On March 30, 1998, nine years into his tenure as Mayor of Chicago, Richard M. Daley unveiled plans to convert an underused Illinois Central rail yard on the northwest corner of Grant Park into a new green space and performance venues in time for the turn of the millennium. The mayor and his supporters touted the proposed Lakefront Millennium Park as completing the shoreline scheme advanced by Daley’s hero Daniel Burnham in his 1909 Plan of Chicago. The new reclamation plan called for the creation of a transit hub topped by a massive green roof spanning the railroad tracks. This would take the form of a 16-acre Beaux Arts-inspired park, designed by architectural firm Skidmore, Owings & Merrill (SOM). As then-chief financial officer, Walter Knorr, recalls, the presentation was short on financial details (Knorr 2018). The mayor and his senior staff had been advised by SOM to avoid specifics on the topic of cost. In general terms, parking revenue could anchor the project’s financing. Daley also sought to tap private resources to construct the new park. Confronted at the press conference with the inevitable question of the project’s price tag, then-transportation commissioner, Tom Walker, cited the ballpark figure of $150 million that was hashed out during a city hall planning meeting days earlier and was based on SOM’s qualified cost estimates.
Knorr found the occasion somewhat awkward. Too many variables remained unclear for a solid estimate of the cost to build the park. From that point, the project’s fiscal planners had to play catch-up. Knorr and his staff and other city officials had to adapt to a constantly shifting set of requirements, planning the project and scoping out funding on the basis of scant and rapidly changing information. Typically, in such major infrastructure projects, planners had the benefit of feasibility studies and pro forma financial statements outlining various scenarios before committing to a strategy. Given the preliminary state of the park design and the relatively tight initial deadline of the new millennium, this wasn’t possible. One thing was clear from the start, though. The mayor pledged that taxpayers wouldn’t foot the bill for the public investment in the project.
From his first inauguration in April 1989, Mayor Daley was focused on developing Chicago’s downtown and especially its shoreline. Daley came into office with the backing of groups who shared his interest in remaking the lakefront and building an economic development strategy around tourism, finance, real estate, and global business. Projects like the renovation of Soldier Field and Navy Pier (and eventually the creation of Millennium Park) were catalysts for tourism and real estate development, raised property values, and helped attract businesses and professionals to the central city. Like the rerouting of Lake Shore Drive and the creation of a landscaped campus around the museums in Grant Park, they were large-scale public works and infrastructure projects that created jobs and provided contracts for local firms.
Chicago and surrounding Cook County in the mid-1990s had capped property taxes following a tax revolt in the adjacent, so-called ‘collar,’ counties (Fegelman and Becker 1995). Thus, Knorr sought to identify funding sources other than politically fraught property taxes. He proposed the selling of parking revenue bonds. The appeal of the parking scheme was that the city’s funding could come through the sale of tax-exempt bonds supported by revenue and parking taxes from city-owned parking garages rather than general obligation bonds, which would be supported by the city’s full faith and credit and are payable from a dedicated property tax levy.
The City, with the approval of the city council, sold $150 million in parking revenue bonds, a figure based on an estimate of the number of parking spaces and anticipated parking rates, factoring in operating expenses and debt service, according to Knorr. Because he wasn’t able to secure firm estimates of the planned garage’s construction costs or anticipated revenues, Knorr had to include in the bond offering a “limited general obligation” backup pledged to other city revenue streams. These could include, various taxes and fees, though not additional property taxes, explained David Narefsky, a partner at the Chicago-based law firm of Mayer Brown, which represented the city and other parties in financing and managing aspects of the Millennium Park project. “The City was taking the risk that parking revenues would be sufficient,” he said (Narefsky 2018).
The bond terms were somewhere between a “moral obligation” pledge to pay any shortfall in parking revenue from general revenues or other property tax and the strict “full faith and credit” requirements of general obligation municipal bonds. “I think that’s stronger than a moral obligation, which often we see as I have a limited stream of revenue that’s pledged to pay off some debt, and if that’s insufficient […] as an executive branch issuer, I promise I will put an appropriation for the deficiency into the next budget. I can’t make the legislature approve [it, but] hopefully they will do the right thing,” Narefsky said.
The city in 1999 would issue a further $40 million in parking revenue bonds under the same terms, again with city council approval. Mayor Daley enjoyed the support of the legislative body representing Chicago’s fifty wards, largely by respecting their traditional autonomy in matters of local services and their veto power over zoning board decisions (Spirou and Judd 2016). Not long after the $190 million bond issue, it became clear that in the face of the park’s expanding footprint and more ambitious program, additional public money was needed (Washburn 2000).
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