Chicago will fund new infrastructure for The 78, the mixed-use development surrounding the new Chicago Fire soccer stadium.
Aldermen last week approved two parts of a redevelopment agreement with Roosevelt Clark Partners LLC, a joint venture of Related Midwest and CSLH Incorporated, to provide tax increment financing assistance for projects around The 78.
The McDonald's Park stadium itself, for which ground was broken in March, will be privately financed by billionaire Fire owner
But the promise of a new neighborhood around the venue will come at a public cost.
The first part of the agreement, $174 million for traditional public infrastructure, will be financed with TIF notes which can be monetized by the developer in early 2028, City Council Finance Committee Chair Pat Dowell's office said.
The second part of the agreement calls for $250 million in TIF funds from the Roosevelt Clark and Canal Congress TIFs for the city-owned podium, which includes the parking garage, foundations and superstructure, and a privately operated stadium plaza.
The 62-acre site is located in Ward 3, which is represented by Dowell. Dowell's office referred questions to her comments at the July 13 finance committee meeting.
"This project is one for the entire city," Dowell said at that meeting, noting that the long-vacant site sits between the South Side and the Loop, limiting connections between the areas and investments in the South Side.
"This infrastructure includes new streets and utilities, reconstruction of the river wall for future connectivity, desperately needed improvements to Roosevelt and Clark Streets, pedestrian access to the south end of the site, safety improvements for Metra and, most importantly, construction of a podium that will directly connect Roosevelt Road to The 78 at grade," she said.
At the City Council meeting Wednesday, Dowell acknowledged not all of the public funding will go toward traditional infrastructure.
"The podium structure and integrated parking garage, while it is unconventional for a TIF request, is the key to unlocking the potential for this 62-acre site that has sat fallow for… at least 40 years, 60 years I've been told," she said. "We cannot achieve this without the necessary physical infrastructure…This is a catalyst for the new neighborhood that is going to be created."
Adjacent
Conway, who voted for the first part of the agreement but not the second, noted the city is spending $424 million in public funds for $17 million in annual property taxes and $3 million to $4 million in parking revenue, according to numbers from the Department of Planning and Development — a less than 5% return on investment.
"The Canal Congress TIF is actually backstopping the entire project's borrowing," Conway told The Bond Buyer.
According to TIF income statement projections, Conway said, $270 million will be sent from the Canal Congress TIF to the Roosevelt Clark TIF where The 78 sits. The Canal Congress TIF is also projected to contribute $250 million to bridge work near The 78, but not directly tied to The 78, he said.
"Between The 78 and the bridge work, the Canal Congress TIF is essentially sending all of its revenue for the next eight years to the Roosevelt Clark TIF," Conway said.
In her finance committee remarks, Dowell noted that porting TIF funds from one district to another has become common in Chicago.
"Porting, and putting our TIF dollars to use by developing, as they are intended, is the best way for us to strategically deploy our resources and is standard practice on these major projects," she said.
Conway said the Canal Congress TIF includes Union Station and the soon-to-be city-owned Greyhound station, and is close to Ogilvie Transportation Center, a Metra commuter rail hub.
"It seemed we were draining a transit-dense TIF to put money towards a plaza and parking lot for a stadium," he told The Bond Buyer. "The infrastructure, the streets, the Metra enhancements, all really made sense. But I cannot ask taxpayers to fund a $250 million parking lot and complex for a private sports stadium."
On June 18, Chicago's DPD sent a letter to the U.S. Department of Transportation,
"That $55 million now no longer exists in the Canal Congress TIF, which is what supports Union Station," Conway said.
At the City Council meeting, a few other aldermen voiced concerns. Alderman Byron Sigcho Lopez questioned whether any housing would be developed on the site and said the redevelopment plan has changed from the 2019 version that called for the project to pay back taxpayers.
"The billionaire owner had promised that this was only going to be privately funded," he said.
Fire owner Mansueto is the founder, majority owner, and executive chairman of Morningstar, Inc. Related's development partner in The 78, CSLH Incorporated, is owned by the British-Iraqi billionaire Sir Nadhmi Auchi, founder and chairman of the conglomerate General Mediterranean Holding.
The economic research is clear that stadiums bring "zero measurable economic (returns)" to municipalities, even with mixed-use developments added to them, said Adam Hoffer, excise tax policy director at The Tax Foundation, an independent tax policy think tank.
"These don't result in any desirable increase in tax revenue. They don't increase wages. They don't increase long-term jobs," he said. "The question that we normally put back to taxpayers is whether or not this amenity is worth paying for."
Hoffer acknowledged these developments can be preferable to a vacant lot. But "should a city like Chicago spend $400 million on this kind of development?" he said. "A better question for policymakers is whether that's the best use of $400 million in the city, especially in Chicago. I think most Chicagoans know the budget pressures that the city is under."
Other aldermen backed the plan. At the City Council meeting, Alderman Raymond Lopez noted Dowell held 14 community meetings on the topic of The 78. He argued the solution to the city's fiscal problems is to expand the tax base.
Conway noted the deal with Related Midwest includes no requirement the developer build housing or anything else on the site, and there is no community benefits agreement.
"We desperately need to grow the size of the city," he said. "We need to be building more housing because we have a significant housing shortage. Unfortunately, in the $424 million TIF allocation, there is not one unit of housing that is funded by that."
A DPD presentation
"What I find interesting is they're taking money from an existing TIF district and transferring it," said Howard Cure, partner and director of municipal bond research at Evercore Wealth Management. "So what's going to happen to that Canal Congress TIF district?
"The other issue is, the city has been balancing its budget the last few years by draining money from TIF districts, just to help operations," he said. "This is a pretty big transfer of money, which is then not going to be available for the city if it needs to resort to that practice again."
Cure noted the amounts of TIF sweeps to balance the budget have been climbing in recent years.
"It's really a mixed bag… relative to the textbook way that we think about TIF districts," said Justin Marlowe, research professor at the University of Chicago's Harris School and director of the Center for Municipal Finance. "It is an improvement over what the city has been doing lately. That is a blighted space."
But Marlowe pointed to the scale of the project and said the idea behind TIF is typically to make a surgical intervention to catalyze broader development.
"You just wonder when districts get to this scale whether they'll be able to produce the increment (so that) it pencils out in the long run," he said. "You could certainly see the logic of saying, 'Let's take this tool and stretch it a little bit.'"
Chicago is a unique environment when it comes to development, Marlowe added, and the types of public-private partnerships that have succeeded from Houston to Hong Kong have not worked as well there.
"It's much more about the broader regulatory and political culture" and less about tax incentives or individual mayoral administrations, he said. "It's a lot more complicated to do these types of deals in Chicago… Those are features of the economic development environment in Chicago that go back (many) years."
That's how you wind up with a deal like The 78, Marlowe said. "They don't have a lot of other good options" to develop that old industrial property, he said.
"Going forward… I think (there's the hope) that Related is going to be building a lot more around this area," Cure said.
Building infrastructure for a stadium doesn't justify the cost, Cure said. But if that incentivizes other development, that makes the financing "a little more enticing… The city is making a big investment on this," he said.
"In theory, TIFs can be an effective use of public resources if they generate the anticipated incremental assessed value and economic activity," Mohammed Murad, director of municipal credit research at PT Asset Management, said by email. "Over the long term, once TIF bonds are repaid, the expanded tax base can provide incremental revenue for local governments."
But Murad said it's difficult to solve fiscal problems through spending alone. Liabilities like debt and pension obligations must also be addressed, he said.
"From a credit perspective, I think the market is focused on the timing of Chicago's second supplemental pension contribution, as well as whether the newly created revenue streams ultimately expand the city's revenue base in line with budget expectations to help offset the deficit," Murad said.
The Tax Foundation's Hoffer said in 2024, more than $13 billion in public subsidies were proposed for stadium developments in 12 cities. "These requests are going up, and they're going up substantially," he said. "In part because these (projects) are getting funded… but now we're seeing an expansion away from just football and baseball. We're seeing professional men's and
It's not really up to cities to change that dynamic, he said. Absent changes at the federal level, sports franchises will continue to pit cities and states against each other to shop for the best deal.
Tax-exempt bonds for stadium developments recently
A spokesperson for Related Midwest did not respond to questions.
