Chicago-Marshall Plan2018-09-29T22:42:44+00:00

“I call for a Chicago-Marshall Plan for Chicago’s Long-Neglected Neighborhoods.”

“I unofficially call this initiative the ‘Put Up or Shut Up Plan,’ because that is the urgency with which a Vallas City Hall will address these critical issues. From Day One of my administration, this plan will deliver the answers our economically challenged communities are asking for.”

Summary:

The goal here is simple.  Chicago needs to take a “front and center” position on this federal program to spur logical and private sector driven development in economically challenged areas.  For decades people have spoken about Chicago’s “tale of two cities.”   It’s time to “Put Up or Shut Up.”

Paul’s stated commitment is to attract $10 billion to these zones in his first term as Mayor.  He believes this will benefit the communities in which the investment takes place, as well as the business and labor groups in Chicago as the transition of neighborhoods is great for the business community and labor groups.

Here’s what the “Put Up or Shut Up” Plan means: 

  1. The Federal Opportunity Zone program, passed as part of the 2017 Tax Cut and Jobs Act, has 133 tracks designated in Chicago (out of 8700 nationally).
  2. The initial response to this program has been very strong by investor groups around the country.  It is just starting now.
  3. To make Chicago a premier destination for investment dollars, Paul has come up with a creative way that will nearly double the returns on equity for those investors and give the Opportunity Zones in Chicago the best chance for top projects.  Here are some of the key potential details, obviously subject to revision as this evolves:
  • Over the next 3 years, while the Opportunity Fund program is at it’s highest benefit to investors, Paul will commit $1 billion of city controlled TIF funds to Opportunity Zone investments in Chicago.
  • The purpose of TIF funds is to spur development in needed areas of Chicago– many believe it has evolved into a bloated program that is used without appropriate transparency and results tracking.  Many feel it is used for political purposes (to reward friendly private sector constituents, keep aldermen in check, curry favor / raise campaign funds, etc.).
  • As part of Paul’s program, any qualified investment under the Opportunity Zone project would not only get the full benefits as allocated by the federal government  but, in Chicago, they would get a dollar-for-dollar match on their committed equity to the investment.  This dollar-for-dollar match would be capped at a certain aggregate amount so as to insure that Chicago’s TIF “investment” is not overly concentrated in any single project.  The cap will likely be somewhere between $20 and $50 million.
  • Chicago’s TIF investment in each project will be contributed as “preferred equity.”  The equity contributed by the actual investor / group will obviously be subordinate to Chicago’s TIF (preferred equity) investment.  For Chicago to lose money on it’s TIF contribution the private investor will have had to lose all their equity investment.
  • The interest rate that Chicago will charge for the preferred equity contribution will be equal to the rate of interest charged by the senior lender, provided that senior lender is an arms length relationship.  Obviously the investor equity and Chicago’s preferred equity would be subordinate to the senior debt.
  • On any residential development there would be a 20% affordable component for 30 years– as is the current program.  In addition, the 20% affordable component would be converted after 30 years to AIM (workforce rate) into perpetuity.  This is to maintain some affordable living for these projects into perpetuity.
  • Paul expects that Chicago will be paid back for 100% of the invested TIF monies with interest–creating an entirely different structure than how TIF has been historically used.

This is a new paradigm for Chicago taxpayers.  

 

 

 

 

Press Release:

Paul Vallas Calls for a Chicago-Marshall Plan for Long Neglected Neighborhoods

 
Like the Marshall Plan following World War II, which was a successful American initiative to help restore the war-ravaged Western European economies, Paul Vallas proposes an equally aggressive plan to address the inequities and lack of opportunities in Chicago’s long-neglected neighborhoods.
 
For decades, political discourse about Chicago embodying a “Tale of Two Cities” formed around a visually growing disparity between the city’s communities. The empirical data supports this claim without any dispute. Many of Chicago’s citizens live in depression-like conditions in their communities. Only 15% to 20% of our city thrives.
This is a massive failure for our neighborhoods. It is also a massive failure for our business community, a community that needs a platform to grow beyond the fewer than ten wards in which they currently base their activities, leaving forty wards with limited opportunities or no opportunities at all.
 
Today, Vallas announces that this will change when he is elected mayor in 2019. He proposes that we will create conditions that will stimulate $10 billion in capital investment specifically for new projects in the economically challenged communities of our city.
 
“This $10 billion of investment will be initiated in my first term as mayor and, if it doesn’t happen, you can hold me fully accountable,” Vallas said. “This investment will be the start of a transformative process that will reinvigorate those communities most in need and serve as a catalyst for my turn-around agenda.”
 
Vallas stated, “I unofficially call this initiative the ‘Put Up or Shut Up Plan,’ because that is the urgency with which a Vallas City Hall will address these critical issues. From Day One of my administration, this plan will deliver the answers our economically challenged communities are asking for. City Hall fails to take advantage of federal programs. On this front, there has been a lot of talk with very little action. When I am elected mayor, it will be the time for action.”
 
How the Plan Will Operate
In the 2017 Tax Cuts and Jobs Act, Congress included a program that holds massive potential for spurring real investment in economically challenged communities around America. The program is called the Opportunity Fund, or the Qualified Opportunity Zone Program (https://www.illinois.gov/dceo/Pages/OppZn.aspx) that is designed to encourage growth in economically challenged communities.
 
This bipartisan program provides massive tax benefits to investors that invest in designated, economically-challenged areas throughout the U.S. Investors around the country are very excited for this program. It is designed so that the federal government provides all the attractive incentives, not the states or our city.
 

Chicago’s Potential for Success Utilizing Federal Opportunity Zones

 
Low-Income Communities
Chicago possesses great potential for this program. With a growing downtown, a vast public transportation system, and 133 designated Opportunity Zones for investors to consider, there is a wealth of opportunity for our city under this program.
 
Recognizing that Chicago’s 133 zones must compete with the other 8,700 designated zones across the U.S., Vallas has designed a plan to ensure that the program produces $10 billion in new investment during his first term as mayor.
Chicago’s Tax Increment Financing (TIF) fund has grown massively under Mayor Rahm Emanuel, up to $660 million in 2017. However, the TIF fund has not been used effectively to invest in the city’s most challenged areas.
Those days are over once Paul Vallas is elected.
 
“I am committing that for the three years coinciding with the Federal Opportunity Zones Program, I will allocate $1 billion in TIF funds to attract nationwide, private sector investment in our 133 economically challenged zones,” Vallas stated.
“This will be done in a fully transparent way. There will be no favorites played and 100 percent of that $1 billion will go into the 133 designated zones.” Vallas continued, “I guarantee the investment of these funds will stimulate $10 billion in new investment in challenged areas in my first term.”
 
The way it will work is the City will lend the money to the new projects and receive preferred equity. This, in turn, will ensure the city is repaid in full for its $1 billion and additionally receives a return on those funds. The end result will be dramatic economic improvement for the designated neighborhoods and an expanded tax base for the city.
 
Additional Funding
Vallas will also direct funding from the Neighborhood Opportunity Program to support development in the zones. This additional funding will finance job training and other business assistance grants in the Opportunity Zones.
Federal Workforce Innovation Opportunity Act (WIOA) funding will also fund job training. Funding in the form of the Federal Workers Tax Credits (WTC) and the Illinois EDGE Program will be secured to provide financial incentives to zone businesses for new and local hires. The WIOA and WTC programs specifically target the training and hiring of high school dropouts, the chronically unemployed, ex-offenders, and veterans.
 
The Business Community & Labor Groups
In a close second to the neighborhoods, Chicago’s business community and labor groups will benefit from the plan. Currently, business and labor are entirely constrained, as the forty underdeveloped wards are not in areas that attract investment or new projects, especially in a city losing more population than any other big city in America. By taking bold action, we will expand our footprint. Labor and business will have more opportunities from which they can work and expand.
 
Community Support
Let’s be reminded that the City and State committed $2.25 billion in incentives to the Amazon HQ2 bid, with over 600 business, civic, and community leaders coming together to enthusiastically endorse that project.
Vallas expects an equal level of enthusiastic support from those same 600 leaders for a program that will guarantee greater investment in our communities that are most in need. The media has been asking candidates for specifics, and the neighborhoods have been demanding that politicians do more than talk.
 
Why Action Needs to Occur NOW
The incentives from this federal investment program—which includes the opportunity for investors to defer taxes on prior capital gains and re-invest these unrealized gains in designated communities—are at their highest for only three years. After which, the program becomes far less attractive. This window creates a sense of urgency for these investments to take place.
 
“City Hall hasn’t done anything with this program previously. We have not heard anything from Chicago’s current leadership, or from the other candidates on this program for various reasons,” Vallas said. “One reason is that Chicago has incredibly partisan leadership, unwilling to work with Washington D.C. Refusing to take advantage of this program for political reasons when there are programs that could benefit our city is a huge mistake. One that I will not make.”
“I am running for Mayor of Chicago, not Mayor of Springfield or Washington D.C. As Chicago’s Mayor, I will work with whomever can best help address the needs of our citizens and neighborhoods, without regard for political affiliation. If that means leveraging programs from D.C. or Springfield, that is what I will do. City Hall under my leadership will put up or shut up.”

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