$32M in cleanup costs complicate Reese deal
Daley wants 37-acre campus as site for Olympic Village
Mayor Daley's plan to borrow $85 million to buy the campus of Michael Reese Hospital to pave the way for construction of a $1.1 billion Olympic Village has hit a snag.
Sources say cost estimates for demolition and environmental cleanup of the 37-acre campus have come back 60 percent higher than anticipated -- $32 million, rather than $20 million.
(Rich Hein/Sun-Times)
The Reese campus has 27 buildings -- many with asbestos and lead-based paint and some more than a century old -- and several abandoned storage tanks below ground.
The mayor's original plan called for Medline Industries, owner of the property, to make a "charitable contribution" of $20 million that was supposed to be enough to cover the cost of demolition, environmental cleanup and five years of interest payments, at 5 percent, on the $85 million loan.
But the higher cost estimate for demolition and cleanup has altered the equation. The Chicago 2016 organizing committee is reportedly trying to salvage the deal by renegotiating the purchase price.
Asked why the Reese deal was not on the agenda for Monday's meeting of the City Council Finance Committee, Ald. Toni Preckwinkle (4th), whose ward includes the property, said, "My understanding is that price is still under negotiation."
In a text message from China, where he is attending the Paralympic Games, Chicago 2016 spokesman Patrick Sandusky said late Friday: "The transaction is delayed because we are still in due dilligence. There are several estimates and ranges to the report that we are still in discussions on. We have no reason to believe that we cannot reach a mutually satisfactory agreement."
Medline spokesman Jerreau Beaudoin said the company has "not been approached by anyone" to renegotiate.
The $85 million borrowing was controversial even before the latest complication. Even as Daley is poised to lay off more than 1,000 city employees in the face of a $420 million budget shortfall, aldermen have questioned why City Hall would make an $85 million gamble that the depressed real estate market will come roaring back.
Though the loan would be backed by property taxes, City Hall has said Chicago taxpayers would not be left holding the bag because, long before the principal is due, the city expects to recoup its costs by selling the property to a master developer.