Second City In Sync

Chicago Mayor Richard M. Daley

Chicago Mayor Richard M. Daley is whistling a similar business-friendly tune, as his 2004 budget also holds the line on property taxes, while calling for infrastructure investments. Some of that investment will come from a 3-percent rise in water and sewer fees. In addition, new fees will come into play for licenses that require city inspections and for building and zone inspections themselves, and the price for heavy vehicle stickers will rise by $15.
        But bigger things are in the works: like the massive O'Hare Modernization program, awaiting final FAA approval, and an equally impressive regional rail plan that will allow the metro's vaunted rail infrastructure to keep pace with market demand.
        In an exclusive interview with Site Selection, Mayor Daley says viewing the airlines and railroads as partners has been crucial to forging these watershed modernization plans.
        "Once completed, this program will save the airlines $370 million annually in reduced delays, and air passengers will save $380 million a year," he says of the O'Hare Modernization Program. "The problem of delays at O'Hare can only be solved by modernizing O'Hare's outdated intersecting runway configuration into a more modern, parallel runway structure."
        "We think it's imperative that it be expanded," Mullen says of the O'Hare project. CenterPoint has a large concentration of properties in and around the O'Hare property, and has agreed to sell the city several buildings in order to facilitate the airport's new northern runway.
        Now, as congestion problems continue to mount at O'Hare, the city awaits the environmental impact statement being prepared by the FAA, the same agency that recently asked airlines to cull flights because of that very congestion.
        "The sooner the EIS process is completed, the sooner the region can begin to reap the benefits from a modernized O'Hare," says Daley. "In fact, according to the FAA, both O'Hare and Midway have exceeded their pre-9/11 flight operation figures, when delays forced Congress to order local leaders to come up with a solution to the problem of delays at O'Hare. That's why we are doing as much as we can now so that we're ready to start construction as soon as possible after receiving the go-ahead from the FAA."
        As for the railroad plan, "The City of Chicago and the major railroads were both well aware that improvements in the railroads' operational efficiencies and physical infrastructure in the Chicago region were needed," says Daley. "Also, it was clear that the improvements would benefit both the railroads as well as the Chicago region and its residents." A public-private coalition involving everybody from the federal Surface Transportation Board to regulators eventually endorsed the plan. And similar coalitions are behind other improvements in the city, which seems to "get it" when it comes to keeping up with infrastructure needs.
        "The road or sewer project that you don't finance today is going to cost a lot more in the future," says Daley, making a point sometimes lost on leaders in some other major U.S. cities. "Businesses – especially those looking to move to a city – see the quality of the infrastructure as a measure of the local government."

Chocolate, Candy and Banking Melting, But Printing Prominent In Chicago Corporate Profile In the heart of Chicago's Loop, 140 years ago, the First National Bank of Chicago opened for business. Eighty-four years ago, Archibald Candy Co. opened for business there too, its Fannie May chocolates becoming synonymous with the city. Hundreds of other national and multinational corporations have brought new meaning to "being in the Loop," making the city center a leading headquarters capital.         Many of those firms have disappeared through mergers or attrition, as Archibald was in January. But as of last year, Bank One Corp. was still there, pouring $100 million into its 1 Bank One Plaza building as the nation's sixth-largest bank holding company welcomed new tenants like AIG and sought even more leasing opportunities for its real estate portfolio in Chicago and across the country. All in keeping with the cost-cutting measures championed by Bank One CEO Jamie Dimon since his arrival in 2000.         "We've worked very closely with Mayor Daley and the governor [Rod Blagojevich] to keep a presence in Illinois," said Bank One corporate spokesperson Thomas A. Kelly in January, mere days before news of the company's acquisition by J.P. Morgan Chase for some $58 billion.         Although it is known that the combined companies will shed some 10,000 jobs and keep the retail and financial services units based in Chicago, the merger's implications for the company's physical Chicago presence were unknown at press time. Asked if the bank's planned real estate investments would continue, Kelly said, "The problem with mergers is that very few people can know about them until they are announced, and only then can the rest of the folks know and begin to work through decisions. It will be a number of weeks or months on some decisions."         Mayor Richard Daley was concerned about potential job losses, but said "My understanding is that the first jobs to be eliminated will be in New York City. Bank mergers have become a part of our nation's economic life in recent years," he said. "While I'm sorry to see Bank One acquired by a larger New York-based company, Chicago continues to be a very attractive place to do business."         That was proven by an earlier merger of giants in November 2003, when Canadian business form company Moore Wallace merged with Chicago mainstay RR Donnelley, choosing to headquarter the combined companies in Chicago.         According to a statement, the combined companies, with some $8 billion in revenues, expect to generate cost savings of at least $100 million on an annualized basis in the first 12-24 months after the closing.         So even as Chicago candy companies Archibald and Brach's decamp for bankruptcy and Texas, respectively, Daley and others continue to be philosophical about the changes, noting activity in the financial services market in particular. Citing the city's coming debut of the world's largest futures exchange center, Daley also notes the highly visible civic involvement of Jamie Dimon and his wife.         "Many companies headquartered outside Chicago have been active participants in our city's civic and cultural life," he said, "and I'm confident that the new bank will be one of them."         Whether that civic largess extends to corporate real estate remains to be seen.

        That measure indicated $1.7 billion in Chicago capital improvements in 2003, from aviation and viaduct projects to industrial economic development, water and sewer improvements and library renovations. Daley says a slow economy has made finding alternative sources of funding for this work "one of my priorities in 2004."

Taxes, Brownfields and the New Urbanism

The Mayor also echoes the Governor in his advocacy for small business. An expansion of scope in the city's small business lending programs in 2002 has led to helping out 58 small firms, with 60 more waiting in the wings. At the same time, property reassessments have driven up the taxes for some residents by as much as 70 percent, says the mayor. While property tax assessment reform is under way, it requires some fancy dancing to appease corporate residents as well. But Daley is up to that challenge.
        "The city's top priority is to solve the residential property tax crisis, because if residents can't afford to own homes in the city, that's not good for businesses," he says. "The biggest contributor to the property tax crisis is the state's over-reliance on property taxes to fund education. One of my top priorities is to develop an overall property tax relief strategy that will lower taxes for both residents and business, and I am currently working with the Metropolitan Mayors' Caucus on this issue."
        That echoes a taxpayer relief measure at the state level that is due to be on the November 2004 ballot. In Chicago, there is also some concern that sales taxes may be raised, or taxes on leases established, but Daley sounds a cautionary note.
        "Before taxes are raised, governments must look at tax rates in neighboring municipalities, counties, and states to determine the potential cross-border effects of raising those taxes," he says. Meanwhile, the Cook County Class 6(b) property tax reduction program was amended in 2002 to allow companies to renew their tax benefits after the first 12-year period.
        "The Class 6(b) program has been one of our most effective economic development incentives recently," says Daley. "In 2003, 16 firms utilized more than $16 million in Class 6(b) property tax incentives to invest more than $44 million in their facilities. Together, the projects have created and retained nearly 2,000 jobs."
        A similar vibrancy surrounds brownfield redevelopment in the Chicago metro, with new industrial parks springing up out of old neglected properties. That's only fitting for the city that's home to the National Brownfield Association.
        "Brink's is moving their headquarters to a former dump site on the far West Side," reports Daley. "Solo Cup is constructing a new facility on the former site of the USX steel mill, and Quality Croutons is building a new manufacturing plant on the site of an old far South Side paint factory. Our Center for Green Technology, which studies and promotes environmentally friendly building technologies, is on the site of one of the largest illegal dump sites on the near Northwest Side. That's an incredible change."
        The same could be said of the the city's own real estate portfolio, which – again like the state's – is seeing renewed focus for its economic development potential.
        "This year, the Dept. of Planning and Development closed on the sale of more than $28 million worth of City-owned property for redevelopment," says Daley. "Those 30 negotiated sales developed new housing units, neighborhood retail and employment opportunities. Just last month, the city council approved the sale of a two-acre [0.8-hectare] parcel in the West Loop for $16 million. Given the slowdown in the economy, and our tight city budget, it is important that we look to capitalize on our valuable real estate assets."
        While some corporations have been less than enthusiastic about placing projects on brownfields, CenterPoint's Mullen says his company's experience has been the opposite, citing tenancy by Motorola and Home Depot in a redeveloped property formerly belonging to Honeywell Corp.
        "People these days are location and cost conscious," he says, "and if they can get into an infill location at better than replacement-cost price, we don't see any pushback whatsoever."
        Perhaps such conditions set yet another example for the Congress for New Urbanism, which is moving its headquarters to the city from San Francisco. Daley says his city was the ideal location for the group "because we've had the 'urbanism' that other cities are trying to recreate."