Clout and egos take a big hit
City's well-connected now closed off from 7-year flow of money from Olympic projects
For some Chicagoans, the Olympic snub was a lesson in what finishing "out of the money" really means.
For finishing fourth in the selection for the 2016 Summer Olympics -- Chicago was the first of the contenders eliminated in voting Friday that ultimately awarded the Games to Rio de Janeiro -- powerful players in the city's life lost a shot at riches. But the blow is much worse to their egos than to Chicago's economy.
Gone are the potential golden gifts of fat construction contracts, of landscaping and sewer deals, of rich consulting fees. Gone is the work that minority-owned businesses would have gotten under required city set-asides.
Hopes for a seven-year flow of that business was one reason the Chicago 2016 bid committee raised $77 million in private donations to pursue the Olympics. The committee, with close ties to Mayor Daley, maintained it was making no promises to donors involving Olympics-related business. It had budgeted a Chicago Olympics as a $4.8 billion enterprise.
But still around is lakefront property Chicago taxpayers bought for $86 million. The city acquired the site of the old Michael Reese Hospital on the Near South Side and planned to level it for the proposed athletes' Olympic Village. After the Olympics, it was to have been converted to private housing.
There's no way to get the money back. And now city officials must decide what to do with the 37-acre site. Thomas Kirschbraun, managing director of the Jones Lang LaSalle real estate firm, said that without the Olympics, redeveloping the property will probably take 15 years, not seven years.
The slowdown probably reduces the financial risk to taxpayers, though. The land could be sold in chunks and redeveloped as the Chicago housing market rebounds. The downtown market currently has more than 4,000 unsold units to digest.
The city bought the hospital campus from Medline Industries Inc. in a deal that called for the price to go up $5 million, to $91 million, if Chicago didn't get the Olympics. If the land wasn't sold to developers in another five years, the cost would rise another $5 million, and payments on the loan would have to start.
Lori Healey, Chicago 2016's president, repeatedly vowed that wouldn't happen.
Kirschbraun said the land remains a good investment.
"That Olympic Village would have been half the size of Central Station or Lakeshore East. Those were very successful projects that were built in phases," said Kirschbraun, who consulted with the Chicago 2016 committee.
Ald. Toni Preckwinkle, whose 4th Ward includes the Michael Reese property, said the redevelopment will go forward and developers will be solicited for ideas.
"We always had two plans," said Preckwinkle. "An Olympic mode and a what-if-we-don't-get-the-Olympics."
The Chicago Housing Authority has expressed interest in putting in public housing mixed with market-rate homes on a portion of the property. Several universities have filed "letters of interest" about using the land for dormitories. Illinois Institute of Technology is a neighbor of the Reese campus.
Preservationists had argued that some Reese buildings had architectural merit and should be saved. They were angry when the city hastened to start interior demolition and to cut down trees.
"All along, we've been saying the presence of those buildings would make it difficult to recoup our costs," said Molly Sullivan, spokeswoman for the city's Department of Community Development.
Asbestos abatement and other work will continue, Sullivan said.
Beyond the Olympic Village, the loss of the 2016 Summer Olympics appears to have little effect on other city neighborhoods. Some venues in city parks were to be temporary, to be taken down when the games ended.
Andrew Mooney, executive director of LISC/Chicago, which supports neighborhood development, said the Olympic setback has no influence on the housing market. "I never perceived that the pricing in the marketplace was much affected by Olympic speculation," he said.
Similarly, experts see little cost to the city in job growth or commercial development. Those trends are controlled by factors far stronger than a two-week athletic festival, they said.
Developer J. Paul Beitler backed the Chicago bid but said its defeat doesn't bode ill for Chicago. An improving economy is more important, he said.