CHICAGO (CBS) — Chicago aldermen, students, teachers, and activists were demanding Mayor Rahm Emanuel and Navy Pier return $55 million in tax increment financing diverted from a project to build a hotel near McCormick Place.
An investigation by the Better Government Association and Crain’s Chicago Business found $55 million in TIF money that was earmarked for land acquisition for a new hotel near McCormick Place was shifted to pay for renovations at Navy Pier. TIF dollars are supposed to be used for projects to combat urban blight.
Ald. Pat Dowell (3rd), whose ward includes McCormick Place, has called for City Council hearings, and other aldermen also voiced their outrage on Monday.
Tax increment financing allows the city to divert a portion of property tax revenue in designated areas on projects to promote development in struggling communities. After learning $55 million in TIF money had been used for renovations at the city’s most popular tourist attraction, aldermen were downright offended.
“I am outraged by Mayor Rahm Emanuel’s decision, lack of transparency,” Ald. Susan Sadlowski Garza (10th) said.
Ald. John Arena (45th) said the Emanuel administration lied to aldermen about how the $55 million in TIF money would be used.
“We were lied to. Alderman Dowell in the 3rd Ward was lied to in public and in private. They perjured themselves to us about this money, and then openly in city emails they discussed the laundering of the money from that project to this tourist trap. This is unconscionable,” Arena (45th) said.
Several students, teachers, and activists joined aldermen on Monday, noting the $55 million transfer took place in 2013, at the same time the Emanuel administration was closing dozens of public schools it deemed underutilized.
Critics said the money in question shouldn’t have been used for a hotel near McCormick Place in the first place, and instead should have gone to struggling public schools.
Alize Vijil, with the Logan Square Neighborhood Association, said Navy Pier should return the TIF money it received.
“Our money should go into education, not into golden hot dogs,” Vijil said.
Grassroots Collaborative executive director Amisha Patel said the city’s TIF system needs to be overhauled.
“There’s no faith in the system. There never has been, and this is certainly yet another huge reason why people are fed up in the city of Chicago that our tax dollars aren’t being used where they need to be going,” she said.
At least four aldermen have called for City Council hearings to investigate the $55 million transfer.
Below is a letter sent to Crain’s over the weekend. The Chicago Department of Planning and Development and the Metropolitan Pier and Exposition Authority said “the assertions made in the article are wrong.”
SETTING THE RECORD STRAIGHT
In a recent article, Chicago’s leading business publication fundamentally misunderstood how business transactions using tax increment financing (TIF) work. Contrary to the article’s assertion that TIF funds for the major new Marriott Marquis hotel at McCormick Square were used as “an elaborate financial shell game” for the benefit of Navy Pier, the funds were properly used for the hotel and only for that purpose.
By failing to understand the typical approach to how the city expends TIF funds, the authors of this article have created unnecessary confusion and overshadowed the significant public benefits that the Elevate Chicago initiative has achieved. We are writing to set the record straight.
In short, no TIF funds were diverted to Navy Pier.
First and foremost, it’s important to understand the City contributed $55 million toward the $498 million overall hotel project cost as a reimbursement to the Metropolitan Pier and Exposition Authority (MPEA), not as an upfront payment. This approach protected the public’s interest by only allowing the expenditure of TIF funds after eligible expenses were complete. MPEA advanced the funds for these reimbursable costs through its own sources. Only after MPEA made these upfront payments did the City reimburse it, and the City’s payments were applied only to certified TIF eligible costs related to the hotel and for no other purpose.
It is also important to remember that all of the projects mentioned in the article were announced together in May 2013 as Elevate Chicago, a unified and targeted $1.1 Billion investment in Chicago’s tourism and convention infrastructure. Elevate Chicago included Wintrust Arena, the Marriott Marquis Chicago, a privately-funded smaller hotel, streetscape work and the first phase of Navy Pier renovations. This was widely reported in 2013.
In sum, MPEA advanced all of the funds for the hotel project, some of which were later reimbursed by the City. Only once MPEA received reimbursement from the City did it have sufficient funds to support other Elevate Chicago projects, including a capital investment in the improvement of Navy Pier, which it owns.
While somewhat complicated, this type of funding source and cash flow timing scenario is not fiscal trickery nor sleight-of-hand, but rather one that might be expected in a large endeavor such as Elevate Chicago.
What is truly lost, however, are the enormous public benefits that Elevate Chicago has achieved and continues to achieve. The McCormick Square campus has created 6,000 construction jobs and will support 15,000 jobs when completed, plus more than $9.4 billion in economic impact by 2018. Additionally, Elevate Chicago is helping Chicago continue to shatter tourism records. Overall tourism is up more than 20 percent since the Mayor took office. Chicago welcomed more than 54 million visitors last year, which supported nearly 150,000 jobs across the city and more than $15 billion in investment in Chicago.
To keep building on that progress we must continue to invest in Chicago’s tourism infrastructure, from McCormick Square to Navy Pier and far beyond it.
David Reifman, Commissioner of the Chicago Department of Planning and Development
Lori Healey, Chief Executive Officer of the Metropolitan Pier and Exposition Authority