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For the Record: TIFs and schools

Activists led by a group called Teachers Solidarity Campaign have scheduled a Wednesday protest at the construction site in Hyde Park where a new Hyatt Place hotel is being built—and has become a symbol of anti-TIF sentiment aimed at Board of Education member Penny Pritzker.

The group echoes a commonly-heard anti-TIF refrain: that tax-increment financing districts siphon money from schools and other government agencies and are slush funds for rich developers. (In TIF districts, tax revenue for local government entities is frozen and any incremental increases in revenue are instead used for projects to spur economic development.)

Activists have been especially incensed by the 53rd Street TIF because Pritzker’s family owns Hyatt Hotels. At the end of the July board meeting, Pritzker, aware of the controversy, noted that “neither I nor Hyatt received any TIF money.”

According to the 53rd Street TIF plan, $5.2 million is going to Hyatt Place’s developer: Smart Hotels LLC and Olympia Companies, which specialize in building hotels linked to universities, in this case the University of Chicago.

The entire hotel complex, with a fitness center and restaurants, will cost $28.5 million to build.

The hotel “will be operated by The Olympia Companies as a Hyatt Place hotel under a franchise agreement with an affiliate of Hyatt. Hyatt does not own any stake in the hotel or the project,” said Farley Kern, vice president of corporate communications at Hyatt.

TIF experts explain that it is the developer who benefits from a TIF.

Still, David Orlinkoff from the Teachers Solidarity Campaign says that Pritzker, as a shareholder in Hyatt, will profit indirectly from the TIF. He notes that the TIF might not have been provided had the University of Chicago and Hyatt not had their names involved. He also says these profitable entities have the funds to build a hotel themselves and should not be subsidized.

He adds that Smart Hotels and Olympia Companies are selling bonds to finance the project and the public doesn’t have access to information on who is buying the bonds. “For all we know it could be Penny Pritzker,” Orlinkoff says.

He adds, “We are not waging a campaign against a particular TIF in Hyde Park, but instead a campaign to change the system that allows this to happen.”

 

 

4 comments

The People are Watching wrote 2 years 7 weeks ago

Once again Corporate greed

Once again Corporate greed and All we here is "Everything is for the Kids" Except this TIF money that could provide school libraries for kids to read an extra 15-30 minutes which research says would increase a students reading and comprehension levels. Or safe and drug free playgrounds for recess or a COMPUTER LAB w/NEW computers. Instead more beanies for the 1%. The sad thing is they play on the illiterate and lazy citizens that are not educated or attuned to the blatant conflict of interest and fraud. Opps the HYATT is for the U of C college students that in return will occupy and use their GOV. approved school loan for college residency. ALL TIF money should go directly into the CPS building/academic funds.

Jeremy Peters wrote 2 years 7 weeks ago

Thank you Sarah

Way to report on this issue! TIF's are the symbol of everything that's dishonest, corrupt and immoral about city government, an implicated county and complacent state government.

Don wrote 2 years 7 weeks ago

So it seems that

no one is actually going to do an analysis to form an opinion as to whether this investment by the city is justifiable.
Why don't we just assume that billionaire Penny set this all up to skim a couple hundred $K for herself?
I have no doubt that some TIF project funding has been inappropriate - this is Chicago after all. But I also don't doubt that the economy to tax is larger due to TIF infrastructure investment.
A belief that all those dollars could have been magically transferred to education is fantasy.

David Orlikoff wrote 2 years 6 weeks ago

On behalf of the Chicago

On behalf of the Chicago Teachers Solidarity Campaign, I want to set the record straight about how Hyatt corporation and billionaire Penny Pritzker directly benefit from the $5.2 million TIF property tax subsidy for the private development of the Hyatt Place hotel at 53rd Street. Hyatt hotels Communications VP Farley Kern made a number of misleading statements distancing Hyatt from the TIF.

That Hyatt is not itself receiving the TIF funds or constructing the hotel is irrelevant as it stands to gain a free addition to its hotel fleet. Hyatt's standard franchise agreement states that they must be paid a 'Royalty Fee' based on gross room revenue in addition to a slew of other charges. Starting at 3% the first year, the Royalty Fee increases to 5% by the third year, when the project's TIF scorecard forecasts gross room revenue at $5,562,743. That amounts to $278,137 annually profiting Hyatt corp. directly from the hotel built with $5.2 million in TIF property tax dollars diverted from neighborhood schools and other public services.

This fruitful and free investment will also likely yield capital gains for Hyatt corp. and the Pritzker family that owns and controls it. What's most disturbing is how Penny Pritzker, who sits on the boards of both Hyatt and CPS, simultaneously slashes $3.4 million and 27 positions from 7 neighborhood schools in the 53rd Street TIF district in her proposed CPS 2013 budget, while personally benefiting from the private use of property tax dollars that would otherwise go to those same schools. The CTSC calls for Penny Pritzker to step down from the Chicago Board of Education she was appointed to by Mayor Rahm Emanuel because she has proven unable to secure funding for CPS due to a conflict of interest. Chicago must have an elected representative school board to stand up to the mayor and end the failed TIF programs that are robbing CPS of over $250 million a year.

Franchise agreement: http://agreements.realdealdocs.com/Franchise-Agreement/FRANCHISE-AGREEME...
TIF scorecard: http://www.cityofchicago.org/dam/city/depts/dcd/tif/T_105_HarperCourtHya...

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