million. FJV couldn't put a deal together, so in 2001 the city bought the land back for $32.5 million. All in all, the city managed to lose roughly $60 million on the transactions.
As Kostiner pointed out, there's no guarantee that Walton's post office project will be a winner either. The downtown condo market's soft, and Walton still hasn't lined up all of its conventional financing. Noting Bluhm's involvement in the Block 37 deal, Kostiner asked the developers what assurances they could offer that the city wouldn't wind up on the hook once again.
Good question. After a moment of awkward silence Dawson said he didn't know anything about Block 37 but was confident this deal would work.
I hope he's right. With property taxes looking to go sky high in August after this year's reassessments, the last thing taxpayers need is to throw away millions of dollars on a real estate deal gone bust.
City officials didn't seem too concerned by this prospect, and I can understand why. Since the electorate never holds Mayor Daley accountable for anything he or his administration does, why not swing for the fences?
Starting With a Handicap
It was the same old story at last weekend's state championship for girls' track and field down in Charleston: Chicago's public high schools were practically unrepresented.
Of the more than 550 girls who participated in the May 19 finals, only 7 came from Chicago Public Schools: Stephanie Omueti, a sprinter from Whitney Young; Morgan Monroe, a hurdler from Lane Tech; Margie Zimoch, a Lane Tech long jumper; Tamika Robinson, a triple jumper from Morgan Park; and Brandi Robinson, Tiffany Edwards, and Tierra Russell, Robinson's three teammates on the 4 x 100 relay team. None finished higher than sixth, and there were none competing in the shot put, discus, high jump, pole vault, or long-distance events.
Yes, I know, every now and then a track superstar emerges from Chicago--there's Morgan Park's Alexandria Anderson, who won four events at state in both 2004 and '05. But by and large the city does a miserable job of cultivating the talents of its athletes. It still has no indoor track facility for students, and it has only a handful of outdoor tracks. There are few Park District programs teaching younger kids the fundamentals.
Talk to the coaches, and they'll tell you it's not just about bringing home medals. It's about giving Chicago students the same opportunities as their peers in Barrington, Naperville, and all the other suburban powerhouses, which have state-of-the-art indoor and outdoor running tracks.
But let's face it, suburbanites are wiser about how they spend their property tax dollars: they invest in their children. Meanwhile, Chicago looks to commit hundreds of millions of property tax dollars to the 2016 Olympics. It's no wonder our city's schoolkids run at the back of the pack.
For more on politics, see our blog Clout City at chicagoreader.com.
Art accompanying story in printed newspaper (not available in this archive): The former post office photo by Godfrey Carmona.