Chicago Forces Developers to Make Donations to Charity of Former Mayor’s Wife

October 5, 2011; Source: Chicago Tribune

Let’s consider both sides of Chicago’s unusual “pay-to-play” scheme from two sides of the ledger.  First, the facts that seem pretty much uncontested.  Prior to Rahm Emanuel moving into City Hall, Chicago’s mayor was Richard Daley.  Developers who were looking for subsidies through Chicago’s well-honed Tax Increment Financing (TIF) programs were required by the Daley administration to make donations to a nonprofit organization–After School Matters–founded and chaired by Daley’s spouse, Maggie Daley. 

ASM received more than $900,000 in this manner, according to a report released by Chicago’s Inspector General.  A point of clarification is needed.  The idea that these funds came from donations is of course silly.  They were exactions from developers, the required ante to participate in TIF subsidies, not donations, which implies a more voluntary character to the transactions. 

Usually, when revelations come out about a previous administration, the new mayor can say “I didn’t know anything,” but not in this case, since Mayor Emanuel was a past board member and his wife a current board member of the nonprofit.  It couldn’t have been much of a secret, as the board of After School Matters was loaded with political powerhouses beyond Maggie Daley and the Emanuels including Avis Lavelle (former press secretary for Richard Daley and Bill Clinton), Victor Reyes (Daley’s patronage chief), Terry Perucca (a top Illinois executive for Bank of America), and others.

So what’s the bad side?  You might say that the Maggie Daley exaction took money that the developers might have donated to other groups and channeled it to the First Lady’s charity.  The charity probably had little or no connection to the content of the projects the developers were pitching for TIF financing. 

But what’s the good side?  If the City’s use of TIF subsidies linked to Maggie Daley’s charity get developers to “give back” to the community and doesn’t create sweetheart subsidy packages for them, the exaction functions to get these for-profit developers who stand in line to make a tidy sum from TIF-subsidized projects to give some back to the community.  As pay-to-play, it wasn’t to line Daley’s pockets, but to generate more tax exempt money that would stay in Chicago neighborhoods. 

Assuming no sweetheart deals, the problems in this situation are still several:  (1) transparency, given that this pay-to-play dynamic existed for years, but somehow didn’t come to light until Daley was out of office; (2) fairness:  there might have been other nonprofits that would have met certain needs that ASM couldn’t, but they couldn’t make it through the door in City Hall; (3) accountability:  although ASM looks like a useful organization serving youth, what are the monitoring and accountability mechanisms for ASM (or any nonprofit) that ts pushed by political figures.

Where do you come out?  Good idea for getting developers to give back or bad idea that forces developers to do something they might not want to do?–Rick Cohen.