Crain's agrees: Lollapalooza tax deal warrants scrutiny

October 19, 2010

 

The reputation of Crain's Chicago Business blogger Greg Hinz precedes him: He's an arrogant, surly bulldog and dedicated contrarian, and he seemed to be gunning for me, eager to challenge my reporting on Lollapalooza's unprecedented, long-term, tax-exempt, competition-free sweetheart deal with the city.

In reaching out to a colleague via email to find my contact information -- never mind that my email address is all over the Web, and my phone number is listed in the book (so much for bulldog journalistic chops) -- Hinz wrote, "I was thinking of doing something on his lollapallooza [sic] post, but it apepars [sic] there's a big mistake in it. I hate to knock him without talking to him."

The mistake Hinz was referring to was the tax percentage I corrected as soon as my error was pointed out, but he wasn't deterred when we eventually spoke: He seemed determined, because I primarily am a rock critic, to snicker at my abilities as a reporter. (Again, never mind that I have spent nearly a quarter of a century wearing both hats, working for five years as a beat and investigative reporter before becoming a professional critic, and continuing as such to report difficult stories such as the litigious mess of Kurt Cobain's posthumous career, the city's assault on the Chicago club scene, and the R. Kelly scandal.)

But surprise: Hinz concluded that there are indeed significant questions to be asked about the 10-year deal between Lollapalooza, the Chicago Park District, and the CPD-powered non-profit Parkways Foundation. He wrote:

Does Lollapalooza, the big music festival that occupies a chunk of Grant Park for several days each summer, get a sweetheart tax deal from the city of Chicago? That's the question a rock music writer who blogs on WBEZ's Vocalo website asked in a recent post and, while I don't think he proves his case, the matter does post [sic] some fascinating and unanswered questions.

Hinz notes as I did that any other promoter staging a concert such as Lollapalooza or anything a fraction of its size "normally would owe 5% in amusement taxes, which would amount to about $1 million a year for city coffers." Then he adds: "On the other hand, the firm [Austin, TX-based promoters C3 Presents] appears to pay far more than that $1 million‚ under its arrangement with the district."

That "appears to pay" part is key. The only numbers that can be confirmed to date are payments that average out to a million dollars a year over the first five years that the concert has been in Grant Park. Hinz is willing to accept city officials' word that the payment for 2010 will be double that, or about $2 million. I'm not -- at least not until the city's take officially is reported, and it hasn't been yet. And the only entity in a position to audit Lollapalooza's numbers is Lollapalooza itself.

"All that dough goes to the park district, not the city," Hinz continues. By law, the amusement taxes any other promoter would pay would go to the city, and a separate, significant figure amounting to as much as a million dollars to close Grant Park for several weeks would go to the Park District.

Even if the city is making more money under the current deal than it would from a straight tax payment plus a rental fee for the park, well, the tax payment happens to be the law. As citizens, we may argue with the police officer who pulls us over for running a red light: "Honest, sir, I had a very good reason!" But in the end, the law is the law, and everybody is supposed to follow it. Why shouldn't big business?

While he was skeptical about this point when we talked, Hinz admitted in his blog post: "There still is a nagging question about how C3 got the exemption from paying the city's amusement tax."

My reading of the municipal code -- and it's one that has been confirmed by several knowledgeable attorneys -- is that tax exemptions for big events such as Lollapalooza are allowed only when all of the profits, after reasonable expenses, go to a non-profit group for civic improvements. "Parkways would appear to fit that definition," Hinz writes. "But C3, which is in the business of making not only music but a buck?‚ I've not been able to get an answer."

Well, at least this blogger is not the only one being stonewalled by city officials reluctant to answer thorny questions about the biggest private for-profit event ever to take place on the jewel of the city's lakefront being granted a tax exemption that it does not seem to deserve and which seems to be illegal, quite possibly thanks to the political connections between C3 and its attorney and lobbyist, Mark Vanecko, a nephew of Mayor Daley.

And Hinz ultimately came to the same conclusion I did:

"Those strike me as pretty good questions for the candidates to ponder as half the city prepares to run for mayor and alderman."

****** Earlier reports in this blog about Lollapalooza:

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

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

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

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

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

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