Mayor Rahm Emanuel’s administration signed off on an elaborate financial shell game that obscured payment of $55 million for renovations at Navy Pier with tax dollars reserved to fight urban blight, records show. The bookkeeping jiujitsu appears to violate the spirit, if not the letter, of the controversial tax-increment financing program, which critics say has been widely abused and not used for its intended purpose of spurring development in or near economically disadvantaged neighborhoods.
A joint investigation by the Better Government Association and Crain’s Chicago Business finds that the administration began filtering the money in 2014 through a hotel project at McCormick Place, capitalizing on its Near South Side location as a rationale for tapping funds reserved for struggling communities.
Emails and internal documents obtained through the Freedom of Information Act show that officials at the city as well as the governing body of the lakefront convention complex knew the planned 1,205-room Marriott didn’t need the financing. But they also knew that Navy Pier, 3 miles away and a vast distance from any urban blight, did.
Those officials, the records show, created a paper trail for the Metropolitan Pier & Exposition Authority—the agency commonly known as McPier that runs the convention center and owns Navy Pier—to obtain the money, ostensibly for the hotel construction. It was paid out in installments from tax-increment financing accounts filled with revenue cleaved from property tax collections. Shortly after each TIF payment, MPEA shifted the same amount of money to Navy Pier Inc., a private nonprofit set up by the authority in 2011 to operate the popular lakefront tourist destination.
“We don’t keep any,” Richard Oldshue, chief financial officer of MPEA, wrote about the TIF funds in an October 2014 email to a legislative analyst in Springfield. “We pass it along in full. . . . It’s a one-time arrangement that we are just a middleman in. We don’t actually get any funding.”
That arrangement vividly illustrates a frequent complaint that the purpose of TIF districts has been distorted by Emanuel, and Mayor Richard Daley before him, to bankroll vanity projects at the expense of schools and other neighborhood services.
Emanuel declines to be interviewed for this story, but a spokesman says the $55 million was properly allocated for the hotel project within the confines of a TIF district. The total price to build the hotel was budgeted at $421.5 million, with the bulk of the money coming from loans taken out by MPEA.
The sequence of money transfers raises a red flag for TIF expert T. William Lester, who deems it evidence of flagrant abuse of the program. “This is an egregious example of the biggest problem with TIF,” says Lester, a professor at the University of North Carolina, Chapel Hill with a focus on city planning. “It takes money and purposely obfuscates the goals of economic development. All the decisions are made behind closed doors.”
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