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January 11, 2009 - Chicago Christian Industrial League and developer Michael Marchese, Chicgo IL

 

City razed homeless shelter for Marchese, Cellini luxury condos and now - Charity could go broke, developers profit

Emerald Chicago
Full Story - Below
 

City razed homeless shelter for Marchese, Cellini luxury condos

Chicago taxpayers spent $1 million to tear down a vacant homeless shelter in Greektown so Mayor Daley’s friend Michael Marchese could build luxury condos there.

Normally when the city provides such financial assistance for a development, there are strings attached: The developers must set aside one of every five condos as affordable housing. Or else they have to pay a hefty fee — about $4.2 million in the case of the Greektown project.

But Marchese and his partners — indicted Republican power broker William F. Cellini and developer William Senne — didn’t have to do either one.

Why? Because City Hall didn’t give the money to Marchese. Instead, the city paid the Chicago Christian Industrial League to demolish the charity’s former homeless shelter using contractors chosen and supervised by Marchese’s team, city records show. After the work was done, Marchese’s team took title to the property in the 100 block of South Green Street, a block west of Halsted.

Marchese and his partners “got around the affordable-housing piece because they said the Christian Industrial League got the money,’’ said Ald. Walter Burnett (27th), a longtime supporter of affordable housing who represents Greektown.

“They were saying the money didn’t go to them,” he said. “It was like a loophole. These guys are smart. They know loopholes.’’

Marchese’s group says it did nothing wrong.

“We paid extra money to have the property demolished,” said Rick Filler, vice president of Marchese’s Harlem Irving Companies. “I paid the Christian Industrial League $6 million to give the property demolished. The Christian Industrial League went to the city and got paid by the city” for the demolition work, which began after the charity moved in to its new home in August 2006.

If the city hadn’t paid for the demolition with money from the Near West tax-increment financing district, Marchese would have paid only $5 million for the land, according to the sales contract.

When TIF money is used in a residential development, the developer is required to set aside 20 percent of the units as affordable housing or to pay the city $100,000 for each affordable-housing unit they decline to build. City Hall didn’t enforce that rule against against the Christian Industrial League or Marchese’s group, which built twin 12-story with 212 condos selling for as much as $560,000.

Under a different program, the city gave the developers permission to build larger condos in exchange for a $510,000 donation to the city’s Affordable Housing Opportunity Fund.

Half the 212 condos at Emerald have been sold for a total of $39.1 million. But the economy has slowed sales.

Burnett jokes he may end getting the affordable housing he wanted from Marchese’s group.

“At the rate they’re going right now, I think half of their property is going to be affordable because they can’t sell it.’’

The Funders

Michael Marchese — A frequent dinner companion of Mayor Daley, Marchese, 61, of Chicago, has been involved in several high-profile deals with the city. In one, he built a West Side shopping center on land he bought from the CTA for a dollar. He has developed every Home Depot in Chicago, at times with city subsidies. He owns Harlem Irving Companies, which his father started in the late 1950s. His wife Debbie is a board member of After School Matters, a charity Maggie Daley started. Marchese’s company has donated $30,000 to the charity since 2006.

William F. Cellini — A Republican power broker, Cellini, 73, of Springfield, is charged with trying to extort campaign contributions from a company seeking state pension business under Gov. Blagojevich.

First Original Story - Chicago Sun-Times

Part Two

'We are facing a possible bankruptcy,' shelter warns city

That’s how the Chicago Christian Industrial League began serving the homeless 100 years ago.

For decades, the charity served the homeless in a warren of decrepit buildings — including an old firehouse — off Halsted Street in the heart of Greektown.

Neighbors objected. They didn’t like that the shelter attracted alcoholics with criminal pasts.

Meanwhile, developers coveted the land just west of the Loop.

“I was under constant pressure to get out of the neighborhood,” said Rick Roberts, the charity’s executive director until 1995.

But the shelter remained in Greektown until 2006, and it thrived with help from Mayor Daley. City Hall started hiring the charity for landscaping in the mid-1990s. Those colorful planters you see in the medians of downtown streets? They’re tended by homeless people hired by the charity.

They also do work for the Chicago Park District and other government agencies. Landscaping brings in about $4 million a year, covering about half the cost of the charity’s homeless programs.

As property values soared in Greektown and the shelter’s buildings fell into further disrepair, the charity leaders decided it was time to move. Developers put in bids for the property. The charity settled on a team led by the mayor’s close friend Michael Marchese, who wanted to build luxury condos on the site of the homeless shelter.

Marchese’s team offered as much as $6 million for the property and agreed to let the shelter stay there until it found a new home. They signed the deal in September 2000, but it took six years for the shelter to move.

City Hall helped find the new home — a former stretch of rundown industrial buildings in the 2700 block of West Roosevelt Road. And the city hired lawyers to go to court to seize the land.

It cost taxpayers about $4 million just to buy the land and remove contaminants — nearly three times more than the city expected to pay, according to a Jan. 3, 2002, memo to the mayor from his then-planning commissioner, Alicia Berg, warning of the skyrocketing cost.

In August 2006, the charity opened its new shelter. There’s room for 400 homeless men, women and children. But only 208 are staying there now. The charity can’t afford to fill the space after losing a $1.7 million federal grant — a major blow to an agency that spends $8 million a year on services for the homeless.

Shortly after the shelter opened, then-executive director Judy McIntyre wrote city officials, warning the charity could go bankrupt as a result of the loss of federal funding and of having to repay $10.8 million it got through the state to finance the new shelter.

“CCIL finds itself in a very precarious financial situation,” McIntyre wrote. “For the first time in our history we are facing a possible bankruptcy. . . We love our new facility, and all the energy-saving features of this building have allowed us to keep our operating expenses reasonable, but the overwhelming debt has left us weakened financially.”

Since it left Greektown, the charity now serves fewer homeless people, struggles to pay its bills and has gotten permission from its lenders to delay payments on the money it owes.

The charity’s leaders — a group of business leaders and civic activists — are looking for another charity that can move in to the half-empty shelter and share the costs.

“I think they need to merge with somebody, or they’re not going to be around,’’ said Roberts, the charity’s former executive director. “It would break my heart to see them go under.”

Second Original Story - Chicago Sun-Times

Part Three

Charity could go broke, developers profit

Mayor Daley is spitting mad. Furious over Chicago Sun-Times/NBC5 News reports on a clout-heavy deal to buy site of the venerable Chicago Christian Industrial League, relocate the charity's homeless shelter and replace it with pricey condos. As a tragic consequence, a century-old mission may now go bankrupt at a time when its services are needed most.

I'd argue that taxpayers should be raining down wrath on City Hall instead, but you be the judge. Sec

"CHARITY BEGINS AT CITY HALL FOR MAYOR'S PAL" -- that was our Thursday headline that caused the mayor to explode at a news conference.

The story, reported by the Sun-Times' Tim Novak and previewed by yours truly on NBC5's newscast the night before, involved one of Rich Daley's best friends, Michael Marchese.

Marchese, along with partner and political power broker William Cellini (who's under federal indictment in the Blagojevich pay-to-play scandal), made a deal with the Christian Industrial League in 2000 to buy their property.

It looked like a win-win.

The decrepit building, located in Greektown was falling down.

The league, which for 100 years has fed the hungry, housed the homeless and trained the jobless, desperately needed a new home. And the developers needed prime real estate on which to put up a 212-unit condo development.

But as in the subprime mortgage mess, warning signs of big trouble were ignored.

Novak's investigation revealed internal memo after internal memo showing City Hall knew full well that the Christian Industrial League couldn't raise enough money to support the building it wanted to build in North Lawndale, a $25 million state-of-the-art shelter.

"There has been a persistent funding gap of $5 to $6 million," Planning Commissioner Alicia Mazur Berg wrote to the mayor in 2002.

"We are deeply concerned with the viability of this agency," Human Services Commissioner Carmelo Vargas wrote to the mayor in 2005.

Flags? There were flags everywhere that the league was teetering if the project proceeded. But proceed it did. The building went up in 2006. The city has kicked in more than $13 million.

Marchese and Cellini, meanwhile, appear to also have received city charity. They didn't have to worry about tearing down the old building. City tax increment financing funds paid the $1 million ticket for that.

Normally, in exchange for TIF money, developers have to set aside units as "affordable housing" or pay a hefty fee.

Not Marchese and Cellini.

That's because the TIF money was channeled through the Chicago Christian Industrial League even though Marchese and Cellini supervised the demolition.

What did that save the mayor's pal? An estimated $4.2 million.

The day before Novak's story broke, the mayor made a big announcement. Declaring the need for affordable housing "more important than ever," Daley rolled out a $2.1 billion commitment to help renters and homeowners.

D'ya suppose he knew the Marchese story was coming?

The following day, when Daley's fury at the Sun-Times was on full display, he cited the deep personal relationship he and his father before him had with the Christian Industrial League -- a fact no one would dispute -- and how unfair it was to tag the city with the mission's grave financial problems or to suggest that the Marchese deal played any role.

While the Chicago Christian Industrial League has its own profound management problems, the sad truth is that City Hall has known it was in trouble for years.

And yet the city, as our banker, effectively let the Christian Industrial League take out a mortgage it couldn't afford, putting it at risk of foreclosure.

As a result, a charity we need could go broke while clouted developers benefit from taxpayer charity they don't deserve.

The mayor's anger should be nothing compared with ours.

 

Third Original Story - Chicago Sun-Times