Navy Pier's private operator exempt from public records law

Written By Tim Novak Posted: 06/23/2014, 12:51am

Chicago’s Navy Pier — touted as the biggest tourist attraction in Illinois — has long been a patronage haven where political insiders turned for jobs and lucrative deals to sell everything from expensive meals to gumballs.

Who was cashing in used to be a matter of public record. It no longer is, since the state of Illinois and City Hall turned over operation of the government-owned pier to a private, not-for-profit group three years ago for $1-a-year rent.

Navy Pier Inc. doesn’t have to explain how it’s spending $115 million in government bonds that were sold to pay for a face-lift for the 98-year-old pier, either.

But secrecy wasn’t the aim, says James Reilly, chief executive officer of the Metropolitan Pier and Exposition Authority, the government agency known as McPier that directly oversaw Navy Pier’s operation before turning it over to the private group.

“The notion that this was done to hide something is just wrong,” says Reilly, who struck the lease deal that gave Navy Pier Inc. control of the government-owned property for at least 25 years — and as long as 105 years — after the Illinois Legislature gave him sole authority for 18 months over Navy Pier and McCormick Place.

“It got the pier out of politics,” Reilly says of the move. “There’s a lot less patronage.”

Under the new regime, though, any records to back that up are no longer available to the public, as they were under McPier’s direct control of the pier.

Related stories:  Big salaries, bonuses for some Navy Pier top staff

Tourism agency won’t say how it spends government millions

And despite Reilly’s assertion, former Mayor Richard M. Daley’s handprints are all over Navy Pier Inc. Five months before Daley left office in May 2011, his former chief of staff John Schmidt incorporated Navy Pier Inc. The deal for NPI to take over control and governance of the pier was signed a month before Daley departed City Hall, taking effect in July 2011. Also, NPI’s board includes Daley’s daughter, his former campaign manager, two of his former chiefs of staff, his onetime top City Hall lawyer and civic leaders who were longtime Daley supporters.

Navy Pier Inc. won’t say who its employees are or what they’re paid, though many previously worked for McPier.

Documents NPI filed with the Internal Revenue Service show the not-or-profit has four employees making higher pay than Gov. Pat Quinn, who appoints half the members of the McPier board.

Top employees have gotten big raises — in addition to bonuses as high as $37,500 — since Navy Pier Inc. took over, the records show. Among them is the son of Daley’s longtime political adviser Tim Degnan.

Says William Brodsky, the Chicago Board Options Exchange executive board chairman who also chairs Navy Pier Inc.: “My goal is to make sure these people are compensated fairly. I have no qualms about the way we’re compensating people.”

Beside a roster of pier employees and salaries, Brodsky also declined to make public contracts that Navy Pier Inc. has signed with restaurants and other vendors — all public information before his group took over in July 2011. 

“I don’t know if we want to create the precedent in giving these things out,” Brodsky says. “I want to operate this as a business. We are not a public entity in the true sense. We’re more like the Museum of Science and Industry or the Lincoln Park Zoo,” both run by not-for-profit organizations.

In 2012, Navy Pier Inc. had $42.6 million in revenue and $38.9 million in spending, including $2.8 million for salaries, according to an audit Reilly provided.

NPI didn’t respond to a Chicago Sun-Times request, made last fall under the Illinois Freedom of Information Act, seeking information on employees, contracts and leases. 

The newspaper appealed to Illinois Attorney General Lisa Madigan, whose father, House Speaker Michael J. Madigan, D-Chicago, sponsored the legislation for the pier’s privatization. Months after being asked to order the documents released, the attorney general issued an opinion June 4 saying the “use of public funds to rehabilitate Navy Pier and to make payments to [the McPier Authority] from operating revenue is not sufficient to make NPI a public body subject to the requirements of FOIA.”

She said reporters were free to seek the records from the city-state government agency McPier, “a public body . . . required to respond to FOIA requests for records relating to work performed by NPI in operating and redeveloping Navy Pier.”

But Reilly, who also sits on the board of Navy Pier Inc., says McPier doesn’t have any of those records — including any documents regarding work by minority-owned or women-owned companies on the Navy Pier makeover involving government bonds issued by McPier.

On Friday, the Better Government Association, which also was denied Navy Pier Inc. records, filed suit against McPier and NPI in Cook County circuit court to get them. The watchdog group argues the not-for-profit agency was created to shield pier operations from public view.

The Illinois Legislature created McPier in 1989, following the success of the annual ChicagoFest music festival at the pier. Legislators formed McPier to manage McCormick Place, with its huge convention business, and to turn Navy Pier into a family entertainment destination, which opened in 1995.

Political insiders have been cashing in ever since. Over the past decade, the Sun-Times has reported that:

◆ Jimmy Buffett’s Margaritaville hired Daley’s nephew Mark Vanecko to get a city liquor license for its restaurant on the pier.

◆ A son of longtime Daley adviser Jeremiah Joyce got a lease to open a Haagen Dazs ice cream shop.

◆ A city sewer inspector got a deal to operate a giant gumball machine that made $700 a month.

Four years ago, as part of legislation to change union work rules at McCormick Place, the Illinois General Assembly, led by Speaker Madigan, directed Reilly to find private operators for McCormick Place and Navy Pier.

Quinn issued an amendatory veto of the bill, saying he wanted to make sure that Reilly followed state purchasing rules. Legislators overruled him, leaving the new privatization law intact.

Reilly decided to hire a private company to run McCormick Place under contract with McPier. He sought competitive bids and hired SMG, which started out managing the Louisiana Superdome and now runs Soldier Field and other facilities worldwide.

At the pier, he went a different route. Rather than contracting with a private operator, Reilly put the pier under the sole authority and governance of the newly created, not-for-profit Navy Pier Inc. and taking direct control away from the McPier board appointed by the governor and the mayor. He didn’t seek proposals from anyone besides NPI.

The law required Reilly “to enter into an agreement with a contractor or private manager to operate the buildings and facilities of the authority, provided that the agreement is procured using a request for proposal process.” Reilly says that part of the law didn’t apply to Navy Pier.

As a result of Reilly’s moves, McCormick Place remains subject to the state’s open records laws, and Navy Pier does not.

“We could have brought in private management, like we did at McCormick Place, but a not-for-profit seemed better,” Reilly says of Navy Pier. “You want people who really care about the pier.”

One difference between the new setups at McCormick Place and the pier: Beside getting public funding for the rehabiltation work, Navy Pier Inc. also was supposed to raise private donations. It hasn’t done that.

Reilly’s decisions were laid out Dec. 30, 2010, in a report to Quinn and legislators. Four days later, Schmidt incorporated Navy Pier Inc. The day after that, on Jan. 5, 2011, Reilly announced Navy Pier Inc. would operate the pier.

Schmidt — who was Daley’s first chief of staff, in 1989 — served on the McPier board that renovated Navy Pier in the early 1990s. He also helped Daley negotiate the $1.8 billion lease of the Chicago Skyway.

Schmidt is one of NPI’s board members. Others include: Daley’s daughter Nora Daley Conroy; his former campaign chairman Terry Peterson; another former chief of staff, Roger Kiley Jr.; and former top City Hall lawyer Kelly Welsh.

Welsh was McPier’s chairman and former Gov. George Ryan’s close adviser Scott Fawell was executive director when many of Navy Pier’s insider deals were cut.

Kiley, McPier’s longtime Springfield lobbyist, testified at the corruption trial that sent Ryan to prison, saying Fawell pressured him to hire Ryan friend Arthur “Ron” Swanson, a former state legislator, to lobby for McPier. Kiley said his law firm billed McPier $60,000 for Swanson, though he did little or no work. 

Daley appointed Kiley to the McPier board in 2010. Two years ago, Mayor Rahm Emanuel appointed him to the re-formed McPier board.

An Emanuel spokesman says: “Roger Kiley Jr. has demonstrated his commitment to Chicago time and again in a number of civic and philanthropic roles, and his knowledge, experience and expertise contributes to the success of MPEA.”



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