Chicago Mayoral Candidates Distance Themselves From Real Estate Community
There’s little doubt the Chicago region’s real estate community was caught a bit flat-footed by the outcome of the city’s mayoral primary Feb. 26. If commercial real estate had a horse in the race, it was William Daley, the former mayor’s brother and President Barack Obama’s former chief of staff. Daley was at or near the top of most polls, and his third-place finish behind attorney and former Chicago Police Board President Lori Lightfoot and Cook County Board President Toni Preckwinkle sets the stage for momentous change in City Hall.
Whomever wins, Chicago will elect its first African-American, female mayor on April 2, and its first leader since the Harold Washington era that openly wears the label “progressive.”
Instead of a clear-cut choice between a progressive and someone they could count on to continue what they see as pro-business policies that foster new development and keeps taxes low, commercial real estate industry leaders now must sift through subtle differences between two candidates, once political allies, with similar profiles and beliefs.
The drama surrounding the mayor’s office is just one element in a political landscape rocked by several earthquakes. Last year, newcomer Fritz Kaegi toppled longtime Cook County Assessor Joseph Berrios after promising to reform the office, which most observers expect will result in higher taxes on commercial real estate and lighter burdens on homeowners.
Scandals revolving around the use of aldermanic prerogative sidelined 14th Ward Alderman Ed Burke, the City Council’s most powerful and long-standing member, as well as 25th Ward Alderman Danny Solis, the former head of the influential Zoning Committee, helping fuel an anti-incumbent surge that could end up changing nearly half the council after the April runoff elections.
And the decisions that face these new political leaders will shape the city for decades. After years of steady growth in the office and multifamily markets, developers like Sterling Bay and Related Midwest stand ready to create vast new mixed-use communities like Lincoln Yards and The 78, with big assists from public tax increment financing that would expand the Central Business District far beyond its traditional boundaries.
That issue is where the two remaining mayoral candidates may have the starkest differences with Mayor Rahm Emanuel, and whether he is successful in getting these proposals approved by the full City Council before he leaves office in May may determine whether these projects happen at all, let alone as planned.
“These megaprojects are going to utterly transform parts of our city, when frankly we’re not investing in other parts of our city, and we have no idea what the impact on infrastructure, transportation and schools will be,” Lightfoot said last week during a political meeting at The Hideout.
That popular music club is at the center of the controversy over Sterling Bay’s plan to transform the former Finkl Steel site, sandwiched between the relatively quiet residential neighborhoods of Lincoln Park and Bucktown, into a $6B community with up to 6,000 residences, offices, riverfront parks and towers up to 650 feet.
Sterling Bay has already reworked the Lincoln Yards plan, which has engendered much more controversy than Related’s The 78, several times due to objections raised by neighboring residents and 2nd Ward Alderman Brian Hopkins and other council members. The company was forced to cancel plans for a 20,000-seat stadium and an entertainment complex over traffic concerns, to boost the amount of on-site affordable housing and to cancel plans for 800-foot towers.
Those moves secured Hopkins’ support, and eased its passage by the council’s Zoning Committee, but both Lightfoot and Preckwinkle have said whatever happens between now and May, a lame duck mayor and council should not give the final green light.
“Why can’t we wait another month, six weeks, to let a new mayor, and a new City Council, really evaluate this project, and make sure there is a level of transparency, so people can take their measure of it?” Lightfoot said at The Hideout.
Asked by ProPublica Illinois’ Mick Dumke whether a new mayor could delay the TIF funding or bring further change to the Lincoln Yards project even if the council approves the current plan, Lightfoot was blunt.
“It’s not like they’re getting a $1.2B check in one fell swoop. The allocation of the new money is going to come when the new mayor is in, and I’m not going to allocate a dime until what needs to be done, including more transparency and impact studies, actually happens.”
Preckwinkle has echoed Lightfoot’s call for a delay in the vote on Lincoln Yards, and also issued a deeper critique of the city’s use of TIF funds while on the same Hideout stage in October.
“Roughly 30% of the parcels in the city of Chicago are in a TIF district, and it’s about a third of our property tax revenue, and much of the downtown, which is our most valuable property, is in one TIF district or another,” she said. “My concern is we have used TIFs in inappropriate ways, where the market would have promoted development anyway.”
Preckwinkle said she believes the new mayor should ask tougher questions when proposing a TIF district.
“Do we need some kind of spark to lift this community up? That would be the lens through which I would look at it.”
Preckwinkle even broached the possibility of phasing TIFs out, and redirecting their funds, particularly into public schools.
That would be an extraordinary change from the way TIFs were administered by both Emanuel and his predecessor, Richard M. Daley. But like many issues, there seems to be little daylight between the two new contenders.
“Before any new TIF is created, the city must strengthen the standards for determining whether a district qualifies for TIF,” Lightfoot wrote in an official position paper. “The city will no longer loosely apply the test for determining whether an area is ‘blighted,’ and it will raise the bar for clearing the ‘but for’ test, which requires one to show that private projects and investment would not happen without TIF investment.”
Lightfoot also called for periodic reviews of all TIF districts, and raised the possibility of closing those that fail to meet undefined performance standards.
There could be some differences between the two on Chicago’s tradition of aldermanic prerogative, which allows individual council members to have final say on almost all development decisions in their wards. Hopkins used the tradition to shape Lincoln Yards to his liking, and aldermen also made significant changes to Related Midwest’s The 78 and Lendlease Development’s Lakeshore East.
Housing advocates have complained certain council members use it to keep affordable housing out of their wards.
As a former longtime 4th Ward Alderman, Preckwinkle approaches the issue with caution.
“I believe in affordable housing, and I believe we should have affordable housing all across the city, but trying to make that happen in every single ward requires a lot of political capital,” she said in October. “I hesitate to attack aldermanic prerogative, because I know it was important to me in trying to implement my vision for my ward, and I don’t want to be in a position where I’m challenging aldermen who are closer to their constituents than I will be about what they think is best for their wards.”
Lightfoot has said she would reform the practice, but with a modest step. She wants to enact an ordinance that streamlines housing proposals in wards where less than 10% of the housing stock is affordable, and stop City Council members from vetoing such developments.
“This ordinance will not solve all of the problems associated with the aldermanic prerogative, but it is a necessary first step aimed at limiting an alderman’s ability to stop the construction of housing that is affordable,” Lightfoot wrote in her position paper.
How commercial real estate developers view the issue is difficult to discern. When asked by Bisnow this winter about their positions on aldermanic prerogative, developers generally refused to speak on the record. The tradition can both hinder and help the project approval process. That was Sterling Bay’s experience, because even though it may have struggled to meet Hopkins’ concerns about Lincoln Yards, once he signed on, his power to control development has served to protect the company from the far more critical stances taken by neighboring members like 32nd Ward Alderman Scott Waguespack, who endorsed Lightfoot, and 43rd Ward Alderman Michele Smith.
It is perhaps not a surprise that with two candidates of such similar beliefs, things would take a nasty, personal turn as they sparred and looked for some way to distinguish themselves. Lightfoot and Preckwinkle met for a debate at NBC on March 7, the first of eight, and Preckwinkle almost immediately charged Lightfoot with accepting endorsements from 41st Ward Alderman Anthony Napolitano, the council’s only Republican, and 38th Ward Alderman Nicholas Sposato, who recently joined with Napolitano to stop GlenStar Properties from building a 299-unit apartment building, which would have included some affordable housing, on the northwest side.
“There is no lie you will not tell, it’s so sad and pathetic,” Lightfoot responded. She said the two aldermen did not endorse her, but merely showed up to an event where she accepted the endorsement of Chicago’s firefighters’ union, to which both belong.
The evening’s fireworks could not conceal the wide areas of agreement already shown in written policy positions and past appearances. Both repeatedly called for developers and city officials to pay more attention to neighborhoods on the South and West Sides, and not just the CBD. Both also agree the city’s Affordable Housing Ordinance needs to be strengthened, and have called for a revamped building code that allows less expensive construction materials and construction methods, which the Chicago Association of Realtors says will help create more affordable housing.
“We have an affordable housing crisis — we’re down about 120,000 units in this city, and it’s not getting better,” Lightfoot said.
Preckwinkle also told the NBC audience she wants to increase real estate transfer taxes, at least for sales of $1M or more, while giving tax breaks for less lucrative sales. Lightfoot made a similar proposal, and both said they want to see the increased revenue go toward fighting social ills such as homelessness.
Unlike Lightfoot, the county board president did back efforts to lift the statewide ban on rent control, a cause embraced by many affordable housing advocates, but Preckwinkle stopped short of making a specific rent control proposal for Chicago.
Neither pitched herself to the city’s business community, including commercial real estate. Preckwinkle even sought to use Lightfoot’s position as a corporate attorney with Mayer Brown, one of the city’s largest law firms, against her, and said voters should be troubled by its work defending wealthy business interests.
Lightfoot, who in 2016 donated $1K to Preckwinkle’s county board campaign, retorted that one of her law partners recently gave Preckwinkle a $2,500 donation.
“If it troubles you so much, give the money back,” she said.
The remarkable number of similarities between the two has left real estate professionals scratching their heads over whom to support.
“It would have been great to have someone like Daley, but Preckwinkle has been the head of the county board for years, and handled projects like the renovation of the former Cook County Hospital, so she knows how to keep things moving,” he said.
Still, he liked Lightfoot’s background as a corporate attorney, and worried Preckwinkle, a former school teacher, receives so much funding from labor unions that she wouldn’t support the city’s business community.
That’s why, after providing huge sums to buoy Daley’s campaign, the real estate industry has decided to adopt a wait-and-see attitude, he said.
“A lot of the money is staying on the sidelines.”