Rahm: City will review Lollapalooza tax exemption

August 2, 2011

As reported once again Monday by this blog, the Chicago Sun-Times, and several other media outlets, Lollapalooza has a unique and possibly illegal exemption from the city and county amusement taxes paid by every other for-profit entertainment event in Chicago, from small club shows, coffee-house gigs, and movie screenings, to U2 at Soldier Field, Paul McCartney at Wrigley, the Pitchfork Music Festival, and the Dave Matthews Band Caravan.

A quick review of the math: Lollapalooza gave its nonprofit partner the Parkways Foundation $2.17 million last year for park improvements, but its gross revenues were more than $21 million. According to former Chicago Park District Superintendent Tim Mitchell, the cost to “rent” all of Grant Park for a weekend would be about $2 million; Lollapalooza pays nothing. The amount of taxes it should be paying the city is more than $1 million.

This means Chicago has been coming up about $1 million short per year for seven years, thanks to the long-term, competition-free contract negotiated in part by the festival’s hired attorney and lobbyist Mark Vanecko, a nephew of former Mayor Richard Daley.

Given the worst financial crisis in the city’s history, with rampant layoffs and widespread cuts in city services, does the new mayor have any intention of rescinding the tax exemption and reexamining Lollapalooza’s sweetheart deal? Here, it’s worth noting that Lollapalooza is co-owned by Austin, Texas-based concert promoters C3 Presents and William Morris Endeavor, the Hollywood talent agency run by the mayor’s brother Ari.

Mayoral spokeswoman Tarrah Cooper wrote: “The Administration will carefully review each request to ensure that the process surrounding exemptions is open, accountable, and directly in line with the spirit of the regulations—to promote value for non-profit associations that do work to better the City of Chicago.”

Lollapalooza’s tax exemption, which apparently needs to be renewed annually, is specified in its contract with the city (and previous conversations with the Department of Revenue have been exceedingly unhelpful in explaining exactly how this works or is justified). The exemption for this year was granted during the waning days of the Daley administration. The statement above from the new mayor’s office can be read to say, “You bet we’re going to look hard at this before granting a tax exemption again for 2012.”

However, Lollapalooza’s contract runs through 2018, which means that Emanuel is saddled with Walmart on the Lake almost until the end of a second term, if he runs and wins one. So the key questions here really are:

Does the mayor think the Lollapalooza deal is a good one for the city?

And, if not, will he honor his pledge to ask the City Council to appoint an independent negotiator to examine and possibly amend that contract?

Cooper did not want to talk about the specifics of the Lollapalooza contract and its future in the next seven years. But she did note that, in its search to cut expenses and increase revenues, the administration is in the midst of a “top-to-bottom review of everything.”

The mayor’s spokeswoman may not have had a lot to say, but at least she was responsive. Jesse Neves, spokeswoman for Cook County Board President Toni Preckwinkle, has not replied to three requests for comment since Monday morning about why the county waived its share of the amusement tax—an especially intriguing question, given that the county doesn’t get any direct financial benefits from Lollapalooza at all, and its financial straits are as dire as the city’s.

Also non-communicative: the office of Illinois Attorney General Lisa Madigan. More than 14 months ago, Madigan sent subpoenas to the key players behind Lollapalooza at William Morris in Hollywood and C3 in Austin. The official comment was, as always, “We cannot confirm or deny whether or not we have an investigation.” But several sources, including one of the subjects of the investigation, said last summer that Madigan was probing Lollapalooza for anti-trust issues stemming from the strictest radius clauses in the U.S. concert business.

Artists who play the giant three-day concert are prohibited from playing anywhere else within 300 miles of Grant Park for as much as six months before Lollapalooza and three months after it. By comparison, the radius clause for the Dave Matthews Band Caravan extended for 120 miles and 30 days before and 30 days after, and local promoters Jam Productions do not impose a radius clause of any kind on shows they regularly book at Chicago clubs, theaters, and arenas. Lollapalooza promoters insist they waive their clause for any band that asks, but some artist managers have said that is not the case, and local club owners say the clauses give their biggest competitor an unprecedented amount of control over the local live music business.

Asked about the investigation once more on Monday, Madigan press secretary Robyn Ziegler wrote, “My response to your inquiry remains the same as the last time you inquired about this subject. I still have nothing to provide. I cannot confirm or deny whether we have an investigation.”

So, what’s really going on here? Choose one:

1. Madigan has dropped the investigation, in which case her office should say so, since subjects have confirmed on the record receipt of her subpoenas, but they have never publicly been cleared.

2. The investigation is ongoing, in which case it’s giving new meaning to that cliché about the wheels of justice grinding slowly.

3. As many knowledgeable observers speculated when the news broke, the Attorney General and Lollapalooza eventually agreed on a consent decree whereby, with no admission of having done anything wrong, Lollapalooza changed its radius-clause policies.

Since the Attorney General’s office won’t comment, I emailed Lollapalooza spokeswoman Shelby Meade on Monday to ask the following questions:

1. Has Lollapalooza in any way changed its radius-clause policies in the last 14 months, either because of the Attorney General’s investigation, or for any other reason?

2. The city never has answered questions about why, when municipal code clearly states that the only exemption from amusement taxes is for events where 100 percent of the profits after expenses go to a nonprofit organization, the very much for-profit Lollapalooza somehow qualifies for a million-dollar tax break. Any comment on this issue?

Wrote Meade: “Thank you for your inquiry. At this time we are completely focused on producing the best festival possible. If you are interested in talking with us after the festival we can set up a time to do so.”

Earlier reporting in this blog about Lollapalooza’s shenanigans:

Aug. 1, 2011: Does Lollapalooza $hort Chicago?

July 13, 2011: Lollapalooza: 'No concerns' about Eminem's hate

April 7, 2011: Two key differences between the mega-fests, Dave Matthews Caravan vs. Lollapalooza

Feb. 24, 2011: Dear Rahm: How to quell fears about your ties to Ticketmaster/Live Nation and Lollapalooza and fix relations with the Chicago music scene

Feb. 21, 2011: Tomorrow we vote, but still no answers from Rahm on his cozy ties to Ticketmaster/Live Nation and Lollapalooza

Feb. 7, 2011: Rahm Emanuel pledges hands off all dealings with Ticketmaster/Live Nation and Lollapalooza

Feb. 4, 2011: Rahm Emanuel: Pal$ with thuggish concert giants Ticketmaster/Live Nation and Lollapalooza

Nov. 19, 2010: Lollapalooza goes South

Oct. 19, 2010: Crain's Agrees: Lollapalooza tax deal warrants scrutiny

Oct. 6, 2010: A second look at my Lollapalooza tax math

Oct. 5, 2010: Does Austin get a crappy deal from Lollapalooza's "little sister"?

Oct. 4, 2010: Is Chicago earning all that it should from Lollapalooza?

July 13, 2010: Lollapalooza, liquor sales, and the links to the mayor's nephew

June 29, 2010: What's behind the Attorney General's investigation of Lollapalooza?

June 24, 2010: Illinois Attorney General investigating Lollapalooza for anti-trust