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Kathy O was having quite a day.

Just two days before, she brought together about 3,000 of the most important people in town to attend the big noontime inauguration ceremony for her boss, Mayor Richard M. Daley, in the huge auditorium at the east end of Navy Pier, an event where absolutely everybody is a VIP and wants to be treated like one. Mission accomplished.

And in just two days, about three-quarters of a million people were expected to line Michigan Avenue to watch the nation`s very first ”Welcome Home” parade for Persian Gulf soldiers and veterans of every one of this century`s wars, police actions, conflicts and unpleasantries involving the military.

All morning on this pleasant, sunshiney early May day, Kathy O had been out on Lake Michigan on a charter fishing boat (”I`m the only one who caught anything!”) to ceremonially mark the start of Chicago`s fishing season. But back in City Hall this very afternoon, after trouble-shooting a few more

”Welcome Home” parade snags thrown up by the Chicago Park District, she had to coordinate a meeting with officials of the World Cup Soccer committee, trying to convince the caretakers of the world`s most popular sport that they should kick off the 1994 World Cup Soccer matches right here in less-than-soccer-mad Chicago.

And in about six weeks, she would be having about 2.5 million people over for dinner.

Throughout the year, there are literally hundreds of special events in virtually every neighborhood in Chicago, and most of them now bear the fingerprints of Kathy O-Kathy Osterman, 47, the mayor`s director of special events, former 48th Ward alderman, former campaign worker and then community affairs supervisor for then-State`s Atty. Richard M. Daley and former social director for Lawrence House, an Uptown community retirement building.

But the big one-the really big one, the one that everybody knows about and dozens of American cities now copy each summer- is Taste of Chicago, the eight-day downtown tribute to gluttony and excess that serves as a city-sponsored excuse to put the diet on hold, forget all those table manners your mother taught you, let the juice run down your chin.

”I think of myself as the social director for the largest summer camp in the world,” Kathy O says this fine May afternoon, taking quick bites of a hot dog while sitting at her desk in her busy seventh-floor City Hall office, with aides popping in without knocking, telephones ringing, notes being dropped on desks, eyebrows being raised in frustration as someone ”very important” has a demand, request, excuse, whatever.

Taste of Chicago, just 11 years old this year (with one year off in 1983 for a political, midflight adjustment) is without question the monster of all existing Chicago special events.

Even with a history of bigness, Taste of Chicago, with a 1991 estimated budget of more than $10 million, is expected to be the biggest ever when it throws open its symbolic gates at 11 a.m. Thursday and then abruptly slams them down at 8 p.m. Thursday, July 4.

It is so big that it has to be measured in terms of overwhelming bigness. Two million people, more than 100,000 slices of pizza, more than 300,000 slabs of barbecued ribs, more than 500,000 cups of beer, more than 5,000 gallons of turtle soup and thousands of orders of chocolate-covered strawberries, corn on the cob, mud-pie cheesecake, turkey drumsticks, vegetable tempura, burritos, gyros sandwiches, roast duck with sauerkraut, charbroiled lobster tail, beef ribs-greens-and-yams, fried dough, calamari, chicken breasts, watermelon, boiled crawfish, pierogi, lechon asado y arroz con gandules, pad thai, tori kara ague, falafil with tahini, san juck, dim sum and, of course, hot dogs.

How big is it? Well, a Taste of Colorado in Denver last year drew about 400,000 people over a four-day period and sold about $2.2 million in food and beverage. Closer to home, a four-day Taste of Wisconsin in Milwaukee drew 250,000 people, who spent $1.8 million. A total of 150,000 persons who attended a Taste of Texas in Dallas over four days bought $1.1 million worth of food and drink, and the 300,000 people who went to a five-day Taste of Minnesota in St. Paul spent $1.8 million. Next to the Taste of Chicago figures over the years, those smaller festivals were more like hors d`oeuvres.

Big, big, big. Biggest food festival in the world, biggest advertisement for any major American city, biggest moneymaker of any city festival. Just plain big by any measure.

That was not, however, the way it was supposed to be.

In January 1980, Arnie Morton had what he thought was a pretty good idea. Flush on the heels of two very successful ChicagoFests, the legendary music and food festival that captured the fancy of Chicago from 1978 until it crashed unceremoniously in 1983, shot down by charges of politics and racism and the withdrawal of city sponsorship by new Mayor Harold Washington, Morton envisioned something quite different.

Morton, the Chicago restaurateur who had taken the initial gamble to participate in the first ChicagoFest and made a bundle selling ribs and steak sandwiches, had seen Taste of the Big Apple in New York City, a one-day event that had been held for three years, and liked the idea of the city`s very best restaurants setting up tents in Central Park and serving up their famous delicacies to the masses for a very limited time.

”I took the idea to Jane Byrne, and she liked it immediately. I thought it should be patterned after Taste of the Big Apple,” Morton recalls. ”The Chicago Fine Dining Association would give the average Chicagoan a sample of what the best restaurants in Chicago have to offer.”

”That didn`t happen, though,” he adds, with a sigh.

From the very start, the concept Taste of Chicago was a victim of its own success.

Mayor Jane Byrne, who reluctantly took over as the stepmother of ChicagoFest after she defeated its original sponsor, Mayor Michael Bilandic, in 1979, wanted a festival to call her very own, and Taste of Chicago seemed to be just that. Using her political clout and the massive army of civil servants in the city`s employ, Byrne vowed from the start that Taste of Chicago would be simply the biggest and best civic event Chicago had ever seen.

If Arnie Morton was the father of Taste of Chicago and Jane Byrne the mother, the obstetrician, the man who gave it a healthy birth was Tom Drilias, an affable Milwaukee Greek who had, as a hired consultant, put on the first two ChicagoFests and who was hired once again to create a Taste of Chicago that would bring glory to the city and resulting popularity to the

controversial Byrne.

Armed with a budget of $250,000, the coerced promises of 35 restaurant owners to cooperate and the clout of Mayor Byrne to literally close down North Michigan Avenue from Ohio Street south to the Michigan Avenue bridge, Drilias held his breath and put on the first Taste of Chicago on an experimental, one- day-only, basis in the summer of 1980.

”It was the Fourth of July, and we figured a lot of people wouldn`t come downtown for something they didn`t even know what it was,” Drilias can say with a laugh today. ”At best, we figured maybe 100,000, thinking it was another ChicagoFest, might possibly come down. We had no idea that it would be so big.”

A quarter of a million people came, on a stifling day, jamming the quarter-mile stretch of concrete in front of the Wrigley Building and Tribune Tower more than an hour before the 11 a.m. opening.

”We opened at 11 a.m., and everybody was out of food by 4 p.m. The crowds were so big we couldn`t get the little beer trucks to the tents, so we got one of the high school bands that was providing the entertainment to march right down Michigan Avenue. The crowds parted to let them by, and the beer trucks followed them,” Drilias reminisces.

And, among the worst of that day`s many surprises, the most unpleasant was that of the 35 restaurant owners who promised to show up and sell their wares, only 26 did.

Taste of Chicago moved to the larger spaces of Grant Park the following year, all the restaurateurs showed up, and this year, of the hundreds of restaurants that applied to get in, only 77 have been accepted.

”The general perception is that Taste of Chicago is the goose that laid the golden egg. But if a restaurant owner doesn`t do it right, he could be the one who lays the egg,” says Patti Costello, the restaurant operations manager for the Illinois Restaurant Association who counts among her many jobs that of helping participating restaurant owners do it right.

When Taste of Chicago took a year off in 1983 when incoming Mayor Harold Washington decided that the city of Chicago shouldn`t be in the festival business all by itself, the Illinois Restaurant Association stepped in in 1984 and, working with the city, took over the food and beverage operations at Taste.

Part of that responsibility involves selecting the restaurants that will be allowed to participate, enforcing the strict rules of participation and conducting training seminars for the new and old restaurants in preparation for the eight-day feeding frenzy.

Applications for participation are sent out by the restaurant association in January. They are sent to prior participants, restaurants plucked from the association`s regular mailing list and restaurants that have indicated an interest during the days since the last Taste of Chicago was held, Costello says.

After the deadline of Feb. 22, the culling process begins, according to Tim McGivern, president of the Illinois Restaurant Association and, as owner of the Great Godfrey Daniels restaurant in Skokie, a Taste of Chicago participant since 1984.

This year, McGivern says, there were more than 300 applications for the 77 spots, and one of the first things the association does is check to see if the restaurants really exist.

”We`ve had some of our inspectors find that the so-called restaurant is just a garage someplace or a vacant lot. We`ve found some little mom and pop storefronts that couldn`t possibly handle the kind of business it would get,” McGivern says.

The best way to describe who gets accepted for Taste and who doesn`t is, perhaps, a modified lottery, with a lot of exceptions, quite a few rules and the always ethereal subjectivity of who is best for Taste, the city and the customer, in no particular order.

”The pioneers, the ones who took the chances at the first Tastes or ChicagoFests, are more or less grandfathered in,” McGivern concedes. ”And the suburban applicants are told that city restaurants will get priority.

”Then we analyze the previous year with the former people to see how they did and how we could improve. It`s all computerized now,” he says.

”Then we get subjective. We clump the restaurants into categories and run a lottery for all those names. Like we pick four of the eight pizza places by lottery, or two of the six rib places. There are from 15 to 25 new restaurants allowed in each year.

”And some of them are just handpicked and assigned. The ones that bring in something new and interesting might be chosen, and we certainly use past performance as a guideline too,” he says.

The IRA holds at least three seminars each year in the six weeks before Taste-one exclusively for the new restaurants and two later for every participating restaurant.

Attendance by restaurant owners and their top management staff is mandatory; paying attention is not.

Costello, who brought her own restaurant experience as a waitress, cook and operations manager with the Levy Organization to the Illinois Restaurant Association three years ago, has conducted a lot of those meetings and has seen a lot at them.

”I can usually tell by who`s paying attention who`s going to do well and who isn`t. Some have the attitude of `Who is she to be telling me about the restaurant business?` ” she says.

One thing she insists they pay attention to are the rules-the unbreakable, repeated-ad-nauseam rules that have made Taste of Chicago a success over the years.

The most basic are these:

– No selling food for cash. Ticket books are sold at $5 each, worth $4.50 for food and beverages and a 50-cent ”service” fee to cover the cost of the admission-free event. Sell food for cash, and you get shut down and fined $1,000. The reason for the ticket-only policy is simple, Costello says. The IRA keeps a close cost-accounting of gross sales because the restaurant owners have to pay from their gross receipts: first, the required 8 percent sales tax, followed by a 15 percent commission to the IRA and city, and then a 1 percent of gross ”donation” to the Sharing It Program, a food drive sponsored by the Mayor`s Office of Special Events for the hungry, a symbolic and lucrative gesture that eases the conscience of Taste of Chicago gluttony. That adds up to 24 percent of the gross before profits start rolling in.

– No selling of any beverages or souvenirs by the restaurants. In its contract with the city, the IRA does all the beverage-selling, taking out a special liquor license for the event and closely monitoring to prevent the underage drinking that has been a steady source of criticism at all big city events. The souvenirs sold or given away are under the control of the Special Events office, which solicits corporate sponsorship all year long and frowns on fast-buck artists setting up shop in or around Grant Park to capitalize on Taste fever.

– Maintain cleanliness and food safety at all times. No salmonella or food poisoning wanted at Taste of Chicago, and if a vendor is found to be cutting corners or skirting health department regulations, he can be shut down and fined $1,000 for each violation.

In addition to the 15 percent commission paid on gross revenues, participating restaurants have to come up with an initial $2,500 application fee if they are accepted.

That`s what they spend. Here`s what they get: A 20-foot-by-20-foot tent and guaranteed Taste space; perimeter tables; two folding chairs; two menu signs that include their restaurant logo; basic electric power; and the three training seminars.