Chicago School Board Member Benefits From District Budget Cut

School board member Penny Pritzker’s Hyatt Hotels Corp. is benefiting from a $5.2 million [tax increment financing] TIF subsidy on 53rd Street – while [Chicago Public Schools’ (CPS’s)] proposed 2013 budget cuts seven schools surrounding the hotel project by $3.4 million, which is roughly the portion CPS is losing from the TIF deal.

“This one example shows the fundamental corruption in the way things are done here,” said David Orlikoff of the Chicago Teachers Solidarity Campaign, a labor and community coalition growing out of Occupy Chicago’s labor committee and supporting the Chicago Teachers Union.

CTSC will hold a press conference and speakout and picket the project at 53rd and Harper on Wednesday, August 8, starting at 5:30 p.m.

“As a member of the Board of Education, it’s Penny Pritzker’s job to find money for our schools, not to take our money for her business,” Orlikoff said.

The $5.2 million subsidy is part of $20.4 million in TIF funds going to the University of Chicago-led redevelopment of Harper Court (see here for some background). In addition to the hotel, the university is building a 12-story office building in the first phase of the project.

CTSC points out that Pritzker has a net worth of $1.8 billion, and the University of Chicago – now engaged in a huge campus expansion – has an endowment of $6.6 billion.

“They have plenty of money,” said Lorraine Chavez of CTSC. “They don’t need a taxpayer subsidy to pay for it. It’s outrageous.”

At Catalyst, Penny Pritzker clarifies that she’s not personally receiving the $5.2 million, and in a statement to Newstips, Hyatt points out that the Hyde Park Hyatt will not be owned by the corporation but, like many Hyatts, operated under a franchise agreement, thus “neither Hyatt Hotels Corporation nor Penny Pritzker…is receiving TIF funds as a result of this project.”

Conflict of interest

“The school board should be defending school funding when the mayor wants to take it for TIFs; it’s the only body in a position to do that,” Orlikoff said. “But they’re appointed by the mayor, and they look the other way.

“Then they tell teachers they don’t have any money for anything, except the mayor’s pet projects. It’s a conflict of interest – and it will be a conflict until the school board is elected.

“We need representation on the school board, and we need to end the chronic underfunding of our schools,” Orlikoff said.

CTSC, which exists “to support teachers and fight for equitable quality education,” calls for increasing school funding “by reclaiming TIFs and taxing the rich.”

TIF is “a failed program,” Orlikoff said. “It’s not fighting economic blight, it’s a way of taking from everyone and giving to the One Percent.”

Questions on 53rd Street

There are lots of questions right now about the 53rd Street TIF, especially with a new TIF district now being carved out of it by a second developer.

Antheus Capital, planning an upscale residential and retail development at 51st and Lake Park, wants to break its parcel out of the 53rd Street TIF to form its own TIF district – in order apply for $10 million or more in TIF funds. The 53rd Street TIF advisory council has okayed the proposal.

But after ten years of operation, the 53rd Street TIF fund has a balance of just $3.7 million.

Now, with thirteen years to go, it’s on the hook for a $20-million subsidy, while revenues are slowing (due not just to a lousy economy but to the County Assessor’s new formula, which shifts the property tax burden from commercial to residential taxpayers) – and the TIF district is getting smaller.

“Many of us don’t expect to seek Phase 2″ ( a 26-story condo tower and four apartment buildings, estimated to cost $100 million), said longtime community activist George Rumsey. “It’s hard to see where the money’s going to come from . Everyone is wondering if there’s going to be enough to finish the first phase.”

“For two years I’ve been asking who is liable if the TIF funds come up short,” he said Rumsey. “I have not gotten an answer.”

Fourth Ward Ald. Will Burns has backed Hyatt’s TIF subsidy, telling the Sun Times it’s “absolutely essential,” though the Ramada Lakeshore hotel is located a few blocks away.

Time to ‘revisit’ TIF?

The Hyde Park Herald called for “revisiting” the 53rd Street TIF in an editorial last week. It points out that the TIF district was sold to residents in 2001 on the basis of promised community benefits, including a new addition for Canter Middle School and a parking lot, none of which have materialized.

The stated purpose of the 2001 TIF was to provide support for schools and parks and increase parking, Rumsey said. In fact a city parking lot at 53rd and Lake Park is being gobbled up by the Harper Court project. The development now under construction includes two floors of parking.

“The one concrete advantage” for the community, a program which hired ex-offenders for street beautification, was cancelled, supposedly due to inadequate funds, the Herald points out.

“There is little evidence at this point that this TIF will do much more than TIFs have done in other parts of the city, namely grease the wheels of development,” according to the Herald.

And given reaction to the Antheus proposal, “it appears that the neighborhood is not any more enthusiastic about supporting private development with public money than it was when the TIF was first brought up in the ’90s.”

Hyatt under pressure

Meanwhile, Hyatt Hotel Corp. has problems of its own. Major organizations including the AFL-CIO and the National Organization for Women have signed on to a global boycott of Hyatt hotels to protest the company’s outsourcing of union jobs to agencies that pay minimum wage and its refusal to adjust workloads – or even provide mops with long handles — to reduce injuries.

In Chicago, while other hotels have negotiated over limits on subcontracting and safer working conditions, Hyatt has refused to do so, according to press releases from UNITE-HERE, which represents hotel workers.

In May, OSHA issued an unprecedent letter to Hyatt calling on the company to take steps to reduce the risk of injury (h/t 1537 News). OSHA has issued 21 citations against Hyatt and its subcontractors.

Staffing reductions and an “amenities race” has increased the risk of permanent, disabling injuries for housekeepers, according to a 2006 study by the union. A 2010 study found Hyatt workers had the highest rate of injuries of hotel chains studied; Hyatt’s injury rate was twice as high as the best-performing chain in the study.

Hyatt housekeepers’ workload is double the industry standard, according to the union.

“Hyatt’s workplace environment is being characterized inaccurately by union leadership as part of tis ongoing campaign to pressure Hyatt associates to join their union in non-union locations,” said Katie Rackoff, Hyatt’s director of corporate communications, in an email which cited Hyatt’s “outstanding safety record.”

At the end of the month, Hyatt workers in Chicago will have been working for three years without a contract.

The Pritzker family took the Hyatt Cororation public in 2009 but retained control with a separate class of shares that have ten times the voting power of common stockholders. Penny Pritzker sits on Hyatt’s board, which is chaired by her cousin, Thomas Pritzker. The family’s total worth is estimated at $20 billion.

In the 1990s, Penny Pritzker chaired the board of Superior Bank as it plunged into the subprime market (the bank later collapsed); recently she established a private equity firm to invest in distressed properties. (More here.)

She’s a major donor to Mayor Emanuel’s campaign fund and to Stand For Children, which pushed anti-union legislation in Springfield.