Archives for the month of: October, 2008
Amid talk of global instability, bank bailouts and consumer uncertainty, one development I have been following closely is the City of Chicago budget mess. While not unlike the money woes facing many city governments across the U.S., this one hits particularly close to home in light of my love affair with Chicago–an affinity developed from having been a resident there for many years.

Enter Richard Daley, the long time mayor of Chicago, who despite cries of autocratic influence, machine politics and corruption from his critics, runs a well oiled city. Struggling to correct, by his own admission, the worst budget shortfall during his long tenure, Mayor Daley put one of Chicago’s prized assets on the table in an attempt to close the fiscal gap. The asset: Midway Airport; The prize: $2.5 billion in spoils.

If you are familiar with Chicago, you know that Midway is one of two airports in the city. It has five runways and handled over 300,000 flights for 19 million passengers in 2007–a significant volume yet a blip on the radar screen compared toO’Hare International flight numbers, which are approaching nearly 1 million a year.

Midway, which is located about 10 miles southwest of downtown Chicago, was my airport of choice when I lived in the Windy City. Prior to a massive renovation completed in 2004, Midway had fallen into disrepair, an indoor shantytown of sorts, featuring a incongruous collection of half-baked newsstands, shoddy restaurants, and less than desirable waiting areas. Today Midway is a first class airport featuring classy eateries, Internet access, and a larger parking facility to support growing passenger demand. Southwest Airlines as the major carrier continues to bring superior service as well as reasonable prices to this premier travel destination.

I am of the opinion that Mayor Richard Daley made a smart move in capitalizing on this prized asset to boost Chicago’s dwindling revenue base. In short, privatization, the strategy that Daley is using, involves the transfer of assets from a government entity to the private sector. The “Midway Privatization Project” ,as some have coined it, took shape on October 8th when the Chicago City Council approved a $2.5 billion lease of Midway Airport to private investors. As a part of a program enacted by the Federal Aviation Administration to privatize up to five airports nationwide, Midway would be the first U.S. airport to reach such status under this initiative spearheaded by Congress in 1986. City officials hope to complete the deal on this 99-year lease by the end of 2008.

This isn’t the first time that Daley has invoked the privatization mantra to shore up City of Chicago finances. In 2005, the city struck a deal with a private operator to run the Chicago Skyway , a major transportation thoroughfare linking the city with major regional markets to the east. More recently, there has also been a great deal of chatter regarding privatizing city parking meters to provide another much needed infusion of city dollars.

So what does this mean in terms of Chicago’s current fiscal mess? According to recent estimates, the city stands to clear more than $1 billion in net proceeds once the deal has been finalized, with most of the monies likely targeted towards budgets for infrastructure and pension funds (Illinois law requires 90% of the proceeds to be used for infrastructure improvements). And the remaining funds? Yes, you guessed it, these funds will be used to shore up a city budget that is estimated to be nearly $450 million in the red. In the end, the city will have free rein to take money out of Midway for the first time and spend it elsewhere–a nice windfall of cash without lost revenues.

Consumers of Midway Airport may not fare as well in terms of their pocketbooks. Prices at the concessions for food, gift items as well as other amenities are likely to rise, as will parking. But passenger airfares are likely be spared for some time as there is a provision in the lease agreement stipulating that fees passed on to airlines renting space at Midway will be frozen for six years as well as capped over the lifetime of the agreement. It is also stipulated that the private operator chosen must maintain or enhance the current level of cleanliness, safety and service at Midway.

Only time will tell whether this dose of pragmatism is an elixir to some of Chicago’s fiscal problems. But tough economic days require bold moves and Daley’s new venture shows why he is one of the most highly respected city leaders, both in the U.S. and globally.

Years ago, I visited the City of Cleveland, Ohio where my brother was living while attending graduate school at Cleveland State University. Upon landing at Cleveland Hopkins airport I was greeted by some friends of mine who were kind enough to taxi me to my brother’s apartment. As we pulled up to his aged residential building on Fourth Street downtown, I was immediately taken aback by its ‘warehouse appearance” as well as the surrounding urban blight. Homeless men were wandering along abandoned area streets where buildings had been boarded up. The sidewalks were dimly lit and lifeless. The smell of urine pulsated the air as I opened the car door and bid farewell to my friends. After entering my brother’s security code to access his building I took the elevator up to his beautifully designed loft apartment. In reflecting back on this experience, it occurred to me that his apartment building exemplified an emerging trend inurbanism called “adaptive reuse.”

The term “adaptive reuse” refers to a process where abandoned buildings, which have outlived their original purpose, are re-adapted for a new use, whether it be a storefront, housing or an entertainment venue. As a redevelopment concept adaptive reuse has garnered a great deal of attention of late due to recent findings suggesting that renewing existing buildings is less environmentally intrusive and more sustainable than tearing down and starting anew. In a sense adaptive reuse is akin to recycling–particularly in light of estimates which indicate that demolition debris encompasses upwards of 30% of all landfill waste.

Many progressive redevelopment experts point to the architectural, environmental, and economic efficiencies associated with adaptive reuse. For example, no longer are the resources and energy used to create our cities squandered when buildings are demolished. The aesthetic beauty of many historic districts is also maintained boosting the character and civic pride in that area. The economic development vitality of an area can also benefit from the fact that dollar-for-dollar, a renovation project generates more funds to the local workforce than a new construction project.

In old industrial, urban centers like Cleveland, Pittsburgh and Detroit, abandoned buildings and vacant lots exist aplenty, driving down property values, fueling crime and creating a sense of economic decline and helplessness in the area. My brother’s former apartment building, located in the Historic Gateway District of Cleveland known as the East Fourth Street Neighborhood is a shining example of how an area can recreate itself through adaptive reuse. This building, the Historic Buckeye Building, has stood as a landmark in the area since 1906, and now contains spectacular one and two bedroom apartments right in the city’s urban core. What has ensued from this and other redevelopment projects in the Gateway District is a resurgence of downtown Cleveland; anchored by spectator sports venues, restaurants, and the nation’s premier rock and roll museum. Many “Clevelanders” are responding to the area’s revitalization by attending sporting events, frequenting local establishments, and even choosing to reside in the downtown area. The recent success of this district is spurring talk of further redevelopment efforts once the economy finds its way back on course.

As in the case of Cleveland’s Historic Buckeye Building examples abound nationwide of structures that have been retrofitted for new uses while retaining many of their historic features. These include the conversion of old industrial factories to condominiums, train stations to retail centers, and department store buildings into office complexes. The bustling Pearl District in Portland, Oregon is an example of an area that continues to evolve as old buildings and warehouses are transitioned into commercial buildings, eateries and residences.

Chip Conley, founder of Joie de Vivre Hotels is among a new class of visionaries that recognize the immense possibilities ensuing from historic building preservation. Chip and his company are known for their adroitness in acquiring older properties and converting them into stylish, urban settings for rest, relaxation and comfort. His newest project involves the transition of the eighty-two year old former Cal Western Life building in downtown Sacramento, California into a 197 room luxury hotel. Known as the Citizen Hotel, it in many ways symbolizes the push to rehab existing buildings over new construction.

As for the long term future of adaptive reuse, look for many more of these projects to take hold as federal incentives to reuse buildings takes center stage. Signs are already pointing to positive trends in the commercial property arena as property owners who choose to renovate their historic buildings and follow designated preservation guidelines are eligible for a federal tax credit equaling 20 percent of the costs. A 10 percent credit also applies to non-historic commercial buildings more than 50 years old. As in the case of recycling having become more mainstream with today’s emphasis on environmental sustainability, adaptive reuse appears poised to make its mark in reducing the environmental, social and economic cost of continued urban expansion.