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Millennium Park built ‘the Chicago Way’

Ten years after it opened, Millennium Park stands not only as the crown jewel of downtown Chicago, but emblematic of how Richard M. Daley got things done as mayor.

The story behind its construction involved Daley’s vision for the city, the well-heeled philanthropists who backed him, mayoral friends who benefited financially and people going to prison. And it was built with money the city didn’t have, leaving a debt that lingers today.

In the end, Daley’s relatively modest proposal to commemorate the millennium with a new park that was mostly open green space for $150 million “at no cost to taxpayers” resulted in a world-renowned, multifaceted destination completed in 2004 with a price tag that eventually topped $490 million, including at least $95 million in tax money. The rest of the tab was covered with $225 million in private donations, some cash from parking fees and the eventual sale of four city and Chicago Park District parking garages for hundreds of millions of dollars.

Once it was built, the city found it did not even have enough money to operate the park, despite help from the private sector, so Daley borrowed nearly $30 million just to keep it running — loans taxpayers continue to pay back.

That’s not the only ongoing financial burden related to Millennium Park, which officially opened 10 years ago Wednesday. Taxpayers also could be on the hook for $58 million related to the lease of those parking garages because of how the Daley administration put together the deal.

Meanwhile, the city is paying a team of lawyers as it tries to back out of a sweetheart deal with the operators of Park Grill, a restaurant at the park. Investors included a Daley friend and a city contractor. The restaurant pays $250,000 a year in rent, while getting free garbage pickup, water and gas. It also pays no property taxes. Mayor Rahm Emanuel is battling in court to void that deal.

In classic Chicago fashion, there also was a contract that led to prison terms for three people: a Park District official who pleaded guilty to taking bribes for $8 million in landscaping work at the park and other district properties, the company owner who bribed her and a company executive.

It was all vintage Daley: The goal was laudable, but the execution was messy, said Dick Simpson, a former alderman who now is a political science professor at the University of Illinois at Chicago.

“There was a lot that in the Daley administration — a lot of the ideas were good ideas, but they were implemented in what’s called the Chicago Way,” said Simpson, who cited as another example Daley’s bulldozing of Meigs Field in the middle of the night to create a nature park. “There were insiders, there was clout, there was corruption. And it was done in a way that cost more than it should have.”

Jacquelyn Heard, a spokeswoman for Daley, declined comment for this story.

As he approached the end of his first decade in office, Daley announced that he wanted to transform a derelict railroad yard considered a blot on the downtown he had worked to beautify into a 24-acre park with an outdoor stage facing a “great lawn.” The plan included a 300-seat indoor theater and a reflecting pool that would double as an ice rink in winter.

At the time, Daley said $120 million of the projected $150 million cost would be covered by parking fees from a new below-ground garage. Private donations would take care of the rest.

As construction began, costs soared as the plans expanded and the work proved far more complex than anticipated. The host of add-ons included the famous Cloud Gate sculpture known as The Bean and an innovative fountain with video sculptures.

Within 15 months of his 1998 announcement, Daley’s City Hall had issued $170 million in bonds. Three months later, all of that money was spent.

As costs soared, Daley’s City Hall drew down funds from a special property tax district adjacent to the park, despite his pledge to put no tax money into the park. Eventually, more than $95 million in tax increment finance district funds went to pay for Millennium Park.

By 2004, the wealthy financial backers Daley enlisted had pumped $200 million into the park’s construction and put in another $20 million for an endowment to help maintain the park.

The money Daley borrowed was supposed to be repaid with fees from the garage beneath the park. By 2006, it was clear they would not cover the cost — the city had paid nearly $10 million from a reserve fund to cover the difference.

Faced with a large debt on his signature project, Daley leased the garage beneath the park and three other Park District-owned downtown parking garages to a Morgan Stanley investment company for 99 years. Morgan Stanley was then free to raise parking rates as high as it saw fit. In exchange, the city got a onetime payment of $563 million.

Daley took nearly $208 million out of that windfall to pay off the bonds issued to build the garage and part of the park. The rest went to the Park District.

As part of the 2006 lease, the city agreed to not allow public parking in the surrounding area. But three years later, it granted Standard Parking a public garage license beneath the Aqua tower, which led to a $57.8 million arbitration judgment against the city that was later upheld in court. The city is appealing.

“The city is giving the (garage operator) control of development in the east Loop,” said Clint Krislov, an attorney who is trying to reverse the lease in court. “There can be no new garages in the East Loop. It is insane.”

The parking garage deal also ended up going south for Morgan Stanley. The firm had borrowed $350 million for its investment and entered into related interest rate swaps that further increased its costs. In January, the firm gave up control of the garages to the bank that lent the money, according to a financial report filed with the city under the terms of the lease.

Much of the early money spent on the park went to people who had connections to Daley after he recruited former aide Ed Bedore to launch the project, according to a 2001 Tribune investigative report that concluded the then-underway project was dogged by haphazard planning, design blunders and cronyism.

A team of Bedore allies was assembled to get things moving. They included financial advisers and bond companies that employed former Bedore budget office employees. And an engineering firm led by James McDonough, a former Streets and Sanitation commissioner under Daley’s father, was hired to work on the effort.

Benefiting from the Park Grill deal that Emanuel is now trying to void were Daley friend Fred Barbara and city contractor Raymond Chin, investors in the restaurant that is run by Matthew O’Malley, who owns the Firehouse Restaurant where Daley took then-President George W. Bush for his birthday in 2006. Daley attorneys are now trying to keep the former mayor from having to testify at the ongoing trial in the city’s civil lawsuit.

A bribery scandal stemming from a Millennium Park landscaping deal saw a former Park District executive, the contractor and one of his top employees plead guilty.

Much of the controversy over the delays, cost overruns and contracts faded away after the park opened. But some of it resurfaced last year, when the Tribune reported that Daley borrowed $29.5 million between 2005 and 2011 just to keep the park running. Emanuel stopped that practice, but taxpayers are paying down $5.5 million of that debt this year and are expected to pay at least $2 million in future years until the loans are paid off.

This year, the city also is paying $6.1 million to cover park operations, money generated by advertising on city bus shelters, as Daley first envisioned. The Millennium Park Foundation chips in hundreds of thousands of dollars a year to cover upgrades and maintenance.

Also helping to subsidize the park are fees from private events such as weddings, fundraisers, corporate events and film and television shoots. In 2013, those events brought in more than $637,000.

While Millennium Park is thought of as a proven tourist attraction that helped spur hundreds of millions of dollars in private development in the surrounding area, the controversy is likely to live on in the history books.

“Millennium Park is clearly one of the Daley administration’s proudest public improvements, and one that is deserving of recognition,” said Laurence Msall, president of the Civic Federation, a government budget watchdog group. “However, the lack of financial oversight and budgeting rigor that went into the project ended up costing the city of Chicago much more than was projected and much more than was probably necessary to build this great public asset.”

hdardick@tribune.com

Twitter @ReporterHal