Chicago accused of diverting millions in TIF money to Navy Pier
The Better Government Association (BGA) and Crain’s Chicago Business have accused Chicago Mayor Rahm Emanuel’s administration and the Metropolitan Pier & Exposition Authority (MPEA) of using creative bookkeeping to direct $55 million in tax-increment financing (TIF) funds to the Navy Pier for renovations.
According to the BGA, the controversy surrounds the intersection of funding for projects in the Elevate Chicago plan, an Emanuel initiative intended to improve Chicago’s tourism and tradeshow infrastructure. The plan included the creation of a McCormick Place entertainment district, featuring an arena for conventions and DePaul University’s basketball teams, and a hotel, the Marriott Marquis Chicago.
Elevate Chicago also included renovations for the Navy Pier.
The BGA reports that the hotel development at McCormick Place, due to its location on the near South Side, was granted $55 million in TIF funding intended to promote development in blighted neighborhoods. The BGA and Crain’s investigation revealed that MPEA – an authority that runs the convention center, owns Navy Pier and developed the hotel – received the TIF and immediately transferred it to Navy Pier Inc. (NPI), a non-profit the MPEA created to run the pier.
The MPEA contends that the TIF funding it received was a reimbursement for eligible costs it had paid for the hotel project, characterizing its transfers of TIF funding to NPI as a cash flow timing scenario that is to be expected on large projects like the Elevate Chicago plan. The BGA report acknowledges that the TIF payments for the hotel were reimbursements but questions the propriety of using TIF funding to enable projects outside of TIF areas.
“On the surface it looks like there is some kind of sleight-of-hand bookkeeping taking place here,” Rachel Weber, urban planning and policy professor at the University of Illinois at Chicago, said, according to the BGA report. “If the intent from the beginning was to move these monies or to free up monies that would then be used for a project in a non-TIF area, then it calls into question whether or not there was a legitimate need for that $55 million.” Weber previously worked with the Emanuel administration on an initiative to make the TIF program more transparent and efficient.
TIF revenues come from property tax revenues in TIF districts, which encompass struggling communities in the city. The TIF monies are earmarked for developments that typically would not happen in such neighborhoods, encouraging public and private projects. According to the BGA, the $55 million allotted for the hotel at McCormick Place is the largest single TIF award for a private partner under Emanuel’s tenure.
The MPEA contends that the TIF funding being paid out as reimbursements ensured that it only covered TIF-eligible costs at the hotel. The BGA report points to several emails related to the project that suggest the TIF funding was, at best, always intended to fund the MPEA’s developments in the Elevate Chicago plan as a whole, and at worst to directly fund the Navy Pier renovations, which are not TIF-eligible.
In one exchange from July 2013, MPEA CEO James Reilly said that the $55 million in TIF funding will enable the organization to give NPI $55 million for the Navy Pier renovations. An October 2014 email from MPEA Chief Financial Officer Richard Oldshue is even more damning.
“Nominally in the [intergovernmental agreement] we’re receiving $55mm from TIF to reimburse hotel project costs but that’s just the bookkeeping for requesting the transfers,” he wrote in an email to a research analyst for House Speaker Michael Madigan (D-Chicago). “Ten days after MPEA receives the money we pass it along in full to NPI.”
It is not clear, based on the investigation, whether Emanuel was aware of the MPEA’s plans for the TIF funding, but members of his administration are included in email chains that make the authority’s plans clear.
The emails and circumstances raised in the BGA and Crain’s investigation have raised concerns and ire in the City Council. The BGA reports that several aldermen who supported the plan were not aware of the TIF funding being used to enable Navy Pier development, and in a subsequent report the group noted that 3rd Ward Ald. Pat Dowell, who represents the Near South Side and was a strong supporter of the hotel’s TIF funding, has called for public hearings on the issue.
“It’s a deliberate omission ... to lead us down a different path than what was really happening,” 32nd Ward Ald. Scott Waguespack, who voted against the TIF funding for the hotel, said in response to the investigation.
Waguespack is now considering a push to recover the $55 million from MPEA.
“I knew it was a boondoggle," he said. "I just didn’t know it was a Navy Pier boondoggle. Here they deserve more than a slap, though. The money needs to come back to the city.”