Wednesday, October 7, 2009
Politics / Clout City / News Jobs at what price? How about $14,356 apiece?
Posted by Mick Dumke on Wed, Oct 7, 2009 at 11:25 AM
UPDATE: The United deal passed unanimously without debate. Finance committee chair Ed Burke said, "The net effect on the Chicago economy will be tremendous over the next ten years, and this represents an ongoing commitment from United Airlines to its hometown.”
Now that the City Council's Committee on Finance has given its consent, the full council will probably vote tomorrow to approve a deal giving United Airlines $35.4 million in taxpayer-funded subsidies to move its corporate operational headquarters, along with at least 2,500 jobs, into the Willis Tower. That works out to about $14,356 per job.
This money comes on top of $15.4 million in assistance the city gave United just two years ago to move its corporate headquarters and at least 325 jobs from Elk Grove Village to 77 W. Wacker.
City officials say United's presence in the Loop will produce tens of millions of dollars more in economic benefits than these initial public outlays, most of which are drawn from tax increment financing accounts.
Under the terms of the agreement, the company is required to keep those latest 2,500 jobs downtown until at least 2021. But the city's record of monitoring this kind of agreement isn't very impressive. As Ben Joravsky and I reported earlier this year, the city appeared to do next to nothing to ensure that Republic Windows and Doors was complying with the terms of its 1996 and 2006 TIF agreements in return for receiving $10 million in taxpayer-funded subsidies.
The Republic fiasco was a big reason aldermen Manny Flores and Scott Waguespack got the council to pass a TIF sunshine ordinance last April requiring the online publication of all TIF agreements and "supporting documents," including those produced during the oversight and monitoring process.
Since then, observers have noted that the city's response leaves a lot to be desired. In fact, it may not even comply with the law. For example, there are no documents showing what if anything the city has done to see that United has been meeting the terms of its 2007 agreement. Of course, there's little documentation showing city oversight of any of the scores of agreements it's entered into over just the last few years. That either means they haven't been posted, flouting the law that they must be, or that they don't exist, which would obviously be even worse, if hardly surprising. After the city failed to document whether Republic met the terms of its contract, the company skipped town and the city was unable to recover any of its money.
It doesn't sound like United will be held to account if it reneges on its commitments. From the Department of Community Development's report on the United deal: "If United fails to maintain a minimum of 2,500 FTE positions at the Building during the term of the Compliance Period, United will be in default of the RDA."
What then? Will the company face any penalties? It's not clear.
It will get a chance to rectify its mistakes. The document goes on to say: "United shall be entitled to a single 1-year cure period during the Compliance Period in the event that the employment number falls below 2,500. Any default year by United (if cured) shall not count toward the required 10 years of compliance or any other obligation of United under the RDA. If a default has occurred and has been cured, then any subsequent default with respect to the employment covenant shall constitute an Event of Default without notice or opportunity to cure."
In essence, United is being handed public money and told to do the right thing.
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Let's not forget the 15 million that the CME Group is getting to fix up the Chicago Board of Trade Bldg. with the help of Alderman "Smilin'" Bob Fioretti of the 2nd Ward. Don't you think that they could afford that with all the rent money they saved by moving out of their old Wacker Drive property?
Also, these aren't new jobs, they're just employees being moved from the suburbs into the city -- and the employees living in the 'burbs will stay put where they are and commute in, especially since you can't sell a home or get a new job these days. Since there's no city income tax (yet) the only one to stand a net gain in all of this is Metra.
There's no city income tax but there is a head tax. United must pay $4 a month per employee to the city just like every other company with more than 50 employees. With 2,500 jobs that would be $10,000 a month. The service industry has the most to gain in all of this. There will be 2,500 more hungry mouths to feed for lunch. It's a good thing I spent all that money on my college degree. It will really help me in my future career of waiting tables!!
And when United eventually merges with Continental Airlines, the current rumor is that most of the jobs will be moved to Houston. Good luck to the city in getting its money back.
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