PI Original Ellyn Fortino Thursday March 13th, 2014, 2:18pm

Chicagoans, Aldermen Clash On $55 Million TIF Subsidy For McCormick Place Hotel

The Chicago City Council last week agreed to allocate up to $55 million in tax increment financing (TIF) funds for the development of a new Marriott hotel adjacent to the McCormick Place convention center. Progress Illinois details some of what proponents and opponents have to say about the project.

The Chicago City Council last week agreed to allocate up to $55 million in tax increment financing (TIF) funds for the development of a new Marriott hotel adjacent to the McCormick Place convention center.

Proponents of the Near South Side hotel project, pegged at $421 million, tout it as a job and tax-revenue generator that will boost the city's competitiveness as a business destination. But opponents are hesitant about subsidizing the new hotel, especially without some sort of revenue-sharing requirement. Others are frustrated because it is yet another public subsidy benefitting a major corporation that, they say, does not need the financial help.

Alds. John Arena (45th), Ricardo Munoz (22nd) and Scott Waguespack (32nd) were the only council members who voted against the financial agreement with the Metropolitan Pier and Exposition Authority — the state-city agency that owns McCormick Place and Navy Pier — for the hotel's development and construction. Under the agreement, up to $55 million in TIF funds will be used to partly reimburse the Metropolitan Pier and Exposition Authority, known as McPier, for site acquisition and eligible construction costs. McPier will own the so-called "headquarters hotel," but the private hotel operator will manage it.

"If the mayor designed an Infrastructure Trust to do public-private partnerships, why are we putting up $421 million between McPier [and our] TIF money? It’s all public tax money," Arena told Progress Illinois. "It’s different pools. It’s still public money. Why not partner with a hotel brand to say, 'You put in half, we’ll put in half, we’ll build this thing and we’ll share revenue?'"

"We’re really not gaining anything in this," the alderman added. "But if you do something that has a revenue-sharing component and ask for those private corporations to put in a good portion of the capital, that they’re going to return nothing but profit on, I think that’s a more sustainable way to look at a public-private partnership, if you’re going to approach it that way." 

The new hotel, to be located at the northeast corner of Cermak Road and Prairie Avenue, is part of an overall effort to establish an entertainment district at McCormick Place. The Marriott hotel will be located next to a new DePaul University basketball arena and events center. A smaller, boutique hotel is also being planned for the area.

Initially, the $55 million in TIF funds were slated to be put towards the arena and boutique hotel projects. TIF money comes from a portion of property taxes within a TIF district that are diverted from local units of government, including the public schools district, and used as a subsidy for community development projects in the defined area.

Chicagoans were outraged by the arena and hotel proposal, which Mayor Rahm Emanuel announced last May just days before the Chicago Board of Education voted to close a record-breaking number of public schools, citing a “utilization crisis” and the Chicago Public Schools' (CPS) $1 billion deficit. 

Opponents at the time argued that TIF funds should be used to support the cash-strapped public school system, not a private university that can pay to develop and build a stadium on its own. In July, community members delivered a petition to the mayor's office with more than 3,000 signatures against the plan to allocate $55 million in TIF funds for the arena and nearby hotel.

The TIF money was eventually moved to the Marriott hotel project because the city is still tied up in court over a land dispute concerning the boutique hotel site

McPier and DePaul are each expected to kick in $70 million to construct the $173 million stadium and events center. McPier will pay the additional $33 million needed to buy the arena land, which the city had originally planned to do through the use of TIF funds.

Ald. Arena, however, believes the main reason behind shifting the $55 million subsidy to the larger hotel project was to "defer some of the angst about it going to the stadium."

"But it’s all part of the same overall development," the alderman stressed. "The hotel is directly next door to where the stadium will go. My concern is that there will just be an ask for the stadium down the road."

CPS teacher Erika Wozniak, who fiercely opposed the DePaul arena TIF subsidy last year and was the one who started the petition against it, is calling on aldermen to put their foot down if additional TIF dollars are requested.

"Given the history of the uses of TIF funds ... it's just going to continue," she said. "We can't just have three aldermen who are thinking straight. We need everyone to come together and say, 'Enough is enough.' ... We can't be giving our money to these private universities and major corporations who don't even need our money in the first place."

The 1,200-room hotel is expected to generate some $66 million from lodging fees and $11 million in hotel taxes each year, according to the mayor's office.

“The economic impact of this is just too important to ignore,” Ald. Ed Burke (14th), who chairs the city's Finance Committee, said at last week's council meeting. “McCormick Place itself … is the largest convention center in the Western Hemisphere. With the addition of the new headquarters hotel, it will increase the number of hotels that McCormick Center has to offer and increase the overall room capacity, which will encourage more businesses to consider Chicago as a destination for their convention and tourism business.”

Proponents have also noted that the project is expected to create some 3,700 temporary construction jobs and 600 permanent jobs.

But Arena said he takes issue with how the jobs will be created.

"At the end of the day, to say you're going to build a hotel right next door to our convention center, one of the top three in the nation, there’s not a corporation out there that wouldn’t want to be in that position," the alderman stressed. "You have a guaranteed consumer base there, so you're going to create jobs. This isn’t about whether we’re going to create jobs or not, this is about who subsidizes the creation of them. And we do enough of that in the city. We’ve seen that does not produce the results we want. We have 20 years of evidence that that’s not the best way to do it in terms of what our books look like in City Hall."

Tom Tresser, co-founder of the CivicLab and leader of the volunteer-based TIF Illumination Project, said many community members perceive using public money to redevelop McCormick Place into an entertainment district as "a poor use" of funds.

"Whether it was $55 million to DePaul or $55 million for a private hotel operator, nobody was in favor of it, so I think these aldermen [who voted for the measure] are completely out of touch with their public," he said, adding that he hopes Chicagoans will remember this vote in 2015 when aldermen are up for re-election. 

Tresser added that Chicago's TIF program is a "slush fund" and a "hidden tax" on residents.

"It showers money on the undeserving," he said. "Since Chicago has no economic development plan, all we get are these clout-driven deals that nobody has asked the public if they favor giving $55 million in public funds to a private hotel developer when we’ve had our schools closed and essential city services cut over and over again. I think our city leaders are completely out of touch with reality."

But at last week's council meeting, Ald. Pat Dowell (3rd), who represents the area by McCormick Place, said there has been "significant community involvement and oversight on this project." She noted that a community benefits agreement for the project has been completed, but it still needs "further definition" and final approval from McPier. 

"This is an ordinance that is good for the city of Chicago and good for my ward," Dowell stressed at the council meeting. "It is a perfect use of TIF funds and an allocation that is for the purpose of economic development, bringing new jobs, new revenue to the city and to support the growing tourism and convention industry in the city of Chicago." 

Construction on the hotel project could start later this year, according to the mayor's office.

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If you think it's time to shut down all TIFs, sign this petition - http://petitions.moveon.org/sign/abolish-all-chicago-tifs.

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