I swear, half the job of reporting on the city's tax increment financing schemes is learning how to read between the lines in the propaganda the city issues about them.
Last week the Community Development Commission OK'd plans to shower the MillerCoors beer company with $6 million in subsidies from the LaSalle Central TIF. According to the overview the city provided the CDC, the money will help MillerCoors rebuild the eight floors of offices the company will occupy once it moves its corporate headquarters to 250 S. Wacker, a 14-story building at the northwest corner of Wacker and Jackson.
The overview, drafted by staffers for the city's Department of Community Development, explains that one of the reasons Miller and Coors merged in June 2008 was to give consumers "more choice."
But as MillerCoors CEO Leo Kiely told the Rocky Mountain News, the merger also enabled the country's second- and third-largest beer companies to reduce overall costs by about $500 million a year, mostly by cutting an unspecified number of jobs. The overview doesn't mention that.
"In the spirit of creating a truly new company, MillerCoors had to select a location for their new headquarters," the overview goes on. Company leaders didn't want to stay in Milwaukee (home to Miller) or Denver (home to Coors) because "it was felt that location in either city would suggest that one of the partners had a controlling interest in the new company."
They flirted with Dallas but settled on Chicago because it's "a true international city" with "an attractive talent pool," "unique business resources," "good schools," and "easy commutes." (I guess no one with MillerCoors, or for that matter the Department of Community Development, has ever had to depend on the CTA.)
And, almost as an afterthought, the report mentions that "during the selection process, both the City of Chicago and the State of Illinois offered economic incentives" to offset MillerCoors's "considerable relocation costs."
I'll say. Our old friend Governor Rod Blagojevich, about six months before he was hauled out of his house in handcuffs, forked over some $18 million in state tax breaks and subsidies, and Mayor Daley agreed to chip in a little more, which we now know to be $6 million. By contrast, there's no record of Dallas offering anything on top of its already-lower property taxes. (Neither Dallas city officials nor MillerCoors responded to calls for comment.)
Once they settled on Chicago, MillerCoors execs narrowed their real estate choices to three possibilities: 250 S. Wacker, 33 S. State (the old Carson Pirie Scott building), and 350 N. Orleans (also home to the Sun-Times). In terms of warding off blight—the nominal purpose of TIF subsidies—pushing State Street would have made the most sense, as the eastern part of the Loop has a far higher vacancy rate than the west. But the city left the decision up to MillerCoors. As a result, our tax dollars are going to give the better-off part of the Loop a leg up over its poorer cousin.
But this problem goes back to the founding of the LaSalle Central TIF, where—thanks to gaping loopholes in TIF law—the city managed to stretch the definition of blight to cover one of the hottest real estate markets in town. By 2030, when this district mercifully expires, the city expects it will have siphoned off at least $1.5 billion in property taxes from the schools, parks, police, fire, and other needy public services. City planners have said they will use the cash to, among other things, renovate the old architectural landmarks on LaSalle that are becoming out of date.
Well, 250 S. Wacker is hardly an architectural jewel. Constructed in 1957, it's a steel and glass box that looks like it was squished to make it fit in its corner space. As even the plan overview dryly notes, "This building has not been identified as historically significant."
In 2005 the joint venture of Carnegie Realty and D2 Realty LLC bought it for about $16.8 million with plans to renovate it and covert it into offices and condominiums. "We are extremely happy with the property which is situated in an 'A' location for our prospective buyers," John Thomas, CEO of Carnegie, said in a press statement at the time. "We anticipate our buyers will be wholly owned or multi-generational businesses that foresee their real estate needs and investments for the long term."
By then Thomas had already been convicted of business fraud, and as part of his deal with the feds he became a government mole, according to a 2007 Tribune article by David Jackson. So maybe the building does have some historical significance after all.
At any rate, after renovating the building, Carnegie and D2 sold it in 2007 for about $57 million to AEW Capital Management, an investment firm out of Boston. But by last summer, the downtown office boom was dying, and AEW was desperately seeking new tenants, as the vacancy rate at 250 S. Wacker was about 82.5 percent. When MillerCoors moves in, 100 percent of the building will be occupied.
According to the city, the $6 million TIF subsidy represents about 27 percent of the $21.8 million MillerCoors will spend to rehabilitate their space. The project overview does not explain why it will cost that much to rebuild a structure that was rebuilt only two years ago—without any TIF assistance, which highlights the lack of analysis in the city plan of why this rehab qualifies for help. It's hard to see a Fortune 500 company that made a $54 million profit the last three months of 2008 as a hardship case.
Perhaps the argument is that without the $24 million in public dollars MillerCoors wouldn't have moved to Chicago in the first place. But so what? Who actually stands to gain from this deal?
Well, clearly MillerCoors. And it's also a good deal for AEW, which no longer has to worry about filling up its space. And the Walgreens and Panera Bread on the ground floor will probably pick up some new customers.
According to the overview, the "project will expand the tax base because the investment in the property will result in an increase in its assessed value." Well, let's hope so. At the very least, maybe AEW will drop its ongoing appeal to get the Cook County Board of Review to lower its assessment. (The firm currently pays about $422,000 a year in taxes on the building.) But even if the tax base does expand, until 2030 none of those new tax dollars will go to schools, parks, or other taxing bodies; they'll flow into the LaSalle Central TIF fund, so Mayor Daley can hand them over to the next conglomerate that comes knocking on the city's door.
Then there's the matter of the 325 jobs that the city keeps saying MillerCoors will "create," with help from the city's "workforce development specialists." I don't know why they're even bothering. It's not like the company's producing 325 new positions for unemployed Chicagoans—they're relocating folks from Milwaukee and Denver. And they might not keep all 325 jobs in Chicago. According to the project overview, they'll only be penalized if they employ fewer than 293 here. None of these new employees will even be required to reside in the city. MillerCoors CEO Leo Kiely says he'll get an apartment in Chicago but keep his primary residence with his wife in Denver.
MillerCoors has agreed to give back to Chicago in another way: it says it will spend some of its money on fencing and landscaping for the river walk just west of the building. I don't think that will make up for the full $6 million either—but given the cost overruns on the rest of the river walk, you never know.v
Ben Joravsky discusses his weekly column with journalist Dave Glowacz at mrradio.org/theworks. And for even more Joravsky, see our blog Clout City.