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Chicago’s TIF scam might be even more crooked than we thought

The city's TIFs will generate a record $561 million this tax year. Which means more money for the mayor to sneakily divert into vanity projects like Navy Pier.

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Rendering of the renovated Navy Pier. An investigation by Crain's and the Better Government Association reveals that $55 million in TIF funds were diverted to the top tourist destination instead of going to a blighted neighborhood. Officials responded by saying there was no fiscal impropriety involved in the transaction. - ADRIAN SMITH + GORDON GILL ARCHITECTURE
  • Adrian Smith + Gordon Gill Architecture
  • Rendering of the renovated Navy Pier. An investigation by Crain's and the Better Government Association reveals that $55 million in TIF funds were diverted to the top tourist destination instead of going to a blighted neighborhood. Officials responded by saying there was no fiscal impropriety involved in the transaction.

If you want to know why Mayor Rahm Emanuel will never give up his beloved tax increment financing scam without kicking and screaming, consider these stories that broke back-to-back just last week.

On July 20, Cook County clerk David Orr released his annual TIF audit, showing that the program across 145 districts will collect a record $561 million dollars this tax year—$100 million more than last year. Obviously, this goose is stilling laying golden eggs.

And then on July 21, the Better Government Association and Crain's released a bombshell investigation into a couple of South Loop TIF districts that shows the mayor really is free to spend that money any way he wants.

To paraphrase Dean Wormer from Animal House: easy money and no oversight is no way for a city to go through life. Particularly a city as corrupt as Chicago.

A TIF, remember, is effectively a surcharge added to your property tax bill. Instead of going to schools, parks, police, etc, the money is diverted to bank accounts largely controlled by the mayor, leaving the rest of us to make up for the difference.

In the case of South Loop TIF deals, the mayor swore up and down he was spending $55 million in TIF dollars on the arena/hotel project at 22nd and Michigan. But thanks to Crain's and the BGA, we now know the money was diverted to pay for Navy Pier renovations. So it's a diversion of a diversion. Impressive! I'm not sure Mayor Daley the Younger even tried that—and he pioneered this scam.

Got to tip my hat to John Chase and Danny Ecker, the two reporters who put this story together. I hammered the hell out of the mayor for wasting property tax dollars on that hotel/arena vanity project—especially since much of the money was diverted from our nearly bankrupt schools. Turns out it was even worse than I thought—a scheme worthy of a John Grisham novel.

In 2014, the city sent $55 million to bank accounts controlled by the Metropolitan Pier and Exposition Authority, the agency known as McPier that oversees McCormick Place and Navy Pier. And MPEA immediately sent the money to Navy Pier.

As Reader readers know, the TIF program is supposed to subsidize development in blighted neighborhoods. I can think of dozens of Chicago neighborhoods (Austin, Englewood, Roseland, etc) far more deserving of TIF dollars than Navy Pier—which is neither poor nor a neighborhood. MPEA CEO Lori Healey and Department of Planning and Development commissioner David Reifman responded in a joint statement today—four days after the investigation was published—that "no TIF funds were diverted to Navy Pier"; they argued unreassuringly that what looked like one of Chicago's top tourist attractions getting dollars intended for struggling areas of the city was merely business as usual.

Surprisingly, state and city officials were up front about the apparent switcheroo—at least in the e-mails they wrote to each other. James Reilly, the former CEO of MPEA—its board is appointed in equal parts by the mayor and the governor—acknowledged the unorthodox transaction in a July 12, 2013, e-mail, one of many Chase and Ecker secured via Freedom of Information Act request: "There is a somewhat complicated series of cash flow issues that we need to get a handle on between the City, MPEA and [Navy Pier] with regard to the Tiff [sic] funds that will come from the City to MPEA to reimburse MPEA for the purchase of the land for the [hotel and basketball arena] which in turn will enable MPEA to grant $55M to [Navy Pier] for its reconstruction project."

"I don't have any doubt that this can be worked out. . . . OK?"

Man, only in Chicago would this even be remotely OK.

On July 20, Cook County clerk David Orr released his annual TIF audit, showing the program will collect $561 million this year. - RICH HEINZ/SUN-TIMES MEDIA
  • Rich Heinz/Sun-Times Media
  • On July 20, Cook County clerk David Orr released his annual TIF audit, showing the program will collect $561 million this year.

Wait, there's more. In October 2014, Richard Oldshue, MPEA's chief financial officer, sent the following message in an e-mail to Mark Jarmer, an aide to Illinois house speaker Michael Madigan: "None of this TIF money comes to MPEA as incentive or otherwise. The City is aggregating balances from various existing [TIF] districts as they become available to transfer funds to MPEA which we transfer in full to [Navy Pier]. We don't keep any."

Got that? Just in case, you don't—Oldshue spells it out even more explicitly.

"We don't actually get any funding."

That's what President Nixon might call a smoking gun. Hey, maybe we can impeach Rahm!

The revelations have upset Third Ward alderman Pat Dowell—as well they should. The hotel and arena are being built in her ward. For the better part of the last few years, Dowell's been the public face of the project, assuring everyone it needed the $55 million subsidy to be built. Now, of course, she sees that the hotel and arena were just a cover to funnel the money to Navy Pier. Let this be a cautionary tale to any politician who thinks it's a good idea to trust Mayor Rahm.

"This is outrageous," Dowell told the Sun-Times after the story broke. "I'm really furious about that, because I worked in good faith with these people. It's a potential stain on me. I have a pristine reputation. I do not like being put in the middle of something like this."

Dowell says she'll insist the City Council hold hearings on the deal. That would be helpful—as the council never actually held a hearing on whether to spend the $55 million in the first place. In July 2013, two weeks after Reilly wrote the aforementioned e-mail, Emanuel hammered the deal through on a voice vote—most aldermen didn't know about it until after the vote was taken. We now know why the mayor wanted to keep it a secret.

Activists like Amisha Patel of the Grassroots Collaborative, a coalition of labor and community groups, say MPEA should immediately send the $55 million back to the city. I'd take it a step further: Send all $561 million in this year's TIF tax to the schools, or just return it to taxpayers who paid it in the first place. At least that way we can be sure that Mayor Rahm won't dump our hard-earned property tax dollars into the lake.   v

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