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Tax-free-palooza: Music fest that hired Daley nephew got pass on tax

People who don't have Lollapaloozticket can't come see Buckingham Fountain---Sun-Times phoby Tom Cruze

People who don't have a Lollapalooza ticket can't come in and see the Buckingham Fountain---Sun-Times photo by Tom Cruze

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Updated: November 16, 2011 1:21AM

Music lovers will pack Grant Park this weekend for Lollapalooza. With acts including Eminem, Kid Cudi and Coldplay all in one place, the sold-out festival will offer a three-day musical bonanza for fans.

And if Lollapalooza wasn’t already enough of a financial bonanza for its promoters, who grossed more than $21 million last year, City Hall and Cook County government officials are doing their part to boost the festival’s bottom line, even as they struggle with their own budget crises, which threaten to result in layoffs of city and county workers.

For a seventh straight year, the city and county are exempting Lollapalooza from paying the amusement taxes normally imposed on arts and athletic performances and even movies.

That will save the promoters — Austin, Texas-based C3 Presents LLC — more than $1 million in taxes on the 270,000 tickets sold for this years’s festival, which opens Friday.

Lollapalooza got its latest waiver from the city’s 5 percent amusement tax in the waning days of the administration of Mayor Richard M. Daley, whose nephew Mark Vanecko has been a lobbyist and lawyer for the festival promoters, helping to negotiate their current 10-year contract with the Chicago Park District.

Then, 18 days ago, Cook County’s revenue director, Zahra Ali, signed off on a waiver of the county’s 1.5 percent amusement tax for Lollapalooza.

Lollapalooza is exempted from the taxes, officials say, because, although C3 Presents puts on the festival, booking the acts, hiring the vendors and overseeing the entire operation, the Chicago Park District, which owns Grant Park, doesn’t contract directly with C3. Nor does C3 obtain the liquor licenses for the festival.

That’s all done through the Parkways Foundation, the park district’s not-for-profit fund-raising arm, which serves as a conduit between the promoters and the district.

For that, Parkways gets a cut — a maximum of 10.25 percent of Lollapalooza’s gross revenue. Last year, the festival paid the foundation $2.17 million, money spent on park district projects — such as a new playground at Washington Park and an artificial soccer field for McKinley Park, according to Parkways’ executive director, Brenda Palm.

The rest of the money that Lollapalooza brings in — more than $19 million last year — goes to C3, under the contract the park district and Parkways struck with C3 during negotiations involving Daley’s nephew.

C3 has to pay all the bills, which it does through a bank account set up by Parkways Foundation.

The promoters also are required to pay for any damage to Grant Park as a result of the festival — it cost more than $200,000 last year to replace sod and re-seed the park, including areas around Buckingham Fountain. And they have to reimburse the city for expenses related to Lollapalooza — last year, C3 paid the city $100,764 last year for crowd control.

Lollapalooza is the biggest entertainment event in Chicago that’s exempted from paying amusement taxes, government officials say. The Dave Matthews Band Caravan — another big music festival, held for three days last month on the former site of U.S. Steel on the south lakefront — didn’t get the tax break.

The park district says the aim of the Parkways Foundation’s involvement in Lollapalooza wasn’t to help the promoters avoid paying taxes. Instead, park district spokeswoman Jessica Maxey-Faulkner says, it was to help build the foundation, which gets most of its money from Lollapalooza.

“Parkways is able to approach Lollapalooza with a fund-raising lens and use the funds to launch, expand and sustain programs and projects directly, while also building a base of new donors and partners,” says Maxey-Faulkner.

The city and the county pay a price for doing that.

To start, there’s the $1 million in lost amusement taxes — which C3’s contract with Parkways and the park district says it would “assume and be responsible for” if the city and county refused to waive those taxes.

Beyond that, the park district is handing over its showcase downtown lakefront park for three days.

Also, under its contract, C3 must give the park district and the foundation 10 all-access passes for Lollapalooza, as well as “a reasonable number of complimentary tickets.” Who gets those? No one will say.

The promoters declined a request for an interview, saying in an e-mail: “Thank you for your inquiry. At this time, we are completely focused on producing the best festival possible.”

Parkways says the all-access passes “are given to individuals including staff and board members.”

The park district would say only, “Passes and credentials are usually distributed to Chicago Park District employees.’’

Also, the contract says C3 has to comply with the park district’s affirmative-action goals — which call for subcontracting 25 percent of work to minority-owned businesses and 5 percent to women-owned companies. The park district says 14 of the 57 Lollapalooza vendors are owned by minorities or women. It won’t identify them. Nor will the district or the foundation provide any records to show how much work Lollapalooza gives to minority- or women-owned companies.

“The Chicago Park District does not have any documents responsive to your request,” the district’s freedom of information officer, Maria Castaneda, says when asked for such records.

Why not? Says Castaneda: “Lollapalooza is a private event.’’

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