Taxation pause gives Magnificent Mile backers time to talk

“What we’ve got here is failure to communicate.”

Wisdom from “Cool Hand Luke” usually doesn’t have an obvious tie-in to the issues facing Chicago, but that famous line seems apt for the tangled situation involving the mayor, two aldermen, the Magnificent Mile Association, some of its members and whether to apply a special tax to help North Michigan Avenue retailers recover from sundry ailments.

That glittering street of credit-fueled dreams contains some of Chicago’s most visible scars from the pandemic and civil unrest dating from the warm weather. Retail vacancies, once drum-tight on the Mag Mile, are now about 20% and due to go higher, the association said, with Macy’s threatening to leave Water Tower Place and the Gap expected to depart at the end of January.

Foot traffic is a fraction of pre-pandemic normalcy. Combine that with closed stores and recent violence and you get a sense the street isn’t safe anymore. So the Mag Mile Association got Mayor Lori Lightfoot to support a new taxing district to pay for needs that include security, beautification and marketing.

Usually, when well-heeled citizens petition government to tax themselves for a lawful and civic-minded service, the political response is, “Be our guest,” provided there are safeguards to ensure nothing goes awry.

It’s a common scheme in Chicago to do what the Mag Mile group wants, to create a Special Service Area with community-recommended but mayoral-approved appointees to oversee the spending. There are more than 50 such SSAs throughout Chicago for the benefit of commercial districts.

But this one got held up in a City Council committee when the aldermen whose wards touch North Michigan Avenue blocked it. Lightfoot fired back, calling it “aldermanic prerogative at its worst,” referring to the tradition of aldermen having veto power over matters in their wards. The practice can get a bum rap, though. The “prerogateurs” here were Brian Hopkins (2^nd) and Brendan Reilly (42^nd).

Calling a timeout on special taxation may have helped. As the Mag Mile leadership considers how to revive the street, it’ll have to confront a difficult prospect: The avenue might never be the same.

It has prospered for decades on the desire of stores, especially high-end labels, to pay premium rents for space it can build into a flagship for the chain. Jacqueline Hayes, a longtime broker for retail space, said the pandemic and the trend toward online shopping have rendered some marquee-type, multi-level stores obsolete.

“Some of these spaces are almost worthless as a flagship,” said Hayes, a board member for the Mag Mile association. “There is far too much retail space everywhere in the city.”

It’s a bracing thought for city planners and developers who favor activity along the street frontage and continuously approve residential high-rises with ground-floor retail exposure, hoping for enough coffee shops and dry cleaners to fill them.

Also, the Mag Mile association, like many trade groups, might have been talking for their members more than they talked to them. There was doubt about the level of support among commercial property owners who would have to pay the tax, estimated to raise $740,000 in its first year.

Hopkins said the association identified 69% of property owners as being in favor of or neutral about the tax, but the extent of neutrality was never clear. “We need affirmative statements of support,” he said.

A source involved with the association said owners of the three large shopping malls — Water Tower Place, 900 N. Michigan and the Shops at North Bridge — backed the plan late in the game. An influential voice for office owners, the Building Owners and Managers Association of Chicago, said it dropped its opposition after boundaries of the SSA were adjusted.

Kimberly Bares, president of the Mag Mile association, declined an interview but sent a statement promising continued work on the issue.

“Some comments seemed to characterize the SSA process to-date as rushed and flawed. We believe it is a swift and nimble response to a singular, supremely challenging moment in time at which Michigan Avenue and the city of Chicago face ongoing ramifications from the twin forces of the pandemic and civil unrest,” she said, citing “overwhelming support for this tax.”

Hopkins agreed the avenue needs support but the SSA idea blindsided property owners not locally based. The plan would not have taxed homeowners, but there was confusion about that as well, he said. The alderman said the deficit-plagued city perhaps should find a way to directly support the vital shopping district. He said $740,000 “is like a rounding error in the city budget.”

The late political analyst Paul Green used to tell his students that local politics boils down to two questions: Who pays, and who gets? It’s an applied lesson in communications.