News

NEIGHBORHOODS FOR SALE: PART 3

February 10, 2008

Todd Lighty and Laurie Cohen, Chicago Tribune

A curious tale of two properties
Tribune investigation:

One parcel was owned by friends of Mayor Daley. One wasn’t. Guess which rezoning request was OKd?

Friends of Mayor Richard Daley made out handsomely when land they owned was rezoned in the 11th Ward, helping them sell the property for about $2.4 million more than they paid for it.A critic of the Daley administration didn’t do so well, however. He couldn’t get a zoning change, and the value of his property diminished by about $4 million, according to court papers.

Both decisions were made by a Daley ally — James Balcer, the 11th Ward alderman who calls the shots on zoning in his South Side ward.

Zoning is one of the last bastions of power left for Chicago aldermen, who have been marginalized under Daley’s control. The Tribune has shown that many of Chicago’s 50 aldermen rely on campaign contributions from developers whose projects, in turn, depend on zoning changes.

In the 11th Ward, the ancestral home and power base of the Daley clan, Balcer enjoys so much support from the Daleys that he is the only alderman who doesn’t have to raise campaign funds.

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To get a view of how he has wielded his zoning power, you need look no further than two parcels that have been swept up in a wave of development that has turned this gritty industrial district into a hot neighborhood for homes.

On Archer Avenue, a familiar cast of Daley insiders benefited. Over on Iron Street, a City Hall antagonist lost out.

The Archer Avenue deal began in March 2002, when Richard Ferro, a political supporter of Daley, bought the property for $325,000. He and his business partner, Thomas DiPiazza, also a Daley contributor, later applied to City Hall to rezone the land for town homes.

DiPiazza and Ferro hired Jack George of Daley & George, the law firm of the mayor’s brother Michael. In the last five years, Daley & George has handled 60 rezoning applications — half of all the applications in the ward that weren’t filed by Balcer himself, city records show.

“Mr. DiPiazza has developed a number of projects in the 11th Ward and they have all been a credit to the community,” George told the City Council’s Zoning Committee at a December 2003 hearing.

Like other zoning changes blessed by aldermen, the request sailed through the City Council.

Landowners who don’t have an alderman’s support rarely bother to seek a zoning change from the city, knowing it has no chance of being approved.

After Ferro and DiPiazza got their zoning change, they did not develop the land. They sold it.

But before they did, two well-known names were added to the deed as owners on June 18, 2004. One was Timothy Degnan, a political adviser to the mayor. The other was Fred Barbara, a friend of Daley’s and a former city waste hauler.

Less than a week later, the land was sold for $2.7 million to another developer who built the town homes.

That sale price was about $2.4 million more than what the Ferro group had originally paid for the land. Before the property was sold, however, the group demolished an old building and cleaned up contaminated soil. That work would likely cost about $300,000, according to public records and estimates from three environmental consultants contacted by the Tribune.

Michael Kralovec, a lawyer for DiPiazza and Ferro, said the group had additional costs and the profit was less than the $2 million suggested by the Tribune’s estimates. He did not respond to a request to provide the bills.

Degnan declined to comment for this article, and Barbara could not be reached.

Flipping land

Balcer, who was appointed to his post by the mayor 10 years ago, testified in a court case last fall that politics plays no role in his zoning decisions. He said he sometimes gets advice from Daley’s brother John, the ward’s committeeman. Balcer testified that his main concern was “how it will affect the community.”

In a recent interview, Balcer said he did not know Degnan and Barbara ended up in the Archer transaction. He said he was not concerned that the land was sold to other developers because the project turned out well.

“That’s called flipping land,” Balcer said. “People flip land all the time.”

DiPiazza and Ferro have done well in other 11th Ward real estate deals under the Daley administration. The Tribune previously reported that they bought contaminated land along the Chicago River for $50,000 in 1998, just before the city sought state funds to buy the property. Six years later, they sold it to the city for a park for $1.2 million.

“They are decent people,” Balcer said of the two men. “They have built projects that have been good for the ward.”

Quiet demise

For developers who don’t win Balcer’s backing, the quest for a zoning change usually dies quietly in the alderman’s office. What happened with the Iron Street property became public only because of federal court cases.

The property sits on the west side of the river’s Bubbly Creek Branch and is owned by the developers of Bridgeport Village, a luxury development directly across the creek.

Bridgeport Village was once a favored project of the Daley administration. Degnan was an adviser to the project, DiPiazza was a consultant and Jack George was the zoning lawyer. The mayor himself took a personal interest, attending a planning meeting at City Hall.

The developers planned to build a pedestrian bridge from Bridgeport Village to their property on Iron Street, where they envisioned more homes.

But the city then soured on one of the project’s developers, who has charged that he was being punished for political reasons.

Thomas Snitzer accused the city in a federal lawsuit of forcing him out as manager because he refused to make additional payments to DiPiazza and to steer clear of property that 11th Ward power brokers had intended for others.

The project has landed in Bankruptcy Court, and the partners must sell nearby industrial land to pay creditors.

The land would be more valuable if it were rezoned for housing, but Balcer has refused to change the zoning on the Iron Street property.

At a meeting in Balcer’s office last August, the alderman told John Kinsella, one of Snitzer’s partners, that the rezoning request was “not negotiable at this time,” according to Bankruptcy Court records.

Kinsella later gave sworn testimony on his reaction to Balcer’s decision. “It was going to depress the sale price, and I think that many of the residents would like to see zoning on the other side [of the river] but he — he has — that’s his job to make that decision,” Kinsella said. “He’s got — he didn’t go into detail with me as to the rationale for his point of view, which I’m sure he had a good rationale.”

Balcer, in his own testimony, did not explain why the property should not be rezoned immediately.

But Balcer denied in that testimony that he might be blocking the zoning change to pressure Snitzer to drop his lawsuit against the city.

Over Snitzer’s objections, U.S. Bankruptcy Judge Jacqueline Cox approved a bid of $7.7 million for the property with the current zoning.

The developers had received bids of more than $12 million if the land could have been rezoned for town homes.

At a court hearing in December, Cox said she had to approve the lower sale price because of the depressed real estate market and Balcer’s stance on zoning.

“We have an alderman who may very well have caused a big problem,” Cox said.