Rahm’s trust a bust? Fails to raise a dime but has cost taxpayers $5M

Since the J. Geils Band left the stage on Dec. 19, 1981, Chicago’s fabled Uptown Theatre has remained dark, waiting for someone with deep pockets to pay for a massive renovation.

Jerry Mickelson, the legendary concert promoter who owns the theater, thought he’d found an angel: the Chicago Infrastructure Trust, a not-for-profit agency Mayor Rahm Emanuel created with great fanfare five years ago to find private investors willing to bankroll public improvement projects.

Three years ago, Mickelson struck a deal to give up ownership of the Uptown as part of a $125 million plan to restore the cavernous theater to its original opulence — a proposal to be partially financed with a $10 million grant from the state of Illinois and $5 million from the city of Chicago.

But Gov. Bruce Rauner put the kibosh on a number of state grants, including the Uptown deal, which had been shepherded through the Illinois Legislature by Senate President John Cullerton, a partner in a law firm that Mickelson uses to challenge the property taxes on the padlocked theater.

Then, City Hall pulled the plug on the project, scrapping the signed deal with Mickelson and also dumping the trust’s chief executive officer and replacing its entire staff.

Mickelson says he still dreams of reopening the theater under a scaled-down rehabilitation plan that’s awaiting approval — and some taxpayer money — from City Hall. The plan still has it as the center of an entertainment district with the Riviera Theatre and the Aragon Ballroom, an idea Emanuel has publicly embraced.

But if the Uptown ever reopens, it will be without the Chicago Infrastructure Trust playing any role in the production, according to City Hall.

The Uptown Theatre could have been the signature achievement of the grand plans Emanuel announced five years ago, with former President Bill Clinton’s endorsement, to persuade private investors to bankroll billions of dollars in public works projects across the city.

The bold idea was that private financing could be found for much-needed, big-ticket improvements for the city, making it possible to get more of them done sooner and sparing taxpayers from having to foot the bills. City Hall says that still can happen.

But the infrastructure trust has fallen short of the expectations the mayor laid out. It has yet to raise a dime in private financing for a single public works project, records show. At the same time, it has cost Chicago taxpayers more than $5.1 million to pay for its handful of employees, offices on Wacker Drive, consulting fees and other expenses.

Rather than disband his taxpayer-funded not-for-profit after failing to attract the private investors Emanuel said it would, the mayor shifted course, changing its mission after the Uptown deal fell apart two years ago. He handed it procurement and management tasks — work that otherwise would be handled by city agencies or the Chicago Public Building Commission, which is headed by the mayor. Now, the trust has been cut in on specific city projects.

Officials say the infrastructure trust helped pick a contractor to upgrade Chicago’s 278,000 streetlights. The city’s Department of Transportation has most of the responsibility for that work, though. The transportation department signed the contract, determines the schedule for replacing the lights and pays the bills.

The trust also has taken part in the process of selecting contractors to build Emanuel’s planned $95 million training academy on the West Side for police officers and firefighters, as well as having a role in the relocation and construction of facilities to repair the city’s fleet of trucks.

All are jobs that might otherwise have been done by the Chicago Public Building Commission, which has built Chicago’s police stations, firehouses and schools. And while the trust is helping to select the contractors, the designs of those facilities will be determined by the agencies that will use them, not by the trust or its handful of employees.

A top city official, who spoke only on the condition of anonymity, wonders why the mayor hasn’t shut down the trust.

“There’s no excuse for the mayor to avoid closing down this thing that’s been a complete failure,” the official said. “They’ve done nothing that can’t be done by [the Department of Fleet and Facilities Management] or the Public Building Commission.”

Other current and former officials say the trust still provides benefits to the city.

“You’ve got to take a step back and think about why the mayor wanted to set this up,” Emanuel’s former deputy mayor, Steve Koch, said in an interview on his last day in office this summer. “There were some growing pains. It’s a start-up. . . It works effectively across city departments. It can work with sister agencies. And we get the benefit of having an outside board that gives good advice without engaging a lot of expensive experts.”

The agency’s five-member staff is overseen by a seven-member board headed by Emanuel’s appointed city treasurer, Kurt Summers. The board includes Ald. Matt O’Shea (19th), four business leaders and Jorge Ramirez, president of the Chicago Federation of Labor, which is an investor in the Chicago Sun-Times. There’s also a four-member advisory board that includes Ald. Michael Scott Jr. (24th).

Insiders who have been involved with the trust say that some investors were leery of investing in a not-for-profit to fund city projects, rather than funding them by buying municipal bonds issued by the city, which are exempt from taxes and whose repayment is guaranteed by Chicago taxpayers.

Investors might also have been skeptical as a result of the criticism that City Hall took after the Daley administration signed long-term leases with private companies to operate parking meters and the Chicago Skyway, which cost the city long-term while providing a short-term boost to the budget — and hit drivers with sharp increases in parking fees and tolls.

Emanuel had been in office less than a year when he announced the creation of the trust amid fanfare in March 2012 at a news conference with Clinton, his former boss. This trust would tap a pool of wealthy investors to fund infrastructure projects that would create 30,000 jobs within three years, Emanuel told The New York Times.

The mayor rattled off a host of ideas the trust might pay for, among them renovating 100 CTA stations, adding 180 acres of parkland and replacing or repairing miles of leaky water mains.

“The Chicago Infrastructure Trust will bring additional resources to stimulate public and private investment in our infrastructure, create thousands of jobs for Chicagoans and ensure that our residents have a world-class quality of life,” Emanuel said.

It took City Hall nearly a year to find someone to run the agency — Stephen Beitler, a venture capitalist who had served as a lieutenant colonel with the U.S. Army’s Special Forces. Under Beitler, the trust took over the project the Public Building Commission had begun to install new lights, windows and other energy-efficient projects at City Hall and in 59 other buildings, including police stations and libraries.

The trust financed the work with a $12.2 million loan from Bank of America. The 15-year loan is being repaid with money City Hall says it’s saving through lower energy bills. The city says it’s saved $2.3 million so far.

Beitler’s team also helped the CTA study financing options for installation of 4G cellphone service in the subways — a project that cost the transit agency $28 million, about 90 percent of which has been reimbursed by cellular companies, according to the CTA.

The CTA paid the trust $200,000 for its work, and the state gave the trust $195,000 for the energy efficiency program — the only payments the trust has received so far outside of the money from City Hall.

By 2015, Beitler and his team had as many as 200 ideas on the drawing board. Among them: expansion of the CTA Red Line. Redevelopment of city-owned vacant land. Energy-efficient streetlights. An express train to O’Hare Airport.

But the most glamorous project was the proposed restoration of the Uptown Theatre, a Roaring ’20s gem owned by Mickelson, co-owner of Jam Productions, which brought in musical acts like the Grateful Dead, Bruce Springsteen and Prince to play the 4,381-seat venue.

The Uptown closed after a Jam-produced concert by the J. Geils Band 36 years ago because it needed repairs. It never reopened, falling further into decline. Chandeliers and other lighting fixtures went missing. There’s water damage from pipes bursting when the heat was turned off three winters ago.

Mickelson bought the theater at a court-ordered sale in 2008 for about $2.1 million, according to documents his lawyer Patrick Cullerton, the Senate president’s brother, has filed with the Cook County assessor’s office seeking a tax break.

Mickelson, the city’s best-known concert promoter, has spent years trying to revive the grand theater, which is on the National Register of Historic Places.

He struck a deal to sell the theater to Emanuel’s trust for $5.6 million, according to a contract signed Jan. 30, 2015. It gave Beitler several months to evaluate the theater and the proposed restoration, whose price tag reached $125 million.

Under the trust’s plan, Jam would again stage concerts at the theater. But to make the project viable, Beitler’s team also wanted more going on there, including a giant, moveable IMAX screen showing movies on days without live entertainment. Seven movie theaters, each seating 42 to 104 patrons, would open in the basement of the seven-level theater. And a rooftop deck would be added.

For months, Emanuel’s trust worked with architects and contractors, while seeking financing from a variety of sources — a bank loan, tax credits, crowd-funding, tax-increment financing money from City Hall, a state grant and the federal government’s EB-5 program, which gives permanent visas to foreigners for investing in economic development projects that create jobs in the United States.

Five days after signing the contract, Mickelson emailed Lori Healey, who was then president of Tur Partners, a Chicago firm headed by former Mayor Richard M. Daley that has federal approval to raise money from foreign investors under the EB-5 program, about financing the Uptown renovation. Healey, who now runs the Metropolitan Pier and Exposition Authority, the government agency that owns McCormick Place, says she never discussed the project with the trust.

By the spring of 2015, Rauner had blocked John Cullerton’s $10 million grant for the Uptown.

AP

The Senate president declined to discuss the grant. And his staff refused to release any emails or correspondence he had with Mickelson or his law partner and brother, who has been the Uptown’s property-tax lawyer for years.

“The information you seek is protected by legislative immunity,” according to a letter from Cullerton’s office.

Three months after Rauner’s action, Mickelson emailed Emanuel on May 6, 2015, appealing for money, according to city records.

“Steve Beitler told me he can get $45 M from EB-5,” he wrote. “With at least another $45 M from other sources there appears to be a minimum of $90 M available for the Uptown Theatre restoration. In order to secure the New Market Tax Credits this year Steve needs to submit full architectural renderings and accurate restoration cost estimates with his application before the allocation is no longer available. He needs at least $5 million immediately in order to pay for the renderings and cost analysis.”

It’s unclear whether Emanuel responded. But the city never came up with the money. And Koch, then deputy mayor, began questioning the cost of the project, emails obtained from City Hall through a public records request show.

By July 2015, City Hall announced that attorney Leslie Darling, a top assistant in the city’s law department, would replace Beitler. The trust’s staff also was replaced. New board members were appointed.

And Darling, whose salary as executive director is $175,000 a year, canceled the contract to purchase the Uptown, according to a letter she sent Mickelson on Nov. 18, 2015.

Summers said the Uptown Theatre was one of several projects he and the new board canceled.

“I had a concern coming in that a number of projects in the pipeline were all over the place, and there was no common theme,” Summers said. “Does this fit with our purpose? Do we have the expertise? . . . Questions like that made us cease several projects.”

Today, City Hall says the trust is helping with five city projects:

• The Home Buyer Assistance Program, which gives grants for down payments or closing costs. The program has doled out 169 grants ranging from $2,503 to $25,020, a total of more than $1.38 million, all funded by City Hall, to homeowners who have borrowed a total of $24.3 million from approved lenders. The trust doesn’t handle the applications. The lenders determine who’s eligible.

• The Smart Lighting Project, operated by the city’s transportation department to replace 278,000 sodium lamps that light the city’s streets, alleys and parks with LED bulbs under a $150 million contract with Ameresco. So far, 12,400 lights have been replaced. The trust helped solicit bidders. The contract is now the subject of a federal lawsuit. Neptun Light of Lake Forest sued last month, accusing the city, the trust and Ameresco of skewing the bidding process to favor bulbs made by General Electric. Darling declined to talk about the suit.

• Construction of truck-repair facilities for the Department of Fleet and Facilities Management, which will vacate a massive warehouse on Goose Island so the city can sell the property to developer Sterling Bay Co. for $104.7 million. The trust helped select AECOM, which will work with city officials to design a 155,000-square-foot shop at 210 W. 69th St., a 31,000-square-foot shop at 4241 N. Neenah and a 2,500-square-foot fueling station on Goose Island.

• The training academy for police officers and firefighters on 30 acres at 4301 W. Chicago, which City Hall has agreed to buy for $9.6 million from a company whose owners have contributed $11,000 to Emanuel’s campaign fund. The trust is working with the fleet and facilities management, fire and police departments to pick a developer to design and build the academy, estimated to cost $95 million.

• The O’Hare Express, a long-discussed idea for a high-speed rail between the airport and the Loop. The trust and City Hall are soliciting proposals to finance and run a system that could make the trip in no more than 20 minutes and charge riders less than the price of a cab or ride-sharing company.

If the city finds someone to build, finance and operate the O’Hare Express, that would be the only project that would fulfill the mayor’s vision of having private investors bankroll a public works project.

Still, Summers said of the projects, “These things wouldn’t have gotten done without the infrastructure trust,” pointing out that officials had been talking about upgrading streetlights for 15 years.

At a meeting earlier this month of the trust’s board, one member asked how the staff’s five employees could oversee all of these projects. George Marquisos, the trust’s managing director, replied: “These are not [trust] projects. These are city projects. We are program managers. Not everything is done by our hands.”

As for the Uptown Theatre, Mickelson is now working with Farpoint, a development company founded by Scott Goodman, a former partner in Sterling Bay. Mickelson and Goodman have submitted an application to the city Department of Planning and Development that asks for city funding from the Lawrence/Broadway tax-increment financing district. Mickelson won’t say how much money they are seeking, and City Hall won’t release the pending application.

Mickelson said the latest renovation proposal would cost as much as $70 million.

“Some of that will depend on how much money we can cobble together,” he said, pointing out that taxpayers have helped fund the renovation of other theaters, including the Chicago Theatre in the Loop.

“I’d like to get this going as soon as possible,” Mickelson said. “We have to have other sources nailed down.