Subsidizing Corporate America

TW: The Republicans moan subsidies/bailouts for auto jobs etc. but rarely about welfare for corporations. Here is a nice tidy example locally (here in Chicago) of our government spending a fortune to attract about 300 jobs to a prime part of our downtown. The cost per job ends up at almost $100K. And our benevolent dictator (ahem Mayor) Daley used funds meant to subsidize development in sub-prime areas of the city, funny how these things work.

Am not saying these things are not necessary but merely that subsidies come in many forms.

From Chicago Reader:
“ [MillerCoors] flirted with Dallas but settled on Chicago because it’s “a true international city” with “an attractive talent pool,” “unique business resources,” “good schools,” and “easy commutes.” (I guess no one with MillerCoors, or for that matter the Department of Community Development, has ever had to depend on the CTA.)

And, almost as an afterthought, the report mentions that “during the selection process, both the City of Chicago and the State of Illinois offered economic incentives” to offset MillerCoors’s “considerable relocation costs.”

I’ll say. Our old friend Governor Rod Blagojevich, about six months before he was hauled out of his house in handcuffs, forked over some $18 million in state tax breaks and subsidies, and Mayor Daley agreed to chip in a little more, which we now know to be $6 million. By contrast, there’s no record of Dallas offering anything on top of its already-lower property taxes. (Neither Dallas city officials nor MillerCoors responded to calls for comment.)

Once they settled on Chicago, MillerCoors execs narrowed their real estate choices to three possibilities: 250 S. Wacker, 33 S. State (the old Carson Pirie Scott building), and 350 N. Orleans (also home to the Sun-Times). In terms of warding off blight—the nominal purpose of TIF subsidies—pushing State Street would have made the most sense, as the eastern part of the Loop has a far higher vacancy rate than the west. But the city left the decision up to MillerCoors. As a result, our tax dollars are going to give the better-off part of the Loop a leg up over its poorer cousin.

But this problem goes back to the founding of the LaSalle Central TIF, where—thanks to gaping loopholes in TIF law—the city managed to stretch the definition of blight to cover one of the hottest real estate markets in town. By 2030, when this district mercifully expires, the city expects it will have siphoned off at least $1.5 billion in property taxes from the schools, parks, police, fire, and other needy public services. City planners have said they will use the cash to, among other things, renovate the old architectural landmarks on LaSalle that are becoming out of date.

Well, 250 S. Wacker is hardly an architectural jewel. Constructed in 1957, it’s a steel and glass box that looks like it was squished to make it fit in its corner space. As even the plan overview dryly notes, “This building has not been identified as historically significant.”

In 2005 the joint venture of Carnegie Realty and D2 Realty LLC bought it for about $16.8 million with plans to renovate it and covert it into offices and condominiums. “We are extremely happy with the property which is situated in an ‘A’ location for our prospective buyers,” John Thomas, CEO of Carnegie, said in a press statement at the time. “We anticipate our buyers will be wholly owned or multi-generational businesses that foresee their real estate needs and investments for the long term.”

By then Thomas had already been convicted of business fraud, and as part of his deal with the feds he became a government mole, according to a 2007 Tribune article by David Jackson. So maybe the building does have some historical significance after all.

At any rate, after renovating the building, Carnegie and D2 sold it in 2007 for about $57 million to AEW Capital Management, an investment firm out of Boston. But by last summer, the downtown office boom was dying, and AEW was desperately seeking new tenants, as the vacancy rate at 250 S. Wacker was about 82.5 percent. When MillerCoors moves in, 100 percent of the building will be occupied.

...According to the overview, the “project will expand the tax base because the investment in the property will result in an increase in its assessed value.” Well, let’s hope so. At the very least, maybe AEW will drop its ongoing appeal to get the Cook County Board of Review to lower its assessment. (The firm currently pays about $422,000 a year in taxes on the building.) But even if the tax base does expand, until 2030 none of those new tax dollars will go to schools, parks, or other taxing bodies; they’ll flow into the LaSalle Central TIF fund, so Mayor Daley can hand them over to the next conglomerate that comes knocking on the city’s door..."
http://www.chicagoreader.com/features/stories/theworks/090326/index.php?cAction=