Mayor Rahm Emanuel has lightened the load of a financial albatross — saving taxpayers $4.25 million — by refinancing $72.8 million in debt used to purchase the former Michael Reese Hospital site for an Olympic Village that was never built.
Shortly after taking office, Emanuel refinanced the Michael Reese debt to save $14.5 million. A fixed interest rate of 7.5 percent was reduced to 5.95 percent.
On Feb. 9, City Hall reduced the burden again by prepaying the outstanding promissory note with MRL Financing LLC and refinancing the debt with PNC Bank N.A. at a fixed interest rate of 3.55 percent.
That will reduce the principal and interest that still must be paid by Chicago taxpayers from $120.7 million to $116.5 million. That’s a savings of $4.25 million. The maturity date remains June 30, 2024.
“This was a legacy liability purchased by the previous administration. . . . The mayor has said . . . he’s gonna do everything in his power to identify savings and mitigate the impact to taxpayers and this is a critical step in that,” said Molly Poppe, a spokesperson for the city’s Office of Budget and Management.
“A fixed rate of 3.55 percent — down from nearly 6 percent — that’s a good savings for the city and a good savings for taxpayers. Saving $4.25 million is a good savings,” Poppe said.
Civic Federation President Laurence Msall credited Emanuel with making the best of a bad situation.
“While it is unfortunate that Chicago taxpayers are on the hook to the tune of hundreds of millions of dollars for a site that continues to go unused, refinancing to save money is a positive step. The $4.25 million in savings can be used to fund other critical City priorities,” Msall said.
On the day the City Council’s Finance Committee authorized the refinancing, Ald. Patrick Daley Thompson (11th), whose uncle engineered the land deal, noted that the anticipated, $4.25 million in savings on a property Chicago has owned for nine years is “not a tremendous amount.”
He added, “Hopefully, we get RFP’s and we sell it.”
Last year, the Emanuel administration issued a request for proposals from developers interested in building “one or more” commercial, institutional, residential and recreational projects on the Reese site.
On Wednesday, the deadline for the RFP closed for the 49-acre site. It was not known precisely how many bidding teams responded to the RFP. A developer is expected to be chosen on April 6.
To make the site more attractive to developers, the Emanuel administration disclosed that it would consider incorporating 28 acres of air rights directly east of the hospital site. The land below is owned by McCormick Place and used as a “marshalling yard” to stage trucks and other vehicles servicing conventions and trade shows.
Speculation abounds that at least a portion of the site bounded by 26th Street, Martin Luther King Drive, 31st Street and the Illinois Central railroad trucks may someday house a Chicago casino.
But not if local Ald. Sophia King (4th) can help it.
Calling the site the “best real estate left in the city,” King envisions a vibrant mixed-use development filled with residential, retail and recreational space that celebrates Bronzeville’s rich cultural history.
“I’d love to see a boardwalk overlooking the lake. Maybe another bridge across there. Dog parks, parks, residences, great restaurants,” King said.
“A casino would suck the life out of all of that. . . . Casinos have a deleterious effect. You may get money from taxes. But restaurants don’t want to locate there,” she said. “Other businesses don’t want to locate there. People don’t want to live there. They siphon off the vitality and vibrancy of a community.”
In 2008, former Mayor Richard M. Daley rolled the dice that a depressed real estate market would come roaring back to further his dream of hosting the 2016 Summer Olympic Games. Chicago borrowed $85 million to purchase the Reese campus to pave the way for construction of an Olympic Village.
The price rose to $91 million after the city’s stunning first-round knockout in the 2016 Summer Olympic sweepstakes.
When the property was not unloaded to private developers within five years, the price rose to $96 million and the city was forced to start making payments on the loan.
At the time, Chicago taxpayers were assured there was no chance of that happening.
Top mayoral aides were certain Chicago would win the Olympic sweepstakes. And even if the city didn’t win, they were certain the valuable land would be gobbled up by developers.
Daley and his team turned out to be dead wrong on both counts. Rio de Janeiro won the 2016 Summer Olympic Games. And the Michael Reese property — cleared of all buildings except the 72,800 square-foot Singer Pavilion — has sat stubbornly vacant.
That has forced Emanuel to make payments on the loan.
Last year, Emanuel used $35 million in proceeds from a $1.1 billion borrowing to make the city’s 2015 payment on the Michael Reese loan. Since then, quarterly loan payments have been made from the city’s operating budget.
If the city can’t find a development team soon, Chicago taxpayers will ultimately pay $50 million in interest on the $91 million borrowing.