Archive for August, 2009

Daley Defends Use of TIF (Re-post From Crain’s)

August 11, 2009

Daley defends TIF for United move

By Eddie Baeb
Aug. 06, 2009

(Crain’s) — Mayor Richard M. Daley says the city’s proposed $24-million subsidy to help bring 2,800 United Airlines employees downtown is warranted because of the recession and the importance of the airline and air traffic to the city’s future.

At a news conference Thursday in the lobby of the newly rechristened Willis Tower, Mr. Daley said the move of UAL Corp.’s operations center from northwest suburban Elk Grove Township to the iconic skyscraper will make UAL the city’s biggest private employer.

“This is the largest relocation of jobs to the city of Chicago in recent years,” Mr. Daley said.

The airline will have 16,000 workers based in the city limits once it moves into Willis Tower, North America’s tallest building, which was known as Sears Tower until last month. The relocation could begin as soon as fall 2010, United says.

The Chicago region’s largest private employer is Wal-Mart Stores Inc., with some 23,000 full-time employees, according to a Crain’s list published Jan. 5.

Contingent on the subsidy, UAL has agreed to lease 460,000 square feet on nine lower-level floors for 15 years in Willis Tower, 233 S. Wacker Drive. The company wouldn’t disclose which floors it will occupy.

The proposed TIF subsidy would cover 40% of the estimated $60-million build out of UAL’s space.

The mayor downplayed the risk of such an investment even though UAL’s credit is sub-investment grade and there’s speculation the company might not survive.

“You have to have confidence. I believe the (federal) economic stimulus did not recognize this industry. This industry is vital,” Mr. Daley told reporters. He later defended providing tax-increment financing for such deals: “If you don’t create jobs, then you lose more and more business.”

City staffers also note that the subsidy will be paid out over several years, and will include provisions allowing the city to get some of its money back if UAL doesn’t live up to terms of the agreement, including maintaining a certain number of jobs.

UAL CEO Glenn Tilton told reporters that the subsidy package was “key,” and that other municipalities also offered incentives. He said 13% of UAL’s local employees live in Chicago and that 80% live within five miles of a Metra station.

“All things considered, this facility — both from an economic perspective and a quality of work-life perspective — was the best facility in the running,” Mr. Tilton said.

The company had estimated it would cost $50 million to $90 million to upgrade the sprawling Elk Grove Township campus, which Mr. Tilton noted was built in 1961 and is now 40% vacant.

“Vacant space is not a motivating influence on a workplace,” he said.

A leasing representative of Willis Tower with U.S. Equities Realty says 1 million square feet of space has been leased in Willis Tower over the past two years. The tower has suffered from high vacancies since the terrorist attacks of Sept. 11, 2001.

Advertisements

Naperville Sun – Letter To The Editor

August 4, 2009

On July 31, 2009, the Naperville Sun posted a Letter to the Editor. The writer of this letter, K.C. Swininoga, of Naperville, listed various concerns about the Omnia project, many of which were mis-statements. In an effort to provide correct information we have submitted a response to the Editor of the Sun, and have also posted our detailed response below.

Original Letter

July 31, 2009

Theater company moved frequently

Here’s a critical thinking challenge to Mr. (Sun columnist Bill) Mego (“Omnia backers …”, July 21) — look beyond the hype regarding TheatreDreams.The Omnia team looks to TheatreDreams to define the future. The activities of this company since formation in 2001 reveal a pattern that brings to mind a theater classic — The Music Man. Their tenure at Chicago Theatre is exemplary:
•
Prior to 2003: Chicago taxpayers inherited $21 million in renovation costs after previous operators defaulted and ownership reverted to the city.

Late 2003: TheatreDreams purchased Chicago Theatre for the fire-sale price of $3 million. October 2007: TheatreDreams sold Chicago Theatre to New York-based Madison Square Garden because they “found it hard to compete with the subscription and programming muscle of Broadway in Chicago.” TheatreDreams principal Larry Wilker is quoted as stating, “The problem is that Chicago is a very, very rough, competitive market.

The opportunistic, short-term nature of TheatreDreams’ commitments has been repeated several times across the country in its brief history — a management partnership at the Kodak Theatre began in mid-2005 and ended March 31, 2008; management services were provided for the Arsht Center in Miami beginning in November 2007, ending in 2008. In February 2008, a project remarkably similar to the Omnia proposal was announced in Salt Lake City, Utah — to be led by Bill Becker, a principal of TheatreDreams. This is proceeding even though a competing venue is already in development in a suburb of Salt Lake City.

They “guaranteed there will be no losses”? Free land and tax exemption might keep this project above water for a few years while the novelty lasts — and then TheatreDreams will move on. After all, “76 trombones led the big parade” … but then what happened?K.C. Swininoga, Naperville

Our Response

We are writing to correct a number of statements by K. C. Swininoga made in Letters to the Editor on July 31, 2009 titled “Theatre Company Moved Frequently.”

The writer’s statement that Theatre Dreams did not stay long in Chicago is misleading.  They paid $3M for the Chicago Theatre in 2003, managing it to profitability within a few years. It was not for sale.  They had no intention to sell it.  However, in 2007, Madison Square Garden Entertainment approached them and made them an offer they could not refuse.  It was simply a good business decision on the part of Theatre Dreams.  Madison Square Gardens saw an opportunity to jointly program it with their Radio City Music Hall facility in New York.  Also a wise move.

In addition the writer’s comment about the $21 million renovation costs for the Chicago theater as a large loss to the city of Chicago is incorrect.  The city did pay the Federal Government for a loan it had guaranteed, however, the quoted amount does not reflect that about 2/3rds of that loan was attributable to the adjacent companion project known as the Page Brothers Office Building.  It was not reflective of the income and tax revenue the city received during the very profitable years associated with Joseph and the Amazing Technicolor Dream Coat, etc.  It also is not reflective of the income the city received from the Page Building rents over the years.  Some of those rents were very lucrative.  More importantly, Chicago has recouped that modest investment many times over as that project evolved into a whole theater district and has pumped perhaps several billion dollars into the Chicago economy over the past decade.  It is a great success and the result of sophisticated planning and use of a Tax Increment Finance District (TIF).

The “quote” about Chicago being a difficult city in which to own a theater was incorrectly ascribed to Larry Wilker of Theatre Dreams.  It was actually a personal observation made by Chris Jones in his column for the Chicago Tribune, which can be viewed here. In actuality, Theatre Dreams has a proven track record of success in overcoming business challenges.

Theatre Dreams has been brought into several cities to take over a less than profitable organization and turn it around.  They have a true knack for managing theatres.  After they have completed their job, they leave.

The writer cited the Arsht Theatre in Miami.  At the time, it was having financial difficulty.  However, what the writer failed to mention was under the management of Theatre Dreams, Arsht’s annual attendance increased from 41% to over 70%, stabilized their financing and ended the last fiscal year with a surplus.  Theatre Dreams was hired on a one-year assignment with clear intent from them to restaff the center so that it would become a better, more accountable, self-managing administration.

By way of background, Larry Wilker had tremendous success in helping to establish, grow, and manage the Cleveland Playhouse Square, a multi-theater district that is a jewel within that battered city.

At the Kennedy Center, where debt was increasing $2million per year, he teamed with attorney Bill Becker, who was General Counsel to the center.  Here they managed to pay off all the debt, more than doubled the attendance, and increased fund raising from $13million to $38million per year.

During that time at the Kennedy Center, Mr. Becker guided the project to expand the Center’s below grade parking garage with a $32M Industrial Revenue Bond, was instrumental in the planning for a $400M expansion of the Kennedy Center which included a 17 acre plaza utilizing air rights over the adjacent highway, in addition to many other projects.

The writer also cited Salt Lake City where Bill Becker is assisting his brother, the mayor, in planning of a 2500 seat Broadway multi-use theatre that was announced as a city planned facility by the previous mayor.  The so-called competing facility mentioned by the writer is not funded nor under construction.  It is unlikely to be built given the City’s recent concentrated efforts to upgrade their arts district with a facility of a size and specifications similar to Omnia.  Mr. Becker has stated he will not own or manage the new theatre because that would be a conflict of the trust placed in him to assist.  The local press has stated his assistance is a lucky break from an expert.

It should be telling to the Naperville community that Omnia’s Theatre Project has captured the attention of Theatre Dreams.  Given their background and repeated success, their interest in Naperville and being managers of our theatres would indicate we are on the right track.  They are true professionals with a track record of success.

Bev Patterson Frier and the Omnia Team