In July the newly merged beer giant MillerCoors announced that it was moving its corporate operations from Milwaukee and Denver to Chicago, which it had narrowly selected over Dallas. Mayor Daley was jubilant. "The company's decision to locate its headquarters here strengthens our reputation as a world-class city in which to conduct business and confirms that Chicago is a great place to live, work, and raise a family."
That may be true, but the company had also been lured here by the promise of a subsidy package that Daley had put together in the 36 hours preceding the decision. MillerCoors and city officials were mum on the details back then, but a few emerged last week when the city's Community Development Commission (CDC) approved the deal. Assuming it gets City Council approval—as sure a bet as they come—the subsidy will cover 27.5 percent, or $6 million, of the costs of renovating the new MillerCoors headquarters at 250 S. Wacker. And the money will come from Mayor Daley's tax increment financing program, a taxpayer-financed slush fund the city draws from when it wants to bestow goodies on developers and corporations.
City officials insist this money will be well spent. "Our city stands to benefit from jobs this company will bring," said Christine Ragusa, the city's acting commissioner of the Department of Community Development. The MillerCoors headquarters will be required to have at least 325 full-time employees, and TIF payments will be made as jobs are added, at a rate of $18,462 per job. According to the project overview that the city provided members of the CDC, if the company doesn't remain at the Wacker Drive location for at least ten years, "the city shall have the right to seek reimbursement."
That seems fair enough. But it might not be, considering the mess that ensued from a strikingly similar deal the city made with Republic Windows & Doors. Republic received $10 million in TIF funds to build a factory on Goose Island. In exchange for the subsidy—disbursed between 1996 and 2006—Republic pledged to keep 610 workers on its payroll until 2019.
By last year the company's payroll was down to less than 300. And on December 5, it shut down altogether, abruptly firing the remaining workers. What's worse, Republic said it couldn't pay the workers vacation or severance pay unless its creditors, Bank of America and JPMorgan Chase, unfroze its assets. The workers took over the factory, drawing attention from the international press, and pointed out that Bank of America had been the recipient of a bailout from the federal government. Overnight the showdown at the factory became a symbol of the double standard in the bailout legislation—the bank got the billions and the workers got the shaft.
After six days, Bank of America and JPMorgan agreed to extend credit so the workers could be paid their severance and vacation pay and the workers exited the plant. It was a victory for the little guys except for one lingering question: what did the taxpayers get for their $10 million?
As part of the deal, the city reserved the right to stop the transfer of the TIF funds if the company's employment fell below 549. In fact, to guarantee that Republic met its hiring goals, the contract required that "the number of jobs at the [factory] will be certified to the City on an annual basis." In addition, "the certification must be accompanied by certified payroll data and such other evidence as the City may request. [Republic] hereby covenants and agrees to maintain its operations at the [factory] throughout the Term of the Agreement." The agreement was to run through 2019.
Since Republic employed fewer than 549 workers at the factory—as in 549 fewer—shouldn't the city get some money back? Aldermen Manny Flores and Scott Waguespack put that question to corporation counsel Mara Georges at a January 12 meeting of the City Council's finance committee.
Her response amounted to sorry, but the taxpayers are out of luck. Embedded in Republic's TIF contract was language that exempted the company from potential penalties after 2006, 13 years before the agreement was supposed to end. "The time period to enforce the job covenant has expired," Georges said.
To his credit, Flores persisted. He wondered if Republic had even bothered to let the city know it was having financial problems. Georges said nothing had been said until the factory was shuttered. "I have a problem with that," Flores said. "We gave them $10 million and I understand this agreement is in place through 2019. If that's true I think we could expect at least a courtesy call."
Then Flores turned his attention to the city's oversight of the deal. "I'd like to know if they ever had 400 jobs," he said. "Did we ever inquire? Did we ever check? Why aren't we doing an audit of companies that receive city subsidies?"
According to Georges, the city had kept track of Republic's job performance. "From my understanding, the Department of Planning did go in there," she said. "This project did receive its certificate of completion. There's no way they would have received that if they had not met their terms."
By this time other aldermen were peppering her with questions. "Do we check to see whether or not they lived up to their promises?" asked Alderman Ed Burke.
"We can pull the reports," Georges answered. "I believe they were standard reports."
Three days after this hearing, on January 15, we sent a Freedom of Information Act request to Georges's office, asking for all documents and reports relating to the monitoring of the Republic TIF agreement. According to state law, municipalities, including the city, are supposed to respond to FOIA requests within seven working days.
But more than three weeks passed without a response. So on February 10, we followed up with an e-mail reminding the law department of our January 15 request. In a response the next day, law department spokeswoman Jenny Hoyle apologized for the delay but said we'd made our request to the wrong department. Despite Georges's testimony, she wasn't planning to pull the reports, so our request would be forwarded to the Department of Community Development (which recently changed its name from the Department of Planning). We also sent a copy of the FOIA directly to Community Development.
On March 6, 15 working days later—and almost seven weeks after we originally sent the request—we got a call saying we could pick up our packet of information. It consisted of exactly five pieces of paper: notarized "certificates" of Republic's "Current & Projected Employment Data" for 1996, 1998, 1999, 2000, and 2005. These certificates are actually forms issued by the planning department with spaces where TIF fund recipients are supposed to detail their staffing—broken down by type of job, sex, and minority status—along with wages, future employment projections, and the training they're providing their workers. Republic's forms included the staffing figures (most of the company's officers, managers, and sales staff were white while almost all of its laborers were minorities) but little else—the columns for employee projections and wage rates were blank, and the training section described good intentions in general subject areas like "math skills enhancement" and "on the job training." There were no statements at all for 1997, 2001, 2002, 2003, 2004, or 2006—in other words, more than half the years Republic was supposed to submit them under threat of penalties. Furthermore, according to the documents, in 1998 and 1999 Republic hadn't met its promised total of 610 employees; since the threshold was changed to 549 jobs in 2000, the city could have withheld some payments, but no penalty was levied.
We called the community development department and asked why Republic hadn't prepared job certificates every year, whether the city had done anything about it, whether city officials had visited the factory and checked the reported job data, and why it had taken so long to round up the materials for us if city officials had recently looked them over, as Georges had suggested to aldermen. We were told it would take a few days to get answers. We're still waiting.
Waguespack says he's not surprised. After Georges said the city couldn't recover any money from Republic, he and Flores proposed a "sunshine ordinance" that would require the city to make "all TIF redevelopment agreements publicly available" online.
"The city has to post this information so that everyone can keep track," says Waguespack. "The technology clearly exists. This shouldn't be an issue."
Adds Flores: "President Obama has promised transparency with the use of federal money. We should also offer some in the city of Chicago."
No one disagreed openly with these arguments when the City Council's finance and economic development committees took up the proposal on Monday. For more than two hours political activists, community leaders, and media and technology experts testified that making TIF materials accessible online would help the city monitor its agreements and save Community Development the hassle of rounding them up every time someone sends in a freedom of information request. They also said it should be easy and inexpensive to do.
Yet from the outset a few aldermen were skeptical. A couple noted that some of the materials were online already, even if they're not easy to find, and it would cost something to provide staff to make them readily available. Plus, citizens might not understand everything that's in the TIF agreements. "We want people to have access to information, but we don't want to overwhelm them," said 39th Ward alderman Margaret Laurino, who chairs the economic development committee. "It's something we may not want to rush into." Laurino held the proposal in committee.
Afterward Flores and Waguespack said they were disappointed but vowed to press on, predicting that some version of the ordinance would pass by as soon as April. "We'll continue to advocate and work on the legislation," Flores said. "I think we're both cautiously optimistic."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.