In a far-reaching move to gain more contracts for minorities, the Washington administration is requiring developers in the North Loop renewal zone to steer 30 percent of all construction work to firms owned by minorities or women.
This action marks the first time the city has extended the mayor`s ”30 percent” rule to projects undertaken by private developers with private funds.
But the city official in charge of the program said the North Loop is just the beginning and that other privately funded projects that need city aid, such as the planned $3 billion Cityfront Center development, will also be asked to comply.
The North Loop rule will cover not only the design and construction of the buildings but their operations in the first five years after completion. During that time the owner-developers will be asked to use minority and female-owned companies to perform 30 percent of such services as building security and maintenance.
The minority set-asides are being written into contracts covering the upcoming sale by the city of three blocks in the North Loop to three teams of developers.
Altogether, the set-asides could produce more than $166 million in contracts for minority firms selected for the three projects.
Some of the first beneficiaries of the program, however, appear to be politically connected consultants–including the mayor`s former press secretary–hired by developers to negotiate and interpret the new rule.
If the contracts are approved by the developers and the City Council, Chicago`s minority-contract regulations will exceed those that apply to downtown urban renewal efforts in New York and Los Angeles, where 20 percent set-asides are the rule.
Those cities, however, have financial penalties in their redevelopment agreements. Chicago will rely instead on a ”good-faith effort” by developers to honor promises made in their land purchase contracts.
Lucille Dobbins, first deputy commissioner of planning, said none of the three North Loop developers has balked at what she prefers to call ”goals”
rather than requirements.
And interviews with executives from all three developer groups turned up only mild reservations about their future ability to find the required number of qualified minority contractors.
”A lot of projects will be going after the same small group of companies,” said Michael Tobin, vice president of Metropolitan Structures, one of the three firms that hope to rebuild the block immediately east of the Daley Civic Center.
”We think it will be difficult,” Tobin said, ”but not impossible.
”What we don`t want is what we`ve seen on some public works. You`ve had firms that turned out to be fraudulent or that were hired more for their political connections than their ability to do the work.”
Tobin referred to recent stories in The Tribune and Crain`s Chicago Business about bogus minority contracting firms that are controlled by whites or that subcontract work to white-owned firms.
Dobbins acknowledged that the proposed North Loop contracts, one of which is expected to be signed before the end of the month, mark the first extension of the mayor`s affirmative-action goals to essentially privately funded projects.
Until now Washington had limited his 30 percent rule–actually 25 percent for minority-owned firms, 5 percent for female-owned firms–to projects funded with city tax dollars or with city bond proceeds.
The hiring rule already applies, for instance, to the $1.5 billion expansion of O`Hare International Airport. On that project the city raises construction funds via the sale of tax-exempt bonds, with retirement of the debt assumed by the airlines at the airport.
A lesser public subsidy is used in the North Loop, where the city`s role has been to condemn and buy blighted property and then resell the cleared land at a discount to private developers who promise to build the type of hotels, stores, offices and apartment buildings city planners want.
”We realize our involvement is just with the sale,” Dobbins said. ”But we appealed to them (developers) that in this day and age most cities have set-asides. This hasn`t been adversarial; it`s been educational. They win and the city wins.”
She said the same ”25 and 5” pledge will be asked of developers of Cityfront Center, the mixed-use development planned along the north bank of the Chicago River between Michigan Avenue and Lake Shore Drive. In that case, Dobbins explained, the Chicago Dock-Equitable Venture wants the city to issue low-interest revenue bonds for streets, sewers and other improvements.
Dobbins said the Washington administration has no intention of foisting politically connected consultants onto the development teams.
There are indications, however, that some of the development teams have already hired advisers with close ties to City Hall.
For instance, the prospective developers of a hotel and office complex at the southwest corner of State Street and Wacker Drive hired GMS Ventures Inc., a firm controlled by Mayor Washington`s former press secretary, Grayson Mitchell, to help draft its minority hiring plan.
The development group that includes Metropolitan Structures is counseled by Robert Howard, a civil rights attorney who recently was hired by Chicago Housing Authority Chairman Renault Robinson as a $50,000 legal consultant.
On the third parcel, bounded by Wacker Drive and Dearborn, Randolph and Clark Streets, the minority hiring plan is being handled by a member of the development team itself: Elzie Higginbottom. A contributor to the mayor`s political fund, Higginbottom has won city subsidies on other development projects and owns part of the troubled Aeroplex drugstore franchise at O`Hare International Airport.
Higginbottom is the only black to come forward as a prospective owner-developer in the 12-year history of the North Loop project, but the new goals do not require minority participation in project ownership–just in hiring.
Whatever the political ties involved, there is much to indicate that both the city and the developers are negotiating the goals at arm`s length and in good faith.
”We think we can live with it,” said Julia Stasch, senior vice president of Stein & Co., a partner in the $152 million office-retail-apart ment project with Higginbottom and Baird & Warner Inc. This group has pledged to exceed city goals by steering 40 percent of their construction budget to minorities and women and by contributing $50,000 and 1,000 hours of consulting time to neighborhood uplift projects.
”A lot of this is new ground for the city and for us,” said John Iberle, vice president of the John Buck Co. The firm is a partner on the $178.5 million State-Wacker project with Jerrold Wexler, Edward Ross, Irving Markin and the Leo Burnett advertising agency. Burnett wants to build its new headquarters on the block alongside a new 625-room Crowne Plaza Hotel.
The hotel and advertising agency have a special stake in minority set-aside negotiations with the city. Rather than mere tenants, they are members of the development team and therefore fall under the same 5-year post-construction provision that applies to the development firms.
Dobbins suggested that the racial makeup of the hotel and advertising agency staffs may be considered in the city`s evaluation of whether the entire complex is meeting its 30 percent goals.
”We can`t tell Leo Burnett whom to hire,” Dobbins said, ”but they can satisfy their goal by counting their own work force or that of their subcontractors” in the advertising business.
Besides the hiring goal, the city is asking the developers to do the following:
— Submit to independent arbitration if the city should determine they are not trying hard enough to meet goals.
— Establish on-site ”opportunity centers” to assist job applicants and prospective minority contractors.
— Agree to use only city-certified minority contractors and to use the mayor`s Office of Employment and Training as a ”first source” of unskilled workers.
— Name a full-time affirmative-action officer to run their hiring program.
