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Self Help

Banker Amrish Mahajan insists that his position on the city Plan Commission had nothing to do with a recent business deal, but the competition isn't so sure.

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By Sergio Barreto

Early this past summer Amrish Mahajan, a member of the Chicago Plan Commission, filed an application with the commission asking for $500,000 in city Tax Increment Financing assistance for Mutual Bank. The bank, based in south-suburban Harvey, was a major lender in the Indian community and wanted to open a new branch at 6339 N. Western, just south of Devon.

A month ago Amrish Mahajan, president and CEO of Mutual Bank, went before the Community Development Commission, which reviews all projects that get city funding; like the Plan Commission, it's part of the city's Department of Planning and Development, and the two commissions share support staff. He told the commissioners that the bank project deserved TIF funds because it would benefit the community by giving it easier access to a lending institution that had invested heavily in it, by improving the appearance of a run-down stretch of Western, and by providing badly needed parking.

Amrish Mahajan the plan commissioner and Amrish Mahajan the banker are one and the same, and he's upset that some people in the West Ridge community have opposed his project and his request for TIF funds, using words such as "sweetheart deal" and "conflict of interest." "Do you mean to tell me that just because I am a plan commissioner I shouldn't be allowed to apply for city funds?" he says. "I think that is highly unfair to me as a citizen. Let's say it was somebody else requesting these funds. Would they have opposed it? If it was somebody else, all people would have considered would be if the project is in the public interest, if it meets all the criteria for TIF assistance. This project meets all the criteria and will benefit the community. So why am I being judged by a double standard?"

Mahajan, who's been in the banking business for almost 30 years, was instrumental in the transition of Devon from a Jewish commercial strip to the heart of Chicago's Indian community. "I came to Chicago in 1968 and joined National Republic Bank as manager after receiving my MBA," he says. "That was in 1972, and as far as I know, I was the first and only Indian banker in town." He helped establish the first Indian business on Devon, the India Sari Palace, in 1975. "That business was owned by a wealthy family," he says. "They didn't need money, just logistical assistance. I decided to concentrate on lending to and working with the Indian and Pakistani communities. I financed physicians, restaurants--all sorts of small businesses."

Mahajan moved on to Lakeview Bank in 1981, then returned to National Republic Bank as president after its 1984 purchase by a group led by Hiren Patel made it the first Indian-owned bank in town. A few years later Mahajan's standing was further enhanced by a letter from Mayor Daley asking him to join the Plan Commission. "I had no idea what the commission did," he says. "I thought, judging by the name, that they did planning, not approval for buildings and other projects. I'm proud of my service with the commission. It has worked hard to produce a beautiful Chicago."

After becoming a plan commissioner, Mahajan moved on to Lakeside Bank, and in 1996 he took over the operations of Republic Bank in Morton Grove and on Chicago's north side. Wherever he went, he says, he remained a committed lender to ethnic communities and never allowed his business interests to overlap with his public duties. "I have never used my personal contacts for business purposes," he insists. "The key is full disclosure. You advise the commission if you're involved in a project and then refrain from discussing or voting on it."

In August 1998 Mahajan bought and became the president and CEO of Mutual Bank. In spite of the bank's south-suburban location, he continued to work with the Indian and Pakistani communities. "When I purchased it, Mutual Bank had $24 million in assets," he says. "Now it has $65 million. We have outgrown ourselves. So many of our loans come from the north side that it made sense to open a branch in the area."

In November 1998 Mahajan leased a building at 2450 W. Devon. "We spent between $75,000 to $80,000 on the building," he says. "We told all our customers we were going to move." Then the building's owner, orthodox Muslim cleric Rashid Khan, decided he didn't want a bank there. "Orthodox Muslims are not allowed to loan money with interest," Mahajan says. "It's immoral to them. Khan said that since charging interest was against the religion he preaches, once people found out that he was leasing to an institution that makes a profit from interest they were going to question him. We didn't want a public relations disaster in the area, so we got out of the lease."

Mahajan tried to rent a location farther west on Devon, but that deal too fell through. Then he turned his attention to a property for sale at 6335 N. Western, a building that included the Sally's Stage nightclub. "That was a horrible place," Mahajan says. "People did drugs there. That strip of Western had been an eyesore, a disgrace to the community. We were desperate for a new location, so we made a deal to purchase that building."

Mahajan's architect, Brian Reno of VRA and Associates, told him the location didn't have enough space for a drive-up ATM. But immediately south of the property was a city-owned lot that used to serve as parking for the Nortown theater. After the theater closed its doors in the late 80s, it fell into disrepair (it currently houses the Pakistani-American Community Center). So did the parking lot; by the late 90s it was full of holes and junk cars. "It was a disaster," says Mahajan. "So we went to Alderman Bernie Stone. He said no way he would sell that lot with the community's need for parking. Then I offered to buy half the lot and to fix up the other half, bring it up to code so that the community could use it."

When James Osburn, president of the Devon-North Town Business and Professional Association (DNTBPA), got wind of the proposed deal in June 1999 he voiced immediate opposition, not because he was against Mahajan, his bank, or his offer to renovate the parking lot, but because other businesspeople had tried to purchase the property and had been turned down by the city. "Whenever someone tried to buy that lot the city said it wasn't for sale," he says. "All of a sudden they negotiate a sale. It seemed like a sweetheart deal."

Al Leavit, owner of Wheels of Chicago, one of many auto dealerships along North Western, says he asked to buy the lot three years ago. "I wanted to put a really pretty dealership there. Bernie wanted to keep half of the lot for the city because of the need for parking, so I said, 'Fine, I'll repair half of it and give it back to the city.'" Leavit seemed surprised to learn that Mahajan's proposal was much the same. "I even offered some sort of shuttle to take people from the lot to other businesses in the area," he says. "I started pouring money into the project, but it fell through. I don't remember the exact reasons they gave me. I thought maybe Bernie just didn't want another dealership in the area. I went to a community meeting about it, and there were three or four other people interested in the property. They just didn't want to sell it."

Mahajan says he doesn't remember how much he paid for his half of the lot, though the July 7, 1999, city ordinance that divided the lot into two parcels and transferred ownership of one to Mutual Bank lists the amount of the transaction as $226,875. "That's a gift," says Leavit. "The price we were talking about three years ago was around $500,000."

Stone dismisses Leavit's claims as "sour grapes. He showed me a layout plan, but Mahajan was the first one who offered to rehab the lot for the city. And if Al was willing to provide a shuttle, that's news to me. If I knew that, I would have given it to him. In his plan the building was in front and parking in the rear. That wouldn't work. But the best thing about Mahajan's plan was that he was willing to buy and tear down Sally's Stage."

In July 1999 the City Council asked for public comment on a proposal that would make the Devon and Western business strips part of a TIF district whose boundaries would be Foster, Devon, Kedzie, and Ashland. TIFs, which are intended to draw development to "blighted" areas, allow any increase in tax revenues generated by development to stay in the area--to be used to improve the infrastructure or to subsidize further private development. Usually the city issues bonds to finance projects in TIF districts, then pays off the bonds with the extra taxes the projects generate. But projects can also be financed on a pay-as-you-go basis, with the investor putting up the money and then getting reimbursed as TIF revenues accrue. The TIF district, which was discussed by the Plan Commission, was approved by the City Council in late September 1999 (the 76th district approved for the city; as of September 2000 there were 102).

The July 7, 1999, ordinance that conveyed half of the lot to Mutual Bank also stated, "This conveyance is subject to the express condition that a bank facility with accessory parking is constructed on Parcel 1 of the property within twelve months of this deed. In the event that the condition is not met, the City of Chicago may re-enter the Property and revest the title in the City of Chicago."

July 8, 2000, came and went with no bank and no parking lot. Mahajan says, "We wanted to have a basement, and we discovered that the soil conditions were a problem. I'm not a technical person, but I can tell you it was something like the soil was too soft and would need special foundations. The estimated cost for the project went from $2 million to $3.5 million."

Early in the summer of 2000 Mahajan applied to the Plan Commission for $500,000 in TIF money for his project, offering to pay up front and be reimbursed later. "I didn't remember doing anything with that TIF," he says. "We had the plans, the meetings, and I forgot all about it." He adds, "Then [the project's] budget went up because we wanted to have a basement and two stories. I talked to Alderman Stone and told him, 'I have a problem.' He said, 'Do you remember that TIF the Plan Commission approved?' And that's when I started to think about applying for TIF assistance."

Mahajan says that when he filed his application, the first for a project in the new TIF, "I advised the Plan Commission that the applicant was me and refrained from discussing or voting on the issue. I had to explain the goals and design of the project to the commission, but after that I had no involvement with it."

Nevertheless, the DNTBPA's Osburn says that Mahajan's request for TIF funds "seemed to me like a conflict of interest. I wouldn't say it's illegal, since I'm not a lawyer, and I understand Mahajan has the right to run his business as he sees fit. But it seemed contrary to the spirit of how a public official should behave. I guess I shouldn't be surprised, having lived in Chicago for so many years, but I was."

A hearing on Mahajan's request for TIF funds before the Community Development Commission was scheduled for early September. It was canceled, rescheduled, then canceled again. Osburn speculates that the city may have been "looking for a friendly audience, or maybe no audience."

The CDC finally held the meeting on September 26. Beth McGuire, a staff member, made a presentation on behalf of Mahajan, highlighting the benefits the project would bring to the area. Similar presentations were made by Mahajan and his architects. Then Thomas Nelson, executive director of the DNTBPA, listed concerns he and some members of his organization had. "I wasn't impressed with the plan or the design," he says. "It forces pedestrians walking to the parking facility to cross in front of the bank's drive-up ATMs. It would make much more sense if the ATMs and the entrance to the bank were placed on Rosemont [an east-west street]--that would eliminate the need for pedestrians to walk in front of the ATM exits and would also avoid feeding more traffic directly onto Western, which is already almost a highway." Stone downplayed the concerns. None of the commission members asked any questions, and the TIF request was approved unanimously. The whole process had taken less than 20 minutes.

Nelson assumed the issue would next go before the Plan Commission for a vote, but Planning Department spokesman Pete Scales says the project didn't raise issues, such as a zoning change, that required consideration by the commission. "Now," Scales says, "it just needs to be approved by the City Council and, I believe, by the Department of Transportation, because of the curb cuts."

"Oh well, I guess it's pretty much a done deal," says Nelson. "I can live with the fact that Mahajan got these funds, as long as he does the right thing with it. It's good to have a powerful person in the community."

Asked why the taxpayers of Chicago should help finance a project by a bank that has millions of dollars in assets, Scales replies, "We are very excited about this project. It's a pay-as-you-go deal--Mutual Bank is going to put up the money, and they will be repaid as the TIF generates funds. There's no timetable for that. It will probably be a few years."

Tom Walsh, cochair of the land-use and housing-strategy committee of the Organization of the NorthEast, says this deal is an example of why residents need to pay attention to how TIF funds are being used. "We believe that distribution of TIF funds should be done through a community process," he says. "It doesn't sound like that was done in this case. The question that needs to be asked is, 'Is this the way the community feels this money should be spent, or does the community feel that there are better uses for this money?'"

He goes on, "We have not been monitoring this TIF, but we have been closely monitoring other TIFs on the northwest side. We think it's important to look closely at the connection between people who receive TIF funds and the contributions they have made to the local political leadership. We are concerned that if there's no significant community input, TIFs can become the new patronage--that instead of awarding city jobs to contributors, politicians can award TIF funds."

Mahajan says the DNTBPA was the only organization that opposed his project, and he finds that suspicious. He points out that the organization didn't take a vote on the issue among its members and that its office is located in the building that houses Devon Bank, whose vice president, Irv Loundy, was until recently the DNTBPA's president. He wonders if Loundy pressured the organization into opposing his project for fear of new competition. "Opposition didn't come from the community," he adds. "The India Tribune, the Indian Reporter, the India Post--all the publications offered nothing but support, including several letters from readers."

Osburn acknowledges that the DNTBPA didn't take an official vote but says some members were called and most of them opposed the TIF request. He also acknowledges that the DNTBPA office is in the Devon Bank building, but he doesn't see why that's a problem. "Irv Loundy was DNTBPA president before me, and he's still a member," he says. "But he has no more influence over our decisions than any other members." He adds that Devon Bank isn't afraid of competition because it already has plenty of it in the area and still manages to thrive. "Our area probably has more banks than anywhere but the Loop," he says.

Stone says he doesn't understand what could be wrong with the project or its use of TIF funds. "We are bringing a business from the south suburbs to the north side of Chicago," he says. "We're cleaning up that stretch of Western and getting badly needed parking space. It's a win-win proposition. Notice that Nelson never said that he didn't want the bank. I have a good working relationship with him, but some people don't take him seriously. Whenever there's something before the Plan Commission that everyone is for, he has to testify against it. TIF money is for the betterment of the community, and this is what this project is going to accomplish."

Mahajan says there could be undesirable consequences if plan commissioners are prohibited from applying for city funds. "The meetings go on for five or six hours, and during that time I can't take care of my business," he says. "It is a serious commitment. I feel I should be given the right to work with city money like any other citizen. If businesspeople are not allowed to apply for city funds they may just decide not to work with the commission."

He insists that protections against cronyism are already in place. "The key is out-front disclosure," he says. "If this went to a vote before the commission I would abstain. This is no sweetheart deal. The city has done me no favors."

Yet Osburn doesn't think the existing protections are strong enough. "This is not a personal attack on [Mahajan] or his character, which we have never questioned," he says. "But he obviously has learned how to operate the system--or at least the way that was used to operate the system in the last century, which has given the city a bad reputation. I certainly hope that this system will change in the new century."

Art accompanying story in printed newspaper (not available in this archive): photo/Jon Randolph.

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