AN ARENA FOR DEPAUL AND ELEVATING CHICAGO: “FRAU BLUCHER, ELEVATE ME!”

5/16/13

Mayor Rahm Emanuel provided a better look at his grand $500 million or so plan for improving the city’s “tourism and trade show infrastructure.”  (Ever notice how politicians, over the last twenty years or so, but more so over the last few years and especially so since Rahm Emanuel moved here from Washington, love to attach the word “infrastructure” to any project that involves their spending millions, or billions, if your money?  “Infrastructure” is just one of those words that a gullible public just seems to lap up…and the pols are counting on it.  But I digress.  Already.)  

The plan, yawningly entitled “Elevate Chicago,” involves improvements at Navy Pier to make it less “cheesy,” as Housing and Economic Development Director Andy Mooney put it.  I say “Hear, hear!”  But I also say that the Pier would never have gotten so “cheesy” if it weren’t for the city’s having dumped hundreds of millions into it about twenty years ago to make it “cheesy.”  Those of us with a sense of history and an attention span longer than, say, twenty minutes, liked the Pier the way it was before it was "improved."  But those who knew better instead insisted on turning it into a Disneyesque abomination.  Now the Mayor proposes spending hundred of millions of dollars to remove the cheese our prior expenditures of hundreds of millions of dollars churned up a mere few decades ago.  (The Mayor’s crew of trendy dazzling urban sophisticates, of course, doesn’t share yours truly’s retro enthusiasms and wants to give the Pier a more upscale feel, which doesn’t come cheap.)  Ain’t government grand?   Yes, if you are on the receiving end of the hundreds of millions, but, again, I digress.

The major portion of “Elevate Chicago” involves not Navy Pier, but improvements around McCormick Place, including two hotels (a “boutique” (how cutesy-pie!) hotel and a “headquarters” (how corporate!) hotel) and, most controversial of all, a 10,000 seat arena primarily for the use of the DePaul Blue Demons men’s basketball team.

Where do I start in commenting on this boondoggle?  Let me (not) count the ways…

--Apparently, not having money does not keep politicians from spending money.   The city of Chicago is broke.  We can’t buy our way out of the malodorous parking meter deal former Mayor Richard M. Daley strapped around our neck. (See my 5/14/13 post, ALDERMAN REILLY WANTS TO BUY BACK CHICAGO’S PARKING METERS:  “MY CREDIT GOOD ENOUGH TO BUY YOU OUT?”)   We can’t hire enough cops.  (See my 2/24/13 post IT’S NOT GARRY McCARTHY’S FAULT.)   And we are closing schools en masse, which would probably not be a bad idea under the best of financial circumstances, given the city’s population’s shrinkage, but that is grist for another mill.   But the city’s poverty does not stop ambitious pols like Rahm Emanuel from announcing, taking credit for, and reaping the indirect financial benefits that flow from projects like “Elevate Chicago.”

Recall that one of the underpinnings of the Reagan tax cuts, a fallback position, if you will, for Reaganomics, was that if you starved the government of revenue, it would stop spending.   So a sure fire way to reduce the size of government was to cut taxes, reduce revenue, and effectively starve government.   That theory went out the window long before we hit trillion dollar deficits at the federal level under President Obama.  In fact, it went out the window while Reagan was still in office.   But this latest example of an all but legally bankrupt city blowing nearly $300 million on a plan to elevate itself is just another example of the utter intellectual bankruptcy of the  theory of bankrupting government into shrinking itself

--When word of this plan began leaking out earlier this week, the experts, and anyone with a functioning brain, realized that it was utterly nonsensical to spend $173 mm to construct, and then millions annually to maintain, an arena for the DePaul Blue Demons, which would play maybe 18 games a year at their new home.   Someone should tell our out-of-towner Mayor that the Demons (strange name for a team from a Catholic school, but I digress) have, for the last 25 years or so, aspired mightily for, yet consistently fallen short of, mediocrity.  Mark Aguirre is about the mayor’s age, George Mikan and Ray Meyer are dead, and the Demons don’t draw flies.   

Since spending all this dough on an arena for the faded Demons made no sense, everyone with a pulse realized that there was more in the mix than a home for DePaul.  Sure enough, today’s announcement listed such things as DePaul Lady Demon’s basketball, an “events center” for mid-sized conventions, and 24 dates for the city’s use for games or events involving the Chicago Public Schools, City Colleges of Chicago, etc.

No mention was made of, say, boxing or ultimate fighting…the kind of events that gamblers like to attend before and after blowing their money at the tables.   However, with the now useless Michael Reese site, which the city bought for $91mm to use for Olympic dorms, so close to the soon to be rejuvenated McCormick Place “campus,” one could be excused for thinking that the Mayor and his minions had such events in mind.   The mayor’s aids flaccid and half-hearted denials of plans for a casino at or near McCormick Place only add to the suspicion, near certainty, really, that a casino will be part of the McCormick mix.   (See my 5/2/13 post ILLINOIS GAMBLING EXPANSION:   “A LADY DOESN’T WANDER ALL OVER THE ROOM AND BLOW ON SOME OTHER GUY’S DICE.”)

 --At the formal announcement of “Elevate Chicago” today, mayoral aides countered charges that the city is using public funds to aid a private, Catholic university by making it sound as if the city were getting the better of DePaul.  After all, they argued, DePaul will be contributing $70 million of the $173 million projected to be needed to build the arena and will only be using it a relative handful of days.

What do we make of this “we got the better of DePaul” argument?

First, these guys seem to be chortling something to the effect of

We got the better of the Vincentians on this deal!  In fact, we really screwed those guys!  Aren’t we just the smartest guys to come down the pike?  

Notice how quickly, after pointing out that the city is getting $70 million out of DePaul, and realizing how that sounded, mayoral henchmen quickly backtracked, pointing out that DePaul would certainly benefit and yammering on about how this was “true example of a public private partnership,” in the words of Development Director Mooney.  It was as if the out-of-towner Mayor’s crew  realized, too late, that bragging that they got the better of their highly respected and revered counterparty is neither good PR nor a great negotiating tactic.  

Second, who knew that the DePaul had $70mm lying around to finance a new basketball arena when the Blue Demons have been offered use of the United Center rent free?   If I were a DePaul graduate and/or financial supporter, I would consider this heretofore unrealized flushness the next time I received a letter or a call from the Vincentians asking me for money.

--The Mayor and his minions assure us that $70 million of the $103 million the city is contributing toward the new arena will come from TIF funds, as if such funds are manna from heaven.

The original idea behind Tax Increment Financing (“TIF”) funds was a good, clever, and innovative one.  Developers would put money into disadvantaged areas, which would be designated TIF districts.   The value of the properties they developed would go up.  The money that would have gone into increased property taxes resulting from that increase in value would instead go into a fund, a TIF fund, and used to finance further improvements in the area.   The city and other local taxing bodies would not see any reduction in property taxes; they would still get the taxes they had been receiving on the property before it was improved.  But any increase in taxes would be reinvested in the area for a period of, usually, ten or twenty years.   The underlying argument was that there would have been no increase in property taxes without the development, and without the property tax abatement there would be no development.  So the city would be losing nothing in taxes but the area would get an economic boost and, once the TIF period was over, the city, the schools, and other taxing bodies would collect taxes on a much more valuable property.  Everyone would win, or was supposed to win.

Like many public finance ideas that started out making all kinds of sense before the politicians inserted their ever growing and all consuming probosces, the TIF idea has grown into a hideous monster bearing little resemblance to its original virtuous and comely design.  TIFs are no longer limited to disadvantaged areas; much of the Loop is now in some TIF district.  And the TIF funds, which have grown as property values have increased with development or with just the workings of the marketplace, have become gigantic slush funds that the politicians can spend with little or no accountability…like this “Elevate Chicago” boondoggle.

It’s too simplistic to say that TIF funds could be used for things like schools and police protection; one could argue that without the TIF tax abatements, property values, and hence tax revenues, would never have increased.   But certainly TIFS in the McCormick Place area have created a huge pool of funds (at least $70 million, apparently) for which better uses could be found than an arena for the DePaul Blue Demons.

--The Mayor and his minions assure us that the remaining $33 million of the $103 million the city is using to build an arena for DePaul (but not for boxing, ultimate fighting, and other gambling related events, no sir… at least not yet) is coming not from “taxpayers” but from the McPier Authority, which is currently flush due to a 2010 bond refinancing.

The argument that McPier does not generate its money from taxpayers could be considered legitimate if we sufficiently narrow the definition of taxpayers.   McPier was set up to fund the original cheesifying of Navy Pier (See the second paragraph of this post.) and the expansion of McCormick Place by issuing bonds and servicing those bonds from hotel and restaurant taxes in the McPier Zone.  The Zone covers just about all of the city’s midsection, from, and don’t quote me on this, from 22^nd on the south to Fullerton, or maybe Belmont, on the north, from the lake on the east to Ashland on the west.   Further, the definition of “restaurant” is, to say the least, a broad one.  When I worked at what was then First Chicago, we paid McPier taxes on our cafeteria meals because, after all, One First National Plaza was in the McPier Zone and the cafeteria served food.  

If I remember correctly, McPier was to have a limited life.  Once the bonds used to cheesify Navy Pier and expand McCormick Place were retired, the Authority was supposed to fold and the taxes it collected were supposed to go away.  But the Authority, as do all political bodies here, and most every place else, became a repository for hacks, lackeys, and hangers-on.   Politicians always found some new project (the uglification of Soldier Field, for example) to finance with anodyne “McPier revenues.”   And so McPier, like most public entities, has attained the closest thing on this earth to eternal life.  Its latest purpose, apparently, is to collect extortionate taxes from people who stay in McPier Zone hotels (most of whom are not Chicagoans but are taxpayers) and eat in McPier Zone restaurants, and cafeterias (most of whom are Chicagoans and suburbanites and are indeed taxpayers) to build an arena for DePaul basketball and “other” activities.   And so McPier lives on.

But if the intent is to attract tourists and convention business, wouldn’t allowing McPier, and its onerous taxes, to die be a good lure?   Anyone who has stayed in a hotel anywhere, and especially in Chicago, knows how much taxes add to a hotel bill.   Wouldn’t less expensive accommodations be at least as big a positive as “interactive fountains” (another part of “Elevate Chicago”) when people are deciding where to hold conventions?  It would seem that the only downside would be that more affordable accommodations don’t provide popinjay politicians the opportunity to preen, posture, and mug for the cameras.  To Mr. Emanuel, his predecessor, and other in their line of work, though, this downside is just too enormous to fathom.

See my two books, The Chairman, A Novel of Big City Politics and The Chairman’s Challenge, A Continuing Novel of Big City Politics, for further illumination on how things work in Chicago and Illinois politics.