I'm starting to feel sort of sorry for the Ricketts family, owners of the Cubs, who've been roundly pounded by politicians and pundits for proposing to spend at least $200 million in public money on Wrigley Field renovations (which, as it happens, is the subject of this issue's cover story).
It's not that I think they should get to use the amusement tax, which would otherwise go to Chicago and Cook County. It's just that when it comes to showering tax dollars on the richest of the rich at a time when the city's broke and a lot of people can barely afford to stay in their homes, the Rickettses are getting the sharp end of a double standard: Mayor Daley's proposal to give $15 million in property taxes to CME Group—one of the largest commodity-trading conglomerates in the world—is heading for City Council approval without a peep of protest. Why do the Cubs get hammered while CME gets a pass?
For starters, the Cubs are a higher profile operation—covered in the sports, news, and business sections. The Sun-Times has been particularly vigilant against public funding of a Wrigley deal since another such proposal came from Sam Zell and the Tribune Company two years ago. Mayor Daley effectively killed that plan, explaining that he didn't think taxpayers could afford it. It probably didn't help that Daley is a lifelong Sox fan—born and raised in Bridgeport—who can barely even pretend to muster any enthusiasm for the north-side Cubs.
Tom Ricketts, who led his family's effort to take over the Cubs from Tribune Company a year ago, mishandled the current plan by bypassing Governor Pat Quinn before going public with it. "Apparently, they don't think I'm as important as others," Quinn told reporters. "I am important in this matter because I'm goalie for the people of Illinois to make sure they get their top priorities addressed."
If only the taxpayers of Chicago had a goalie to protect them from deals like the mayor's CME proposal, which is to pay the Chicago Mercantile Exchange out of the mayor's favorite little honeypot—the tax increment financing program.
As you know by now, TIF money is incremental property tax revenue diverted into bank accounts largely controlled by the mayor. It's supposed to foster development in blighted communities. So how does money intended to lift up the poor wind up subsidizing the extremely wealthy?
You have to go back to 2007, when the Chicago Mercantile Exchange was gearing up to buy the Chicago Board of Trade for about $8 billion. As the deal neared completion, the Intercontinental Exchange (ICE), a trading company in Atlanta, set off a bidding war by offering $10 billion.
On July 6, a few days before CBOT's shareholders would decide which offer to accept, Mayor Daley weighed in. In a letter addressed to Terrence Duffy, the Merc's executive chairman, and Charles Carey, CBOT's chair, mayoral chief of staff Lori Healey wrote: "On behalf of Mayor Richard M. Daley, the City of Chicago is prepared to offer the City's assistance to facilitate the real property acquisition and property rehabilitation that is part of your historic efforts to merge."
The letter didn't say how much money Daley was offering—though an article in Crain's said it could go as high as $40 million. More to the point, Daley made no such offer to ICE.
Effectively, Mayor Daley was volunteering to pony up public property-tax dollars to give one billion-dollar corporation a leg up on another billion-dollar corporation in a bidding war to buy out a third billion-dollar corporation. And you still thought Chicago was the home of free-market economics.
On July 9, 2007, CBOT's shareholders overwhelmingly voted to accept the Merc's final $11.9 billion bid—over ICE's $11.7 billion—and from the merger CME Group was formed.
It's not surprising that Daley's heart was with the Merc over ICE. The Merc's officials are local guys, who have known the mayor and contributed to his war chest for years. Earlier in 2007, the Merc had contributed roughly $107,000 to Daley's reelection campaign. The Board of Trade donated $101,000. ICE donated nada.
After Healey's letter was publicized, Daley told reporters he'd made the offer to keep the Merc in town. "I will do anything possible to make sure they are staying here, make sure they expand—anything they need," Daley said. "We will be talking to them—whatever they need—but it is very important keeping them here."
The Merc's spokesman, Allan Schoenberg, told me at the time that the mayor's support hadn't been asked for. "My understanding is that it was an unsolicited letter of support for the merger," he said. And ICE officials told me they'd assured the city that if they took over the Board of Trade they would move their headquarters from Atlanta into the Board of Trade's longtime headquarters at 141 W. Jackson.
Nonetheless, the city, when asked, contends to this day that if ICE had won the bidding war it would have moved jobs to Atlanta. "The Intercontinental Exchange emerged as a competing bidder for the CBOT," reads a 2009 staff report on the project from the Department of Community Development. "In order to complete the transaction, CME wanted to raise its proposed price and requested the city's assistance in helping to cover redevelopment costs for the consolidation. ICE is headquartered in Atlanta and if ICE were the successful bidder, it is likely they would have moved the headquarters and many CBOT jobs to Atlanta. The city's offer of assistance helped to incent CME to raise its price by an amount that allowed them to outbid ICE."
After the merger was completed Daley sat on his offer for years, but this November he proposed giving CME Group $15 million from the LaSalle Central TIF district to help pay for improvements at the Board of Trade Building. "The trading floor will be renovated to add trading pits and booths to consolidate all the trading pits and booths from the CME Trading floors formerly at 20 S. Wacker," says the Community Development report. "The work also includes the addition of a trading floor studio for media shots used by the exchange leadership, various media outlets and CME clients."
This will be the second tax break the Board of Trade Building has received from the city in the last five years. In 2004 the City Council voted to designate it a Class L property, an incentive designed to encourage the preservation and rehabilitation of landmark buildings. According to a report CBOT filed with the Securities and Exchange Commission, it was expected to lower CBOT's property taxes "by a total of approximately $17 million over 12 years beginning in 2006."
In exchange for the $15 million TIF subsidy, CME must agree to keep its payroll at the current level of 1,750 employees for ten years after the project is completed and hire at least 638 more employees. If the payroll ever falls below 1,750, the exchange must return some portion of the TIF money it's received. But once the ten years are up, the exchange will be free to fire as many employees as it wants—and, for that matter, move wherever it wants.
Why is a landmark Loop building like the Board of Trade even eligible for a program intended for blighted communities like Englewood? The state's TIF laws let the city create what are called TIF conservation areas. These are areas that are not in fact blighted but theoretically need TIF handouts to keep them from becoming blighted. In this case, the city has essentially argued that if it can't give the CME $15 million, it's only a matter of time before the LaSalle Street business district starts looking like 60th and Halsted.
That seems unlikely: In 2007 CME sold two floors it owns in the skyscraper at 20 S. Wacker for about $17 million. In 2008 it found $8.3 billion to buy out the New York Mercantile Exchange. So far this year the exchange has made some $750 million in profits on revenues of more than $2.2 billion, according to the Sun-Times.
And each year for the past several, it's hired the law firm of 14th Ward alderman Ed Burke to appeal the assessment on the Board of Trade Building to the Cook County Board of Review. Remember, every time one property owner pays less in taxes, someone else pays more. And renters aren't immune: your landlord more than likely raises your rent to offset the increase.
The City Council's finance committee— which is chaired by Alderman Burke—will probably consider the TIF proposal sometime in the next few weeks. From there it moves on to the full council for approval.
When I recently read that the matter was coming before the council, I called the folks at ICE, just to make sure they hadn't changed their story since my last article on this matter in 2007. "Your original understanding is correct," company spokeswoman Kelly Loeffler responded by e-mail. "ICE stated on several occasions our intent to make Chicago our headquarters, expand the industry in Chicago and to preserve more jobs at the CBOT as a result."
CME could probably teach the Ricketts family a thing or two about how things work in this town. v
Care to comment? Find this story at chicagoreader.com/politics. Ben Joravsky discusses his reporting weekly with journalist Dave Glowacz at mrradio.org/theworks.
Good job by Ben Joravsky showing how Chicago (really) works through a circle of political contributions, legal contracts and public subsidies.
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