Friday, May 18, 2012

Chicago’s River Point Office Tower – Another Block 37 TIF Debacle?

May 16, 2012, Mayor Rahm Emanuel announced a tax increment financing grant of $29 million to Hines Interests Limited Partnership for construction of a 45 story, 850,000 square foot, $300 million office tower to be called River Point, at 444 West Lake Street. The proposed office building qualifies for TIF financing because it is a “redevelopment” of blighted riverfront land west of the banks of the Chicago River where the main branch splits into the South Branch and the North Branch. The property Hines owns lies east of Canal Street and west of the Milwaukee Road commuter tracks leading north from Union Station to Elgin and Big Timber, Antioch, and Fox Lake, directly along the riverbank. Views from the proposed tower would look west across the cityscape and east at the Apparel Mart and Merchandise Mart.

Hines has previously announced construction of a 50 story office tower on this site, and when two major tenants withdrew from that project, scaled back the concept to a 40 story building. The current 45 story proposal is designed to have 26,000 square foot floor plates, a 170 car parking garage, white tablecloth restaurant, fitness center, conference center, and a 3,600 square foot pavilion on the east side of the Hines property. The TIF money, plus another $30 million from Hines, will go toward construction of a grassy park to be located on air rights above the Milwaukee Road commuter tracks.

In announcing the new concept, Mayor Emanuel touted tax revenues from the to be developed property, plus creation of 1,000 construction jobs. He says the Hines determination to proceed with new office construction in the West Loop neighborhood signals business confidence in the competency of his administration to meet the city’s financial problems head on. “Of you do the fundamentals right people will bet on the leadership that a city is showing, not running away from its future. Denial, as I’ve always said, is not a long term strategy, but meeting its challenges head on. Confidence is the cheapest stimulus you can but. It’s free.”

Before the new mayor gets too big for his britches in the confidence department, he should look back over the city’s history in redeveloping blighted loop property and building grassy parks above commuter rail lines.  It took decades and a baker’s dozen failed redevelopment proposals before Block 37, directly across from the Daley Center in the heart of the loop, could be redeveloped with anything economically viable, and even now parts of that commercial redevelopment are struggling to make a profit. And the now complete Millennium Park, which started out as a grassy field on top of lakefront METRA Electric commuter tracks, could be made into what it is today, there was an infusion of $250 million donated by then cash flush Chicago businesses and rich citizens. Even so, Millennium Park went more than $33 million over budget, even without counting the millions in legal fees consumed in litigation over design, engineering and fabrication errors on the project.

Finally, Mayor Emanuel needs only look eastward down the main branch of the Chicago River from the proposed development site to see the concrete skeleton of the incomplete Shangri La Hotel standing 27 stories above the south riverbank where work stopped altogether three years ago because the project could not be financed.  How many unfinished high rise towers does Chicago’s skyline need?

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