These are hard times for the commercial real estate industry, which is why some experts say the recession is an ideal time for the City of Chicago to update its controls on planning and zoning.
There are no big projects awaiting city approval, the reasoning goes, so no particular developer or landowner would be shortchanged if the city moves to lower its density limits or strengthen its protection of landmarks.
”If you`re going to make changes, the time to do it is now, when nobody gets hurt,” said Richard Roddewig, president of Clarion Associates, a real estate consulting firm.
When they say ”now,” Roddewig and others hip to the ways of Chicago politics generally mean after next month`s mayoral election. Or more to the point, after Chicago`s real estate developers have written their checks to you-know-who`s campaign fund, yet before the inevitable rebound fills the city`s zoning docket with fresh applications.
To be sure, one can make the opposite case: that a recession is the worst time for City Hall to make life harder on developers. They are having a tough enough time scrounging up tenants and financing, the logic goes, without forcing them to cope with new requirements for built-in day-care centers, limits on the size of shadows cast on Grant Park, or some other civic good.
”I don`t see anything wrong with our zoning laws the way they are,”
said John Buck of The John Buck Co., one of the Chicago area`s most successful commercial developers.
For Buck and others in his industry, no time would be a good time to make any change that would add to the cost of their developments or reduce the potential of their building sites.
The developers make some good points, but it is also true that some of the changes sought by reformers need not cost them a dime.
That is certainly the case when it comes to proposed changes to the city`s density bonus system. Perhaps the most outmoded section of the city`s 34-year-old zoning ordinance, the bonus system allows developers to build higher or wider than would otherwise be allowed in a given zoning district, but only if they agree to provide one of three ”amenities” in return.
Problem is, the city no longer needs or wants the amenities for which bonuses are granted: setbacks, plazas and arcades.
The way it works now, the developer of a downtown office building can build border to border on his or her property to a height of 16 stories. In the jargon of zoning this is called a floor-to-area ratio, or FAR.
To build higher than downtown`s FAR 16, developers can set the building back from the street (a setback), consolidate it on a portion of the site and landscape the rest (a plaza) or widen the sidewalk into the base of the building (an arcade).
For example, if a building fills only half its site, it can rise to 32 stories. To that add four stories for every sidewalk arcade, five stories for every street-level setback of 10 feet or more, and a few more for the upper-level floors that are set back. These bonuses can be compounded upon each other, and then coupled with loopholes that allow the subtraction of such interior spaces as elevator shafts and parking stalls from the chargeable floor area.
In the hands of a skilled zoning attorney, a maximum zoning envelope that starts out looking like Marshall Field & Company`s blockish State Street Store can be stretched and padded to accommodate the 110-story Sears Tower.
The system wouldn`t be a problem if city planners actually wanted more setbacks, plazas and arcades. They don`t.
Over the last 15 years or so, city planners-and more than a few enlightened developers-have come to recognize that nothing kills the vitality of an urban street as effectively as moving buildings away from the sidewalk. This was not apparent in 1957, when the drafters of the bonus system thought they would, over time, replace cramped, shadowy Loop streets with an Olympian grid of clean-lined modern skyscrapers, each rising from its own landscaped plaza.
Here and there the formula actually worked. The best example is First National Plaza, a lunch-hour magnet for brown-bagging office workers who go there to admire the Chagall and watch the world go by.
But that was the exception. Elsewhere, the formula produced block after block of tall but nondescript glass boxes, most with ground floors that contained not stores but sterile elevator lobbies. Few small-time retailers could survive at the base of the typical `60s or `70s skyscraper. With the exception of banks, airline ticket offices and other high-rolling operations, most retailers simply couldn`t afford the rents. And even if they could, Chicago skyscrapers became notoriouly poor places to display merchandise, what with their arcades and setbacks acting like moats, fending away window shoppers.
Things got so bad that by the late 1970s it became nearly impossible in some parts of the Loop to order a sandwich, find a pay telephone or buy a greeting card. One study estimated the Loop lost half its street-level stores in the 10 years between 1976 and 1986.
So city planners did an about-face. In the mid-`80s they gave the owners of several buildings permission to glass-in their sidewalk arcades and use the extra interior space for shops. Needless to say, the owners were not asked to reduce the height of their buildings.
Incredibly, though, City Hall did not change the bonus system. Instead of rewriting the zoning law, replacing setbacks, plazas and arcades with new-wave amenities such as shops, pedestrian tunnels and transit links, city planners set up a curiously informal system of swaps.
The ad-hoc system evolved into a curious dance, the steps to which were never written down. Developers approach the city with an initial set of specifications that show, in effect, how gruesome their structure would be if they chose to exercise their rights under the old bonus system. Both sides quickly agree to scrap the initial plan and proceed instead as a PUD, or planned unit development. The city`s loosely drawn planned development guidelines allow virtually anything to be built, though by gentlemen`s agreement the density of the project should not exceed what could have been built under the bonus system.
So the developers and their architects closet themselves on the 10th floor of City Hall with Richard Wendy, deputy planning commissioner for zoning, and his staff. By the time the two sides shake hands, the unwanted plazas, setbacks and arcades are generally replaced by street-level retail, undergound pedways, river-edge landscaping or whatever else the city wants on or near a given site.
The problem, of course, is that millions of dollars worth of bonus-able amenities are being traded back and forth behind closed doors without any written standard regarding what is worth what.
”Flexibility is one thing,” said Roddewig, the real estate consultant,
”but developers should know at the beginning what kinds of things might be expected of them. Now they don`t.”
Commissioner of Planning David Mosena is also uneasy about the system, though he points to several examples where the city used it to get developers to pay for big-ticket items such as pedestrian tunnels, and even the donation of two landmark theaters, the Harris and the Selwyn, at 160 and 180 N. Dearborn St.
Nevertheless, Mosena`s department has hired Roddewig`s firm to develop a menu of amenities in which each item would be ”calibrated” to a certain amount of density bonus. Street-level stores might be worth four extra stories; a million-dollar contribution toward a new subway station might be worth eight.
But Mosena admits that drafting a new bonus system, or for that matter, a new zoning ordinance, is ”a second priority level” compared to other items on his department`s agenda, such as planning for the proposed downtown circulator trolley.
In the meantime, he points to the Daley administration`s success in enacting development guidelines for projects along the Chicago River, and its more recent mandate for generous tree plantings surrounding new commercial developments both downtown and in the neighborhoods.
Many civic leaders agree those were important achievements, but they still think the Daley administration is missing a bet by not pushing ahead with a complete zoning overhaul before the real estate market rebounds.
”By then the pressure will be back and there will be no practical way to get some balance in the ordinance,” said Carol Wyant, executive director of the Landmarks Preservation Council of Illinois.
Wyant particularly wants the city to get going on reforms aimed at financially compensating the owners of landmark-quality buildings so they won`t be tempted to tear them down and build anew.
Her organization is currently helping the city`s planning and landmarks commissions evaluate several techniques. One would be a property tax assessment break not unlike those already used by Cook County to encourage commercial and industrial development in blighted areas. Low-interest fixup loans are another option.
But the device that most intrigues Wyant and other preservationists is called transfer of development rights, or TDR. Already working in New York and San Francisco, the system compensates the owners of beloved but uneconomic buildings with density rights that can be applied at another site. The landmark owner could use those rights himself or sell them to a developer who wants to build a denser structure than would otherwise be allowed.
Wyant views TDR as good way to compensate the owners of such gems as the Medinah Temple, 600 N. Wabash Ave., and its adjoining Tree Studios building. The city has been loath to confer landmark status on the Temple because the owners claim the underlying land would be stripped of its potential as a future site for an office tower.
But there is a problem with bringing TDR to Chicago: Developers here generally don`t need more development rights. The 1957 ordinance is already so permissive that, in the words of architect Jack Hartray, ”you can build a Sears Tower on every block.”
To make TDR work here, most experts agree, downtown`s base FAR would have to be lowered to 14 from its present 16.
Doing that, according to developers like John Buck, would be an unthinkable taking of value from landowners.
”The owners paid `X` amount for their land based on existing zoning,”
Buck said. ”If you down-zone across the board, their value goes down. It`s that simple.”
Then again, civic leaders retort, those same owners would lose nothing if the old bonus system was replaced with an even more generous one, but one based on amenities or contributions that the city really needs.
”The point is,” said Wyant of the Landmarks Council, ”we`re not going to accomplish much of anything if we wait until the recession is over.”
