Chicago’s Olympic bid: An expensive proposition

The Windy City would face a tough financial challenge in hosting the Olympics, experts say, but it’s well prepared with stadiums, infrastructure.

By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) — With help from hometown heroes like the Obamas, Chicago is aggressively lobbying to host the 2016 Summer Olympics. But making the games profitable would not be an easy win.

Chicago is competing with Tokyo, Madrid, Spain and Rio de Janeiro in wooing the International Olympic Committee in Copenhagen. A decision is expected Friday.

Chicago 2016, the organization leading the effort to host the games, expects a cost of $3.8 billion, including a “rainy day” fund of $450 million in case of unforeseen increases.

But there’s good reason to be skeptical of that projection, said Robert Livingstone, producer of GamesBids.com and a leading expert in the Olympic selection process. Host cities routinely overrun their Olympic budgets, he said.

“It’s going to be more expensive than we think it’s going to be, because it typically is,” Livingstone said. “I think every [host] city is going to lose money. It’s not an efficient event.”

The bidding process alone is costing Chicago about $100 million, even if it doesn’t win, Livingstone noted.

An argument often made by host city advocates is that presenting the international spectacle is good for a local economy. But such “trickle-down effects,” like benefits to local businesses, are “almost impossible to measure,” Livingstone said.

“I think a lot of people look at the Olympics, and they try to justify it by how much money it adds to the economy,” said Livingstone. “[But] if you’re in this to make money and improve your economy, you’re in it for the wrong reasons.”

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Change is coming whether Chicago gets the 2016 Summer Olympic Games or not–just not big change

By Blair Kamin

It’s easy to get carried away dreaming about how the Olympics might change Chicago. All that TV exposure! All those visitors spending all that money! Some giddy observers even have talked about a fifth star on the Chicago flag to accompany the four that symbolize such historic events as the Chicago World’s Fairs of 1893 and 1933-34.

Here’s some advice: Chill.

Sure, the games could do a lot for Chicago. They might erase the long-lingering image of Al Capone. Or prod the feds to kick in billions of dollars to upgrade the CTA. Or lead to new stores and housing in poor neighborhoods near Olympic venues. Or boost Chicago’s drive to become a city of global stature.

Some of this undoubtedly will transpire if Chicago gets the nod from the International Olympic Committee. But Chicago’s Olympic plans are actually quite modest. Besides, with President Barack Obama not committed to attending the big Olympic bake-off in Copenhagen Friday, it may be more realistic to ponder what will happen even if Chicago doesn’t get the 2016 Summer Games.

Think of the Museum Campus.

Back in the 1980s, then-Mayor Jane Byrne touted the idea of unified, landscaped campus that would join the Field Museum, the Shedd Aquarium and the Adler Planetarium. It would be a major legacy, she said, of the planned 1992 Chicago World’s Fair.

Political infighting helped kill the fair. Yet the inspired notion that Chicago could shift the northbound lanes of Lake Shore Drive westward to create parkland acquired enough political momentum that it came off anyway — just a few years later than anticipated.

The equivalent in Chicago’s Olympic plans is the proposal to convert the former Michael Reese Hospital campus at 29th Street and Ellis Avenue into a high-rise residential complex that would serve as the Olympic Village.

The plan will go forward whether Chicago is selected or not, city officials say. Although landmarks advocates have bemoaned the pending demolition of hospital buildings co-designed by Bauhaus founder Walter Gropius, almost no one is disputing the plan’s core idea: This stretch of the south lakefront can be put to better use.

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CHA may buy 15% of Olympic Village units

By: John Pletz

(Crain’s) — The Chicago Housing Authority could buy up to 15% of the units in the Olympic Village planned for the former Michael Reese Hospital if the city is chosen to host the 2016 Summer Games.

It’s just one possible scenario for an Olympic Village, but such a move would solve two problems for the city:

• Create demand for a significant chunk of the 2,500 units in the development at a time when developers and lenders are skittish about whether the private market could absorb all of the units.

• Help the CHA in its ongoing effort to shift public-housing residents into mixed-income neighborhoods instead of large developments of traditional high-rises filled only with low-income residents.

“We view (the Olympic Village) as yet another option to add affordable housing in a great location to Chicago’s housing stock and to assist thousands of people in the city,” a CHA spokesman says.

No funding or other commitments have been made by the CHA beyond a letter of interest submitted to Chicago 2016 as it prepared its bid book for the International Olympic Committee earlier this year.

Rush University Medical Center, Columbia College Chicago and the Illinois Institute of Technology also submitted letters expressing interest in possibly using some of the village for student housing.

Members of the Olympic bid committee have hinted previously that federal funding for low-income and senior-citizen housing could provide a source of financing for the massive project. Depending on the mix of uses, potential costs for the Olympic Village range from $967 million to $1.2 billion, according to a report last week by the Civic Federation that analyzed the city’s Olympic bid.

The original concept for the Olympic Village was for 90% private condominiums. But in response to pressure from community groups, the city agreed that up to 30% of the Olympic Village development would be affordable housing after the games.

• The project is expected to be built in two phases; the first to provide the housing necessary for Olympic athletes by 2016. The IOC prefers low-rise housing of 10 to 14 stories. But in a second phase, after the games, developers would build taller buildings at the north end of the site to get a higher-density product mix to increase the profitability of the project, similar to other condominium developments along the lakefront.

• Chicago 2016 estimates the village will cost $236 per square foot to build, with an average sales price of $425 per square foot. The Civic Federation report suggests the sales price could be higher because other properties with park or lake views sell for an average of $567 per square foot. However, most of those properties are significantly farther north in more upscale neighborhoods.

• The project would require about $111 million from a proposed new tax-increment financing district that would be carved out of the existing Bronzeville TIF to pay for infrastructure, such as sewers, sidewalks and a 60-foot-wide pedestrian bridge that will connect the village housing to the lakefront, a key part of Chicago’s concept for the games and a potential amenity for developers when they put the units on the market.

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Civic Federation: Chicago 2016 budget gives ‘adequate protection’ to taxpayers

BY FRAN SPIELMAN and LISA DONOVAN – Staff Reporters

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Chicago’s $4.8 billion operating budget for the 2016 Summer Olympic Games provides “adequate protection” for taxpayers, but the $1.1 billion Olympic Village exposes the city to “ongoing real estate risks” that must be insured and closely managed, the Civic Federation has concluded.

The Civic Federation and its handpicked consultant, L.E.K. Consulting of London, conducted a six-week review of Chicago’s Olympic bid at the City Council’s request after the furor caused by Mayor Daley’s pledge to match the full government guarantee promised by rival cities — and Chicago 2016 Chairman Pat Ryan’s decision to keep aldermen in the dark about it.

Today, the study was hand-delivered to aldermen, who are expected to vote next month on whether to authorize Daley to sign the blank-check promise.

The report recommends that:

•   The Olympic Organizing Committee that replaces Chicago 2016 be led by a “professional and experienced management team” that selects employees and contractors “based on non-political criteria.”

•   The City Council ride herd over the games by mandating “regular reports.”

•  That insurance coverage designed to limit the contribution from Chicago taxpayers to the $500 million the City Council has already pledged include “capital replacement insurance” for the Olympic Village to be built on the campus of Michael Reese hospital. “If developers proceed with the village as planned and are not required to buy the insurance, then taxpayers could be exposed to risk,” the report states, noting that Chicago 2016 has a $68.3 million insurance budget.

“It is critically important that aldermen provide legislative oversight to ensure the Organizing Committee is sticking to the detailed plan laid out by the Bid Committee,” said Civic Federation President Laurence Msall.

“Some of the greatest risk … does not come from the plan itself, but from not following the plan.”

The report reveals that the city expects to spend $122 million on direct city services during the games, including police, fire and emergency services, however, public safety expenses would be reimbursed by the federal government. City costs after federal help are estimated at $41 million. Those costs would be covered by revenues generated by the amusement tax assessed on ticket sales and some sales taxes tacked on to Olympic concessions and merchandise.

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Olympic Village: Architecture preservation or destruction?

Sensible plans for the proposed site emerge

Blair Kamin – Cityscapes

For months now, the city officials trying to bring the 2016 Summer Olympic Games to Chicago and the preservationists trying to save buildings co-designed by architect Walter Gropius on the proposed Olympic Village site have been on a collision course. And there was little doubt about who would get their way and who would not.

A visit last week to the city-owned, 37-acre site, formerlyMichael Reese Hospital, did little to dispel the impression that everything on the campus is doomed except for the main Reese building, a 102-year-old Prairie Style structure that city officials have promised to spare.

Chain-link fencing surrounded the Reese complex, from 26th to 31st Streets near South Lake Shore Drive. The once-vibrant hospital campus resembled a ghost town, with security guards racing about in small white cars with whirling yellow lights on their roofs.

But this bleak picture, which emerged after the city awarded demolition contracts for the old Reese hospital site, belied some hopeful signs. Although the city’s landmarks commission voted against placing the Reese campus on the National Register of Historic Places on Aug. 6, for example, some commission members and staff commented that a proposal that suggested saving fewer buildings might win their support.

Last week, as if on cue, a respected advocacy group, Landmarks Illinois, unveiled a plan calling for seven of the campus’ 29 buildings to be reused. In addition, Chicago architects DeStefano Partners have proposed their own alternative village plan to the city’s Olympic organizers. The plan, it turns out, would preserve only one of the Gropius buildings, but the architects stress it can be modified.

What does all this add up to? A tiny opening for good planning, which would create lively streets, save selected buildings and offer a diversity of building types, uses and people. The stakes are enormous. Whether Chicago gets the Olympics or not, the redevelopment of the Reese campus will be one of Chicago’s signature undertakings of the early 21st Century. Blowing it with business-as-usual design should not be an option.

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The battle of Walter Gropius

By MICAH MAIDENBERG

Graham Balkany, with the Gropius in Chicago coalition

What the Olympic Village proposal doesn’t include has sparked one of the biggest historic preservation battles in recent memory. At issue is the future of at least eight modernist buildings, slated for demolition, that dot the Michael Reese Hospital campus, site of the village.

The structures were designed by Walter Gropius. A godfather of mid-20th century modernism, Gropius founded the Bauhaus school of architecture before fleeing the Nazis for London. He later moved to the U.S., making his mark in the postwar era.

The Reese buildings were Gropius’s sole Illinois project, a fact that increases their value to the city’s built environment, said Grahm Balkany, a researcher with Gropius in Chicago, the organization formed to campaign for their saving them.

“If you can’t save Gropius buildings, you can’t save anything,” he said. “We talk about being world-class. No other city has this. You can’t replace it.”

During a recent tour of the exterior of Reese, Balkany pointed out features on each building — two-toned colored brick on the hospital power plant, a canopied entryway and sloping brick wall fronting the Serum Medial Pavilion, for example — that embodied Gropius’s style. Considered with the older Reese buildings, the Gropius structures formed a harmonious whole with parks and mature trees on the hospital grounds, Balkany said.

Ald. Toni Preckwinkle (4th), whose ward includes the Reese campus, confirmed she requested and received confirmation from the city and Chicago 2016 that the old main Reese Hospital building — a 1905 structure at 2838 S. Ellis that’s rated as potentially significant in the city’s historic resources survey — would be saved as part of an Olympic Village.

Preckwinkle said it wasn’t clear if a consensus existed that the eight buildings in question were designed by Gropius himself or if they just came out of his studio, The Architects Collaborative. She doesn’t plan to request they be saved.

“I don’t share their view. Since some of them are my friends, it’s an awkward position,” she said. “These preservation issues are always difficult and I appreciated the efforts by the preservationists. This is one where we don’t agree.”

Chicago 2016, the group organizing the local Olympic bid, assumes Reese is mostly cleared for the athletes’ village, according to the bid book submitted to the International Olympic Committee. Envisioned as an environmentally oriented community for the 16,000 participants expected to compete in a Games here, 21 new, 12-story buildings would be built on the site.

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Landmarks Illinois Releases Alternative Olympic Village Plan

On August 13, Landmarks Illinois released an alternative site plan for the threatened Michael Reese Hospital complex—the proposed Olympic Village site in Chicago’s 2016 Olympic bid. The plan retains what Landmarks Illinois has identified as six of the campus’ most viable historic buildings for re-use, reintegrates the area’s street grid, saves significant landscaped areas, and retains the required amount of Olympic Village housing to meet the requirements of the International Olympic Committee (IOC).

“We believe this plan offers a more sustainable approach, not only for the Olympic Village but for a more viable neighborhood after the Olympics,” said Jim Peters, president and CEO of Landmarks Illinois. “By reusing the most adaptable historic buildings—just six of the 29 structures now scheduled for demolition—we think this will result in a more balanced approach for community development.”

“We believe this plan offers a more sustainable approach, not only for the Olympic Village but for a more viable neighborhood after the Olympics,” said Jim Peters, president and CEO of Landmarks Illinois. “By reusing the most adaptable historic buildings—just six of the 29 structures now scheduled for demolition—we think this will result in a more balanced approach for community development.”

“Our organization is supportive of the city’s efforts to bring this important event to Chicago. This is why our plan incorporates all the necessary and critical elements identified by the IOC for the Olympic Village,” Peters noted. “Even though a decision on the Olympics will not be made until October 2nd, we felt it was critically important to put this plan on the table now, if only to stimulate alternative ideas before the project gets underway.”

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Michael Reese landmark supporters hit road block

By Michael Konopasek for ABC7Chicago.com

August 6, 2009 (CHICAGO) (WLS) — A preservation group’s effort to save the Michael Reese Hospital hit a road block Thursday.

The Commission on Chicago Landmarks denied The Gropius in Chicago Coalition’s current proposal to preserve the Near South Side campus.

The group plans to resubmit a proposal but has less than a month to try to sway the commission. They want to prevent the destruction of the former hospital, which is the proposed site of the Chicago 2016 Olympic Village.

To gain landmark status for the site, the Commission on Chicago Landmarks would need to submit a nomination for the Michael Reese Hospital to the Illinois Historic Sites Advisory Council by September 11, 2009. That nomination would put the former hospital and most of its campus on track to becoming a National Historic Landmark.

Chicago 2016 plans to turn the site into part of the proposed Olympic Village should the city win the 2016 Olympic Games.

The Gropius in Chicago Coalition says it believes the hospital buildings are significant because they were created by German born architect Walter Gropius. The Reese campus holds the only collection of Gropius architecture in the state of Illinois.

Grahm Balkany of the Gropius in Chicago Coalition authored the nomination. “Michael Reese Hospital contains a vast collection of [Walter] Gropius styles,” said Balkany.

“Regardless if we get the Olympics or not, these Gropius buildings can be restored and used for other purposes,” said Preservation Chicago Executive Director Jonathan Fine at Thursday’s meeting.

Commission member Phyllis Ellin says that it is possible for certain parts of the campus to receive National Historic Landmark status, but the current plan should be revised to meet National Register criteria.

“New boundaries need to be created [for landmark designation],” said Ellin during the meeting.

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Click here to read Chicago Sun-Times article on this issue

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City creating TIF to draw $100 million to transform hospital into Olympic Village

BY FRAN SPIELMAN AND LISA DONOVAN

Chicago taxpayers must spend $100 million to transform the old Michael Reese Hospital site on the Near South Side into an Olympic Village.

On Wednesday, Mayor Daley’s Olympic bid team confirmed the $100 million pricetag to install roads, sewers and utilities, raising questions about how the Chicago 2016 organizing committee and Daley can continually say the games won’t cost taxpayers a dime — especially at a time when the city is dealing with a mounting fiscal crisis.

While Chicago won’t know until October if it beat out its competition to win the 2016 Summer Games, the city has agreed to create a tax-increment-financing (TIF) district surrounding Michael Reese to generate the $100 million subsidy.

TIFs re-direct taxes away from schools, parks and other local government agencies bankrolled by property taxes. Property taxes within a TIF district are frozen at existing levels for 23 years.

The decision to draw a $100 million subsidy from the tax-increment-financing (TIF) — or create a TIF within a TIF to generate even more money — comes at the worst possible time for Chicago taxpayers.

Most of the city’s unionized employees have been forced to swallow furlough days and other concessions to eliminate a threatened $300 million year-end shortfall. More than 430 members of two unions that refused to make concessions have been laid off.

Next year threatens to be even worse. Daley’s preliminary 2010 budget has a $520 million gap that can only be closed with service cuts, tax increases or a combination of the two. Some aldermen want to use unallocated TIF money to eliminate that shortfall.

Ald. Joe Moore (49th) said the $100 million subsidy “doesn’t come as a shock,” given the expense of building new streets, water and sewer lines to the Michael Reese campus.

But, he said, “It begs the whole question about whether this is a good time for the Olympics, given our financial straits.”

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Cost of proposed Olympic Village increased to $1.18 billion

Latest figure includes $100 million for streets, sewers

By Kathy Bergen | Tribune staff reporter

The tab for building an Olympic Village typically is reported to be about $1 billion, but a tally of various associated costs puts the total at $1.18 billion.

The Tribune revisited the estimate after Chicago 2016 bid leader Patrick Ryan made a misstatement at a community forum Monday evening.

“It’s not that large a development–in total it’s about a billion and a half,” he said during the 47th Ward meeting in the Lincoln Square neighborhood. After the meeting, he said he misspoke, due to fatigue from a long day. But he wasn’t so far off.

If Chicago wins the right to host the 2016 Summer Games, it intends to construct 21 12-story residential buildings, with 2,500 to 2,600 units, on the Near South Side site of the closed Michael Reese Hospital. The apartments would house about 16,000 athletes and coaches during the games, and be converted to a mixed-income residential and retail development after the Olympics.

Private developers would build the complex, at an estimated cost of $976.6 million, including what it will cost them to purchase the property from the city, which recently acquired it for $86 million.

Olympic revenues will pay for $111.4 million in temporary village costs, such as athletes’ dining and shopping facilities and the conversion of athletes’ quarters into permanent residences after the games.

As well, the city intends to create a tax increment financing district for the site to pay for infrastructure costs, including streets and sewer. On Tuesday, Chicago 2016 officials said those costs have not been determined yet, but are likely to be around $100 million. That number had not been disclosed previously, and brings total costs to $1.18 billion.

An earlier version of this story reported total costs of $1.27 billion because Chicago 2016 officials initially said land acquisition costs of at least $86 million were additional. On Tuesday evening, officials corrected that, saying the cost was already worked into totals.

If the village is built in a tax increment financing district, the extra property tax revenue generated by the new development would pay for public improvements in the area for a set period of time.

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