WBEZ | Economy http://www.wbez.org/news/economy Latest from WBEZ Chicago Public Radio en Labor unions celebrate judge's ruling against Illinois pension law http://www.wbez.org/news/labor-unions-celebrate-judges-ruling-against-illinois-pension-law-111148 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/springfield_0_0.jpg" alt="" /><p><p>An Illinois judge has ruled unconstitutional a controversial plan to reduce state employees&rsquo; retirement benefits.<br /><br />Labor groups sued the State of Illinois for passing a bill reducing their members&rsquo; pension benefits. The unions representing downstate and suburban teachers, university employees and most other state workers argued the state constitution says, specifically, that retirement benefits can&rsquo;t be diminished. On Friday, Sangamon County Circuit Court Judge John Belz agreed.</p><p>Belz quoted directly from the state constitution in his six-page decision, citing the passage that states retirement benefits &ldquo;shall not be diminished or repaired.&rdquo; He singled out components of the bill that narrowly passed the state legislature last year to explain why he was ruling against the state. For instance, the law changed cost-of-living increases certain employees receive in retirement, and put a cap on some employees&rsquo; pensionable salary.</p><p>&ldquo;The State of Illinois made a constitutionally protected promise to its employees concerning their pension benefits,&rdquo; Belz wrote in his decision. &ldquo;Under established and uncontroverted Illinois law, the State of Illinois cannot break this promise.&rdquo;</p><p>Labor unions representing employees who are in those retirement systems celebrated the decision.</p><p>&ldquo;The court granted us everything. The court saw it our way,&rdquo; said Dan Montgomery, president of the Illinois Federation of Teachers. &ldquo;This is an unambiguous, unequivocal victory for the constitution and for working people.&rdquo;</p><p>&ldquo;Retirees who earned their modest security in retirement, they always paid their share. And they should not be punished for the failures of politicians,&rdquo; said Anders Lindall, a spokesman for the We Are One Coalition, a group of labor unions.</p><p>Attorneys who defended the bill acknowledged that it reduced benefits, but argued it is needed to deal with a $105 billion unfunded pension liability. Studies have shown that massive debt tied to Illinois&rsquo; retirement payments is the worst of any state in the country.</p><p>Gov. Pat Quinn, and those who supported the legislation, argue basic functions of state government are in danger if the pension law is found to be unconstitutional.</p><p>&ldquo;This historic pension reform law eliminates the state&rsquo;s unfunded liability and fully stabilizes the systems to ensure retirement security for employees who have faithfully contributed to them,&rdquo; Quinn said in a statement.</p><p>The Democratic governor was defeated in this month&rsquo;s election by Republican Bruce Rauner, who also released a statement asking the state&rsquo;s Supreme Court to take up the case as soon as possible.</p><p>The office of Illinois Attorney General Lisa Madigan is defending the law in court. Her office said Friday that it will ask the state Supreme Court to expedite an appeal &ldquo;given the significant impact that a final decision in this case will have on the state&rsquo;s fiscal condition.&rdquo;</p><p>Meantime, Democratic Senate President John Cullerton is considering a plan, in case the state Supreme Court agrees with Judge Belz and throws out the law. Cullerton had pushed for a separate pension proposal that would ask employees to choose between earning state-funded health care coverage in retirement or receiving pay increases.</p><p>&ldquo;If they throw it out, we&rsquo;ll be back to square one and then we go back again to the alternative that already passed the Senate and when that passes, save some money that we can then pass on to education funding and whatever else we want to utilize that savings,&rdquo; Cullerton said Friday.</p><p>Legislators would have to re-visit Cullerton&rsquo;s proposal in a new General Assembly, after January&rsquo;s inauguration.</p><p><em>Tony Arnold covers Illinois politics for WBEZ. Follow him <a href="http://twitter.com/tonyjarnold" target="_blank">@tonyjarnold</a>.</em></p></p> Fri, 21 Nov 2014 17:19:00 -0600 http://www.wbez.org/news/labor-unions-celebrate-judges-ruling-against-illinois-pension-law-111148 CPS chief backs the mayor's $13-an-hour minimum wage http://www.wbez.org/news/cps-chief-backs-mayors-13-hour-minimum-wage-111138 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/Board of Ed at Westinghouse.JPG" alt="" /><p><p>The head of Chicago Public Schools is making a political statement supporting Mayor Rahm Emanuel, ahead of February&rsquo;s municipal elections.</p><p>CPS CEO Barbara Bryd-Bennett told the Board of Education Wednesday that the district wants to move to a $13-per-hour minimum wage. The statement falls in line with <a href="http://www.chicagotribune.com/news/local/breaking/chi-emanuel-minimum-wage-hike-push-20140930-story.html" target="_blank">other city agencies</a>, like the Chicago Park District.</p><p>The budget implications of a $13-per-hour minimum wage for CPS workers and contract employees would still need to be worked out internally, CPS officials said.</p><p>Alderman Jason Ervin, of the 28th Ward, urged board members to consider the $15-an-hour wage he and other aldermen are pushing. The meeting was in Ervin&rsquo;s ward, at Westinghouse College Prep, making it the first board meeting held in a community since 2004, when the board met at Orr Academy. It was also the first time in several years the board has met in the evening. Typically, board meetings start at 10 a.m. at CPS&rsquo;s downtown headquarters.</p><p>CPS spokesman Bill McCaffrey said they moved the meeting into a community and held it in the evening in order to give more people the opportunity to come. The district is also in the process of moving its offices to a new building downtown.</p><p>The meeting, which took place in Westinghouse&rsquo;s auditorium, had a larger crowd than usual and frequent interruptions from audience members. One of the biggest gripes had to do with a recent Chicago Tribune <a href="http://www.chicagotribune.com/news/watchdog/cpsbonds/" target="_blank">investigation into CPS&rsquo;s debt payments</a> on risky interest rate swap deals. Those deals were entered into when now-Board President David Vitale was the district&rsquo;s chief financial officer.</p><p>Tara Stamps, a teacher at Jenner Elementary in Old Town, spoke about a lack of funding for the school&rsquo;s arts program, even though the school is designated as a fine arts school.</p><p>&ldquo;How is it that you can say you want this kind of student, but you don&rsquo;t want to make that kind of investment?&rdquo; Stamps asked. &ldquo;You&rsquo;d rather not renegotiate these toxic deals and squander what could be hundreds of millions of dollars that could go into classrooms that could create well-rounded classrooms where children are appreciated and they learn and they thrive. But you don&rsquo;t. You refuse. You will not arbitrate. You will not renegotiate. You will not do any of the initial steps to get some of that money back.&rdquo;</p><p>The Chicago Teachers Union first sounded the alarm on the bank deals in 2011, but board members and CPS officials repeatedly dismissed the issue.</p><p>&ldquo;Three years we&rsquo;ve been coming here and being told that our facts are wrong, that we just don&rsquo;t understand, and being dismissed by Mr. Vitale,&rdquo; said Matthew Luskin, a CPS parent and organizer for the CTU. &ldquo;A full week of Trib headlines tell a very different story.&rdquo;</p><p>Luskin said he understands that CPS cannot just cancel the contracts with the banks, but he pushed the board to file for arbitration to renegotiate the contracts, and &ldquo;take a stand.&rdquo;</p><p>&ldquo;They could call these banks out, blame them for the cuts and closings that have happened, instead of blaming retirees and parents and children who take up too many resources,&rdquo; Luskin said. &ldquo;They could announce that CPS won&rsquo;t do business with these banks anymore if they refuse to renegotiate.&rdquo;</p><p>McCaffrey with CPS said the district is monitoring the risks of its swap portfolio closely, &ldquo;including the possibility of termination.&rdquo; But he also said, by the district&rsquo;s calculation, the deals saved more than $30 million in interest costs compared to the costs of fixed-rate bonds.</p><p>The debt payments and the minimum wage weren&rsquo;t the only issues raised at the meeting. Two librarians came to speak about the <a href="http://www.wbez.org/news/losing-school-librarians-chicago-public-schools-110547" target="_blank">reassignments and layoffs of full-time librarians</a>.</p><p>&ldquo;The loss of school librarians is especially alarming in CPS high schools where there are now only 38 high schools with librarians,&rdquo; said Nora Wiltse, a school librarian at Coonley Elementary.</p><p>A student and a teacher from Kelly High School came to sound the alarm on <a href="http://www.wbez.org/news/custodial-contract-causing-problems-start-school-year-110767" target="_blank">cleanliness at their school since Aramark</a> took over CPS&rsquo;s janitorial services.</p><p>The Board also approved <a href="http://www.wbez.org/cps-changes-school-ratingsagain-111118" target="_blank">a new school rating policy</a>.</p><p><iframe frameborder="no" height="166" scrolling="no" src="https://w.soundcloud.com/player/?url=https%3A//api.soundcloud.com/tracks/177839305&amp;color=ff5500&amp;auto_play=false&amp;hide_related=false&amp;show_comments=true&amp;show_user=true&amp;show_reposts=false" width="100%"></iframe></p></p> Thu, 20 Nov 2014 13:16:00 -0600 http://www.wbez.org/news/cps-chief-backs-mayors-13-hour-minimum-wage-111138 What’s filling the gap in small business lending? http://www.wbez.org/news/what%E2%80%99s-filling-gap-small-business-lending-111115 <p><p>Since the financial crisis, small business owners have had greater challenges getting loans. Traditional banks rarely lend those small amounts, and the community banks that typically serviced those loans have shrunk significantly.<br /><br />That lending gap has been a boon for a rapidly growing financial product called a merchant cash advance. Business owners can quickly get the money they need, but it can come at a very high price.</p><p>Edgar Jones explained that many in his position don&rsquo;t have other options. Jones asked to change his name for the story. He owns a company that cleans commercial sites. With less than 15 employees, the company makes about $500,000 in revenue each year. After booking a big job to do post-construction clean-up, Jones needed fast cash to buy more equipment. But the bank wouldn&rsquo;t approve the small loan he was looking for. So he turned to a merchant cash advance, or MCA.</p><p>&ldquo;At that time, you be so vulnerable you take it because you really need the money at that time. After that, that&rsquo;s when things either go uphill or downhill,&rdquo; Jones said.</p><p>The MCA company deposited the money in Jones&rsquo; account and began collecting on that debt the next day.</p><p>&ldquo;When the checks don&rsquo;t come on time, then they hit your account and then your account is in the negative,&rdquo; Jones said.</p><p>So when the repayment period was up, Jones said his bank account was still being drained. In order to pay off his most recent advance, he had to take on side jobs.</p><p>Jones&rsquo; credit score wasn&rsquo;t much of a factor in getting approval for the merchant cash advance. What mattered most was his daily cash flow.</p><p>Here&rsquo;s how it works. The MCA firm will deposit a lump sum into the business&rsquo; account, and then repayment can happen one of two ways. The MCA firm could collect by taking a cut of the business&rsquo; daily credit card sales. If there&rsquo;s no credit card sale that day, there&rsquo;s no collection.</p><p>With the other repayment plan, the MCA firm takes a daily withdrawal from the business&rsquo; account. If there&rsquo;s no sale that day, the MCA firm still debit the account. The repayment period is usually a short amount of time, like 90 days.</p><p>Sean Murray with the Daily Funder, a merchant cash advance forum, said it&rsquo;s the business owners&rsquo; responsibility to comb over the fine print. He hasn&rsquo;t heard of bad actors in the industry, but said he&rsquo;d be disappointed if the contract wasn&rsquo;t fully explained.<br /><br />&ldquo;At the end of the day, if they don&rsquo;t get back their money. It hurts them, too,&rdquo; Murray said.<br /><br />Merchant cash advances first came on the scene in the late 90s, but really took off after the financial crisis. Murray expects this industry to be worth about $5 billion for 2014. That&rsquo;s small compared to the personal lending industry, but it&rsquo;s big growth from the millions MCAs earned before the financial crisis.</p><p>Murray said the interest rate on an APR basis does seem high, upwards of 80 percent.</p><p>&ldquo;But what&rsquo;s important to note when we&rsquo;re talking about costs that are high like that---these loans sound really, really high--is that these loans amortize daily. And so the actual cost of the money might only be 20 percent. Let&rsquo;s say I give you $10,000 and the cost is $2,000, so that&rsquo;s 20 percent,&rdquo; Murray explained.</p><p>The MCA might be referred to as a loan, but it isn&rsquo;t the traditional personal loan with which most are familiar. It escapes the scrutiny of regulation.<br /><br />&ldquo;Merchant cash advances are business-to-business transactions. They don&rsquo;t involve consumers. The consumer protections that exist elsewhere in the market don&rsquo;t really apply to businesses. It doesn&rsquo;t mean there are no laws, and it&rsquo;s a free for all. But the laws are generally pretty lax,&rdquo; Murray said.</p><p>There&rsquo;s not really a central office these companies report to. It&rsquo;s not something that state lawmakers are keeping an eye on either.</p><p>Murray said people can certainly file any complaints with the Federal Trade Commission. He said the general industry consensus is that self-policing is the best option.<br /><br />&ldquo;Regulators come in and have a tendency to see part of the picture. It makes things more difficult for everyone else in the long run. It ends up hurting the customers they&rsquo;re trying to protect rather than helping them,&rdquo; Murray said.</p><p>Kevin Daleiden is the owner of Flange Advantage in Waukegan. He and two other men sell nuts and bolts out of a warehouse. Daleiden&rsquo;s taken out at least seven merchant cash advances. He said he&rsquo;s planned carefully for each one, but has still been caught off guard by fees he didn&rsquo;t notice in the contract terms.</p><p>&ldquo;One of the hardest things to get out of people at the very front is give me the payoff information. Give me the way I pay this back to you. There&rsquo;s not a one of them out there that will tell you the facts upfront. And they won&rsquo;t put it in writing until you&rsquo;re signing the documents,&rdquo; Daleiden said.</p><p>He said he&rsquo;s constantly getting calls, emails and letters from MCA firms trying to get him to sign a deal.</p><p>&ldquo;I don&rsquo;t know how they get my name, but there&rsquo;s hundreds of these companies out there and I think they call me everyday. I&rsquo;ve had one gentleman that yelled at me, says &lsquo;you need to give me all your business.&rsquo; I said &lsquo;I&rsquo;ll give my business to who I feel comfortable with,&rsquo; and he actually yelled at me on the phone,&rdquo; he said.<br /><br />Daleiden is trying to move away from MCAs and toward microloans. He&rsquo;s now working with the Chicago non-profit Accion for his latest deal.<br /><br />Microloans are what they sound like, smaller loans to small businesses distributed by a qualified non-profit. Accion services amounts $100,000 and less.<br /><br />CEO Jonathan Brereton said it&rsquo;s a better loan option with less than 5 percent defaulting, but MCA firms can distribute the money faster. Brereton admits meeting the demand is a big challenge.</p><p>&ldquo;We think the market has a need and supply, there&rsquo;s still an enormous gap. So we think we&rsquo;re only serving about 15 percent of the market demand in Chicago,&rdquo; he said.<br /><br />Brereton said this past year has exploded with clients like Edgar Jones and Kevin Daleiden trying to get out from under merchant cash advances. He&rsquo;s even seen people layering them.<br /><br />&ldquo;So they take one, cash flow gets tight. They take another. We&rsquo;ve seen people take five or six loans from different lenders. All in the 100-190 percent interest range. But no where on any of the agreements does it specify the actual interest rate,&rdquo; Brereton said.<br /><br />The gap in small business lending left behind by the financial crisis allowed merchant cash advances to thrive. The product has helped some businesses increase their revenue when they otherwise wouldn&rsquo;t have.</p><p>But Kevin Daleiden said it&rsquo;s also the reason why some businesses have failed.</p><p>&ldquo;My merchant advances have made them more money than I&rsquo;ve taken home this year, and I&rsquo;m doing the work. But I did that knowing it would be expensive. I had a goal,&rdquo; Daleiden said. &ldquo;If you don&rsquo;t&rsquo; have a long term goal, a way in and a way out, the merchant advances will kill you.&rdquo;</p><p><br /><em>Susie An is the business reporter for WBEZ. Follow her <a href="https://twitter.com/soosieon">@soosieon</a>.</em></p></p> Tue, 18 Nov 2014 06:33:00 -0600 http://www.wbez.org/news/what%E2%80%99s-filling-gap-small-business-lending-111115 SRO tenants gain protections http://www.wbez.org/news/sro-tenants-gain-protections-111093 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/RS7102_IMG_2085 (outside 2)-scr.jpg" alt="" /><p><p>Low-income tenants of Chicago&rsquo;s disappearing single-room occupancy hotels have new protections under an ordinance city council approved Wednesday. The &ldquo;Chicago for All&rdquo; ordinance, as it has come to be known, passed 47-2, with only Aldermen Carrie Austin (34th) and Mary O&rsquo;Connor (41st) opposing. Supporters of the measure hope it will slow the trend of affordable SRO units falling into the hands of for-profit developers who displace low-income tenants.</p><p>&ldquo;This is all a piece of an overall fabric,&rdquo; said Mayor Rahm Emanuel, whose office helped broker the compromise between affordable housing advocates and SRO owners. &ldquo;The housing strategy particularly is part of a five-year plan: 41,000 units of affordable housing in the City of Chicago.&quot;</p><p>Emanuel&rsquo;s office worked closely with sponsors Alderman Walter Burnett (27th), Ameya Pawar (47th), and a coalition of organizations including ONE Northside, the Sargent Shriver National Center on Poverty Law, the Chicago Coalition for the Homeless, and many more.</p><p>The ordinance regulates the sale of SRO buildings such that owners are encouraged to negotiate first with buyers who intend to preserve the building as affordable housing. If an owner opts not to do so, he may sell to for-profit developers and pay into a city SRO preservation fund at the rate of $20,000 per unit in the building. The preservation fund, in turn, could be used to provide forgivable loans to SRO owners who wish to make building improvements, to subsidize building purchases by preservation buyers, and to build new SRO buildings in Chicago.</p><p>&ldquo;In places like the Fourth Ward, we believe that we are doing our fair share when it comes to affordable housing and public housing,&rdquo; said Alderman William Burns (4th).&nbsp; &ldquo;And when we look at other places in the city, we ask what&rsquo;s being done to create affordable housing on the north lakefront? On the North Side of Chicago? So that there&rsquo;s equal opportunity for people to have affordable housing throughout the city&mdash;and particularly in communities where there&rsquo;s access to good schools, jobs, grocery stores, and an opportunity to break down racial segregation in this city?&rdquo;</p><p>Burns and other aldermen praised the ordinance for addressing, in part, the city&rsquo;s shortage of affordable housing. In particular, they cited it as a key way to combat the problem of homeless veterans. Housing advocates estimate about one-quarter of SRO residents are war veterans who might otherwise be homeless. Mayor Emanuel has declared one of his goals in the 2015 budget will be to end veteran homelessness in Chicago.</p><p>Additionally, the ordinance would provide additional financial assistance for SRO residents who are displaced. It would require building owners to pay between $2,000 and $10,600, depending on the circumstances. It would also forbid SRO owners from retaliating against residents who complain to the city or the news media about conditions in their buildings.</p><p>Negotiations between the city, advocates and SRO owners were challenging. Initially, many SRO owners hoped the city would shy away from regulations, and instead offer more financial incentives for them to keep their buildings affordable. But concerns early on that the regulations may be enough to prompt a lawsuit against the city have largely dissipated.</p><p>&ldquo;We were disappointed that the ordinance fell a bit short. We, and so many other stakeholders over about six months had been working very diligently,&rdquo; said Eric Rubenstein, Executive Director of the Single Room Housing Assistance Corporation. &ldquo;We will, as operators, do our very best to work with the plan, with the ordinance, as it was presented.&rdquo;</p><p dir="ltr" id="docs-internal-guid-6cd3f03c-a623-4dee-4055-9af79ec2a054"><em>Odette Yousef is WBEZ&rsquo;s North Side Bureau reporter. Follow her <a href="https://twitter.com/oyousef">@oyousef</a> and <a href="https://twitter.com/WBEZoutloud">@WBEZoutloud</a>.</em></p></p> Wed, 12 Nov 2014 16:29:00 -0600 http://www.wbez.org/news/sro-tenants-gain-protections-111093 As temp work grows, African Americans push for their fair share http://www.wbez.org/news/temp-work-grows-african-americans-push-their-fair-share-110945 <p><p>Between his wife, children and grandchildren, there are a lot of mouths to feed in Kenny Flowers&rsquo; home. But he says it has been a decade since his last full-time job. And he lost one of his two part-time jobs a few months ago.<br /><br />&ldquo;So I&rsquo;ve been coming to MVP to pick up [work] and just get some honest money,&rdquo; says Flowers, 38, referring to Most Valuable Personnel, part of Personnel Staffing Group, a chain based in the Chicago area with operations in eight states.<br /><br />Flowers, a lifelong resident of the city&rsquo;s West Side, says he has gone at least four times this year to MVP&rsquo;s office in the Town of Cicero, a suburb bordering the city. He says he has spent hours and hours in the waiting room.<br /><br />But MVP has yet to give Flowers any work. Asked why, a company spokesman responds that Flowers &ldquo;calls the office frequently and is advised to come in the following day to be assigned out for work&rdquo; but &ldquo;does not arrive to be sent out.&rdquo;</p><p>Flowers calls that baloney and wonders whether MVP is trying to hide something he has noticed in the waiting room. &ldquo;I see more Latinos going out than I do African Americans,&rdquo; he says.<br /><br />Flowers suspects that many of those Latinos are in the country illegally. He says MVP assigns them work on the belief that unauthorized immigrants are less likely to raise a stink when employers short them out of pay or put them in dangerous conditions. The staffing firm denies that allegation.<br /><br />MVP&rsquo;s Cicero location is among 933 offices of temp agencies registered to operate in Illinois. Nationwide, more than 2.9 million people were employed as temps in September, according to U.S. Bureau of Labor Statistics data. Temp jobs, once mostly clerical, are now mainly blue-collar and constitute about 2 percent of the nation&rsquo;s employment.</p><p>Those are all record numbers, but African Americans say they are not getting a fair shot at the work. They are accusing the staffing companies of discrimination. And their claims are getting attention from temp-worker advocates, federal regulators and some Illinois lawmakers.</p><p><span style="font-size:22px;">Few blacks sent to bakery</span></p><p>Flowers takes me to that MVP office, part of a strip mall along the border between Cicero and Chicago. In the waiting room I see more than four dozen blue-collar workers hoping for an assignment. Some say they have been there for hours. While they wait, they are not getting paid. Nearly all are black.<br /><br />I pull out my audio-recording gear and take a few photos of Flowers on the sidewalk, where workers have spilled out from the waiting room. Within minutes a woman who helps run this MVP office comes out and commands everyone to go back inside. Everyone, that is, but Flowers and me. She tells us to leave, and we do.<br /><br />But we do not get far. As I interview Flowers on a residential sidewalk around the corner, a Cicero police car pulls up, then another. &ldquo;We have the subjects,&rdquo; one of officers tells his radio dispatcher.</p><div class="image-insert-image "><img alt="" class="image-original_image" src="http://www.wbez.org/system/files/styles/original_image/llo/insert-images/waiting%20room.jpg" style="height: 426px; width: 620px;" title="At the Cicero office of Most Valuable Personnel, dozens of black workers fill the waiting room. (WBEZ/Chip Mitchell)" /></div><p>&ldquo;I&rsquo;m going to need to see IDs from both you gentlemen,&rdquo; the officer tells Flowers and me. The cop says it was MVP that called the police on us.<br /><br />After they run our driver&rsquo;s licenses for warrants, the officers leave us alone. But the whole experience signals that discrimination allegations in the staffing industry have touched a nerve.</p><p>MVP is a defendant in two class-action lawsuits in federal court. Both claim employment discrimination against African Americans. Temp-worker advocates, meanwhile, have come to the company&rsquo;s Cicero office to hand out flyers about wage theft. MVP claims the leafleting is an effort to &ldquo;coerce&rdquo; the company to settle the litigation.</p><p>But Christopher Williams, the attorney who filed the suits, says MVP has only itself to blame. &ldquo;Where there&rsquo;s a staffing agency within two miles of zip codes that have a population that&rsquo;s 97-98 percent African American, why were no African Americans &mdash; almost none &mdash; sent to work jobs at Gold Standard Baking?&rdquo;<br /><br />Gold Standard, an industrial bakery on Chicago&rsquo;s Southwest Side, relies on MVP for labor. The two companies are co-defendants in one of the suits. The claim is that the bakery asked for immigrant temps instead of African American temps and that the staffing agency fulfilled that request.<br /><br />&ldquo;Over a four-year period, when approximately 5,000 workers were sent to Gold Standard Baking, only 85 of those were African American,&rdquo; Williams says. &ldquo;These are low-skilled jobs that people on the West Side of Chicago need to have access to.&rdquo;<br /><br />At the same time, Williams says, MVP focused its recruiting on Spanish-speaking workers, and the company sent out vans to pick them up in heavily immigrant neighborhoods such as Little Village.<br /><br />In court, MVP has countered that the reason its workforce is mostly Latino is because of the office&rsquo;s location. Nearby Chicago neighborhoods may be black, but Cicero is mostly Latino.<br /><br />&ldquo;MVP does not discriminate against African Americans,&rdquo; Elliot Richardson, an attorney for the company, tells me. &ldquo;MVP sends out the very best employees for the positions that fit what those employees can do. There are plenty of job offerings at MVP right now. They are looking for workers. Regardless of their race, we welcome people to come in and to apply.&rdquo;</p><p>Gold Standard officials, for their part, referred WBEZ questions about the suit to a lawyer. He sent a statement that denies the allegations and calls the company &ldquo;an equal opportunity employer&rdquo; that is &ldquo;proud of its diverse workforce.&rdquo;</p><p>Last week MVP brought a suit of its own. The claim, filed in Cook County Circuit Court, accuses the temp-worker advocates and their group, the nonprofit Chicago Workers&rsquo; Collaborative, of defamation.<br /><br />&ldquo;Their goal is to destroy the temporary employment agencies in the city,&rdquo; Richardson says. &ldquo;MVP does not steal its employees&rsquo; wages.&rdquo;<br /><br />The temp-worker advocates respond that they are not trying to destroy the agencies, just some of their practices, such as the alleged race-based hiring.<br /><br />Leone José Bicchieri, the collaborative&rsquo;s executive director, calls it &ldquo;sad that one of the major staffing agencies in the state of Illinois has decided to use so much time, energy, resources and money on lawyers&rdquo; instead of addressing worker grievances. Bicchieri says the defamation suit is an effort to silence workers.<br /><br /><span style="font-size:22px;">Allegations hard to prove</span></p><p>If some temp agencies are discriminating, it is difficult to find out how many. The U.S. Equal Employment Opportunity Commission does not tally complaints against staffing firms.</p><p>But a few of those EEOC complaints in recent years have led to six-figure settlements from those companies. &ldquo;There have always been staffing agencies willing to steer employees based on race and other illegal factors, and that&rsquo;s certainly ongoing,&rdquo; said Jean Kamp, a top attorney of the EEOC&rsquo;s Chicago office. &ldquo;As more people are working through staffing agencies, it&rsquo;s more of a problem.&rdquo;<br /><br />Besides filing EEOC complaints, temp workers alleging race-based hiring discrimination&nbsp;are also dragging staffing firms into federal court. In the Chicago area, Williams is representing plaintiffs in three class-action suits. The defendants include MVP, four other temp agencies and three companies that contracted with the agencies for labor.<br /><br />But alleging discrimination is easier than proving it. In court, MVP has claimed that it does not keep records on people who arrive in search of a job. That claim, contradicted by a company vice president at a July forum recorded by WBEZ, has made it difficult for the plaintiffs to gather information about the job seekers&rsquo; race.<br /><br />&ldquo;This issue is about to be resolved,&rdquo; state Rep. Ken Dunkin (D-Chicago) said last week as he came out with draft legislation that would tighten up record-keeping requirements. His proposal would require staffing firms to keep a contact form on each job seeker and enable those workers to indicate their race and gender on that form. The idea is to make hiring discrimination easier to find.<br /><br />&ldquo;Hopefully we&rsquo;ll get to the bottom line in resolving this open and blatant discrimination against African Americans, [whose] unemployment rate is just as high as our Latino brothers and sisters,&rdquo; Dunkin said.</p><p>The two main trade groups representing temp firms in the state &mdash; the Staffing Services Association of Illinois and the Illinois Search and Staffing Association &mdash; both declined to comment about the discrimination allegations and Dunkin&rsquo;s proposal.<br /><br />Dunkin says he will introduce that bill this fall or winter after gathering co-sponsors.</p><p>In the meantime, Flowers is still hoping to find more income. &ldquo;Holidays are coming up and it&rsquo;s real rough on me,&rdquo; he said. &ldquo;It&rsquo;s going to be winter and the heat and gas bills are going to go up even more. I would like my kids to have a nice Christmas like everybody else.&rdquo;<br /><br />He might be eligible to file a claim under one of the class-action suits against MVP, but the company is not showing much interest in settling.<br /><br />So, Flowers says, he will keep showing up at the temp agency. Some day, he says, it might send him out to work.</p><p><em><a href="http://www.wbez.org/users/cmitchell-0">Chip Mitchell</a> is WBEZ&rsquo;s West Side bureau reporter. Follow him on Twitter <a href="https://twitter.com/ChipMitchell1">@ChipMitchell1</a> and <a href="https://twitter.com/WBEZoutloud">@WBEZoutloud</a>, and connect with him through <a href="https://www.facebook.com/chipmitchell1">Facebook</a>, <a href="https://plus.google.com/111079509307132701769" rel="me">Google+</a> and <a href="http://www.linkedin.com/in/ChipMitchell1">LinkedIn</a>.</em></p></p> Wed, 15 Oct 2014 16:56:00 -0500 http://www.wbez.org/news/temp-work-grows-african-americans-push-their-fair-share-110945 How home appraisals are calculated http://www.wbez.org/news/how-home-appraisals-are-calculated-110910 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/diningroom.JPG" alt="" /><p><p>WBEZ&rsquo;s been looking at why some Chicago neighborhoods aren&rsquo;t recovering as quickly as others in this post bubble market. <a href="http://www.wbez.org/news/neighborhood-value-challenge-housing-recovery-110530">As we reported over the summer</a>, part of the measure of a neighborhood is the value -- or appraisal -- of the property there.</p><p>So exactly how is that value measured? I tagged along with an appraiser to find out.</p><p>&ldquo;What is the home consisting of? How many bedrooms, how many bathrooms? What&rsquo;s the floor plan? What&rsquo; the quality of the interior,&rdquo; said Michael Hobbs, president of PahRoo Appraisal and Consultancy. &ldquo;Then, how does that as a package go together and how does that compete with others in proximity.&rdquo;</p><p>He said it&rsquo;s not just about walking through a house. It&rsquo;s also hours of research and looking at comparable properties in the area.</p><p>One of the properties we looked at was a bungalow in the city&rsquo;s Albany Park neighborhood. It was originally listed at $329,900.</p><p>Before we even stepped inside the house, Hobbs sized up the neighborhood to see how this house fits in. The block had a mix of single-family homes and two flat rentals.</p><p>&ldquo;If you look around you can see there&rsquo;s a couple frame properties on the block, a few stucco, but most of them are brick,&rdquo; he said.</p><p>Hobbs also took note of recent tuck pointing work, updated windows and gutters.</p><p>A placard on the front door notes home&rsquo;s historic bungalow designation.</p><p>&ldquo;The first thing we notice as we walk in is the original wood work that&rsquo;s still here, from the flooring to the doors,&rdquo; he said.</p><p>Some other original features include vintage brass handles and a certain crown molding common in the early 1900s when the home was built.</p><p>Hobbs took note that the sellers made efforts to preserve these touches to maintain the bungalow&rsquo;s historic status.</p><p>He made note to research what the demand is for vintage properties in this micro market.</p><p>The kitchen also has a retro look.</p><p>&ldquo;This is quite typical for the age. You can see the metal sink, original metal cabinetry,&rdquo; he said.</p><p>It&rsquo;s flanked with yellow tile backsplash and a green and blue tile floor. Behind us is a breakfast nook right out of a 50s diner.</p><p>&ldquo;We measure the perimeter of the home. We&rsquo;ll start in one corner and literally measure our way around the property. We make a full floor plan and sketch, and what we&rsquo;re noting here as we&rsquo;re walking through is that this home has 3 bedrooms on the first floor and a bathroom,&rdquo; he said.</p><p>The homeowners could&rsquo;ve paid for updates, but Hobbs said that cost wouldn&rsquo;t necessarily result in a higher market value.</p><p>&ldquo;There&rsquo;s almost no home improvement project that returns 100 percent of the cost to the actual owner. And that&rsquo;s an important clarification for a lot of people. Just because you spent $50,000 doesn&rsquo;t necessarily mean you&rsquo;re going to get $50,000 back,&rdquo; he said.</p><p>The home has a large unfinished basement that&rsquo;s mostly dingy, storage space. But it also includes a finished portion with wood paneling--think VFW hall. Hobbs also made note of the water heater and boiler, not to inspect them, but to make note the home has them.</p><p>In the backyard, there&rsquo;s no lawn or garage, but there&rsquo;s a concrete patio and enclosed parking pad.</p><p>&ldquo;The first thing I see is how much shorter the neighboring homes are,&rdquo; Hobbs said.</p><p>He points out the home&rsquo;s larger back end and wider lot than those nearby.</p><p>Back inside, the second level of the home opens up into a large red room with white trim and built in shelves, reminiscent of an old classroom.</p><p>&ldquo;As we can see based on the plywood on the floor and the wear on it, this has been here for an awfully long time,&rdquo; Hobbs said.</p><p>For home buyers looking to get a mortgage loan, banks often require an appraisal.</p><p>Regulation post housing crisis is set up to safeguard against collusion between appraisers and bankers, a problem in the past. So now a third party, an appraisal management company assigns the jobs.</p><p>Hobbs said that&rsquo;s sped up the closing of the home deals, which is good for buyers and sellers, but can limit an appraiser&rsquo;s time for thorough market research.</p><p>&ldquo;So we have to make some assumptions. And therefore we end up completing reports in a shorter amount of time and with maybe less of the information we more traditionally would have had because the push is faster, faster, faster,&rdquo; he said.</p><p>Hobbs said people often criticize appraisers for the short time they spend looking at a property.</p><p>&ldquo;You were only in my home for 30 minutes or 45 minutes or an hour, how do you know how much it&rsquo;s worth? I&rsquo;m like, we got to go do research,&rdquo; he said.</p><p>That means looking at comparisons or comps nearby. How dissimilar are they and how much might those features change the value of the home we&rsquo;re appraising?</p><p>&ldquo;So it&rsquo;s a matter of both looking back in terms of what has closed. Looking laterally&hellip;buyer activity has chosen that home instead of this one. And then what&rsquo;s active. What&rsquo;s ahead of us in the form of what this buyer looks at as alternatives,&rdquo; he said.</p><p>Appraisers get the buyer/seller contract before viewing the property. Hobbs said the appraisal and contract price often end up being the same. He said that doesn&rsquo;t necessarily mean the appraiser was influenced by the offer price.&nbsp; Rather, buyers and sellers have more access to information to make a more informed valuation for themselves.</p><p>&ldquo;Really the appraiser is coming along and documenting the activities of typical buyers and sellers to really confirm that one person isn&rsquo;t way out there,&rdquo; he said.</p><p>Here&rsquo;s your chance to make an appraisal.</p><p><iframe frameborder="0" height="3600" scrolling="no" src="https://s3.amazonaws.com/wbez-assets/WBEZ-Graphics/AppraisalQuiz/index.html" width="620"></iframe></p></p> Tue, 07 Oct 2014 21:26:00 -0500 http://www.wbez.org/news/how-home-appraisals-are-calculated-110910 Chicago moves on taxi reforms to leave more money in cabbies' pockets http://www.wbez.org/news/chicago-moves-taxi-reforms-leave-more-money-cabbies-pockets-110877 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/Cabs.png" alt="" /><p><p>The city of Chicago is moving on a set of reforms to help cabbies take home more money, a partial salve after a months-long fight over legalizing competing rideshare services left many taxi drivers feeling bruised. While many hail the step as a sign that city officials are finally working to redress cab drivers&rsquo; complaints, some say the changes don&rsquo;t go far enough.</p><p>&ldquo;What we wanted to do is improve overall their experience here in the city, and make it more lucrative for them as cab drivers,&rdquo; said Maria Guerra Lapacek, Commissioner of Chicago&rsquo;s Department of Business Affairs and Consumer Protection.</p><p>Guerra Lapacek said her department crafted the proposals after working with representatives from Cab Drivers United/AFSCME Local 31 and other driver advocacy groups. Some of them will be included in an ordinance to be introduced at City Council&rsquo;s meeting next week. Others will be implemented through rule changes by the BACP.</p><p>The most significant change would reduce how much taxi owners may charge to lease their fuel-efficient cabs after the vehicles&rsquo; first year on the road.</p><p>&ldquo;The garages are able to recoup their investment after a year of having these vehicles in circulation,&rdquo; explained Guerra Lapacek, &ldquo;so the idea was to reduce the lease rate cap for the second year, and that way give relief back to the cab driver.&rdquo;</p><p>Guerra Lapacek said this idea resulted from the surprising finding in a recent <a href="http://www.wbez.org/study-chicago-cabbies-earn-average-12hour-110726">city-commissioned study</a>, which found that cab drivers spend about 40 percent of their gross income on their vehicle leases. Ultimately, the reform could affect leases for an estimated 3,700 of the city&rsquo;s nearly 7,000 cabs.</p><p>Leases would also be reduced for drivers whose vehicles generate a separate revenue stream from advertising displays. The reforms would require cab companies to credit leases in these cases.</p><p>&ldquo;There are over 2000 owner-operators in the City of Chicago. They don&rsquo;t pay a lease,&rdquo; said Peter Enger, a cab driver and Secretary of the United Taxidrivers Community Council. &ldquo;This will not help them in the slightest.&rdquo;</p><p>Enger said he&rsquo;s delighted that city officials appear to be considering the difficulties cab drivers have faced since a previous set of reforms took effect in 2012. Those reforms raised the lease rates for cabs, without a commensurate increase in taxi fare rates. Many cab drivers say that has resulted in longer working hours to earn the same income.</p><p>Cab drivers who own and drive their own taxis affirm Enger&rsquo;s fear that a new round of reform will still leave them in the dust.</p><p>&ldquo;The only way is to get a fare increase that we did not get for almost ten years, to offset the cost of living and all of that stuff,&rdquo; said Ahmed Ammar, who owns and drives his own taxi. &ldquo;Everything went up.&rdquo;</p><p>While some cab drivers, particularly those aligned with UTCC&rsquo;s union, push for a taxi fare increase, others worry it could adversely affect demand. Representatives from another union, Cab Drivers United, say raising fares is lower on their priority list.</p><p>&ldquo;Our focus first and foremost has been moving forward on these changes that will both put money in drivers&rsquo; pockets, and keep the cab companies competitive with the (rideshare) companies,&rdquo; said Tracy Abman, an organizer with AFSCME Local 31.</p><p>Guerra Lapacek said her department will not consider a fare increase at this juncture because she worries it could turn customers away from the taxi industry. Rideshare companies&rsquo; prices routinely undercut taxi fares.</p><p>The proposals also include city-backed smartphone applications to allow passengers to electronically hail taxis, as they do with popular services such as Uber and Hailo.</p><p>&ldquo;We think this is an excellent reform that&rsquo;s going to bring the cab industry into more innovation and really help them access those customers,&rdquo; said Guerra Lapacek. She said the city will put out a request for proposals, and will require all taxis to be on at least one of the city-backed apps.</p><p>Additionally, the reforms would reduce the fee that taxi drivers pay on credit card transactions, from 5 percent to 3 percent; lower the maximum penalties for taxi offenses from $1,000 to $400; and <a href="http://www.cityofchicago.org/content/dam/city/depts/bacp/publicvehicleinfo/publicchauffer/chauffeurtrainingtaskforcefinalrecommendations.pdf">streamline</a>&nbsp;the required driver training process.</p><p>The city will also create a task force to review <a href="http://www.wbez.org/series/curious-city/how-often-are-cabs-pulled-over-and-what-109734">the enforcement process of taxi rules</a> at the Administrative Hearings Court, which many taxi drivers disparagingly refer to as a &ldquo;kangaroo court.&rdquo;</p><p>&ldquo;I think it&rsquo;s significant that the City is listening to drivers that are organized, listen to them, hearing their concerns, addressing some of their concerns and agreeing to continue to work together with drivers to make their lives better and make sure the industry remains viable,&rdquo; said Abman.</p><p><em>Odette Yousef is WBEZ&rsquo;s North Side Bureau reporter. Follow her </em><a href="https://twitter.com/oyousef"><em>@oyousef</em></a><em> and </em><a href="https://twitter.com/WBEZoutloud"><em>@WBEZoutloud</em></a><em>.</em></p></p> Tue, 30 Sep 2014 18:03:00 -0500 http://www.wbez.org/news/chicago-moves-taxi-reforms-leave-more-money-cabbies-pockets-110877 Investors gather in Chicago seeking cannabis businesses http://www.wbez.org/news/investors-gather-chicago-seeking-cannabis-businesses-110820 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/marijuana investors.JPG" alt="" /><p><p>The country&rsquo;s largest cannabis investor group held a pitch forum in Chicago.</p><p>It looked like a typical business conference in a hotel ballroom, with people in suits shaking hands and exchanging cards. But the biggest difference was that it focuses on a federally illegal substance.</p><p>&ldquo;While we&rsquo;re slaying stereotypes, I also want to open up and make room for the people who may fit the stereotype. I know some great people that I&rsquo;ve done business with that have long hair, or hippies or all the other things that we associate with it. Because once again, the hippies keep being right,&rdquo; said Troy Dayton, CEO of the ArcView Group.</p><p>Dayton was addressing a room full of marijuana industry investors. The industry is expected to be valued at $2.6 billion by the end of this year. More than 100 companies applied online to make their business pitch and only a dozen were chosen for ArcView&rsquo;s forum.</p><p>&ldquo;There&rsquo;s a lot of competition between investors. There&rsquo;s a lot of competition between companies. And everybody&rsquo;s trying to elbow and move,&rdquo; he said.</p><p>The room vibe was part Apple product launch and part speed dating.</p><p>Joshua Hill is from Washington state. His handle bar mustache fluttered as he talked to a table of investors about his company Oil Slick. He moved from table to table talking about a non-stick product used to handle sticky cannabis concentrates. His pitch was successful.</p><p>&ldquo;We came here seeking a million dollars for our upcoming projects. Just this morning, I just left a meeting with some investors form ArcView,&rdquo; he said. &ldquo;They&rsquo;ve signed a memorandum of understanding, which is the first stage of getting funded. So they&rsquo;ve committed to raising that million for us.&rdquo;</p><p>There was also companies making pitches in a shark tank like presentation.</p><p>Keith McCarty from San Francisco worked in the tech industry before he moved over to cannabis. He launched an app called Eaze just six weeks ago, and he&rsquo;s hoping to raise more capital.</p><p>The app is like Uber for medical marijuana where drivers deliver from dispensaries to patients.</p><p>McCarty&rsquo;s product won&rsquo;t be seen in Illinois anytime soon because state laws restrict anyone other than a certified patient or caregiver to make a pickup. But that doesn&rsquo;t mean Illinois investors won&rsquo;t bite.</p><p>Dayton said all the companies pitching at the Chicago forum were from out of state, but many of the investors in attendance were from Illinois. ArcView has about 330 members with about 30 from Illinois. Annual membership fees range from $2,500 to $15,000.</p><p>&ldquo;It&rsquo;s just really significant for the whole industry that there&rsquo;s now a Midwestern state with a legal cannabis industry. And so it&rsquo;s great for us all to come here and visit and meet all the people who are the applicants,&rdquo; Dayton said.</p><p>He said these business pitch forums will get larger, more competitive and increasingly commonplace as states move toward legalization.</p><p><em>Susie An is WBEZ&rsquo;s business reporter. Follow her @soosieon</em></p></p> Fri, 19 Sep 2014 08:00:00 -0500 http://www.wbez.org/news/investors-gather-chicago-seeking-cannabis-businesses-110820 Chicago SRO owners say proposed city ordinance is 'hostile' http://www.wbez.org/news/chicago-sro-owners-say-proposed-city-ordinance-hostile-110775 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/SRO ordinance.jpg" alt="" /><p><p dir="ltr" id="docs-internal-guid-6a96fd4e-5c8e-a95a-a0fa-12b9a087e263">A new City Hall plan to preserve <a href="http://www.wbez.org/news/slow-disappearing-act-chicago-sro-105836">fast-vanishing</a> affordable housing units in single-room occupancy (SRO) and residential hotels has some Chicago SRO owners upset.</p><p>The Single-Room Occupancy and Residential Hotel Preservation Ordinance, to be introduced at Wednesday&rsquo;s City Council meeting, includes incentives to induce building owners to maintain a certain threshold of affordable units in their buildings. There are few specifics about those incentives, but much of the measure focuses on financial penalties that owners would face if the number of affordable units in their buildings falls below a mandated percentage.</p><p>&ldquo;Essentially what has happened is the city wants to change the rules in the middle of the game,&rdquo; said Eric Rubenstein, Executive Director of the Single Room Housing Assistance Corporation, which works with building owners, operators and tenants to preserve SRO housing in Chicago. &ldquo;The properties are going to be dropping substantially in value because of the proposed ordinance, as now written,&rdquo; he said.</p><p>Under the proposal, owners who wish to demolish or convert their properties to market-rate rentals would be required to maintain at least 20 percent of the building&rsquo;s units as affordable, or else pay a $200,000 &ldquo;preservation fee&rdquo; for every unit that falls short of that threshold. Additionally, if an owner wishes to sell a building, it would allow non-profits first crack at purchasing it and would require the owner to engage in good-faith negotiations with those organizations. If no sale occurs within six months of notifying non-profits, then the owner may attempt to sell the property to private developers.</p><p>&ldquo;The private market often moves too quickly for these non-profits to pull together the financing,&rdquo; explained Michael Negron, Chief of Policy to Mayor Rahm Emanuel, &ldquo;and so we wanted to make sure that there was enough period of time for these organizations to actually&hellip; know a sale is coming, and then work with potential lenders, work with the city, work with the state. There are different parties that could potentially help put together a deal like that, but they just need the time to do it.&rdquo;</p><p>The proposal would allow building owners to bypass this process altogether, and to approach the private market first, if they pay a fee of $200,000 on each unit for 30 percent of the units in the building. But many current owners fear that these fines will drastically undercut the selling price of their buildings.</p><p>&ldquo;The property values will have plunged based on the market being so restricted, that the only option essentially for a current owner when he or she is ready to sell is to turn to a non-profit,&rdquo; worried Rubenstein, &ldquo;and the non-profit could offer nickels or dimes on the dollar.&rdquo;</p><p>All fees collected through the proposed ordinance would go to a preservation fund, which the city would use to assist SRO owners with defraying the cost of maintaining, developing or improving their properties. Negron said, additionally, that the city already may have existing resources to preserve at least 700 SRO units through the end of 2018. He said owners may call the city&rsquo;s Department of Planning and Development to discuss rental subsidies from the Low Income Housing Trust Fund, and financing from TIF districts and low-interest loans, to maintain affordability.</p><p>Rubenstein said he and other building owners had hoped the city would employ more incentives than penalties to encourage affordability. He said SRHAC submitted a list of 15 suggested incentives for the city to consider in its ordinance, including exemptions from sales taxes, water fees, and the proposed minimum wage ordinance. Negron said many of the suggestions were impractical.</p><p>A broad coalition of advocates for the homeless, and low-income tenants around Chicago, praised the proposal.</p><p>&ldquo;I think it&rsquo;s a great ordinance,&rdquo; said Adelaide Meyers, a former tenant of the Norman Hotel and affordable housing advocate. &ldquo;I think it&rsquo;s exactly what Chicago needs to maintain SROs throughout the city, because if we lose all our SROs we&rsquo;re going to have a lot of homeless people.&rdquo;</p><p>Meyers was herself displaced from the Norman Hotel when Cedar Street Co. bought the North Side property and converted it to upscale rentals within its <a href="http://www.wbez.org/news/flats-chicago-developer-weighs-housing-affordability-debate-110475">FLATS portfolio</a>. Meyers now shares an apartment in the Rogers Park neighborhood with a friend, and with some rental assistance from her father.</p><p>&ldquo;I never thought that I would end up living in an SRO to start off with, but I lived in a few different ones for several years,&rdquo; she said. &ldquo;So I could definitely end up back in an SRO.&rdquo;</p><p><em>Odette Yousef is WBEZ&rsquo;s North Side Bureau reporter. Follow her <a href="https://twitter.com/oyousef">@oyousef</a> and <a href="https://twitter.com/WBEZoutloud">@WBEZoutloud</a>.</em></p></p> Tue, 09 Sep 2014 17:33:00 -0500 http://www.wbez.org/news/chicago-sro-owners-say-proposed-city-ordinance-hostile-110775 Illinois begins accepting applications for marijuana businesses http://www.wbez.org/news/illinois-begins-accepting-applications-marijuana-businesses-110764 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/medical-marijuana-2.jpg" alt="" /><p><p>Illinois officials are now accepting applications for people who want to open a medical marijuana dispensary or cultivation center. The number of licenses are quite limited &ndash; only 22 available for cultivation centers and 60 for dispensaries.</p><p>Michelle West is hoping to be awarded a license to open a cultivation center. She&rsquo;s a nurse who originally set out to research how legalization would affect her job, but instead she found a business opportunity.</p><p>&ldquo;It&rsquo;s not only a business opportunity for a person, but for economic development for a community, for a neighborhood,&rdquo; West said.</p><p>The Illinois Department of Agriculture will sift through the many applications that are expected to be submitted. Officials are looking at six specific areas: the proposed facility, staffing and operations, security, cultivation, product safety and labeling and business and financial disclosure.</p><p>West said she&rsquo;s been researching the industry for the past year. Her 300 plus page plan includes economic growth all the way down to different types of cannabis plants. Most applicants have brought on consultants from other states that have already legalized medical marijuana. West is no different.</p><p>&ldquo;A lot of the other people I met, they spent a ton of money on consultants. Consultants are important, yet I was hesitant. I found one because I have to know my plan, inside out,&rdquo; she said.</p><p>In addition to attending conferences, West hired a consultant from Colorado who&#39;s gotten underperforming cultivation centers back up to top production.</p><p>The competition to run dispensaries and cultivation centers in the Chicago market will be very tough. West lives in the city, but decided to look elsewhere to set up her cultivation center. She eventually found a rural town in Police District 6.</p><p>She presented her plans to the town&rsquo;s council members and that night they decided to support her. The town preferred she not disclose the name until a license is actually awarded.</p><p>&ldquo;It was amazing the support because people want jobs. Everyone in the town, all the jobs had left. So people have to drive 40 miles away, 50 miles away. Some are driving into Chicago and then they&rsquo;re driving back home,&rdquo; she said.</p><p>West visited other towns that had mixed views on the legalization of medical marijuana. For this particular community, the cultivation center looks like a path to economic recovery. That&rsquo;s part of the deal they have with West. Their decision to back her means their community members would get first dibs at the job openings.</p><p>&ldquo;The plan that I have, it includes not only hiring younger people, but there&rsquo;s been a lot of people over 50 that have been downsized or they couldn&rsquo;t find a job and they keep trying to find a job. If they&rsquo;re willing to be retrained or work within the facility, they&rsquo;re going to have a job, too,&rdquo; she said.</p><p>West has written an employee handbook that includes wages starting at around $12 an hour with benefits.</p><p>She found a potential property in the area. She&rsquo;s already crafted plans for year-round growing and plans to scale in the years following.</p><p><span style="font-size:22px;"><strong>Security Plan</strong></span></p><p>State officials are making security a high priority for all applications. They see the future cannabis facilities as major targets for crime, since they will deal with large amounts of cash and drugs.</p><p>Joel Brumlik works in law enforcement and he&rsquo;s been running his suburban security company, Tactical Security since 2007. He started researching how he could profit after the state legalized medical marijuana.</p><p>&ldquo;Right now, we have a significant investment in this. A lot of time, a lot of studying, a lot of resources expended. We&rsquo;ve been involved in two or three conferences. We&rsquo;re going to be in one in Las Vegas. These aren&rsquo;t cheap,&rdquo; he said.</p><p>Tactical Security has been training officers specifically for medical marijuana, everything from use of force to patient hospitality, even how to inspect a facility according to the state&rsquo;s rules and regulations.</p><p>Brumlik prides himself on the hefty 70 plus page security plan he&rsquo;s written up. He says he&rsquo;s fielded at least a dozen calls from potential medical marijuana businesses and already has a few signed contracts.</p><p>He says his competition seems to be based mostly on price.</p><p>&ldquo;Yes, our company may be charging you a higher price per hour, but what is your cost? And when I say &lsquo;what is your cost&rsquo;, what I&rsquo;m saying is, is that if you don&rsquo;t have the right people, the highly trained people, then your cost might be a lot higher than you believe if you&rsquo;re just going by the price,&rdquo; he said.</p><p>But some security experts say it isn&rsquo;t necessary to have such specific tailoring for the marijuana industry. Eugene Ferraro is a security consultant based in Colorado. He calls it a marketing ploy.</p><p>&ldquo;The tailoring that&rsquo;s necessary to provide services to a marijuana retailer have very small differences from other types of retailers or operations whether it&rsquo;s manufacturing or distribution operations,&rdquo; Ferraro said.</p><p>He says bigger security companies have been staying away from cannabis to avoid any potential legal issues. But he&rsquo;s definitely seen specialized companies gaining a lot of business.</p><p>&ldquo;The small operators, the mom and pop alarm companies, the mom and pop guard companies have some opportunity here,&rdquo; he said.</p><p>Ferraro says Illinois&rsquo; emphasis on security is overkill and that the cost will be passed down to the consumers, which might create another problem of pushing people to the black market.</p><p>Brumlik doesn&rsquo;t see it that way and says every dispensary he visited in Colorado had been broken into.</p><p>&ldquo;We&rsquo;re not interested in trying to compete on a level where we&rsquo;re just trying to put warm bodies in there,&rdquo; he said.</p><p><span style="font-size:22px;"><strong>Financing</strong></span></p><p>It&rsquo;s going to take anyone who&rsquo;s awarded a license a lot of money to open and operate the marijuana facility. For West, she needs to pay a $25,000 non-refundable application fee, and she also needs to show she has $500,000 in liquid assets. If she&rsquo;s awarded the license, she&rsquo;ll have to pay a $200,000 permit fee, not to mention the cost it takes to run any type of business.</p><p>Financing and banking has been tricky for business owners in states that are already well into their legalized marijuana programs. Illinois will be no different.</p><p>Even ancillary businesses are finding it difficult to find a bank just to make a simple deposit.</p><p>&ldquo;Difficult is such an understatement. It was the bane of my existence for 90 days,&rdquo; said venture capitalist David Friedman.</p><p>Recently, the Chicago businessman added another title to his resume; publisher. He started a news website called Marijuana Investor News.</p><p>&ldquo;I don&rsquo;t understand why Bloomberg can run stories about medical marijuana, but we can&rsquo;t. And I&rsquo;m sure, I understand now about the banking regulations and everyone&rsquo;s just very cautious about anything that has to do with it. We did ultimately find a bank because it&rsquo;s ridiculous that we shouldn&rsquo;t,&rdquo; he said.</p><p>Friedman is being approached by entrepreneurs for investments into their proposed dispensaries and cultivation centers. He says since the final rules were approved he hasn&rsquo;t slept much.</p><p>Troy Dayton is CEO of the Arcview Group, a California-based national investment and research firm focused on cannabis. A lot of accredited investors in the marijuana industry are members of the group, including David Friedman. It has some of the first angel investors in the sector.</p><p>Dayton said Illinois&rsquo; program might be more difficult to finance with all the restrictions and a possibility of the pilot program sunsetting in a few years.</p><p>&ldquo;[Business owners] had better have a lot of money in the bank because it may be a long ramp up before they can make their businesses profitable,&rdquo; he said.</p><p>According to Arcview&rsquo;s annual report, the industry is expected to grow to $2.6 billion in 2014.</p><p>&ldquo;That&rsquo;s a 68 percent growth in one year. Making it the fastest growing industry in America. &nbsp;And growing to 10.2 billion dollar industry by 2018,&rdquo; Dayton said.</p><p>Another challenge businesses are likely to face is a high tax rate. Marijuana is categorized as a Schedule 1 illegal substance, next to heroin and LSD. The Internal Revenue Service has a code to tax illegal drug income, up to 50 percent.</p><p>Dooma Wendschuh, CEO of Ebbu, a Colorado cannabis company said it takes a lot of work to keep your business completely above board in this federally illegal industry.</p><p>&ldquo;You&rsquo;re really limited in who you can raise that money from. You can&rsquo;t go to Sand Hill Road with a couple of baggies of your product and expect to raise your money. It just doesn&rsquo;t work like that,&rdquo; he said.</p><p>Sand Hill Road is an area in California with a lot venture capital companies.</p><p>But Wendschuh thinks the opportunity in marijuana is bigger than the Internet and tech boom if you&rsquo;re willing to take the risk.</p><p>He looks at it like alcohol after prohibition. Laws were left for states to determine individually. Some counties remain dry even today. It took companies some years after prohibition to feel comfortable enough to even promote their product.</p><p>Wendschuh says for the first several years after prohibition, bootlegging was big and the black market thrived.</p><p>&ldquo;Of course it was cheaper than buying alcohol at a licensed facility. But hey look right now. If you wanted to go buy bootleg alcohol could you even find it? I don&rsquo;t know where you would find it,&rdquo; he said.</p><p>He says eventually the alcohol industry became less taboo. People wanted to buy from a reputable source rather than a cheaper, criminal operation. Product pricing evened out and financing was easier.</p><p>Wendschuh believes the cannabis industry isn&rsquo;t far from seeing relaxation of federal regulations, and marijuana could follow the path of alcohol.</p><p><em>Susie An is WBEZ&rsquo;s business reporter. Follow her <a href="https://twitter.com/soosieon">@soosieon</a>.</em></p></p> Mon, 08 Sep 2014 07:40:00 -0500 http://www.wbez.org/news/illinois-begins-accepting-applications-marijuana-businesses-110764