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Rahm gets into the real estate game—with your money

The mayor moves to buy land for a hotel and basketball arena.

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As if the city doesn't have enough problems with crime, budget deficits, and school cuts and closings, Mayor Emanuel has decided to barrel headfirst into the South Loop real estate market—with at least $55 million of your property tax funds.

The key moment came at the July 24 City Council meeting, when he hammered through an ordinance giving the city eminent domain authority to buy property at Indiana and Cermak. He plans to have a hotel built there.

A couple days later, the Metropolitan Pier and Exposition Authority—the city-state agency that oversees Navy Pier and McCormick Place—sued to seize the land across the street, where DePaul University will build a basketball arena.

The city is planning to buy both properties with that $55 million, though I suspect the final bill will be much higher, as it usually is.

You'd think the mayor would dive into this deal only after months of analysis and debate, especially when the money's coming from schools that are so broke they recently fired around 1,500 teachers.

But no, the City Council spent all of a second contemplating the ordinance. That's roughly the time that elapsed between the moment Alderman Ray Suarez offered the matter for a vote and Mayor Emanuel said he heard no objections and slammed down his gavel.

By comparison, approval of the parking meter deal was an example of Talmudic study.

I'm not sure what it is about the South Loop that makes otherwise pragmatic mayors lose their freaking minds.

I saw the same thing happen with Mayor Daley back in 2008, when he got the council to sign off on buying the old Michael Reese Hospital site for $86 million. It's just a few blocks south of the proposed basketball arena.

Mayor Daley swore up and down that within a year or two, private developers would buy the land from the city, and no taxpayer dollars would be lost.

Alas, the land is still vacant and we still own it. Now Mayor Emanuel is looking to buy some more property.

As with Michael Reese, the money used to buy the land on Cermak comes from the tax increment financing program, the slush fund mayors use to finance their wildest schemes.

More than half the tax dollars we pay into the TIF program are diverted from the Chicago Public Schools, ostensibly to help develop property in blighted areas.

Just so you know, the South Loop is most definitely not a blighted community. Dumping TIF dollars there makes about as much sense as spending them in, oh, River North—which, come to think of it, this mayor has also done.

Like I always say, give a mayor a slush fund and he loses all self-control, like Patty Duke with that hot dog.

As a result of nearly two decades of South Loop development—a good chunk of it subsidized with TIF money—nearly every lot is filled with townhomes or high-rises. And most of the remaining vacant lots have already been earmarked for future development.

What briefly stopped the development rush was, of course, the recent real estate collapse. Now that the market is picking up again, here comes our mayor, using our public dollars to buy land as the costs are climbing.

A spokesman for the Emanuel administration said he couldn't comment on the potential acquisition costs while the negotiations are still under way.

But consider the property on the southwest corner of Indiana and Cermak, currently owned by James McHugh, a wealthy and connected construction company operator.

For the last decade, McHugh has been pushing to build a computer data center there—no TIF subsidy requested. Imagine that.

That's the property the City Council voted to acquire at the July 24 meeting. It's as though the mayor told McHugh: I want your property—now stay the fuck out of my way. Which, knowing our mayor, sounds like something he might actually say.

Emanuel says it will cost about $22 million to buy McHugh's land. If you say so, Mr. Mayor.

When the city targets land for acquisition, both parties go before a judge to haggle over the sale price. You can expect McHugh to be compensated for every nickel he put into developing his plans for the site. (McHugh did not return calls for comment.)

Moreover, there's the principle of compensating an owner for the highest price and best use of his or her property. In this case, the city is planning to put a hotel there—not a data center. So the land would be more valuable.

I don't expect McHugh and his lawyers to go down without a fight.

To be clear, I'm not saying a data center is the be-all of existence—there are plenty of locals who opposed it.

The point is that by swooping in to buy the property, city officials are essentially doing two dumb things at once. They're taking land that was producing property taxes and making it tax exempt, since taxes aren't paid on publicly owned land. And they're using your money to pay McHugh not to build his data center. Think of it as our version of a farm subsidy, where the feds pay farmers not to work their land.

In short, the mayor is spending your tax dollars to lose money.

Kitty-corner from McHugh's lot is property owned by Lakeside Bank, which is on the block targeted for DePaul's basketball arena. That's the land that McPier is trying to seize in court.

The mayor says property needed for the arena can be acquired for about $33 million. You know, just like Mayor Daley told us we wouldn't be out a dime on Michael Reese.

And what do you, the public, get from this—besides the bill? Well, the mayor claims the hotel and arena will bring more convention business to nearby McCormick Place.

But even if this is all a forerunner to putting a casino in the area—just imagine the land costs that would entail—it's exceedingly unlikely that the public will recover all the money spent to buy the land and all the property taxes lost by making it tax exempt.

The tab is even higher when you consider all the tax money involved at a time our schools are so broke they recently fired 200 cafeteria workers on top of the teachers and hundreds of others laid off earlier this summer. We're consigning another generation of Chicago Public Schools students to an inadequately funded system, while another mayor plays out his fantasies of being Donald Trump.

The irony is that Mayor Emanuel's South Loop venture comes at a pivotal moment in the city's sordid romance with the TIF program. In recent weeks, parents, teachers, principals, and even editorial writers have gotten wise to the scam, calling on the mayor to spend TIF surpluses on the schools and restore the cuts.

Yet here comes Mayor Emanuel, taking a page from Mayor Daley's playbook, and pretending one thing's not related to the other—as though TIF dollars magically appeared from thin air.

I hope we're too smart to let him get away with it.

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