The CEO of City Hall


Corporate Chicago loves Mayor Daley and helps him on must-fix problems. Its payback: big tax breaks

When Mayor Richard M. Daley joined 2,200 of the city's corporate elite for sea bass and steak at U.S. Cellular Field a few weeks ago, the $1,500-a-plate affair swiftly turned into a lovefest. Looking over the assembled business leaders, Daley crowed, "No other city has what we have." For their part, executives from the likes of JPMorgan Chase (JPM), AT&T (T), and Motorola (MOT) used the event—a fund-raiser for an afterschool program pushed by Chicago First Lady Maggie Daley—to show fealty to the six-term leader, who is their biggest champion. "He's just terrific," gushed JPMorgan Chase CEO James Dimon. "I wish every city had an executive like him."

Daley can boast of no real experience outside government, of course. Still, businesspeople universally claim him as one of their own. He turned downtown into a gleaming showcase that impresses clients from around the world. He's privatizing city operations and leasing out facilities such as the Chicago Skyway and, if he gets his way, Midway Airport. And he's out to bring the 2016 Summer Olympics to Chicago, aiming to earn the city recognition as a global center every bit the equal of Paris or London.

Daley isn't just the city's biggest cheerleader, though. For 18 years, executives say, he has made the city work. While keeping taxes tolerable, he makes sure the downtown core is clean and alive with flowers and cultural activities. Executives credit him for tranquil race and labor relations. And they give him high marks for making City Hall run smoothly, crucial for the developers who have remade the Chicago skyline during his tenure. Perhaps most important, they enjoy the tax breaks Daley readily doles in the name of job creation.

Keeping Jobs in Town

The mayor showed his business bent last year when he vetoed a "big-box" ordinance that would have imposed higher minimum pay rates on such retailers as Wal-Mart (WMT) and Home Depot (HD). Rallying aldermen and community leaders—and facing down unions—he argued the retailers would just set up shop in close-in suburbs, denying Chicagoans jobs. "He understands that to have a healthy city you have to have jobs, and jobs come from business," says Charles P. Carey, vice-chairman of CME Group (CME), parent of the Chicago Mercantile Exchange and the Chicago Board of Trade. "The guy takes a CEO's approach to being mayor."

A typical morning in Daley's life might rival any CEO's. After speaking at a school-related breakfast downtown, the 65-year-old Daley strides back to his office, chatting en route with striking construction workers, passing office workers and farmers at an outdoor market. At his fifth-floor office at City Hall, he hosts an Italian consular official before popping into a science fair in Daley Plaza. Then Daley ambles back to his office, where organic food evangelist Alice Waters of the Chez Panisse restaurant in Berkeley, Calif., presses him to use his "benevolent dictatorship" to serve better food in the schools. As he takes Waters up a narrow staircase in City Hall to show off grasses and plants on his famed green roof, Daley is warm and attentive. All the while, he is catered to by staffers who jump at his call—just like a CEO.

Known for running through subordinates and displaying a fiery temper when crossed, Daley can be imperious. Years ago, he took over the city schools and public housing authority, convinced he'd do better than either elected boards or the federal government. He long coveted Meigs Field as a park site and famously sent in bulldozers overnight in 2003 to carve up the airport's runway, arguing terrorists might use it. No matter that the city wound up paying a $33,000 federal fine, plus legal costs and $1 million in airport funds it had misappropriated for the demolition work. "That was a hugely popular move," asserts lawyer Philip F. Suse of Baker & McKenzie, adding that many Chicagoans thought, "'Hey, that guy's in charge.'"

Admittedly, Daley's admirers overlook some shortcomings. In fact, if he were a corporate CEO, his job security would be, well, in doubt. Public shareholders would roar at the hiring-and-promotions scandal that has given U.S. Attorney Patrick J. Fitzgerald 45 convictions since 2004, mostly of city employees. High-ranking city officials took bribes, shook down companies for contributions, and traded jobs for campaign work. One former campaign worker was cleared for a job even though he never interviewed for it—because he had died.

Daley's administration is notorious for budget overruns, too. Millennium Park, first projected to cost less than $160 million, wound up costing $500 million. In October, the mayor proposed more big spending—a $5.9 billion budget for 2008—supported by as much as $300 million in higher taxes and fees. But the resulting outcry has forced him to scale back the levies. The business-funded Civic Federation, in "shock and awe" at the plan, is "not convinced all the inefficiencies have been wrung out of the city government," says President Laurence J. Msall. Still, Msall praises such steps as leasing out the Chicago Skyway, which garnered $1.8 billion. Similar plans to lease out operations at Midway and city parking garages should help too, he adds.

On top of that, Chicago suffers from problems afflicting most big, older cities. Its police department faces charges of corruption and brutality. Schools remain troubled: About 48% of ninth-graders never finishing high school. Chicago ranks No.3 in murders in U.S. cities, with 468 last year, and sixth in murders per 100,000 residents. Mass transit service cuts and higher costs weigh on every bus and "L" rider.

Meanwhile, the mayor is not above demagoguery—especially on racial matters. Take the recent flap about a new Children's Museum building in Grant Park. Residents of upscale condos nearby who opposed the project insist they were worried about traffic and construction in the park, but the mayor suggested they feared black children coming into the neighborhood.

Still, Daley can count on business support because he's good at finding common ground with corporate leaders. Businesses ranging from Baker & McKenzie and Ariel Capital Management to Microsoft (MSFT) and Ford Motor (F) help with the schools. Companies chip in money, mentor students, and even assist in developing curricula. They buy Daley's view that companies need schools to turn out skilled workers. And they agree that good schools will keep families from fleeing the city. "He knows that if we don't improve schools, we lose the middle class," says King Harris of Chicago Metropolis 2020, a nonprofit think tank set up by the city's Commercial Club.

One-upmanship

Daley seeks counsel from business interests—but sometimes goes them one further. For instance, when the Commercial Club's Civic Committee called for a modest expansion of O'Hare International Airport, he took a more aggressive approach: an $8.2 billion plan, now under way, will boost capacity 25%, to 1.2 million takeoffs and landings annually by 2018. The plan infuriates airport neighbors but is a winner with executives keen to make Chicago a global hub. "He just kind of knocked our socks off," says Lester Crown, who chaired the committee's aviation effort.

The mayor can take the long view on issues like education and the airport because he doesn't live from election to election. Business leaders would like him to be as permanent as Lake Michigan. His father, Richard J. Daley, who died in office at age 74, was mayor for 21 years, and Daley the son should top that during his current term. Businesses helped mightily to get him reelected last February, and with no serious opposition, he won more than 71% of the vote. The Chicago Mercantile Exchange (CME) contributed $107,000, the Chicago Board of Trade (CBOT) $101,000, and the Chicago Board Options Exchange (CBOE) $25,000—plus personal contributions by executives.

Daley, in turn, has helped the exchanges. In the early 1990s, his administration readily vacated a stretch of LaSalle Street to accommodate an addition to the CBOT. More recently, Daley backed the merger that united the CME and CBOT, believing it would strengthen Chicago's claim to being a global financial capital. And when an Atlanta exchange threatened to snatch away the CBOT, Daley's staff jumped in to offer a tax break worth up to $40 million—provided the Chicagoans linked up.

Tax Breaks Aplenty

Developers are also high on the list of Daley enthusiasts. The Pritzkers of Hyatt fame added at least $161,500 to his coffers in the last election. Penny S. Pritzker (page 12), head of the family's realty unit, credits the efficiency of City Hall with helping to get the 48-story Hyatt Center up swiftly from spring 2003 to its grand opening in mid-2005. "It's very easy to put up a building in this town," says Pritzker.

Many developers like the breaks they get from tax increment financing, which Daley credits for much of the recent explosion in development. Such TIF districts freeze taxes and earmark funds for improvements, though critics say TIFs short-shrift the park and school districts. What's more, Daley has been generous with incentives to woo or retain companies. He teamed up with then-Governor George H. Ryan in 2001 to put together $41 million in tax breaks to lure Boeing. More recently, electronic mapmaker Navteq got $5 million to add office space, coincidentally in the Boeing Building.

With such pro-business policies, executives say, Daley would likely be a Republican anywhere else. Private-equity investor John A. Canning Jr. of Madison Dearborn Partners swoons over how Daley slammed Democratic Governor Rod R. Blagojevich last spring over plans for a gross receipts tax. The mayor, who warned that overtaxed businesses would flee to Wisconsin, Indiana, or China, has "the right instincts," says Canning.

Of course, behaving like a businessman is anathema to some. Daley's Chicago, say critics, is peopled solely by wealthy and middle-class folks, not the poor or blue-collar workers. "His vision of the city is a thriving, prosperous place where people like him want to live," argues John D. Cameron, director of political and community relations for the American Federation of State, County and Municipal Employees. Daley's fondness for gentrification, Cameron adds, has pushed lower-income residents to the city's outer reaches and beyond.

Simplistic? It seems so to business people, who see the undeniable pluses of Daley's mayoralty in the bustling Loop and on crowded Michigan Avenue. Certainly, all Chicagoans can wander around Millennium Park. And if companies plaster their names on walls throughout the park, that's just fine with business leaders. Daley's Chicago, after all, is their Chicago, too.


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