Faced with soaring demolition and environmental cleanup costs and a recalcitrant property owner, the Daley administration has broken off talks aimed at moving the $1.1 billion Olympic Village to the campus of Michael Reese Hospital.
Mayor Richard Daley wanted to roll the dice that a depressed real estate market would come roaring back, by borrowing $85 million to finance the hospital purchase and sell it to a private developer.
His original plan called for Medline Industries, which owns the 37-acre site, to make a "charitable contribution" of $20 million that was supposed to be enough to cover demolition, environmental cleanup and five years of interest payments on the loan at a rate of 5 percent.
Instead, demolition and cleanup costs were projected at $32 million. Chicago 2016 Chairman Pat Ryan tried to salvage the deal by renegotiating the purchase price, but Medline apparently wouldn't budge.
So it's back to the drawing board -- either by reviving the original plan to build the Olympic Village on air rights over a truck staging area for McCormick Place or building it south of 31st Street on a massive parcel being developed by Draper & Kramer.
"We just reached an impasse at this stage as to what is appropriate when you consider the value of the land cleaned environmentally and cleared of existing facilities that make it available for development," Ryan said Tuesday.
"We've been keeping the taxpayers of Chicago paramount in our minds," Ryan said. "We're not willing to have an investment in the future of that development that's not the appropriate value. We don't want to burden the taxpayers with anything at all. That's been the plan from the beginning -- that this be a village that stands on its own for private development."
A top mayoral aide, who wanted to remain anonymous, added, "We were trying to come up with a transaction that protected the integrity of the [Olympic] bid and balanced all that with a financially viable transaction. We couldn't get to the 'financially viable transaction' part."
Medline spokesman Jerreau Beaudoin could not be reached for comment on the stalemate.
Ryan said the city has until Feb. 2 -- when the final 2016 Summer Olympic Games bid book must be in the hands of the International Olympic Committee -- to refine its original plan for the village and pursue "alternatives."
"I wouldn't define it as a blow. We have a plan that works and has passed review, but we've wanted to add to it to improve the impact on the community and the development opportunity for the Near South Side," Ryan said.
The mayoral aide added, "Our original plan made a lot of sense. We were talking about under-utilized property on the lakefront. It was attractive to athletes, very close to the Barcelona model."
Daley also insisted that the setback should not affect Chicago's bid for the Games.
"Every city has sumbling blocks; Tokyo, Madrid, Rio. This is nothing new. It's all part of planning," Daley said
Daley and local Ald. Toni Preckwinkle (4th) pushed for the move to the Reese site because the village could be built on solid ground at a lower cost and integrated into the surrounding Bronzeville community.
The Reese deal has been controversial from the outset.
At a time when Daley is poised to lay off well over 1,000 city employees to erase a $420 million budget shortfall, aldermen have wondered why City Hall was willing to take an $85 million gamble that the depressed real estate market would make a rapid recovery.
Although the loan would have been backed by property taxes, Ryan and City Hall had insisted that taxpayers would not be holding the bag. Long before the principal is due, the city had hoped to recoup its costs by selling the property to a developer.