Two aldermen with close ties to Chicago’s music scene are demanding that the City Council investigate the tax-and competition-free sweetheart deal that keeps Lollapalooza in Grant Park through 2018.

“It’s all about the asset of Chicago with Lollapalooza and whether or not we’re getting a fair deal,” said Ald. Joe Moreno (1st). “I don’t think we are. I don’t think we are from a council member’s standpoint, and also from a fan’s perspective.”

“This should have council oversight, and it is all the more reason that the City Council should pass an ordinance—already introduced under Daley—to view these and similar contracts first,” said Ald. Scott Waguespack (32nd). He added that his staff is “drafting an ordinance—or a resolution at least—to nullify the tax break.”

Initially reported by this blog last year, Lollapalooza’s possibly illegal tax exemption became the source of renewed focus last week, shortly before 90,000 people per day (plus uncounted flash-mob gatecrashers) arrived in Grant Park on Friday, Saturday, and Sunday. Last Monday, the Sun-Times reported that the city may have lost as much as $1 million annually for the last seven years, thanks to Lollapalooza’s unprecedented break from the amusement taxes paid by every other for-profit concert, festival, and sporting event. Then on Saturday, in fiery language rarely read in its editorial pages, the Tribune excoriated “Walmart by the Lake” (yes, they used those words) and demanded that “the region’s biggest music fest… pay its fair share.”

As the Chicago media at large finally took notice of the problematic contract, Rahm Emanuel’s spokeswoman told this reporter that the mayor would closely examine the tax exemption before it is granted again for 2012. But there are other troublesome aspects to Lollapalooza’s relationship with the city, including the egregious radius clauses it imposes on bands at the expense of local music venues, and the fact that the festival’s contract with the Chicago Park District  prohibits any similar concerts or festivals from happening in Grant Park. The only exceptions to the latter clause are Taste of Chicago and the other city-run music fests—and sources say that may have been the reason for Mayor Daley’s inscrutable flip-flop on privatizing those events just before he left office.

Lollapalooza’s Austin, Texas-based promoters C3 Presents were favorites of the Daley administration, and they hired one of his nephews, Mark Vanecko, as their attorney and lobbyist to negotiate their contract with the city. But the nepotistic connections don’t end there: The festival is co-owned by William Morris Endeavor, the all-powerful Hollywood talent agency run by Mayor Emanuel’s brother, Ari.

To avoid charges of conflict of interest, Emanuel has vowed to ask the council to appoint a special negotiator to handle all city dealings with Lollapalooza (as well as with Ticketmaster/Live Nation, which his brother serves as a member of the board of directors, and which is seeking a long-term contract for the permanent concert venue on Northerly Island).

Like the new mayor, Moreno and Waguespack are both big music fans, but they are in much closer contact with Chicago’s grassroots music scene—its venues, its patrons, and its issues with the city. Waguespack’s 32^nd Ward is home to Schubas, the Hideout, and Delilah’s, while Moreno has been dubbed “the hipster alderman” thanks to profiles in Red Eye and the Onion’s A.V. Club. He may be the only elected official in America with a vinyl copy of the 1984 Minor Threat compilation prominently displayed in his office, and he boasts that the 1st Ward has “the most small music venues in the city,” including the Empty Bottle, Double Door, and Subterranean.

Both of these elected officials also have earned reputations for questioning high-profile backroom deals that are shortchanging Chicago taxpayers. Waguespack was the most vocal opponent of the parking meter deal, and he first criticized the forces that “conspired to monopolize the summer music scene with Lollapalooza” in a post on this blog last December. For his part, Moreno recently led the charge in questioning the city’s contract with vendors at O’Hare Airport.

“What happens in this situation and others is that we take this approach in Chicago politics/government that ‘Lollapalooza is giving [the Parkways Foundation] $2.17 million,’ and [city officials] go crazy,” Moreno said. “Yet they don’t realize that their asset is that lakefront. That skyline, millions of people, the music—and we whore it out! All of these things… giving away the fort to Boeing, or ‘We can’t require any affordable housing from big developers because they’ll go elsewhere.’ No they won’t! Where are they going to go? Milwaukee? Detroit? They are not going anywhere else.

“This is corporate welfare… Scott [Waguespack] and I have had extensive discussions about this: Stop giving away our assets for ten cents on the dollar. Stop doing that! Especially with the budget deficit and [battles with] the teacher’s union. My staff and office budgets are being cut, but then Lollapalooza gives $2.1 million but we leave a million on the table when they can definitely afford it. They made $21 million last year.”

Moreno also was critical of Lollapalooza’s radius clauses, which were the subject of an investigation launched by state Attorney General Lisa Madigan in the summer of 2010, the status or resolution of which remains a mystery. The existence of those clauses, the longest in the U.S. concert business, potentially cancels out or at leasy chips away at Lollapalooza’s alleged boon to the local economy—a number that, with no credible sourcing, Crain’s put at $85 million annually—by hurting as many businesses as the festival helps. Hotels and restaurants may benefit, but the local club scene suffers.

“The radius clause needs to go. Thirty days before and after? That’s reasonable. You don’t want Eminem playing in the United Center the night before. But nine months? That’s crazy. From a non-politics/government side, I think that many people in the Chicago music scene have the attitude towards Lollapalooza that ‘It’s a big corporate thing and we don’t go anyway.’” But they’re forgetting the impact the festival has on local music businesses, Moreno said.

“The council has got to direct the Park District Superintendent: ‘We want to see this contract and we want to renegotiate. We want to open for bid.’ That’s where the meat of this discussion is: What can we do as a council? I’m totally brazen on doing that. I haven’t had that direct discussion with the mayor, but if we don’t talk about being efficient and getting the best deal for taxpayers out of all this, that’s just crazy. And why does the money all go to Parkways?… The city needs a minimum of a million dollars [more] on the table next year; a minimum! Another tax exemption? Lollapalooza, you can forget about it.”