Crain's Chicago Business

GE HealthCare needs to trim down to bulk up

tals and other health care providers. Sales rose 4% to $18.3 billion last year.

GE HEALTHCARE STARTS independent life with a strong position in big medical equipment markets and plans to jump-start growth through acquisitions and technology innovations. But it also carries a heavy debt load and some excess costs that need to be cut.

Spun o  by longtime parent General Electric this month, Chicago’s newest public company joins a local roster of health

BY KATHERINE DAVIS

care giants that includes Abbott Laboratories, AbbVie and Baxter International. Some 1,000 of GE HealthCare’s 51,000 worldwide employees are in Illinois, with several hundred at a downtown headquarters.

“ is has been a real hub for us,” says Brian Montgomery, GE HealthCare’s chief strategy o cer. “We’re . . . looking forward to life here as a standalone, publicly traded company.”

GE HealthCare sells imaging machines, ultrasound equipment, patient monitoring products and diagnostic agents to hospi-

Not surprisingly for a GE o spring, the health care business is No. 1 or No. 2 in each of its markets, according to Chicagonancial rm Morningstar. GE HealthCare’s sales represent about 22% of the $84 billion total addressable markets for its four business segments, the largest market share.

But the markets grow relatively slowly, at annual combined rates of 4% to 6%.

GE HealthCare CEO Peter Arduini

It’s one of the eternal questions in Chicago and Illinois politics. And just as predictably as a squabble over proper policing standards, it’s back again.

The question: Are companies so many cows to be milked in the name of saving “working-class” folks from privation, or are they at the opposite extreme: sacred wealth producers and job creators that ought to be thanked with big tax subsidies for their every action?

If it sounds like I’m calling for a reasonable middle ground in the corporate tax and incentive wars, I am. Local politicians, with rare exceptions, go to the extremes on such matters. Holding the middle ground is tough—but the correct strategy.

You don’t have to go far to find pols and other interests at those extremes. Take, for instance, mayoral hopeful Brandon Johnson.

Johnson wants to invest in human needs and long-neglected neighborhoods— who doesn’t?—but would come up with the money by, in essence, permanently raising the Chicago River bridges. Included: hiking hotel taxes in a town with the highest hotel taxes in the land; taxing welloff Metra commuters for the privilege of working downtown at a time when the Loop often is empty because people are working from home; imposing a “use fee” on anyone who shops in a "high-end" area, like vacancy-plagued North Michigan Avenue; and imposing a tax on jet fuel at the city’s airports that appears to conflict with federal law. But, hey, what the Chicago Teachers Union wants, the CTU gets.

At the opposite extreme are the Chicago Bears.

ey’re tired of Soldier Field—I can relate to that— and want to build a nifty new football palace in Arlington Heights, along with an adjoining hotel/retail/entertainment complex. But to do all of that, they want a big fat subsidy, as in a new bill they’ve oated in Spring eld that would allow them to pay less than normal property

taxes. (See story on Page 7.)

If the tin-cup McCaskeys want to cut taxpayers in for a share of increasing team pro ts and value, great. But they’re neither going to do that, nor move the franchise to Dubuque. So they can just build it on their own nickel via borrowing or other capital-raising moves, just like the Ricketts clan did at Wrigley Field.

In between the “shake them down” and “give it away” approaches are some economic development deals that truly would help us, by pulling in jobs and spinning o tax revenue that would not otherwise be here.

The top example is the ongoing campaign by Gov. J.B. Pritzker to bulk up the state’s nascent electric vehicle manufacturing business, and particularly to convince Stellantis to convert its Belvidere plant to EV production rather than shipping out the work to Michigan. Pritzker is going to have to put real money on the table because other competing states are. The type of property tax breaks the Bears want might be helpful, too, though not for the Bears. I wish him luck because the loss (or gain) of thousands of well-paying factory jobs that can support a middle-class family is really at stake in this one.

Deciding for or against a subsidy can be a very tough call. e late Gov. Jim ompson “saved" the headquarters of Sears’ merchandise group and its thousands of jobs by, in part, creating a tax-increment nancing district in Ho man Estates. But the company was broken and directionless, and eventually fell. On the other hand, while Richard M. Daley’s decision to give tax breaks to Boeing to move here caught lots of ak—the company last year decamped to the Washington, D.C., area—it came at a time when Chicago was hemorrhaging corporate headquarters and badly needed a big win. Sound familiar?

My point is that each of these deals, each of these taxing situations, is different. They needed to be carefully weighed, one by one. Voters ought to look with a jaundiced eye on any pol who fails to make such distinctions.

Harris Associates halves stake in long-suffering Credit Suisse

The Chicago-based asset management rm was the Swiss bank’s largest single investor six months ago, with a 10% stake. Harris has chopped that position to 5%.

BY STEVE DANIELS

Harris Associates, one of Chicago’s largest locally based asset managers, with $94 billion in assets under management, dramatically reduced its investment in struggling Swiss bank Credit Suisse Group last month.

Harris, which manages the Oakmark series of mutual funds, saw its stake in Credit Suisse cut roughly in half, according to a Jan. 10 Securities & Exchange Commission filing. Harris’ shares in Credit Suisse dropped nearly a quarter after net sales to a little over 201 million from 266 million in mid2022, according to filings.

Prior to the sales, Harris was Credit Suisse’s single largest investor, with about 10% of the shares. David Herro—who runs the Oakmark International Fund, Harris’ largest offering, with $18.8 billion in assets under management as of Dec. 31—has been an ardent defender of the firm’s longtime stake in Credit Suisse, even though the bank’s stock has plummeted amid multibillion-dollar losses tied to poor risk controls and most recently a dilutive capital raise.

Oakmark International long was a standout fund in Harris’ fund family but has struggled over the past decade, lagging returns in the index to which it compares itself. In 2022, the International Fund su ered a 15.7% negative return while the MSCI World Index declined 14.3%.

Herro told Bloomberg and the Financial News earlier this month that Harris participated in Credit Suisse’s equity raise. But it sold even more shares at the same time.

In May 2022, he predicted Credit Suisse wouldn’t have to raise equity to solve its capital problems.

The Swiss bank overhauled its leadership and ultimately decided it had no choice but to issue new shares.

Harris unloaded some longer-held shares in Credit Suisse to help fund distributions and withdrawals at the end of

the year, Herro told Bloomberg. Credit Suisse’s sale of new shares also helped reduce Harris’ stake in the bank, which now is around 5%, he said. So far, he hasn’t offered his opinion publicly on whether he continues to believe the Credit Suisse investment will ultimately pay off. A spokeswoman didn’t respond to requests for comment.

Credit Suisse now is just 1.0% of the International Fund’s portfolio, down from 2.3% in mid-2022 when it was a top 10 holding, according to Harris’ website.

IF IT SOUNDS LIKE I’M CALLING FOR A REASONABLE MIDDLE GROUND, I AM.

Some tax breaks aren't bad policy. But others are.

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Unequal utility rates won’t stop increases

Soaking the rich used to be mostly a game for left-wing politicians pushing higher marginal rates on upper-income taxpayers.

Now local utilities want in on the action. As my colleague Steve Daniels reported Jan. 19, gas companies Peoples Gas and Nicor are seeking regulatory approval for a new regime of income-based rates. Electric utility Commonwealth Edison plans to o er a “progressive” rate plan next year.

Under the proposals from Peoples and Nicor, lower-income customers would pay less for heating and cooking gas, and higher-income customers would pay commensurately more.

A contrarian bet on suburban office space

BY DANNY ECKER

Real estate investors have long coveted o ce buildings anchored by big-name corporate tenants. But as the battered o ce sector adjusts to post-COVID realities, Je Bernstein and Larry Elbaum are betting that suburban buildings packed with small, local rms have more upside.

e partners have been among the most aggressive buyers of local suburban o ces since the pandemic began. eir BA Investment Advisors paid more than $120 million for properties in Downers Grove, Deer eld, Northbrook and next to O’Hare International Airport, where it bought a big o ce building in November.

See SUBURBS on Page 24

Larry

This is what’s replacing Tavern on Rush—it’s not a steakhouse

Tavern on Rush’s longtime landlords share details on The Bellevue, the new restaurant coming this spring to replace the former Gold Coast staple

BY ALLY MAROTTI

e owners of the Gold Coast building that housed Tavern on Rush for 25 years con rmed they are opening a new restaurant there this spring, and here’s the kicker: It’s not a steakhouse.

e new restaurant will be called e Bellevue, named for the cross street at which it sits on Rush Street. Serving contemporary American cuisine, it will go in a decidedly di erent direction

than Tavern on Rush.

“ e only thing the same about e Bellevue and Tavern on Rush (is) the address,” said landlord and owner Jim Banks.

Banks, an attorney who lives in the Gold Coast neighborhood, and trucking magnate

Fred Barbara have owned the building at 1031 N. Rush St. since 2005. Tavern on Rush had been there since the early 1990s, notching up a star-studded history and establishing itself as a

go-to spot to sit on the patio, to see and be seen. Owner Phil Stefani announced last year that the steakhouse’s lease was ending and it would close. It ended up closing earlier than expected— in October instead of after New Years’ Eve service.

Barbara, who invests in other restaurants, said he and Banks were ready to breathe some new life into the neighborhood,

See TAVERN on Page 26

If approved by the Illinois Commerce Commission, the new rate system would be a big change for Illinois. In the past, customers who struggle to pay heating bills have quali ed for assistance, and utilities have added the cost of unpaid bills to the accounts of paying customers. But basic rates have always been the same for everybody.

Not surprisingly, state political leaders play a role in this. Gov. J.B. Pritzker’s Climate & Equitable Jobs Act, which mandates the elimination of fossil fuel power plants in Illinois by 2045, also authorizes the ICC to approve rate structures that charge lower-income customers less and higher-income customers more. Last month, the ICC directed utilities to propose such a rate structure.

e utilities seem only too happy to comply, and it’s easy to see why. e discounts they’re o ering low-income customers won’t cost them a dime. Higher-income customers will pick up the cost of subsidizing their less-a uent counterparts.

RATE HIKES

Income-based rate proposals come as utilities pursue recordsetting price hikes. Peoples wants a $402 million rate hike that would boost the average customer’s annual bill for gas delivery by 16% to $1,009. Nicor’s proposed $321 million increase would add $9.28 to monthly bills. And ComEd seeks a staggering $1.5 billion hike that would raise monthly bills 18%.

Coincidence? Maybe. But utilities are seeking these rate hikes at a time of rising public anger over a string of previous increases that have made basics like heat and light una ordable for a growing number of people. In Chicago, about a quarter of Peoples’ customers struggle to pay their bills on time.

One way to defuse a poten-

tial backlash is to reduce the requested increases, or forgo them altogether. But that could pinch the ow of dividends to utility shareholders, and possibly imperil the massive investments in clean energy technology envisioned by CEJA.

at’s a non-starter for Pritzker and the utilities. Still, the governor needs to mask the reality that his climate initiative will drive up utility costs across Illinois. And utilities need to keep raising rates while appearing to address a ordability concerns.

Enter progressive rates. A two-tier rate structure allows utilities to ease costs for some customers without sacri cing any revenue. And Pritzker can trumpet discounts for lower-income customers under the banner of equity.

WHO LOSES

A win-win-win, right? Unfortunately, there’s always a loser. In this case, the losers are customers who don’t qualify for discounted rates, businesses and the state’s economy.

Businesses and higher-income residential customers will pick up the tab for discounts, keeping the utilities whole and protecting Pritzker’s political ank. Expect utilities to hit business customers especially hard—businesses don’t vote, after all.

As for a ordability, the new rates may not solve the crisis so much as shift it to a new set of customers. It’s not just millionaires who would pay the higher rates. In Peoples’ case, anybody with annual income of more than $55,000 for a family of four would pay more.

Progressive rates also open the door to more rate hikes in the future. After all, it’s easier to justify increases when they mainly a ect those who supposedly can a ord to pay more. And even lower-income customers could see their rates climb over time if discounts are tied to a rising base.

Rate increases weigh heavily on the Illinois economy no matter how they’re distributed. Already, they’re eroding an economic advantage Illinois once enjoyed over many other states— lower energy costs.

Utility regulation should focus on ensuring cost-e ective, reliable supplies that are a ordable for everyone, not advancing redistributive social policies.

Yes, an argument can be made that it’s only fair that people of lesser means pay less for basic necessities, especially when the cost of so many essentials is rising. But don’t expect progressive rates to stop the price of heat and light from rising.

COSTAR GROUP

While bigger players ee the vacancy-riddled market, this rm scoops up buildings full of small businesses I

“WE’RE NOT FACED WITH THE RISK OF ONE TENANT GOING OUT” AND DRAMATICALLY HURTING A BUILDING’S CASH FLOW.

Elbaum, partner in BA Investment Advisors

Another rough year ahead for auto suppliers

Suppliers have been through three years of challenges and setbacks. They might be in for a fourth.

BY JOHN IRWIN

It’s already shaping up to be another bumpy year for parts suppliers as they get the nancial squeeze from in ation and rising interest rates while navigating uncertainty in the economy and the new-vehicle market.

“ e squeeze is really being applied to suppliers right now because of the drop in sales volumes, as well as the rising raw material and labor costs that continue,” said Paul Carrannanto, a principal in the industrial manufacturing and automotive sector for PwC.

e number of suppliers innancial distress spiked in 2022 as those issues cut into margins and sent companies scrambling for price relief from their customers.

According to a PwC analysis, 42 percent of suppliers reported some level of nancial distress in the rst half of 2022, up from 27 percent in 2021. at gure nearly matches the 45 percent of suppliers who reported nancial distress in 2020 when the rst wave of the COVID-19 pandemic shut down auto manufacturing.

e pinch is likely to be felt sharply in Illinois, which has long been a hub of auto parts suppliers. It’s a $2.7 billion sector in this state, according to industry researcher IBISWorld, with 49 businesses employing nearly 7,300 people.

A convergence of factors made 2022 a di cult year for parts companies, even as their automaker customers reported sizable pro ts. e microchip shortage continued into its sec-

ond year, shaving millions of vehicles o production schedules and cutting supplier volumes.

e troubles promise to come to light in upcoming days as publicly traded suppliers report fourth-quarter and 2022 earnings results.Unstable commodity pricing and rising interest rates raised business costs for suppliers, some of whom sought pricing relief and changes to their contracts with customers. And a host of regional challenges, most notably the war in Ukraine, created further supply chain uncertainty.

In ation and the microchip shortage have shown signs of easing in the opening weeks of 2023, but those situations are expected to continue well into the year, said Michael Robinet, executive director of automotive advisory services at S&P Global Mobility.

“Instead of an on-o switch, it’s a dimmer switch,” he said. “ e chip situation has gotten somewhat better and that will probably continue. But to think we’re completely out of the woods is a bit Pollyannaish.”

ALTERNATIVE SCENARIOS

Given the persistence of those issues—and given heightened economic uncertainty—suppliers have indicated they are preparing for a variety of scenarios to play out in 2023.

In an interview with Crain’s sister publication Automotive News this month, Marelli CEO David Slump said he expects the rst half of the year to be di cult for the industry, but conditions

could improve in the back half. Marelli, which went through a court-led restructuring in 2022, ranks No. 20 on the Automotive News list of the world’s largest auto suppliers.

“ e second half is my question,” he said. “With pent-up demand and a potential soft landing in the U.S., there’s a scenario where the second half could pick up, particularly in North America. Or it’ll feel tough all year. We’re preparing for both.”

Likewise, Forvia CEO Patrick Koller said the world’s seventh-largest supplier is preparing for a wide range of scenarios.

He pointed to the war in Ukraine as a major source of uncertainty, with outcomes ranging from the war’s end to a major escalation, with each having a signi cant impact on the auto industry.

“ e only thing we can do is to

get ready, no matter what the scenario might be,” Koller said during a news conference this month.

SINCE 2019

Suppliers have been dealing with one operating crisis after another since 2019, when the UAW’s strike against General Motors in the U.S. created major planning and nancial ripples throughout the supply chain.

Since then, companies have dealt with the pandemic, higher prices for energy and raw materials, labor shortages, complications in logistics, factory shutdowns in China, production interruptions at subtier parts factories and market uncertainty over how quickly automakers will roll out new electric vehicles or wind down legacy internal combustion programs.

“ is coming fourth quarter, we will have basically been in this

situation for four years,” Robinet said. “ at respite that a lot of suppliers hoped for as volumes came back—they just haven’t had that kind of relief. It’s been calamity after calamity after calamity.”

But PwC’s Carrannanto said that suppliers can navigate this period of uncertainty and emerge stronger than they were when they entered it in 2019. He said rms should use this year to focus on ways to improve liquidity and pro tability while keeping their long-term focus on making sure they are set up well for the era of electri cation and connectivity.

“Any supplier can certainly bene t if they make the right moves in their portfolio and their footprint to be more exible and come out of the recessionary pressures in a stronger and more pro table position,” he said.

He predicted that a large number of mergers and acquisitions will likely occur over the next year, particularly in areas related to EVs, electronics and software. Given the nancial distress many companies nd themselves in, there could be some value buys to be had for companies looking to bolster their positions in those areas, he said.

“Now is the time to rethink your portfolio and your capacity to see if you can create more value in this time frame,” Carrannanto said.

e past few years have driven home the importance of being nimble and exible, Robinet said. “ ere’s just a lot going on,” he said. “ ere’s more than just one signi cant issue that these suppliers need to deal with at one time.”

Coldwell Banker Realty closing five Chicago-area offices

The brokerage con rms locations in the West Loop and four suburbs are shuttering

BY DENNIS RODKIN

Coldwell Banker Realty, the Chicago area’s third-largest brokerage by volume, is closing ve o ces, company o cials con rmed.

e closings amount to a 12% cut. Coldwell Banker Realty had 41 o ces in the Chicago area, Wisconsin, southwest Michigan and northwest Indiana before the cut.

Agents told Crain’s recently that the o ces in Barrington, Elmhurst, Downers Grove, the West Loop and Wheaton are closing. Ayoub Rabah, president of Coldwell Banker Realty in the central west region, con rmed the information Jan. 24.

A sixth o ce, in Libertyville, is moving to a much smaller space—not a closing but another way for the brokerage to shrink its footprint.

Corporate-owned Coldwell Banker Realty is a separate entity from Coldwell Banker Real Estate Group, which in Decem-

ber expanded to 70 o ces by acquiring the 10 o ces of D’Aprile Properties.

As the real estate market slowed in the latter half of 2022, cuts at brokerages seemed inevitable. New York-based brokerage Compass went rst, announcing a 10% cut to its workforce. Compass spokespeople and agents in Chicago have repeatedly told Crain’s that the cuts were administrative positions—not agents. No other brokerages have announced cuts in the Chicago area.

Rabah, too, said no agents will be lost in the Coldwell o ce closings. “We made a strategic decision to merge some of our o ces with others close by, many within 5 (to) 10 miles of each other,” Rabah said in an emailed statement. Agents from the closed o ces can shift to the still-open nearby o ces if they use o ce space at all.

One justi cation for the brokerage’s reduction in square footage

is typical of many employers in recent years: People don’t go to the o ce as much as they used to. A Coldwell Banker Realty agent who asked not to be identi ed in this story said, “ e only reason I go into the o ce anymore is to print big documents.”

SALES DROP

After an epochal housing boom from mid-2020 to early 2022, sales have dropped steeply. e volume of home sales in the Chicago metropolitan area was down about 19% in 2022 from the year before, according to year-end data from Illinois Realtors.

“While we are in a challenging market currently, this was always part of our strategic direction,” Rabah said in his statement. e strategy, he said, was announced in April 2022.

Coldwell Banker Realty’s position in the pack of real estate competitors has been dropping for several years. It was the pe-

rennial top-volume rm for at least nine years in the 2010s, until it was dethroned by @properties—now @properties Christie’s International Real Estate—in 2019. In 2021, Coldwell Banker Realty dropped to third.

Year-end data for 2022 is not yet available from RealTrends, the Colorado-based industry

tracker that provides annual rankings. Coldwell Banker spokesperson Andrea Gillespie declined to give Crain’s a sales volume gure for 2022.

Rabah wrote in his statement that the o ce closings “are not due to agent attrition. Last year we recruited more than 1,000 new agents in greater Chicagoland.”

John Irwin writes for Crain’s sister publication Automotive News.

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The Coldwell Banker o ce in Barrington at 530 N. Hough St.

Sola Cook President, Bank of America Chicago

‘Back to normal’ for Chicago apartment renters in 2023?

Landlords hit renters with double-digit increases during the pandemic. Those days are over.

BY ALBY GALLUN

In the constant tug of war between apartment landlords and renters, Chicago renters are gaining strength.

Rents in the city and suburbs are climbing more slowly, o ering some relief to tenants who endured double-digit increases over much of the past two years, according to new data from Integra Realty Resources, an appraisal and consulting rm.

Demand for apartments is moderating amid a slowdown in hiring and an uncertain economic outlook. e market’s still pretty healthy, but it’s just not as frothy as it has been over the past couple of years.

“ e market is softening,” said Ron DeVries, senior managing director in Integra’s Chicago o ce. “We’re kind of back to normal.”

In downtown Chicago, the net rent at top-tier, or Class A, apartment buildings was $3.44 per square foot at the end of the year, up 2.1% from a year earlier but down from a record high of $3.64 in the second quarter, according to Integra. Net rent includes concessions like free rent.

DeVries expects downtown rents to rise about 2% to 4% this

year. at’s roughly in line with historical trends for a downtown market that gave landlords whiplash during the pandemic, crashing in 2020 and rallying with a vengeance in 2021.

Decelerating rent growth is good news for tenants and the broader economy as well. Soaring housing costs helped drive in ation higher last year, triggering multiple interest rate hikes by the Federal Reserve to contain price increases and cool the economy.

SLOWING DOWN e slowdown in rent growth should help bring in ation down, though it also signals that the economy is weakening. Not sure where the economy is headed, many renters are holding o on housing decisions. Young workers are less likely to move out of their parents’ homes, and roommates are less likely to split up, reducing the rate of household formation—a key driver of apartment demand.

“Everything that’s going on in the economy is just making everybody stop,” DeVries said during a presentation at the Union League Club on Jan. 19. Many renters are saying, “Let’s sit

tight right now.”

On the other hand, the rising interest rates that are slowing the economy also should provide a lift to the multifamily market. Amid higher borrowing costs, many renters who planned to buy a single-family home or condominium are priced out of the market for for-sale housing. at means more renters will stay put for a while longer.

“Retention rates (at apartment buildings) should stay elevated for a while, while rates are still up there,” DeVries said.

Rising interest rates and a pullback in lending have also put the brakes on apartment construction. But many projects are already underway and will add to the supply of apartments over the next couple of years, especially in the West Loop, the city’s hottest multifamily submarket.

Integra forecasts that developers will complete 2,900 apartments in downtown Chicago this year and 5,600 in 2024. at would be the most apartments added annually to the downtown market since at least 1999, according to Integra data. Developers completed just 1,737 downtown units in 2022.

DeVries isn’t worried about a potential glut. Many developers have yet to break ground on their projects, and some will face delays in securing their nancing

or permits, pushing completion dates o into the future, he said.

“If they don’t break ground over the next three months, they’re not going to deliver in ’24,” DeVries said. e pandemic disrupted the downtown market, as many people worked remotely. Some moved out of downtown Chicago, while many new hires just delayed plans to move to the city for their jobs. at changed in 2021, when renters returned in droves to downtown buildings. Rents soared.

SUBURBAN MARKET

Downtown Chicago is hardly back to normal. Many downtown professionals still only work two or three days in the o ce. But DeVries isn’t convinced that hybrid work schedules are much of a factor a ecting the downtown multifamily market. Even

if downtown workers only head to the o ce two days a week, it’s still more convenient for many to live near their workplace downtown, he said. Moreover, plenty of renters prefer to live downtown for the lifestyle.

“It’s where the action is,” DeVries said.

e downtown Class A occupancy rate slipped to 93.5% in the fourth quarter, down from 94.6% in the third and 94.7% a year earlier, according to Integra.

e suburban market is slowing down, too. e median net suburban rent rose 7.3% in 2022, to $1.90 per square foot, down from a 14.2% increase in 2021, according to Integra. DeVries forecasts that suburban rents will rise 3% to 4% this year.

e suburban market wrapped up the year with a 97.5% occupancy rate, down from 98.0% at the end of 2021.

Empty Sears, Carson’s stores poised for change

BY ALBY GALLUN

ree empty department stores in the Chicago suburbs are ready for reincarnation after recently changing hands, including one store that’s being converted into exible warehouse space.

e three sales—of a Carson’s in North Riverside and Sears stores in Joliet and Orland Park—are good signs for the shopping malls connected to the big stores, properties that need to transform themselves with new ideas and money. e department store has become the ultimate white elephant of suburban real estate, and so many have closed at shopping malls over the past several years that it’s hard to nd a local suburban mall without one that’s vacant. Apartments have emerged as the most popular replacement for department stores, with projects underway at the Hawthorne Mall in Vernon Hills and Fox Valley Mall in Aurora and more planned at West eld Old Or-

chard in Skokie and Northbrook Court in Northbrook.

But apartments won’t be coming to the former Sears in Orland Park. Cubework, a California company that specializes in “co-warehousing,” bought the 203,000-square-foot store at the mall, according to CoStar Group, a real estate data provider. Borrowing from the co-working model, rms like Cubework lease small warehouse spaces to startups and entrepreneurs on exible terms.

COURTING INVESTORS

Cubework, which has four locations in the Chicago area, paid $4.3 million for the Sears store, about half the property’s $8.8 million asking price when CBRE was courting investors for it last year. Cubework and CBRE representatives did not respond to requests for comment.

In Joliet, ventures led by local car dealer Joseph Ghaben paid $4.3 million for the empty Sears at the struggling Louis Joliet Mall, according to CoStar. It’s

unclear if Ghaben, leader of the Ghaben Auto Group, plans to open a dealership at the property, which encompasses 16.7 acres, including the surrounding parking lot. Ghaben did not return a phone call.

Cubework and Ghaben’s group bought the Sears stores from Seritage Growth Properties, a New York-based real estate investment trust created in 2015 by Hoffman Estates-based Sears Holdings, now known as

Transformco. Seritage has been selling off and redeveloping former Sears stores ever since.

ENHANCING VALUE

In North Riverside, the owner of the North Riverside Park Mall, the New York-based Feil Organization, con rmed that it has acquired the vacant 181,000-squarefoot Carson’s store. In a statement, Feil CEO Je rey Feil o ered no speci cs about the company’s plans for the store.

“Owning this site supports our ongoing focus to enhance the value of North Riverside Park Mall for the community, strengthens our engagement with the Village of North Riverside and reaffirms the Feil Organization’s commitment to elevate the shopping center,” he said. “We are in the process of finalizing redevelopment plans, and acquiring this site is an important step toward fulfilling our long-term vision.”

The sales represent a step forward for malls struggling to rede ne themselves in a post-department store era

This former Sears store in Orland Park has sat empty since 2018.

Demand for apartments is moderating amid a slowdown in hiring and an uncertain economic outlook.

COSTAR GROUP

GETTY IMAGESA

Subsidy plan surfaces for a new Bears stadium

Illinois could create a new kind of tax break that would net the Bears millions to help fund the massive Arlington Heights project the team is considering

BY GREG HINZ

e draft of a bill that potentially would entitle the Chicago Bears to millions of dollars in subsidies for their proposed new Arlington Heights stadium complex has surfaced in Spring eld—and there are signs it has begun to pick up significant backing.

Under a measure that the Bears have been informally shopping for a while and which has now moved to a new phase, the state could create a new kind of break known as payment in lieu of taxes, or PILT.

e measure is somewhat similar to tax-increment nancing in that the tax value of property in a PILT district would be frozen for at least 20 years for normal purposes, with revenue from any development of the land used in part to compensate the developer for their expenses.

PILT is di erent from TIFs in that the initial tax payment would be negotiated with local taxing bodies, rather than being set at an appraised level. And only “megaprojects” that involve at least $500 million in investments would qualify.

“Illinois’ property tax system disproportionately discourages largescale projects that generate signif-

icant economic activity relative to their burden on taxing districts, placing Illinois at a competitive disadvantage to other states,” says a fact sheet distributed by a representative of the Bears. e fact sheet specifically points to the state’s failure to attract any electric vehicle battery plants—an apparent suggestion that the Bears would be only one of many potential bene ciaries of the bill.

e team did not immediately respond to a request for comment, but earlier had indicated it was interested in the concept. e Bears have said they need a subsidy not for the stadium itself but adjacent real estate that would be developed for shopping, entertainment and potentially housing.

e head of one major business group, the Illinois Chamber of Commerce, con rmed in a phone call that the chamber is generally supportive of the bill.

In a phone interview, CEO Todd Maisch said the chamber is “highly inclined to be in favor of the legislation,” which has been drafted but not yet introduced. Before totally signing o , Maisch said he’d like to see nal language and would prefer that some other development breaks be added, such as for the long-blighted

south suburbs.

Also said to be in support is the Illinois Road & Transportation Builders Association, an in uential Spring eld trade group that is close to organized labor.

CEO Mike Sturino con rms that his group, too, backs the bill. “It’s not just about the Bears,” he said. “It would be a good tool for lots of infrastructure projects.”

UNION WAGES

Language in the bill guarantees that construction work on any PILT project will be done under a project labor agreement that generally guarantees payment of the union wage to all workers.

e Bears representative underlined that dozens of other states have legislation on their books similar to the PILT proposal here.

No sponsor yet has been selected for the bill, but it’s believed the Bears have run it by top legislative leaders.

ere are two key questions: Will the city of Chicago, which hopes to retain the Bears at Soldier Field, outright oppose the measure? And will local public school districts go along since the draft appears to leave negotiations for the amount of tax that will be paid not to them but to the

sponsoring municipality?

e draft also would allow local governments to use the increased taxes they do get under a PILT agreement as a revenue stream to issue bonds, perhaps for infrastructure.

Reaction to earlier reports of the Bears’ lobbying in Spring eld has been mixed in the Arlington Heights area, with some o cials expressing general support but others saying the Bears-owning McCaskey family is wealthy and does not need a public break.

e team is expected to announce soon whether it will close on the Arlington Heights property, the former site of Arlington International Racecourse.

“As we have said publicly, prop-

erty tax certainty is necessary for the Arlington Park project to move forward. We continue to do our due diligence on how that can be accomplished,” the team said in a statement. “We, and many other developers and organizations, support mechanisms like the mega project PILOT because it provides a negotiated payment to local taxing bodies that would exceed the revenue they currently receive from the property while providing tax certainty for the developer.  is tool is currently used in many other states and would be valuable to make Illinois more competitive in attracting and retaining mega projects that create thousands of jobs and economic opportunities across our state.”

1 in 4

1 in 25

The Bears have said they need a subsidy not for the stadium itself but for adjacent developments.

Can a later, shorter ‘Chicago Tonight’ compete?

WTTW says the move for its agship newscast makes sense in the age of online news and declining TV viewership I

The WTTW agship newscast “Chicago Tonight” shifted to a new time slot last week. e nearly four-decade-old news show moved to 10 p.m. from its usual 7 p.m. time, where it has aired since 1986. e show also shrank its airtime from an hour to 30 minutes— the show’s hourlong time frame began in 2002.

In a Q&A, Jay Smith, WTTW news director and “Chicago Tonight” executive producer, said the move would include more investigative reporting, providing “real-time, solutions-oriented journalism” that viewers won’t get anywhere else.

An essential part of the move is also expanding the audience. “We know viewers in Chicago and the surrounding communities are looking for and are watching local television news at 10 o’clock and that there is an opportunity at that time to provide a high-quality news program that takes viewers deeper into the stories behind the headlines of the day,” Smith said in the interview.

Analysis by the Pew Research Center shows that viewership for local news stations has outpaced cable and network TV, especially in the time slots of evening and late-night news.

ough local news is beating out its counterparts, the move also comes at a time when TV viewership is shrinking overall. Pew Research also shared that “more than eight-in-ten U.S. adults (86%) say they get news from a smartphone, computer or tablet ‘often’ or ‘sometimes.’ ”

During an interview on the news-talk podcast “ e Mincing Rascals,” WTTW reporter Heather Cherone said that the station hopes the move will encourage viewers to watch the stream of the broadcast on its website as well.

“Like (everywhere) else, postTrump, the ratings have been down signi cantly, and the sense is that the people who watch at 7 p.m. will nd us at 10 p.m. by and large or they’ll nd us online, which is really what we want them to do,” Cherone said on the podcast.

Chicago Tribune political

commentator and former correspondent for “Chicago Tonight”

Laura Washington expressed her thoughts on the shortened time slot in an op-ed, saying it “leaves less time for the long-form journalism newsmaker interviews and investigative reporting the station promises and less time for coverage of arts and culture, civics issues and public policy.”

DRAWING COMPARISONS

Eric Zorn, former columnist at the Chicago Tribune and a founding panelist of “ e Mincing Rascals,” told Crain’s that while he thinks that condensing the newscast will make for a better show, he is less than optimistic about the new time.

In his Substack publication, the Picayune Sentinel, Zorn compared the move to that of WBBM-Channel 2 in 2000, when the station made the e ort to change the format of its 10 p.m. newscast to a more hard-hitting, serious style with one anchor. Eight months after making the transition, the show was canceled and replaced by “a more traditional evening news program,” as reported by e New York Times.

“Pitting it against the conven-

tional, ashier, short-attention span 10 p.m. newscasts seems poorly advised, reminiscent of WBBM-Ch. 2’s failed experiment in 2000 hosted by Carol Marin,” wrote Zorn of the “Chicago Tonight” shift.

In an interview with Crain’s, Smith said that the shift couldn’t be compared to WBBM’s. “So much has changed in the last 23 years. I would not call (the WBBM move) unsuccessful. I think (Marin’s) program was successful in doing a really thoughtful 10 p.m. newscast. And that is really what we are going to be doing.”

Even with the changes that have occurred in the media landscape over the years, it remains to be seen if the long-form newscast will sustain at the time slot and compete with its commercial counterparts. e latest numbers from the November sweep show ABC 7 Chicago in the ratings lead, as it has been for the last 26 years. Its broadcasts from 4 p.m. to 6 p.m. and 10 p.m. have won the key demographic of 25- to 54-year-olds.

While ABC 7’s 10 p.m. news was in the top place with 184,600 households, NBC 5’s 10 p.m. news came in second with 104,900, WGN-Channel 9 had 82,200, CBS-

owned WBBM-Channel 2 had 66,500, Univision WGBO garnered 50,800, Fox 32 had 39,900 and Telemundo WSNS had 28,900.

Smith believes there is enough room for everyone to succeed in the time slot. “I think there are some people that will be happy to have an alternative and happy to have a di erent type of newscast. Certainly, there are the newscasts that everyone is doing at 10 o’clock (that) serves an audience as well. But I do think there’s an appetite for some kind of deeper reporting, analysis and sort of thoughtful looks into stories that we will be providing at 10 o’clock.”

WTTW did not provide ratings for “Chicago Tonight.”

‘IT’S ABOUT STREAMING’

Recently retired media columnist Robert Feder said that the move matters less today than it would have 20 years ago, stating that it’s less about getting a bigger audience and more about their online platform.

“ at 7:00 time period was great 37 years ago, when people were just getting home from work, when audiences were looking for something like that, when people could sit down in front of a

TV for an hour and watch a show like that,” said Feder. “ ose days are gone. It’s about streaming, it’s about on-demand, it’s about the late viewership.”

Feder also suggested that the show was losing viewers at the 7 p.m. spot and thinks the move was needed to allow for growth.

Tim Franklin, senior associate dean at Northwestern University’s Medill School of Journalism, said less reliance on ratings for broadcasts like “Chicago Tonight” relieves its producers of those pressures, which makes it stand out.

He also added that the change in timing is not too important in today’s climate. “More and more people are streaming, more and more people are watching video clips on YouTube. ey’re watching video clips through Google searches. So the timing of a newscast is almost becoming less and less relevant by the year.”

Franklin believes that the shift could possibly in uence the commercial stations in doing more informed stories. “If it is peeling o viewers from the commercial stations, could this prompt the commercial stations to change their approach to the news at 10 o’clock?

So that, I think, could be another ripple e ect of this,” he said.

Asked if he was worried about the show losing guests due to the late time, Smith said that the new broadcast would consist of pre-recorded interviews and news packages to address the risk, but that it would remain live.

For WTTW, the change would put the station’s prime-time lineup in sync with the rest of the country, where Chicago has usually been the outlier.

“It’s potentially a plus for us as well. Some of those programs will be on at a more appealing time and will help lead into us. And so we will be the bene ciary of that as well,” said Smith.

“So, it’s all good for the WTTW lineup. at is not the reason we made this move in any way, shape, or form. We made this move with the audience in mind and with the idea of just enhancing and making our coverage even better and even deeper than it has been.”

City touts $160M ‘social bonds’ sale as success

Chicago

retail investors, who had a one-day head start on the larger market, bought 8% of the o ering

BY JUSTIN LAURENCE

City o cials are claiming success with this month’s sale of social bonds that gave city residents rst priority and were tailored to capture investors in the environmental, social and governance, or ESG, market.

As part of the $1.2 billion Chicago Recovery Plan put together by Mayor Lori Lightfoot and approved by the City Council, the city issued a roughly $160 million bond o ering and gave Chi-

cagoans a one-day head start on the right to purchase the bonds ahead of the larger market.

According to the city, 8% of the bond o ering, or $12 million, went to Chicago retail investors who were able to make investments from a minimum of $1,000 up to $1 million. Illinois residents made up 24%, or $38 million, of the purchases.

And $88 million in orders came from “11 ESG-focused investors,” following outreach to the ESG market ahead of the of-

fering to learn how to structure what services the city would fund with the bond proceeds.

e proceeds will help fund seven projects already approved as part of the $1.2 billion Chicago Recovery Plan, including the construction of 2,000 units of affordable housing, purchasing temporary shelter space for those experiencing homelessness, replacing 200 vehicles in the city’s eet with electric vehicles, making city lots ready for sale, community development projects and the planting

of 15,000 trees across the city.

e series was sold through the Sales Tax Securitization Corp., a nonpro t entity previously created, and backed, by the city’s sales tax in an e ort to secure a lower interest rate and which has higher credit ratings than the city itself.

Jennie Bennett, the city’s chief nancial o cer, said the “participation by retail investors on this transaction was the highest” of any city-backed bond o er “in at least a decade.”

“ e city is pleased with the

success of its inaugural social bond issue,” she added. “ e city created a unique social bond which allowed Chicagoans to invest in historic investments in their own community.“

“ e city generally sees 0.3% retail participation in its deals,” according to the city’s budget o ce, which credited a marketing push that included transit and radio ads. Earlier this month, Bennett told Crain’s the city would look to offer additional social bonds in later o erings, potentially totaling hundreds of millions of dollars, as part of the $1.2 billion recovery plan.

“Chicago Tonight,” which for decades aired at 7 p.m. on WTTW, has moved to a 30-minute slot at 10 p.m.

Will city effectively ban natural gas in new buildings?

Mayor to back planned ordinance that would force most new construction to fuel heat and cooking with electricity

BY STEVE DANIELS

Mayor Lori Lightfoot is set to back an ordinance that would clamp down on carbon emissions from newly constructed buildings in Chicago, forcing most if not all new construction to fuel heat and cooking with electricity rather than natural gas.

e measure is expected to be introduced Feb. 1 when the City Council next meets, according to sources familiar with the proposal.

e ordinance would mark a critical rst step in shifting away from carbon-emitting natural gas, for decades the principal way Chicagoans have stayed warm during the winter.

It would echo a similar statute signed into law a little over a year ago in New York City by then-Mayor Bill de Blasio. Cities like Los Angeles and San Francisco have taken matters further and outright banned gas in new buildings as America’s largest cities attempt to do their part in response to climate change.

e mayor’s o ce declined to comment on the ordinance. But in a statement, a Lightfoot spokeswoman said, “Mayor Lightfoot has made it clear that she’s committed to working with the Illinois Clean

Jobs Coalition and stakeholders across all sectors to meaningfully reduce carbon emissions to meet the city’s Climate Action Plan goals while delivering health, climate and economic bene ts to Chicagoans. e mayor continues to work collaboratively on this issue, notably having launched the Chicago Building Decarbonization Working Group in 2021 who studied building decarbonization extensively. Mayor Lightfoot is focused on creating bold policy that supports a clean energy future and healthy and e cient buildings for all.”

e anticipated ordinance echoes a key recommendation in the report issued late last year by that working group, which was to quickly phase out gas in new buildings and structures being extensively renovated.

e measure will set limits on carbon emissions rather than imposing a gas ban, potentially allowing for carbon-free alternatives to electricity like hydrogen and fuel from gas released from land lls and other waste sites converted into usable fuel, sources say. In practical terms, though, electricity—at least for now—will be more cost-e cient than those emerging energy sources.

ere also will be exemptions

for commercial cooking establishments, crematoriums and other gas-dependent businesses.

e mayor’s o ce is in the process of brie ng a ected interests and aldermen, sources said.

SUPPORT AND OPPOSITION

Environmental groups are in strong support, as are some consumer groups like the Citizens Utility Board.

It remains to be seen how groups representing builders, developers and building owners will react. e fact that the ordinance applies to new construction and not existing buildings is likely to mute some opposition.

In opposition is Peoples Gas, the

natural gas utility for the city of Chicago.

“Proponents of natural gas bans regularly claim that electric heat pumps may help keep Chicago warm in the future. at simply isn’t true. Not only do they struggle to work in cold climates, but it costs up to $60,000 to convert a single home to an electric heat pump,” Peoples said in a statement on the proposal. “ e fact that the proposed ordinance includes exceptions for hospitals and health care facilities should raise alarms as it shows supporters of this proposed ban on natural gas are fully aware the alternatives to natural gas are not safe and reliable enough for the most vulnerable Chicagoans.”

Peoples also emphasized that fossil fuels currently are burned to produce electricity for the region. Adding demand for electricity could mean more natural gas consumption—but by power plants instead of buildings.

e Climate & Equitable Jobs Act, enacted in 2021, requires the phaseout of gas and coal to produce electricity in Illinois by 2045.

Peoples is in the midst of a controversial, multibillion-dollar revamp of its underground piping system serving the city. at project, behind budget and mired in cost overruns for several years, has signi cantly increased heating costs for Chicagoans. Peoples has a record-setting $402 million rate-hike request before the Illinois Commerce Commission that could exacerbate the a ordability problem.

Critics have said an extensive upgrade of the entire system, meant to last for 50 years or more, is foolhardy when the city wants to move away from gas over the next few decades.

A wild card will be whether Local 150 of the International Union of Operating Engineers, whose members have bene ted from the massive Peoples project, will join Peoples in opposition. Local 150 is politically potent and has played a key role in stymieing e orts in Spring eld to rein in Peoples’ infrastructure spending and associated rate hikes.

ALAMY

A tax idea for the dustbin of history

It took nearly four decades for Chicago business leaders to squelch the head tax, the job-killing per-employee levy rolled out by Mayor Richard J. Daley in 1974. Now, one of the contenders with a reasonably good shot at making it to the mayoral runo this spring wants to put this bad idea—and several others—back on the table.

As Crain’s Greg Hinz reports, Cook County Commissioner Brandon Johnson is touting a bevy of new taxes in his pitch to unseat incumbent Mayor Lori Lightfoot. Among them:

 A surcharge on Metra fares paid by suburban residents that Johnson argues would raise $40 million a year.

 A $98 million-a-year tax on jet fuel used at Chicago’s airports, primarily O’Hare.

 A “user fee” on “high-end commercial districts frequented by the wealthy, suburbanites, tourists and business travelers.”

 And, of course, a $4 per worker per month employee head tax.

ese ideas aren’t coming from some fringe write-in candidate but rather from a man many polls place in the top tier of the nine-person eld heading into the Feb. 28 election. Johnson’s momentum is being provided in large part by the Chicago Teachers Union, which granted him its endorsement early in the contest and stands ready to throw its get-out-the-vote army and organizing muscle behind his candidacy. Many of the ideas Johnson is touting come straight from the CTU’s well-worn playbook.

So it’s important to take these proposals seriously—and to point out in no uncertain terms how damaging they could be to Chicago’s economic health.

A Metra tax, at a time when ridership is still depressed and downtown o ce landlords and tenants are desperate to bring workers back to the Loop? Not smart. As Crain’s has reported, the Regional Transportation Authority, Metra’s parent, is staring down what it terms “an existential crisis that neither fare hikes or service cuts can solve.” e agency warns it faces a $730 million scal cli by 2026 without an infusion of federal and state aid. Boosting ridership will be crucial if the transit system is to avert this crisis, making a suburban rider tax the very last thing Metra needs at this critical moment.

A jet fuel tax? It’s not clear that’s even legal. As Hinz pointed out in his original re-

port, bond agreements at O’Hare generally require that money raised at the airport be used to support airport projects. And a “use fee” for shoppers and diners in “high-end” neighborhoods such as, presumably, the Magni cent Mile is similarly defective. Even if such a tax could be enforced, one has to wonder: Has Johnson seen North Michigan Avenue lately?

As for the head tax, then-Mayor Rahm Emanuel’s justi cation for nally putting a stake in it in 2011 was that the revenue it generated didn’t o set its job-killing e ects. In the 20 years after the head tax was enacted, Chicago by some accounts lost more than 250,000 jobs—a virtual body blow to

the city’s economy. Restoring such a tax now would only make it that much harder for Chicago and the state to compete for investment.

What Chicago needs in its next mayor— whether it’s Lightfoot or any of her challengers—is a leader who understands what Chicago business owners, managers and investors are up against, and who values the contributions these people can make not only to Chicago’s economic well-being but also to its civic welfare and cultural vibrancy. Chicago has a rich history as a place where business leaders are expected to get behind big public causes such as the creation of Millennium Park and the modernization of O’Hare. It’s also a city where business leaders contribute considerably to philanthropic causes—as is only right when those leaders are fortunate enough to do well in a town that creates the conditions for their success. Head taxes and the like, however, do little more than reinforce the notion that Chicago is hostile to business. ere’s no doubt this city faces enormous challenges, many of which Johnson and other candidates in the eld rightly want to solve: a shortage of a ordable housing, for one, inequitable distribution of investment from neighborhood to neighborhood, and a need to improve educational outcomes for all residents of the city, not just those lucky enough to make it into magnet schools. But knee-jerk “soak the rich” solutions to these ills not only demonstrate a lack of creativity—they undercut the very idea that the people and businesses targeted by these policies could actually help provide the answers to such problems if only they could be seen as partners rather than opponents.

U.S. Attorney John Lausch’s legacy

The public learned recently that U.S. Attorney John Lausch would be leaving his post when he unexpectedly mentioned his departure during a press conference about another matter.

It was a tting way for Lausch to end his tenure as Chicagoland’s chief federal law enforcement o cer. Always understated, his aversion to the spotlight served him well as he led the prosecution of some of the most powerful politicians in the state, including former House Speaker Michael Madigan and Ald. Ed Burke, who were previously considered untouchable.

In an increasingly polarized nation, where accusations of politicized prosecution abound, Lausch and his o ce have managed to earn the trust of politicians on both sides of the aisle. As an appointee of former President Donald Trump, it appeared that Lausch would initially be

red with the other U.S. attorneys when President Joe Biden took o ce. Instead, Sens. Dick Durbin and Tammy Duckworth made a public statement of support for Lausch, who kept his job.

e last Chicago U.S. attorney to outlast a presidency was Pat Fitzgerald, a George W. Bush appointee who prosecuted former Govs. George Ryan and Rod Blagojevich. I worked with both Fitzgerald and Lausch, and they are cut from the same cloth. ey’re workhorses, not show horses, who are more comfortable in an FBI eld o ce than a press conference.

Lausch leaves behind a significant legacy. Although the prosecution of politicians has drawn the most press attention, perhaps his most significant impact was his focus on gun and narcotics prosecutions, which was controversial but represented a notable shift in priority for his office.

He also leaves behind an o ce of talented prosecutors. When a famous politician is indicted, the name of the U.S. attorney is noted in news stories and his photo is on the evening news. But the hard work of building that investigation from scratch was done by the men and women who stand silently behind the U.S. attorney at the press conference. You don’t know their names, but you know their work.

CONTINUITY

When Lausch leaves for private practice in the upcoming weeks, the man who will step into his shoes until a new U.S. attorney is appointed is a career prosecutor named Morris Pasqual, who will be the rst Black American to serve in that role.

Pasqual was my chief when I was a junior prosecutor. He was also Lausch’s chief, and supervised Mayor Lori Lightfoot when she was a federal prosecutor many years ago. Pasqual not only has decades of experience investigating crime and supervising other prosecutors, but he is nonpartisan, and, like Lausch and Fitzgerald,

doesn’t like the limelight.

So if you’re concerned that Pasqual will scuttle the important prosecutions he helped supervise over the past years, don’t be. He’s the same sort of prosecutor Lausch is.

But for all the attention that has been paid to Lausch, and will be paid to Pasqual, the real work of trying di cult cases like the upcoming trials of Madigan and Burke will fall to career public prosecutors led by Public Corruption Chief Amarjeet Bhachu. You don’t know his name, but he is the driving force behind the high-pro le prosecutions that have captured your attention. He isn’t going anywhere.

When I worked the U.S. Attorney’s Ofce, I was taught that the o ce is much bigger than any one person. Each of us learned its procedures and practices, but more importantly, we learned that we were stewards of its legacy. e legacy of Lausch’s tenure is really the legacy of the U.S. Attorney’s O ce, and that legacy will continue even after he departs.

Former federal prosecutor Renato Mariotti is an analyst for MSNBC.

Brandon Johnson

Believing in the promise of Invest South/West

Critics of Mayor Lori Lightfoot’s Invest South/West program are missing three fundamental points that will ensure the initiative’s success after decades of economic disinvestment on the South and West sides.

First, the program is a nodeand corridor-based strategy in areas with existing economic strength and activity. e old real estate cliche about “location, location, location” applies even in formerly active shopping districts in Englewood, Bronzeville and Auburn Gresham, where Chicago’s street grid and trans-

CRAIN’S

President/CEO KC Crain

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engagement Aly Brumback

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content creation Marcus Gilmer

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and social media Robert Garcia

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Steve Daniels, Alby Gallun, John Pletz

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G.D. Crain Jr. Founder (1885-1973)

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For subscription information and delivery concerns please email customerservice@ chicagobusiness.com or call 877-812-1590 (in the U.S. and Canada) or 313-446-0450 (all other locations).

portation infrastructure provide the best potential for restoring economic health.

ese areas were carefully chosen by the city to build on existing investments initiated by previous administrations, a fact that critics have claimed to be a repackaging.

ey’re missing the point. It is the consistency of commitment of the Invest South/West program that is novel, not the investments themselves, since it will take more than one administration to turn around decades of systemic disinvestment.

Second, Invest South/West

adheres to the necessary real estate proposition “rooftops before retail,” which will help ensure a healthy population density for new goods and services. While some residents and critics have questioned why the rst investments are not supermarkets, major retail investments are still premature, given the nearly 400,000-person population loss that has occurred on the South and West sides since 1980.

Finally, what was attractive to my development team about Invest South/West was clear messaging from the Lightfoot administration that viable projects would receive the necessary resources to bring them to fruition, even during a di cult economy. Invest South/West’s largest projects involve complex public-private partnerships involv-

ing local, state and federal governments, as well as neighbors who have spent lifetimes advocating for their neighborhoods.

In Auburn Gresham, neighbors’ input expanded what was supposed to be a single mixed-use building into two structures that more closely re ect the neighborhood’s scale. Mayor Lightfoot’s support for what became a $48 million project was unwavering, given its strategic location at an important intersection, the need for rooftops, and its intended impact as a catalyst for even more investment. With focus, regular communication and determination, investing in Chicago’s South and West sides will pay long-term dividends for these neighborhoods and for the city itself. at’s an investment worth making.

David Block is director of development for Evergreen Real Estate Group, which is co-developing Auburn Gresham Apartments.

ACCOUNTING

PKF Mueller, Elgin

PKF Mueller, a Chicago area CPA rm, is proud to announce the promotions of Scott Anderson, CPA, CTA, and Jessica Connell to Director, effective 1/1/23. Anderson has over 7 years of public accounting experience providing services for clients in various industries. He is a key member of the Firm’s Consulting Group, where he consults clients in fast-changing, highgrowth, and distressed situations.

Connell joined PKF Mueller in 2021 after 21 years of working for a small accounting rm in Sarasota, FL. She works closely with small to mid-sized, growth-oriented, and family-owned business owners to implement management and accounting software, maintain their accounting records, and report sales, payroll, corporate, and individual taxes.

ARCHITECTURE / CONSTRUCTION

Wight & Company, Darien

Megan Zack, AIA, LEED AP, WELL AP, joins Wight as Chief Sustainability Of cer. Megan is highly regarded for her ability to make sustainable practices achievable and affordable without compromising design excellence. She will lead rm efforts to further reduce our impact on the environment while continuing to serve communities through beautiful, sustainable design.  Ava Muench joins Wight as Project Director. With more than 25 years of experience in construction management, she has managed a broad range of projects across public and private markets.Ava’s passion for mentoring and process development will foster the growth of our project teams and provide leadership in our rapidly growing Construction group.

ARCHITECTURE / DESIGN

MKSK, Chicago

BANKING

First Bank Chicago, Highland Park

First Bank Chicago proudly announces the promotion of Brien Leahy to President of Community Banking. His new role includes overseeing business segments designed to meet the needs of individuals and small businesses in the communities where we have branches. With 30+ years of banking expertise, Brien is responsible for the overall strategy, products, and branch operations while leading a diverse team focused on consumer banking & lending, private banking and business banking. He joined us in 2018.

CONSTRUCTION

Skender, Chicago

Skender, one of the nation’s top building contractors, congratulates Lauren Bauer on her promotion to Senior Project Manager. Lauren joined Skender in 2019 as a Project Manager and has over a decade of experience in the industry. Lauren’s role as SPM involves preconstruction, job-start planning and management of commercial ground-up projects. Her team recently completed the 15-story 609 W Randolph of ce building and she is currently managing the 21-story 741 N Wells mixed-use residential tower.

CONSTRUCTION

Skender, Chicago

Skender, one of the nation’s top building contractors, congratulates Alex Panici on his promotion to Vice President. Alex joined Skender in 2016 and has over 15 years of experience in the industry. As VP, Alex will continue to lead new construction of ce, hotel and high-rise residential project teams. He recently led Skender construction teams on the 11-story 345 N. Morgan and 15-story 609 W Randolph of ce buildings. His team is currently managing the 21-story 741 N Wells residential tower.

BANKING / FINANCE

Prairie Capital Advisors, Oakbrook Terrace

CONSTRUCTION

Skender, Chicago

CONSTRUCTION

Krusinski Construction Company, Oak Brook

ACCOUNTING McAvoy Schlup

PKF Mueller, Elgin

PKF Mueller, a Chicago area Certi ed Public Accounting rm, is proud to announce the promotions of Mike McAvoy, CPA, and Kurt Schlup, CPA, MST, to Director, effective 1/1/23. McAvoy has over eight years of public accounting experience performing audits, reviews, and compilations for various not-for-pro t, government, and forpro t entities. He is also a member of the Firm’s Not-For-Pro t Leadership Group. Schlup has over 20 years of broad business-based tax experience. He is a member of the Firm’s Consulting Services Team and is a key member of the Firm’s Employee Retention Credit Services Team. Schlup’s industries of expertise include manufacturing, distribution/retail, and professional services.

Landscape Architect and MKSK Chicago Studio Leader, Brett Weidl, PLA, ASLA, LEED AP has been promoted to Principal at MKSK, an Employee-Owned practice of Planners, Urban Designers and Landscape Architects located throughout the Midwest & Eastern US. Brett is a Director on the Chicago Central Area Committee Burnham Council board and Co-Chair of Wilson Underline Committee, Uptown. She is a licensed professional landscape architect in Illinois and a LEED accredited professional with the U.S. Green Building Council.

ARTS / ENTERTAINMENT

Joan W. and Irving B. Harris Theater, Chicago

The Joan W. and Irving B. Harris Theater, Chicago’s home for music and dance, welcomes Susan Lape as Vice President of Development. Lape brings her extensive experience in arts management, most recently as Executive Director of the Chicago Youth Symphony Orchestras, to lead fundraising efforts across all streams of contributed revenue for the 1,500-seat venue in Millennium Park.

Prairie Capital Advisors, Inc., a leading corporate advisory and investment banking rm, is pleased to announce it has hired David Horvath, CPA as Managing Director. Mr. Horvath will focus on Employee Stock Ownership Plan (ESOP) advisory services, including sustainability. His experience will also allow Prairie to expand service offerings to include compensation and employee bene t consulting services.

BANKING / FINANCE

Wintrust, Chicago

Wintrust Commercial

Real Estate is pleased to welcome Sri Krishnan as Senior Vice President to our CRE team! As a 12-year veteran to Commercial Real Estate and life-long Chicagoland resident, Sri brings a wealth of knowledge and expertise in C&I and CRE loans, credit analysis, portfolio management and underwriting. Previously with Bank of America, he will be joining a dedicated team focusing on bringing creative lending solutions to their clients. Welcome, Sri!

Skender, one of the nation’s top building contractors, congratulates Taylor Betthauser on her promotion to Project Manager. Taylor joined Skender in 2018 and has ve years of experience in the industry. In her new position as PM, Taylor is responsible for managing the day-to-day details of construction projects including scheduling, change orders, invoicing and reporting. She has helped deliver numerous healthcare construction projects for Northwestern Medicine and Lurie Children’s Hospital.

CONSTRUCTION

Skender, Chicago

Skender, one of the nation’s top building contractors, congratulates Brian Kane on his promotion to Vice President. Brian joined Skender in 2008 and has over 15 years of experience in the construction industry. As VP, Brian will continue to lead Skender’s specialized healthcare and life sciences construction teams on various hospital, outpatient and laboratory projects. He has completed numerous projects on behalf of Northwestern Medicine, Lurie Children’s Hospital, Loyola Medicine and others.

Krusinski Construction Company (KCC) is excited to announce that David Julian has joined the rm as Vice President of Business Development. In his role, David will lead local and national business development efforts and continue to grow the KCC brand. He will help curate experiences with clients and forge new relationships in targeted growth markets. A proud graduate of Western Illinois University, David joins KCC with over 20 years of experience in the A/E/C industry.

EDUCATION

Prairie State College, Chicago Heights

Prairie State College

Board of Trustees appointed Michael D. Anthony, Ph.D., to serve as the 16th president of the institution. He is the rst African American and the youngest to hold the position. With over 18 years of experience in higher education, Dr. Anthony has an extensive background in leadership, administration and student affairs. Dr. Anthony is a dedicated leader on a mission to help pioneer a new future at Prairie State College.

ENGINEERING / CONSTRUCTION

ACCOUNTING

Vrakas CPAs + Advisors, Chicago

Vrakas CPAs + Advisors is excited to welcome Andy Kamphuis to our shareholder group in Chicago! Andy brings with him nearly 15 years of professional services experience serving clients across various industries and ownership structures. Vrakas has been providing full-service accounting and business advisory services since 1971 and we pride ourselves on taking the nancial worry off business owners’ plates so they can concentrate on running their business. Experience the Vrakas difference!

BANKING / FINANCE

Capital One, Chicago

Matt Gilbert joins Capital One as Vice President and Senior Business Banker in Chicago, where he will serve as a trusted advisor to clients on personalized lending solutions. Matt is a graduate of Saint Xavier University and brings fteen years of banking experience to this role. A fan of the Dallas Cowboys and the Chicago White Sox, Matt also coaches his sons’ sports teams and helps lead a football organization in his community.

BANKING / FINANCE

Wintrust, Chicago

Wintrust Commercial Real Estate is pleased to welcome Tommy O’Brien as Assistant Vice President of Portfolio Management to our team. With his formative years in the Chicagoland area, Tommy will bring uncompromising dedication and expertise to our clients. Previously with Amalgamated Bank of Chicago, he’s worked his way from Credit Analyst to Portfolio Manager and will bring nearly a decade of community banking experience to the team. Welcome, Tommy!

CONSTRUCTION

Skender, Chicago

Skender, one of the nation’s top building contractors, congratulates Ben Miltzow on his promotion to Director of Self-Perform, Carpentry.

Ben joined Skender in 2019 and has more than 20 years of experience in the construction industry. In his role, Ben oversees Skender’s in-house carpentry capabilities, working with Skender project teams and clients to effectively schedule and estimate carpentry services while managing projects, coordinating trades and ensuring the highest levels of quality.

Milhouse Engineering and Construction, Inc., Chicago

Maryam Brown, PMP has been promoted to Vice President of People & Culture and Operational Excellence at Milhouse Engineering and Construction, Inc. Maryam ensures that business initiatives are performed ef ciently while guiding team members to grow in the Milhouse culture. With over 22 years of experience in leading cultural transformation processes, Maryam has focused on developing process improvements that support commercial outcomes for the collaborative and rapidly growing organization.

Anderson

Connell

Zack Muench

HEALTH CARE

One Home Health Agency, Downers Grove

OHH, a home healthcare provider in Illinois and Indiana, has promoted Dennis Doheny to President and CFO.

Doheny brings over 30 years of leadership experience specializing in nancial oversight, business strategy and leadership development. Doheny graduated from the Univ of Illinois with a Bachelor of Business Administration in international nance and earned a Master of Business Administration in international business from Northwestern University’s Kellogg School of Business.

To place your listing, visit www.chicagobusiness.com/peoplemoves or, for more information, contact Debora Stein at 917.226.5470 / dstein@crain.com

LAW

Ginsberg Jacobs LLC, Chicago

LAW

Marshall, Gerstein & Borun LLP, Chicago

NON-PROFIT

TASC, Inc., Chicago

REAL ESTATE

HEALTH CARE

One Home Health Agency, Downers Grove

OHH announced Katie

Drennan as Director of Marketing. With over ten years of experience in the home health and post-acute industries, Drennan brings a proven track record of business growth and development both leading teams as well as individually. In her new role she will be responsible for leading the strategic direction, management, and growth of the marketing department. Drennan graduated from No. Central College/degree in Exercise Science then Master of Public Health from Benedictine U.

INFORMATION / DATA TECH

Wavicle Data Solutions, Chicago

Tom Lin has joined Wavicle Data Solutions as Manufacturing Practice Leader. Wavicle will tap into Lin’s expertise in data strategies, modernization, and governance to lead teams in delivering data analytics and AI solutions for manufacturers. In his 22 years of experience, he has led data-driven transformations for several Fortune 500 companies, served as Midwest AI Retail Lead at Accenture, and built and led the manufacturing practice as a Partner at Clarity Insights.

INSURANCE BROKERAGE

The Provant Group, LLC, Chicago

Lynn Harper joins The Provant Group as Chief Operating Of cer. Lynn brings an unparalleled industry background with over 20 years of insurance expertise and operational acumen. In past roles she was responsible for all aspects of operations, on both the carrier and broker sides - making her a valuable asset to propel Provant’s growth and strategic initiatives. The Provant Group provides business insurance, employee bene ts, and personal insurance solutions to organizations and individuals.

Krause

Cory

Ginsberg Jacobs LLC, a Chicago law rm representing clients nationally in commercial real estate matters, is pleased to announce that Michele Krause and Janet Cory have been elevated to the rm’s equity partnership. Michele is the head of the rm’s general leasing practice and represents clients in the acquisition, disposition, and leasing of commercial, of ce and industrial properties, with a particular focus on retail and of ce leasing on behalf of both landlords and tenants Janet has a national practice in commercial real estate transactions with expertise in nance. Her experience includes real estate nancing, leasing, acquisitions and dispositions on behalf of borrowers, owners, landlords, and developers.

Marshall, Gerstein & Borun LLP has bolstered its Electrical & Computer Technologies Practice with the addition of Sanjay Agrawal as Special Counsel. Sanjay oversees domestic and international patent matters, guiding inventors to develop legal strategies. He previously served as Senior Counsel to Elekta, Inc., a global provider of radiation therapy hardware and software, managed the global patent portfolio for Nestlé Purina PetCare, and worked for major law rms in St. Louis and Chicago.

LAW

Marshall, Gerstein & Borun LLP, Chicago

Treatment Alternatives for Safe Communities (TASC) announces that Rebecca Levin, MPH joins their Executive Team as Vice President of Policy, leading public policy and advocacy initiatives for TASC and its Center for Health and Justice (CHJ).

Prior, Levin worked as Senior Advisor and Executive Director of Public Policy for the Cook County Sheriff’s Of ce and in senior policy roles at Ann & Robert H. Lurie Children’s Hospital, the American Academy of Pediatrics, among other organizations.

PUBLIC AFFAIRS

Culloton + Bauer Luce, Chicago

Newcastle Limited, Chicago Delight Merrill joins Newcastle Limited as SVP of Multifamily Operations. In her new role, Delight will be responsible for building the strategic vision for Newcastle’s residential operating platform. She will oversee the rm’s 3,000-unit multifamily portfolio and a team of 100 employees responsible for management and leasing. She joins the rm with 20 years of multifamily leasing and management experience and was most recently with Redwood Capital Group as Director of Property Management.

LAW

Laner Muchin, Chicago

Laner Muchin proudly announces Marron Mahoney has joined the rm as Of Counsel. She focuses her practice on representing employers in numerous areas of labor and employment law, including collective bargaining negotiations, grievances, investigations and employment counseling. Previously she worked for the Will County Executive’s Of ce and the Illinois Department of Juvenile Justice, where she engaged in collective bargaining negotiations, grievance resolutions and employment counseling.

Joseph S. Sakevich joined Marshall, Gerstein & Borun LLP as an associate and handles patent prosecution matters involving electrical and computer technologies. Joseph served as in-house counsel in the healthcare sector and has assisted startups with patent, trademark, and copyright issues. Joseph holds a bachelor’s degree in computer systems engineering from Syracuse University and obtained his law degree from Chicago-Kent College of Law, Illinois Institute of Technology.

Eleni Demertzis joined public affairs & crisis management rm Culloton + Bauer Luce as Vice President. Eleni is a highly respected communications professional with over a decade of experience at the highest levels of Illinois government. Most recently, she served as Deputy Chief of Staff and spokesperson for House Minority Leader Jim Durkin. Eleni’s work in government and on highpro le political campaigns gives her a veterans’ perspective in managing crises and driving advocacy campaigns.

REAL ESTATE

Advocate Commercial Real Estate Advisors, Chicago

TECH / TELECOM

Comcast, Chicago

John Colucci has been named Vice President of Engineering for Comcast’s Greater Chicago Region, which includes Illinois, Northern Indiana and Southwest Michigan. Colucci most recently served as Vice President of Construction for the region. In his new role, Colucci will oversee Comcast’s regional Engineering and Construction Teams. He and his teams will also play a major role in a construction and current upgrade project designed to create the next generation network.

TECHNOLOGY SERVICES

UScellular, Chicago

LAW

Laner Muchin, Chicago

Laner Muchin proudly announces Katherine Stryker has joined the rm as an Associate. She concentrates her practice in private and public sector employment litigation and is skilled at working with clients on complex legal issues arising under the FMLA, Title VII, ADA and FLSA claims. She also represents clients in cases at the EEOC and state and local agencies. Previously, she worked at several boutique law rms where she gained experience handling a myriad of employment litigation cases.

MANUFACTURING

Leeco Steel, Lisle

Leeco Steel, a steel plate supplier based in Lisle, IL, announces the appointment of Erich Eiermann to Director of IT. In this newly created role, Mr. Eiermann will oversee Leeco’s IT department and lead the implementation and exploration of new technology, which will enable Leeco to improve ef ciencies across all departments and locations. Mr. Eiermann has 15 years of IT experience, including extensive knowledge of ERP systems and data analytics.

NON-PROFIT

Project SYNCERE, Chicago

Dan Obiala rejoins Advocate Commercial Real Estate Advisors as Senior Vice President. He brings more than 20 years of experience as a commercial real estate broker in the Chicagoland area. He focuses on business development, with an emphasis on solving client’s challenges with strategic real estate planning and nancial analysis. Obiala holds a BS in Criminal Justice from Loyola University of Chicago.

REAL ESTATE

NAI Hiffman | Hiffman National, Oakbrook Terrace

Renae Grob has been promoted to vice president of supply chain at UScellular. In this role, she is responsible for all aspects of UScellular’s supply chain operations, policies, strategic objectives and initiatives to help ensure a great experience for customers. Renae joined UScellular in 2012 and has held roles in accounting, nancial planning and analysis, and supply chain. Most recently she served as senior director of channel supply chain.

WEALTH MANAGEMENT

Strategic Wealth Partners, Deer eld

To order frames or plaques of profiles contact Lauren Melesio at lmelesio@crain.com or 212-210-0707

Project SYNCERE is proud to welcome Andria Winters to the Board of Directors. Andria brings a unique background and relationships in the public, private and non-pro t sectors. Andria is the Senior Director in CBRE’s Advisory & Transaction practice. She has an incredible body of work across a range of technology-based companies and offers her clients a holistic approach to strategy development, incorporating corporate and civic perspectives. Andria is a Leadership Greater Chicago Fellow (2020).

NAI Hiffman | Hiffman National proudly announces the addition of John Heiberger as its president. Previously US head of portfolio management at CIBC, Heiberger brings over 30 years of nancial and CRE business experience to oversee the corporate accounting and operations teams while advising on strategic nancial decisions and positioning Hiffman for new growth opportunities. Heiberger is a Northwestern University Kellogg School of Management graduate with an MBA in nance and real estate.

Strategic Wealth Partners, an independent wealth management rm, is delighted to announce the hiring of Ben Bremen, CPA, CFP®, as Wealth Advisor. With over 11 years of experience, Ben will focus on serving the needs of retirees, professionals, and corporate executives. Ben enjoys helping clients reach their nancial goals, whether they are saving for retirement or building wealth for the future. To learn more about Ben and the SWP team, visit our website: Stratwealth.com.

Northern Trust to cut up to 400 jobs as investors focus on costs

BY STEVE DANIELS

Northern Trust is eliminating 300 to 400 jobs in early 2023. Are more cuts to come?

Chicago’s largest locally headquartered bank is under investor pressure to clamp down on costs after a quarter that bank executives themselves called “unacceptable” in terms of expense growth outpacing revenue growth.

Northern recorded $32 million in fourth-quarter severance costs in preparation for the headcount reduction. Severance in 2021 totaled just $8 million, according to investor disclosures.

In terms of workers, last year featured salary increases and hiring at Northern until the fourth quarter. rough nine months,

Northern had no severance expenses.

ere’s no word on where this year’s cuts will occur.

e reductions are “part of an ongoing e ort to operationalize e ciency and ensure that we have partners in the optimal locations aligned to the most critical work,” spokesman Doug Holt said in an email. “ ree hundred to 400 roles will be impacted in locations globally across all business functions.”

WORKFORCE

Northern employed more than 21,000 globally at the end of 2021, so this reduction totals a little over 1% of its global workforce. At that time, 6,000, or 29%, were employed in the Chicago area.

Chief Financial O cer Jason Tyler provided the number of forthcoming job cuts on North-

ern’s quarterly earnings call with analysts this month. Executives were peppered with questions about spending, with fourth-quarter non-interest expenses totaling 127% of trust fees—the productivity metric Northern highlights most.

“If you go back a number of years, where we were at levels that were like this, it’s been a long time, and that’s why it is considered unacceptable where we are,” CEO Michael O’Grady said on the call.

e goal is for expenses to be at 105% to 110% of fee revenue, he said.

In addition to the job cuts, Northern is reducing what it pays technology contractors. IT expense growth is driving much of Northern’s pro tability issues.

“ ere’s in ation, but, wow, this is the worst quarterly operating leverage that I can recall for you guys,” Wells Fargo analyst Mike Mayo told O’Grady and Tyler on the call.

For 2022, expenses grew 10% while revenues increased just 5%. e question now is whether the steps Northern is taking now are enough. In a Jan. 19 report, Mayo wrote: “Historically, Northern has had periods of outsized expense growth and responded with an expense cutting program. e last program suggested that further expense programs would be unnecessary, but the current pace of growth suggests more radical action may be needed.”

In an interview, Mayo said layo s represent just one area for expense control available to Northern. e bank can reduce hiring

Wealth tax proposal pushed in Springfield

With a plan to revive the graduated income tax facing an uncertain future, a lawmaker is proposing a di erent way to squeeze revenue out of rich people

of outside vendors and put o discretionary technology improvements as well.

Another analyst, Brennan Hawken from UBS, almost begged executives during the conference call for more speci cs on their cost-control plans. In response to Northern’s announcement that it was establishing a new “productivity o ce,” Hawken said, “What are the objectives, right? What are the metrics that (you’re) looking to drive?. . . .Really, expenses have been a bit out of control—just being blunt, especially relative to the peer group and especially relative to the revenue trends. I’m getting hit a lot this morning, (investors) looking for some more details, better understanding, and what speci c metrics you’re using and how we can make sure that you’re hitting your goals when you’re pushing through to make these changes.”

STOCKS

Northern’s stock dropped nearly 9% on the fourth-quarter earnings news. Over the past year, the stock is o more than 17%.

MERGERS & ACQUISITIONS

PKF Mueller Elgin, IL

(847) 888-8600

pkfmueller.com

PKF Mueller, a Chicago area

Certi ed Public Accounting r m, has announced the acquisition of Donlan Goldman & Roth, PC (DG&R), a Des Plaines-based Certi ed Public Accounting r m, effective 1/1/23. DG&R staff will operate under the PKF Mueller brand and continue serving clients from their existing location. “DG&R is a respected CPA r m in the business community, and we are very excited to add them to the PKF Mueller family,” said Jeffrey A. Delheimer, PKF Mueller President.

Archrivals Boston-based State Street and New York-based Bank of New York Mellon have seen their stocks fall 7% and 14%, respectively, in that period.

Economic conditions for Northern and its peers have been choppy and challenging to navigate. Rapidly rising interest rates have boosted what Northern makes on lending, but they’ve hammered both stock and bond values. at puts pressure on fees Northern collects from institutional and individual investors for processing transactions and managing money. e bulk of those fees are based on asset values, which have been declining.

For the year, Northern posted net income of $1.34 billion on $6.8 billion in revenue. Earnings dropped 14% from 2021 while revenue rose 5%, which illustrates the expense problem as well as anything else.

BY GREG HINZ

With plans for a second try at passing a graduated income tax in Springfield facing an uncertain future, an Illinois lawmaker is proposing a different way to squeeze revenue out of rich people—really rich people.

Under a proposal being introduced by Rep. Will Guzzardi, D-Chicago, anyone with a net worth of at least $1 billion would have to pay 4.95% of it off the top to the state each year regardless of whether investment markets are rising or falling and notwithstanding underlying economic conditions.

e tax on wealth—speci cally on unrealized capital gains—is likely to be controversial, even in Democratic-controlled Springeld. But it’s part of a larger move nationally in which legislators in blue states are acting on their own in the absence of progress in Washington on, for instance, taxing carried interest and other lucrative devices used by a small segment of the population.

“ e bill’s prognosis is good,” said Guzzardi, whose measure also will be sponsored in the Senate by Sen. Robert Peters, D-Chicago. “ e pandemic has only deepened the already wide economic disparity in this state. We need to act.”

“But people with assets of $1 billion or more, I’m confident they’ll have the scratch to pay the bill.”

Guzzardi estimated his measure will pull in $200 million to $500 million a year, even after last year’s departure to Florida of the state’s wealthiest resident, Citadel’s Ken Griffin. He said proceeds would be dedicated to three purposes, all on the spending side: child care services, affordable housing and public education.

DETAILS UNKNOWN

Key details on the as-yet-unfiled bill are not yet available, including to what extent taxpayers would be able to offset investment gains with losses, like depreciation. Guzzardi said he expects the Illinois Department of Revenue will write

ILLINOIS IS ONE OF EIGHT STATES IN WHICH DEMOCRATIC LAWMAKERS ARE INTRODUCING LEGISLATION TO IMPOSE A STATE WEALTH TAX.

rules detailing such matters.

‘THEY’LL HAVE THE SCRATCH’ Guzzardi rejected the notion that his wealth tax is in some ways similar to the muchhated property tax, which requires the owner of an asset to pay up each year whether or not they’ve sold their land or building and have the needed cash on hand.

“The property tax puts an enormous burden on a lot of people that have a hard time making ends meet,” said Guzzardi, who represents a portion of the mid-Northwest Side.

Illinois is one of eight states including California and New York in which Democratic lawmakers are introducing legislation to impose a state wealth tax in the absence of federal rules. at absence allows many partnerships, real estate holders and other wealthy individuals—such as former President Donald Trump—to pay little if anything in federal taxes even though they enjoy great wealth.

Earlier, another Illinois lawmaker, Sen. Rob Martwick, D-Chicago, said he soon plans to introduce plans to revive a graduated income tax. Such a constitutional amendment was rejected by voters in 2020, but Martwick said he may tweak the measure to gain more backing.

Could this round of layo s be just an initial slice? Last year was one of the bank’s worst ever for growth in expenses outpacing growth in revenue.

There’s no word on where this year’s job cuts will occur.

ILLINOIS THE OUTLIER: State stands out among right-to-work neighbors. PAGE 18

QUALITY OF THE GIG: Survey reveals conditions of app-based workers. PAGE 19

LABOR ORGANIZING

A WORKERS MOVEMENT

IN PROGRESS

Labor organizing makes inroads in nontraditional areas, and Chicago joins the wave. Will a new class of workers reshape labor’s in uence here? BY BRANDON

Matteo Hintz proudly claims his family’s union pedigree. Like many families in Chicago and Illinois, he says he “was born and raised in a union house.” His grandfather was a railroad switchman in Illinois, directing trains to their nal destination. His father belongs to a union that represents Illinois state park superintendents.

“My dad takes union stu very seriously because my grandpa took it seriously. And now I’m trying to do the same.”

Hintz is doing just that by organizing colleagues at the Field Museum in their second attempt to unionize. Workers at the natural history museum will begin voting in early February, with votes being counted in early March.

DUPRÉ

Hintz, 26, who builds structures that encase some of the Field Museum’s most priceless objects, is part of a push in labor organizing that is being led most visibly by professional and technical workers seeking not just higher wages, job

See UNIONS on Page 16

MISSING WORKERS: What’s lost when labor force participation declines. PAGE 22 SPONSORS

Matteo Hintz and his father, Tom, on the steps of the Field Museum.

LABOR ORGANIZING

UNIONS

Continued from Page 15

security and better working conditions, but also social changes highlighted by the social justice movement. e pandemic spotlighted social and economic divides as well as those in the workplace. Workers more likely to be organizing today are school principals, health care workers, college faculty and graduate students, publishing professionals and cultural workers.

is new class of union members is also younger and politically progressive. Unions, as political observers know, also play a critical role in determining who gets elected, especially in Chicago. In the mayoral race, current Mayor Lori Lightfoot has her trade union allies. Cook County Commissioner Brandon Johnson and U.S. Rep. Jesús “Chuy” García have both picked up endorsements and dollars from top in uential and progressive unions.

“ e pandemic changed the way people thought about their labor, changed what they wanted from work and what the workplace should be like,” says Robert Bruno, a professor and director of the labor studies program at the University of Illinois Urbana-Champaign. “It was really a change in worker consciousness.”

Over the last year, workers at some of the nation’s highest-pro le companies—Starbucks, Amazon, Trader Joe’s, Apple, Microsoft, HarperCollins and Chipotle—have organized.

Fourteen Starbucks stores have held elections through Chicago’s National Labor Relations Board o ce. Ten resulted in union victories. More recently, Starbucks workers at Old Orchard Mall voted 10 to 7 to unionize. Nationally, workers at 278 Starbucks stores have approved a union.

Last year, the Art Institute of Chicago became the city’s rst major cultural institution to see employees organize. Adjunct professors at the School of the Art Institute of Chicago followed with their own election victory. In early January, Northwestern University graduate students voted to unionize, joining their counterparts at campuses across the country and notching one of the largest union wins in Illinois. e vote, 1,644 to 114, was a landslide victory.

And later in the month, Steppenwolf eatre workers voted decisively to be represented by the International Alliance of eatrical Stage Employees.

But as workers in di erent industries unionize and grab headlines, organized labor nationally continues to see historic declines, and it remains unclear whether this moment will bring brief victories for wage earners or is the rst phase of a larger push by workers to bargain collectively for themselves in a tight and shifting labor market.

STIRRING FROM A LONG SLUMBER e labor movement has long ties to Chicago, from the ght over the eight-hour workday and the Haymarket a air in 1886 to the Pullman railroad strike in 1894 and the Memorial Day Massacre during the “little steel” strikes in 1937.

Even as unions saw agging memberships in the last decades, Chicago was still at a higher rate than the national average, says Bob Reiter, president of the Chicago Federation of Labor. “ ere’s always something going on around unionization in Chicago,” he says.

But despite Chicago’s steady union membership, Illinois has seen signi cant declines. Union membership in Illinois fell to 13.1% in 2022 from 20.8% in 1989. Nationally, unions followed a similar trend as the share of the workforce in labor unions dropped to 10.1%.

at’s the lowest on record, according to recent data by the U.S. Bureau of Labor Statistics, despite union members growing by 273,000 last year. e reason for the record low: Organizing couldn’t keep up with the booming job market, which added 5.3 million jobs over that same stretch, outpacing labor gains.

Twenty years ago, manufacturing accounted for 2.8 million union workers nationwide. Since 2000, manufacturing has lost around 1.7 million members, a 61.6% decrease to roughly 1 million members.

While the blue-collar workforce was long the bread-and-butter of industrial union organizing, new elds and industries are on the rise.

In the health care sector, nurses concerned about understa ng in some cases and layo s in others are exerting their collective power. Nurses led a quarter of the major work stoppages last year, according to BLS tracking reported by e Washington Post. In early January, 440 Howard Brown Health workers held a three-day strike at several of the health system’s clinics across

Chicago in response to layo s. Workers in education services, restaurants and the gig economy at companies like Amazon, Starbucks, Microsoft and Trader Joe’s made union moves in recent years. Some see the sustainable-energy sector to be the next frontier for unions. e Illinois Legislature sent a bill to Gov. J.B. Pritzker’s desk in early January that would relax restrictive zoning regulations that have slowed wind and solar energy projects. at could potentially bring thousands of new jobs to the state, making the industry a new target for unions. Union support is at an all-time high. Seventy-one percent of Amer-

icans now approve of labor unions, the highest Gallup has recorded on this measure since 1965, arming organizers with the power of public support.

“ ere’s always a structural advantage for the employer, but right now, workers are nding themselves in a stronger position with more leverage and can now be more selective about where they work,” Bruno says. at strength led in part to the “great resignation” of 2021, when the rate of job quitting in the U.S. reached highs not seen since the start of the BLS Job Openings & Labor Turnover Survey program in December 2000.

“Millions came to realize that their jobs could really kill them during the pandemic and that the employer was probably not going to champion their best long-term interests,” says Bruno.

In 2021, the Illinois General Assembly commissioned the Illinois Future of Work Task Force, which examined challenges and opportunities related to the state’s workforce. e task force, composed of policy experts, legislators and scholars, looked at how the state could best recover from the pandemic and “confront the worsening crisis of poverty.”

Reporting in 2022, the task force

UIC faculty members went on a nearly weeklong strike this month after failing to reach a contract agreement.

JOHN R. BOEHM

Northwestern University graduate students paint messages on a landmark campus site ahead of a vote to form a union.

TODD WINTERS

concluded that it’s not enough to have a job. Rather, it’s job quality that matters. e report’s authors recommended that the state adopt a job quality measurement; extend bene ts to more workers, including independent contractors and other nontraditional workers; and expand equitable access to education and training programs for K-12 and postsecondary students to help close the racial gap in access to high-growth career pathways.

e authors added that as “workers navigate the changed economy, there has been renewed interest in unionizing.”

But employers don’t always embrace union activity. Employees who organize can face anti-union rhetoric, intimidation and even job loss. An NLRB ruling in December, viewed as a victory for organized labor, expanded the fees and penalties the federal agency can collect from employers that illegally re workers for organizing and other labor activism.

“Employees are not made whole until they are fully compensated for nancial harms that they su ered as a result of unlawful conduct,” NLRB Chair Lauren McFerran said in a statement. Previously, employers that red workers for their involvement in labor organizing only had to pay for the employee’s reinstatement and lost wages.

But even after employees win elections and certify their union representatives, employers can drag out contract negotiations for years. e average time it takes to agree on a rst contract is 465 days, oftentimes outlasting employees in high-turnover job sectors.

e University of Illinois Chicago faculty union, after winning an election in 2012, only approved its rst contract in May 2014, after a faculty-led walkout led to hundreds of canceled classes and lasted two days. UIC faculty held a nearly weeklong strike earlier this month after they failed to reach a contract agreement with the school’s administration over compensation and mental health services for students, among other items.

A YOUNGER CROWD

Younger workers are “now looking at the labor movement and saying, ‘Hey, you know what, this is a body that can champion not just my workplace interests, but can help me promote my vision of what I want to be working for within my society,’ ” Bruno says.

It’s exciting to see younger workers organizing this union movement at the museum, says Anna Balla, who works at the collections registrar at the Field Museum. Balla spent 12 years at the museum before management gave her a raise. She asked for the increase only after she couldn’t a ord rent on her old salary.

“Even then, it wasn’t much, and they changed my title, but they make it feel like you should be grateful to be working at the museum and that’s enough,” says Balla, 48. “I don’t want the younger workers experiencing that.”

On college campuses, graduate students at some of the country’s most elite private institutions have achieved union victories. e year started with students at the Massachusetts Institute of Technology winning a union election, followed by counterparts at Yale and Northwestern universities. Next month, graduate students at the University of Chicago will cast their votes on a union, and others are expected to follow.

PERCENTAGE OF ILLINOIS WORKFORCE WITH UNION MEMBERSHIP

Illinois has seen its share of union membership decline to 13.1% in 2022 from 20.8% in 1989.

U.S. MANUFACTURING UNION MEMBERSHIP PLUMMETS

Twenty years ago, the manufacturing industry accounted for 2.8 million union workers nationwide. Since 2000, the sector has lost 1.7 million union members, a 61.6% decrease. Illinois had 67,000 manufacturing union members as of 2021.

HEALTH CARE WORKERS DRIVE UP UNION MEMBERSHIP

While manufacturing has seen a decline in union members, the health care sector has grown its membership since 2000. Today, 1.2 million health care workers belong to unions, outnumbering manufacturing union members nationwide.

UNION REPRESENTATION PETITION FILINGS

The number of petitions being filed with the National Labor Relations Board’s 48 field offices has increased since 2020. In fiscal year 2021, the NLRB saw the highest number of union representation petitions filed since fiscal year 2016.

Robert Bruno, director of the labor studies program at the University of Illinois Urbana-Champaign

For Hintz, the Field Museum worker, the summer 2020 social justice protests across the country “lit a re under us” and inspired his rst organizing.

“We felt the need to do something bigger after the protests,” he says. “We’ve got to make sure that everyone in the museum is being treated equally, and we have to make sure we are getting compensated adequately.”

What makes today’s labor movement di erent are its ties to the ght for social justice and equity. “ is isn’t just your mom and dad’s meat and potatoes kind of union,” Bruno says. “ ere’s a linkage of the political and social values of younger workers” that the professor believes has created a new “worker consciousness.”

“Look at Amazon, look at all these di erent campaigns that are also happening right now,” says Sara Bowden, a doctoral student in music theory and cognition and cochair of Northwestern University Graduate Workers, or NUGW. “ is is a starting point for educating an entire new generation of people, like folks at private universities, about what work can mean, and I think that’s going to signi cantly shape the way that we see labor in the future.”

NUGW says its demands include higher base stipends, paid sick days, coverage of visa renewal costs for international graduate workers and more comprehensive health insurance. e union says it will seek at least $40,000 per student in a new stipend that would put them more in line with other top private schools like Columbia, Princeton and Harvard. NU’s current minimum stipend is $35,000.

“We’re seeing a lot of those old-fashioned unions stepping into higher education because they understand that there’s something there and there’s huge potential for organizing,” says Gali Racabi, an assistant professor who teaches labor and employment law at Cornell University. Gali believes that this new alignment of U.S. elites at Yale, Harvard and Northwestern, who are all unionized, represents

UNIONIZING MOVES INTO NEW INDUSTRIES

White-collar and gig workers in traditionally nonunion industries such as academia, technology, personal transport and culture are changing the face of a growing labor movement. An Illinois Economic Policy Institute survey shows that more than 90% of ride-share drivers support unionization.

UNION SUPPORT STRONG IN COOK COUNTY AND THE NATION

As union membership rebounds in some industries, so does public support for organized labor. A recent Harris Poll survey shows the majority of Cook County residents support unions. Those results are similar to a recent nationwide Gallup Poll. And that public support could translate into more political support for unions, meaning more public policy wins for organized labor, as was demonstrated in Illinois last November.

“THERE’S A LINKAGE OF THE POLITICAL AND SOCIAL VALUES OF YOUNGER WORKERS.”

Illinois bucks a trend among neighboring states

but it does have higher unemployment and the highest minimum wage

BY CORLI JAY

Illinois voters made clear in November that they stand on the side of workers. By passing the Workers’ Rights Amendment, Illinois became the fourth state in the country to protect collective bargaining in its constitution.

e state cemented its place as a progressive landscape for workers, making it an outlier among its Upper Midwestern neighbors—Indiana, Michigan and Wisconsin—where right-towork support remains strong. In those states and 24 others, workers can opt out of paying dues in union-represented jobs but still receive bene ts.

Furthermore, Indiana, Michigan and Wisconsin have repealed laws that provided a wage oor for contractors working on state-funded projects. “ ese states have experienced slower construction employment, decreased wage growth, lower workforce productivity growth, increased construction jobsite fatalities and less market share for in-state contractors, compared to states that maintained their prevailing wage laws,” according to Wisconsin Watch, a nonpartisan, nonpro t newsroom.

A recent statewide poll in Michigan found that 58% of voters support the state’s right-to-work law, though unions are lobbying for its repeal, hoping to be successful now that Democrats control the state House.

A study by the Mackinac Center for Public Policy, a think tank based in Midland, Mich., states “right-to-work laws have shown themselves to be useful economic development tools. Research by academics and other scholars generally show positive economic

UNIONS

Continued from Page 15

an “almost unfathomable alliance” that makes for a potentially new kind of partnership and coalition in U.S. politics.

CONSTITUTIONAL PROTECTION

When Illinois Constitutional Amendment 1, or the Workers’ Rights Amendment, passed, Pritzker hailed it as a major win for workers’ rights in Illinois’ “rich union history.”

e amendment added language to the state’s constitution that protects the rights of workers to unionize, including the ability to “negotiate wages, hours, and working conditions, and to protect their economic welfare and safety at work.”

“It is the strongest constitutional protection of any state in the na-

gains from adoption of right-towork laws.”

Some policy experts like Bryce Hill, director of scal and economic research at the Illinois Policy Institute, believe that pro-labor and right-to-work states don’t have to be “diametrically opposed.” He adds, “Ideally, you want to be a state that’s friendly to workers, and also entices businesses to come there.”

Although Illinois has one of the highest unemployment rates in the country combined with slow job growth, its manufacturing industry, which has had high unionization historically, experienced the most growth within the state.

e sector grew 3.2% from December 2021 to December 2022, but is still down 5,100 jobs compared to pre-COVID numbers.

Michigan had the second-highest overall 12-month growth, with a 2.5% increase in manufacturing. Indiana had a 1.1% increase, and Wisconsin’s sector grew 0.1%.

Indiana is the only state to exceed pre-pandemic job levels in manufacturing and for jobs overall. e state gained 3,400 manufacturing jobs between January 2020 and December 2022, according to Bureau of Labor Statistics data.

Michigan experienced steady growth in its manufacturing sector from 2012 until the start of the health crisis in February 2020. e state in 2021 approved a $1.11 billion fund to attract new economic development that would bolster jobs in manufacturing. Similarly, Gov. J.B. Pritzker recently said he would pursue a fund to secure more electric vehicle plants for Illinois to level the playing eld.

Illinois may be a more worker-friendly environment, and polls have shown an uptick in support

tion,” says Frank Manzo, executive director of the Illinois Economic Policy Institute.

Surrounded by right-to-work states, which allow employees in unionized workplaces to opt out of joining a union, Illinois has cemented its place as a friend to organized labor in the Midwest, giving fuel to the belief that Illinois is hostile to business.

In the past year, high-pro le businesses—Citadel, Boeing, Caterpillar and Tyson Foods—have left the state. While these companies didn’t cite labor as an issue—a lot has been made of Chicago’s crime problems—their moves are a hit on the state’s reputation, especially as these companies head to Southern states with friendlier business climates.

is isn’t only a big business problem, but small businesses, already hurt by in ation, will also suffer, says Todd Maisch, president of

Illinois’ total nonfarm employment grew 2.7% over the 12-month period starting in December 2021 to a total of 6.15 million. Illinois experienced the most growth in manufacturing jobs over a 12-month period. Indiana is the only state to exceed manufacturing jobs levels compared to January 2020. Total jobs in Indiana are also up.

business climate, its tax burden, its nance and, in particular, its pension obligations that are unfunded, (which) are serious burdens when it attempts to attract business,” says Patrick Anderson, CEO and principal of Anderson Economic Group, a consulting rm with o ces in Chicago and East Lansing, Mich. “I think all those are more important to businesses than the lack of a right-towork law, but right-to-work is still an important signal to many employers, particularly in the Midwest.”

According to the 2023 State Business Tax Climate Index by the policy nonpro t Tax Foundation, Indiana ranks No. 2 among states with the lowest property taxes, Wisconsin ranks 15th, Michigan ranks 25th and Illinois comes in 44th.

for unions, but unionization activity nationwide is down as a result of more states adopting right-towork laws, according to a report by the Illinois Economic Policy Institute and the University of Illinois School of Labor & Employment Relations.

“In the last decade, ve states passed legislation allowing workers to ‘free ride’ and receive all the services, bene ts and representation from unions without paying either dues or fair-share fees,” the report states.

e national trend of falling unionization as a result of rightto-work laws would have been upended by the Protecting the Right to Organize Act, or PRO Act, an amendment to the National Labor Relations Act of 1935 that allows all workers to unionize. e PRO Act passed the U.S. House of Representatives in March 2021 with a bipartisan vote but stalled in the Senate e PRO Act would “strengthen

the Illinois Chamber of Commerce.

“When the union reps come knocking on small businesses’ doors, (businesses are) going to say, ‘How much of my thin margin is this union going to take from me and is it time for me to shut the doors?’ ” e terms are stark for Maisch: Unionize, and small businesses will close.

Maisch doesn’t see the Workers’ Rights Amendment having an immediate e ect. e amendment’s real impact will come ve years down the line, he says, after prounion lawyers have “expanded, expanded, expanded and expanded all interpretations and uses of the amendment.”

Manzo doesn’t hold the same outlook. He points out that in this historically tight labor market, companies are in need of employees.

e new union protections could help retain workers and prevent costly turnover, while also attract-

the ability to organize, to negotiate a contract and to hold an employer liable for violating the law,” says Robert Bruno, professor and director of the labor studies program at University of Illinois Chicago.

Unionization promotes higher wages, and the PRO Act would increase salaries nationwide as well as decrease the wage gap, Bruno says.

Glenn Spencer, senior vice president of the Employment Policy Division at the U.S. Chamber of Commerce, says the potential economic impacts of the act are unknown. “States with right-towork laws have higher rates of job creation, lower unemployment rates; there’s a range of economic indicators that would suggest that right to work is a useful economic tool,” Spencer says.

Even with the impact of labor laws on business, some say taxes have more of an impact on business than right-to-work laws.

“Illinois has a problem with its

ing higher-skilled workers, now that Illinois has some of the strongest labor protections in the country.

“Just as businesses compete for customers, they must also compete for workers,” Manzo says. “And winning in the market for workers is all about job quality,” which he believes the amendment will boost.

While conclusions on the amendment’s scal consequences aren’t clear, what experts do believe is that by strengthening worker protections, it will embolden a union-curious workforce. Fiscal year 2022 saw 2,510 union representation petitions led with NLRB’s 48 eld o ces—a 53% increase from the 1,638 petitions led in scal year 2021. at’s the highest number since 2016 and is expected to grow in 2023.

Pro-union states such as Illinois have to fear business leaving for “more hospitable climates” due to their minimum wage, says Allen Sanderson, a professor of economics at the University of Chicago.

Illinois also has the highest minimum wage at $13, set to rise to $15 in 2025. Indiana’s and Wisconsin’s minimum wage is the same as the federal $7.25 minimum wage. Michigan increased its minimum wage to $10.10 on Jan. 1; the law requires the wage to increase every year provided the annual unemployment level is below 8.5%.

Sanderson believes campaigns such as the Fight for $15 are damaging to Illinois’ economy. “Just arguing that the costs outweigh the bene ts, mainly the cost being higher unemployment because employers don’t want to pay that, they can move to a state that doesn’t have that,” Sanderson says. “But the other thing is (these pro-labor states) lay people o or reduce the number of hours or automate faster.”

Workers “feel a little stronger, a little more emboldened,” Bruno says. “I would expect organizing to increase, and workers who haven’t been approached before about organizing will start to sign union cards.”

Frank Manzo, executive director of the Illinois Economic Policy Institute

But despite decades of declining union memberships nationwide—a sobering trend for organizers who were buoyed by last year’s high-pro le labor wins—labor appears to have plenty of friends in Chicago. For Reiter of the Chicago Federation of Labor, labor will continue to grow as organizers “drill deeper into these niche workplaces.”

It doesn’t have a right-to-work law,

“WINNING IN THE MARKET FOR WORKERS IS ALL ABOUT JOB QUALITY.”

Survey looks at gig workers, in a class by themselves

BY MARGARET LITTMAN

e gig economy disrupted a lot of norms. e use of apps changed the way we get a ride to the airport, how we buy groceries and nd a dog sitter. With that change, too, is a disruption in how we think about employment, taxes and work.

At issue is the classi cation of people who take on app-based work.

A new survey conducted in conjunction with the Project for Middle Class Renewal at the University of Illinois Urbana-Champaign and the Illinois Economic Policy Institute found that drivers are divided about whether or not they should be classi ed as employees, but not about their rights as workers. ( e Illinois Economic Policy Institute, or IEPI, is di erent from EPI, the research arm of the AFL-CIO, which has published other data on the topic.) e IEPI’s “Quality of the Gig” study, the results of which are being released for the rst time here in Crain’s Chicago Business, found that the conditions under which many drivers work are not optimum.

Among the ndings: About 40% of drivers make less than Chicago’s minimum wage; 75% report avoiding taking bathroom breaks while working; and 59% have experienced verbal violence or harassment while driving, while shouldering the expense of health insurance and vehicle purchase and maintenance. Slightly more than half of the 502 drivers surveyed (54%) responded that they thought drivers should be employees of the rms for which they work, while 90.8% thought they should have the right to unionize.

e results of this research di er from other studies, including those from the IRS and Pew Research Center, which underscores the

Support for the workers, but not for their pensions

Chicagoans are proud to stand by the working man and woman. ey support collective bargaining, labor unions and pension funds. at backing is accompanied by a healthy dose of skepticism, though, especially when their taxpayer dollars are on the line.

complicated nature of the issue. At odds are desires to properly classify those who are working as employees while balancing concerns about misclassifying independent contractors, who largely don’t face the same challenges as the appbased workers in the IEPI research. Independent contractors, including long-haul truckers, musicians, dance instructors, hairdressers and shopping-mall Santas, report making good incomes, funding their own retirement savings, paying their own self-employment taxes, buying their own health insurance policies and enjoying the freedom that owning a business can provide.

California’s Assembly Bill 5, known as AB5, went into e ect Jan. 1, 2020, in an attempt to address these issues and has had a long list of problems, carve-outs and unintended consequences. Proposition 22, passed in November 2020, aimed to rectify those but then faced its own legal challenge. While the IRS currently has a test that de nes independent contractors, California is using a 1930s-era test called the ABC Test, which can misclassify independent contractors as employees.

“I was horri ed when I heard about AB5,” says Jennifer Murto , a freelance translator, educational publisher and musician who lives in the western suburbs. “ e government has no right to take away the way I want to work.”

Study co-authors Robert Bruno, a professor at University of Illinois Chicago and director of the Project for Middle Class Renewal, and Frank Manzo, executive director of IEPI, believe exibility concerns are less relevant in a post-pandemic world, where asynchronous and remote work is more common. But independent contractors who are small-business owners and

sole proprietors control more than their workplaces, making decisions about the kind of assignments they accept and how they complete them.

State Rep. Marcus Evans, DChicago, along with others in the Illinois General Assembly, is working on a bill that could be introduced as early as February that would address these issues.

“I’m glad California got out ahead of us and did it so we can now avoid some of their mistakes,” Evans says. He was a co-chair of the Illinois Future of Work Task Force, which produced a report last year highlighting some of the concerns of small-business owners and gig workers while making some recommendations. One possibility is to introduce a third class of worker, someone who is neither a traditional employee nor a traditional small-business owner.

On the federal level, the Protecting the Right to Organize Act, or PRO Act, passed the House but failed in the Senate, in part because some lawmakers wanted to see language that would protect self-employed business owners.

e U.S. Department of Labor is also looking at changes to the way independent contractors are classi ed. e U.S. Chamber of Commerce, the National Retail Federation and other organizations have opposed such changes.

Bruno and Manzo are less concerned with the legal classi cations than they are with the conditions such workers experience.

e recommendations of their new report include requiring sexual harassment training for drivers, paying drivers for all of their time worked—not just their “engaged” time—and removing the rating system that discourages drivers from canceling a ride even when they feel unsafe.

In last November’s election, Illinoisans voted to add the “Workers’ Rights Amendment” to the state constitution. It expanded employee protections available under the National Labor Relations Act and state labor laws. Already, Illinois union workers had a right to collectively bargain in disagreements involving wages, working hours and other aspects of employment.

e amendment extended that right to negotiating “to protect their economic welfare and safety at work.” It further allowed employees to negotiate “through representatives of their own choosing,” rather than solely relying on union representation.

More than 58% of Illinois voters chose to ratify this amendment, re ecting their solidarity with workers. Chicago residents share that feeling. According to research conducted by e Harris Poll, more than 3 in 5 (62%) Cook County residents agree that collective bargaining is the only way for workers to be guaranteed fair treatment. Most Cook County residents (60%) support organized labor groups. Of those who are aware of Chicago’s local labor and trade unions, 82% believe they effectively advocate for their members (e.g., negotiating contracts, ensuring workplace safety).

But while most Chicagoans voted to extend workers’ rights, some city residents fear tipping the balance of power too far in the workers’ direction. A plurality of Cook County residents (46%), believe union representation is only necessary within certain industries, for example, while one-third (32%) of Cook County residents agree that organized labor groups give workers too much power. Even 22% of those who support labor unions would like to limit their reach.

Organized labor has been hotly debated for more than 100 years, but pensions are perhaps the most controversial aspect of Chicago workers’ rights and bene ts. ey remain at the forefront of Chicagoans’ minds when discussing worker protections. In general, Chicagoans support employer-funded retirement accounts.

Well over half (64%) of Cook County residents support pensions, and 74% think they are a good way to reward employees—but that support wavers when taxpayers are forced to reckon with the nancial burden of funding these accounts. Nearly half (48%) of Cook County residents agree that funding government employee pensions is a waste of taxpayer dollars— and that includes 44% of self-described union supporters and 42% of pension supporters—and more than half (59%) agree that the city of Chicago spends too much money on pension accounts. Again, similar numbers of union supporters (58%) and pension supporters (56%) agree on that point.

Chicagoans’ tight fists make sense when we look at the numbers behind the city’s pension system. Chicago taxpayers support eight pensions with a total debt burden of $47 billion. In 2019, Chicago paid more than $1.31 billion to its pension obligations. In 2023, the city will pay more than $2.34 billion—well over 10% of the city’s annual budget. Each year, Chicago pays $2.1 billion just to cover the interest on pension debt. Many Chicagoans worry that the city’s pension system is unsustainable and will harm the city’s long-term financial stability and growth. This financial reality dampens some residents’ enthusiasm for this indefinite retirement-income source.

While eliminating pensions seems out of the question, Chicagoans want more oversight on how the money is spent. Seven in 10 (68%) Cook County residents—and 70% of pension supporters themselves— agree that pensions funded using taxpayer dollars should be subject to additional regulations. Establishing a civilian oversight committee to scrutinize how these pensions are structured and funded could help relieve some of voters’ unease.

Clearly, tension remains among Chicago residents regarding workers’ protections. While the city’s ideals remain in solidarity with the workers, some worry about pushing the power (and financial) balance too far in workers’ favor.

It is incumbent upon city leaders to find the right balance between Chicagoans’ pro-labor predisposition and their pocketbook priorities.

Will Johnson is CEO of e Harris Poll, a global public opinion polling, market research and strategy rm.

BLOOMBERG

UNINTENDED CONSEQUENCES

Prevailing-wage law rollbacks failed to deliver

Agood rule of thumb in policymaking is “first, do no harm.” When elected leaders fall short, the genius of our system is that we have the opportunity to course correct, either at the ballot box or by demanding legislative change.

In the case of states that repealed laws governing who can win bids on public infrastructure projects, the data overwhelmingly suggests that such a correction is warranted.

Between 2015 and 2018, six U.S. states—Indiana, Wisconsin, Michigan, Kentucky, West Virginia and Arkansas—each repealed their state prevailing-wage laws that established minimum labor standards on taxpayer-funded projects like roads, bridges, schools and water infrastructure. All did so promising to save money, including by “building ve schools for the price of three.”

e problem is: it never happened. As one Indiana Republican lawmaker put it, “we got rid of prevailing wage and, so far, it hasn’t saved us a penny.” His conclusions were ultimately con rmed by the Indiana Department of Labor.

In Wisconsin, a study that examined highway projects pre- and post-repeal showed that the state not only failed to save money, but that it might have increased cost overruns. In West Virginia, the School Building Authority similarly concluded that prevailing-wage repeal was not saving taxpayers

any money.  e list goes on.  In general, most politicians have little experience in the construction industry and don’t know the myriad of interconnected factors that contribute to the cost of a project. e fact is that labor only accounts for 23% of total costs. e rest is materials, fuels, equipment, management overhead, land costs, permitting, retained earnings and other factors.

at said, in public construction, the lowest bid wins. e purpose of a prevailing-wage law is to protect local standards of craftsmanship on often dangerous jobs. Without these standards, contractors can lower their bids by replacing skilled labor with unqualied workers who earn sub-market wages or by failing to invest in the kind of workforce training that is necessary to ensure that the infrastructure projects we all rely on are completed safely and correctly.

at’s why researchers at the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois Urbana-Champaign recently compared construction labor market outcomes in repeal states against the states that maintained their prevailing-wage laws.

e results are not pretty.

Compared to states that maintained their prevailing-wage laws, construction wage growth lagged by 4% to 13% in repeal states. Construction employment growth and workforce productivity were slower as

well. On-the-job fatalities increased by 14%. Repeal created unnecessary hardships for blue-collar workers struggling to keep up with rising costs.

Repeal also imposed new burdens on taxpayers. Local businesses won fewer projects, with more than $1 billion in taxpayer dollars being exported to out-of-state contractors annually. And, instead of delivering any project savings, repeal states saw the number of construction workers relying on food stamps and other government assistance programs grow as job quality eroded.

e bottom line is that market standards and job quality matter. Especially in construction, where competence can be a mat-

Cooperation is the only way forward

The Illinois Chamber of Commerce believes that business and labor can work together. Here are three areas where they can in Illinois.

Rechart our energy future

e Clean Energy Jobs Act, or CEJA, is a disaster for the state of Illinois. While labor appropriately fought to support union jobs at nuclear power plants that are subsidized under CEJA, they also signed up for an arbitrary, radical environmental agenda that is already killing other union jobs. It is increasing the cost of energy for employers and consumers alike.

CEJA will force the closure of vital energy-producing facilities that provide jobs and low-cost energy for Illinois, all on the false altar of a new “green economy.” e Illinois Chamber fully supports renewable sources of energy. It is vital. But all one has to do is

look at the experience in Europe to know that a hasty, headlong rush to renewables before our infrastructure and economy are ready for them can lead to very bad outcomes for our citizens.

Embrace renewable energy, but do so without abandoning safe, reliable sources that provide the bulk of our energy now.

Labor and business can work together to reopen CEJA and make it a much better law.

Start planning our transportation strategy now

Business and labor both like to build productive assets for our economy. Unfortunately, the state of Illinois has a history of waiting until the last minute to decide what our critical infrastructure needs are and how to pay for them.

e harsh reality is that our typical answer—an increase in the gas tax—will not

meet our future needs. Increasing fuel eciency and a move to electric vehicles will leave our roads, bridges and transit to the ravages of perpetual underfunding. Illinois leads the nation in the vitality of our transportation system. We must have a better way.

Tolling our interstates, allowing public private options and deciding how we fund our waterways and airports are absolute musts. ey may not be instantly popular, but we cannot wait for these complicated issues to be addressed years from now. ese issues must be addressed now.

Develop commonsense compromises on employment laws

e business community knows that our workforce has changing demands. COVID has forced everyone to re-examine the world of work. Our employees have di erent demands than they did three years ago. But employers still need skilled, committed workers that, in most instances, show up to work and collaborate with co-workers and clients.

ter of life and death and a lack of job quality only makes it harder to attract skilled workers to in-demand and physically challenging occupations.

With trillions of dollars owing into infrastructure improvements and the construction industry nationally warning of acute skilled labor shortages, an understanding of the value of prevailing-wage laws is arguably more important now than ever. So, too, is understanding the costs and consequences of repeal—which has undermined labor market competitiveness during a historically tight labor market.

For all these reasons, Illinois, Minnesota and Ohio have retained their prevailing-

So, what are we to do? Labor has supermajorities at the Statehouse, but they must understand that they do not have the ability to force businesses to invest in our economy. If businesses do not see Illinois as a good place to do business, they simply won’t come here. at is bad for the Illinois Chamber of Commerce and for organized labor. You have a willing partner. Just pick up the phone.

Frank Manzo is executive director of the nonpartisan Illinois Economic Policy Institute

COMMON GROUND

Todd Maisch is president and CEO of the Illinois Chamber of Commerce.

wage laws. Colorado brought back prevailing wage in 2022 after 37 years of repeal. And Michigan is now considering restoring its prevailing-wage law.

In the other recent repeal states, where politicians e ectively voted to cut wages for construction workers and to reduce the market share of local construction businesses in exchange for empty promises of cost savings that never materialized, no such action appears immediately forthcoming.

at’s like leaving a self-in icted wound on the economy untreated.  e skilled craft professionals, construction businesses and taxpayers in these states deserve better.

TURNING POINT

MANAGEMENT

How leaders can respond when employees decide to unionize

Gone are the days when labor unions were a dying breed sequestered to blue-collar industries such as construction and rail transportation. Since the pandemic started, the number of unions forming has skyrocketed, with a 53% jump in union filing petitions in fiscal year 2022 compared to the previous year, according to the National Labor Relations Board. And it’s not just the trades where workers are banding together to demand better working conditions and pay—they’re doing so in previously nonunionized industries like nonprofit and hospitality.

While several factors are at play in this union resuscitation, the pandemic is a big one. It changed the way many people view work’s role in their lives. Now, workers across the country are turning to unionizing when they feel unheard and disregarded by their employers, and they’re succeeding. Organizers won 77% of union elections in the rst half of 2022, the most in almost two decades.

What’s more: Americans support it. According to a 2022 Gallup poll, 71% of Americans are pro-union—-the highest percentage since 1965.

A central focus of my work as a consultant at Spectacular at Work is helping companies’ management teams become great leaders. In 2023, that means helping executives navigate several new realities and lead a workforce that is increasingly unionized. It is essential that business leaders have a plan for how to work with their employees in this new work environment.

If you’re a business leader, here’s what to keep in mind about leading your workforce

when you have both represented and nonrepresented employees.

Communicate directly

Communication problems are the root cause of many relationships unraveling. Better communication between employers and employees helps build a more positive workplace for everyone and that means not di erentiating between how you communicate with employees who are unionized and those who are not.

One of my clients, whose workforce has a signi cant union population, told me that opening communication lines helped her company’s relationship with both its unionized and nonunionized workers. Previously, the management team went through union leaders to communicate with represented employees, letting the union speak with these employees instead of communicating with them directly.

Now, they use events like town hall meetings to ensure everyone’s voice is heard.

Think empathetically

As a business psychologist, I know that empathy is crucial in creating positive relationships with employees. Empathic leaders know that the success and well-being of those who work for them is critical to business success.

By joining a union, represented employees have made it clear that they want protection that ensures certain treatment by their employer. But what’s legally required shouldn’t be where you draw the line. Consider what needs all your employees have, regardless of representation. And in nego-

tiations with unions, empathize with why your employees might be asking for certain bene ts—and think about whether these should be extended to non-union employees, too.

One of the most common reasons individuals quit jobs now is a desire for more exibility. Some leaders are nding success by listening closely to the needs of their employees and nding creative ways to o er hybrid or remote work options.

Develop a partnership

When leadership teams and employees are working together e ectively, it should resemble a partnership, not a dictatorship. is means understanding that work is only one important aspect of a person’s life, and employees are no longer willing to sacri ce anything and everything for a job. Leaders need to adjust their expectations of the relationship they have with employees.

is can be a more challenging dynamic to achieve with unionized employees because often, the relationship between a company and a union can become fraught and adversarial. In reality, you and all of your employees—unionized or not—should be united in the goal of helping the company succeed. If you enter into all employee interactions with a partnership mindset, not a transactional mindset, you will create a more collaborative environment.

e pandemic led to a wave of unionization across industries that shows no signs of slowing, and business leaders can’t ignore this trend. To ensure that your company isn’t one that makes headlines with its fraught relationships with unionizing employees, understand that unions are here to stay—and the way you lead with them can set your organization up for success.

There is a new sentiment spreading among the American workforce. The pandemic changed the way we live and the very nature of our day-to-day relationships. As millions of Americans sat isolated at home and millions more realized their value as “essential workers,” so many of them evaluated their work-life relationship and decided they wanted more and deserved better. While the dominant narrative emerged about the “great resignation,” another movement was brewing—most likely at a coffee shop near you—about workers who liked their job, wanted more and deserved better. Those workers would decide to form a union.

e labor movement welcomed 273,000 new union members in 2022, in part due to organizing drives at Starbucks, Amazon, Apple and other mammoth corporations. What do all of those 273,000 workers have in common? e desire to take a stand and demand

more from their employer. is demand is nothing new. Let’s set aside the complicated framework that has evolved over the course of the last two centuries to de ne the employeremployee relationship: Everyone is a worker. And that reality drives the empathy that surfaces when we are all confronted with struggles in the workplace. From coffeehouses to construction sites, we all work for the same fundamental reason: to provide food, shelter, and opportunities for ourselves and our families.

ere was a time when the labor laws in this country set the standard for the world and American workers enjoyed the best quality of life.

But that time slipped away as the corporate world increasingly obsessed over productivity and pro ts, while forgetting the human cost of their pursuits. ey limited the de nition

of an employee in labor statutes and created industries to sit outside of those de nitions, all to increase pro ts by paying workers lower wages and providing fewer bene ts. While many point to “ride share” as a glaring example, the taxi industry took us down that road decades earlier by misclassifying workers and shifting the burden of “ownership” to drivers in order to pay them less.

But today, workers at all levels of the economy see through that ction. ey understand there is a worker and a boss, and they hold a strong conviction that the worker deserves to be treated better.

Many see the pandemic as the prompt for the current shift in the workplace, but that aggravation has been building for quite a while. Decades of soaring executive pay and stagnant workers’ wages have fueled the growing dissatisfaction and led 70% of hourly workers to say they would join a union if given the opportunity, according to a 2022 Gallup poll. Not only do Americans want more for themselves, they are willing to do something about it.

Workers’ rights and economic justice are becoming kitchen table issues in America once again. Solidarity is building among all workers. Worker empathy across the economy drove the ability to achieve those wins for many vulnerable workers. And while those wins are important and signi cant, those who control the economy from the top fought to limit their applicability. As long as there is a strong force trying to keep wages low and cycles of poverty churning, there will be a force led by workers to counter and ght back.

Hopefully those at the top of the economy have learned a lesson through the “great resignation” and growing union movement in America. It is not hard to gure out what workers across the economy want: paid leave, predictive scheduling, just compensation. ey want a quality of life we all should enjoy as the most developed country on Earth. And the way to get that is by standing up for themselves and demanding fairness in the workplace. e pie is big enough for us all to have a generous slice.

John Philbin is the founder and a partner at Spectacular at Work, a management consulting rm.

Bob Reiter is president of the Chicago Federation of Labor.

273,000 workers took a stand and demanded more

What’s causing managers, CEOs sleepless nights

Over the last two decades, the Midwest recovered from a dramatic downfall in manufacturing. It turned over a new leaf by diversifying its economy, supporting entrepreneurship, creating a culture of shared workspaces, attracting new investments, and opening gluten-free, vegan, and eco-friendly contemporary casual restaurants and cafes to keep their millennials and Gen Zers after graduation.

Behind new bakeries, contemporary tness centers and Tesla stores, there is an army of managers and CEOs who are kept up at night by one of the most important questions for current businesses: where to nd workers.

Population trends and changes in the country’s demographics have been blamed for the decline of the current labor force, including those who are working or actively seeking jobs. e number of people outside of the labor force is at an all-time high and growing at an increasing rate. ose outside of the labor force include retired, ill and disabled, those who are in school, and those who are not actively looking for a job, even a part-time one.

CAUSE AND EFFECTS

In Illinois, the percentage of those who are in the labor force dropped from its ve-decadelong peak at 70% in 2000 to 64.3% in December 2022; in Michigan, from 68.8% to 59.9%. Indiana entered its fall in 1995 with 70.9%, coming down to 63.2% at the end of 2022.

is profound fall started with the retirement of baby boomers and was only sped up by the Great Recession, giving it a nal accord in 2020-21 when 2.6 million more than predicted retirees exited the U.S. workforce prompted by the pandemic. ese two waves of retirement happened in quick succession and interrupted the traditional trend of skill-passing where new hires worked alongside experienced workers. e demand for skills grew, favoring higher wages paid to those who have more than just a high school diploma. Surprisingly, the participation in the labor force of men ages 30 to 60 decreased over the decades, while women in the same age range were increasingly entering the labor market up to the pandemic year.

Compared to 1970, in Michigan and Illinois, the labor force participation for prime-

age men dropped by 11.1% for those bringing home a check from an employer and by 8.4% among those self-employed.

In these two states, among prime-age men, the biggest drop happened for those having less than a high school education— from 91.5% to 64.8%; however, this group is relatively small. e most promising workforce pipeline is a group of prime-age men with high school diplomas and some college. In the same two states together, this group’s participation in the labor force dropped by 15% among those with a high school education and by more than 8% among those who have some college. ese two groups constitute more than one-third of prime-age men and can help ll current job vacancies. Hopefully, a part of this group

is in school and aiming to enter the job market after graduation. Unfortunately, some research suggests that many in this group do “not appear to be engaged in constructive activities” and are “watching more television and playing more video games.”

Many men of the prime-age group were growing up during the manufacturing collapse in the Midwest, and quite a few of them were raised in pockets of poverty.

In 2016, the nonemployment rate for men ages 25-54 was over 35% in Flint, Mich., but 5% in Alexandria, Va. Encouraging them to work through employment subsidies, investing in education and other smart placebased policies could be the answer to the sleepless nights of business managers and to the promise of growing back the Midwest.

Adoption of Amendment 1 is no victory for workers

With its rich history and diverse cultural and natural attractions, Illinois can be a great place to live if you already have a well-established career. But if you are seeking a good-paying job or hoping to get a better job soon, in your current place of employment or elsewhere, Illinois is and has long been one of the worst places to be in America. at isn’t a matter of opinion. It’s what the data show.

According to the U.S. Labor Department’s Bureau of Labor Statistics, from 2011 to 2021 (the last year for which annual totals are available at the state level), the number of people employed in Illinois grew by just 0.17%.

By comparison, the overall employment gain for the U.S., as measured by the BLS national household survey, was roughly 9.1%.

at’s more than 50 times greater than Illinois’ employment growth in the same period. Forty-four of the 49 other states, including every other Midwestern state, enjoyed superior employment growth relative to Illinois over the past decade.

Illinois’ job market looks even worse matched up against the 22 states that had right-to-work laws on the books, prohibiting

the termination of employees for mere refusal to join or bankroll a union they don’t want, over the entire period from 2011 to 2021. eir aggregate employment growth was 13.2%, more than double the average for the 23 states that still lack right-to-work protections today. (Five states, including Indiana, Michigan and Wisconsin in the Midwest, adopted and implemented right-to-work statutes between 2012 and 2017.)

A 2018 scholarly analysis by Je rey Eisenach, an economist currently a liated with NERA Economic Consulting and the American Enterprise Institute, concluded that the correlation between right-to-work status and faster job and income growth manifests in BLS household survey data as well as an array of other data is quite unlikely to be a coincidence. ere is evidence, wrote Eisenach, that right-to-work laws have “a direct, positive e ect on employment, output, and personal income.”

e experience of Midwestern states that until a few years ago permitted forced union dues and fees, as Illinois still does today, but later passed right-to-work laws, bears out his point.

From 2001 to 2011, for example, employ-

ment in forced-unionism Indiana fell by 3.5%, even as nationwide employment rose by 2.1%. In other words, employment growth in Indiana lagged the national average by 5.6 percentage points.

In 2012, Indiana citizens nally overcame entrenched big labor opposition and successfully prodded legislators to pass, and then-Gov. Mitch Daniels to sign, legislation making Indiana America’s 23rd right-towork state. From 2012 to 2021, the number of employed Hoosiers soared by 10%, while nationwide employment grew by just 7.1%. Over the rst nine years of right to work in Indiana, the state’s employment growth exceeded the national average by 2.9 percentage points.

ough they understandably never speak about it plainly, Illinois and national union o cials are surely aware of the impressive track record right-to-work states have chalked up in promoting job and income growth.

at’s why they decided, despite the fact that there was no chance that an Illinois right-to-work law would be legislatively approved at any time in the immediate future, to push for passage last year of a constitutional amendment barring Prairie State lawmakers from ever protecting the freedom of employees to hold a job without

paying tribute to big labor.

Without an anti-right-to-work constitutional amendment in place, union bosses feared that it would become more and more di cult over time for their allies in the Illinois Legislature to defend maintaining the labor-policy status quo.

In the end, with the enthusiastic help of Gov. J.B. Pritzker and a 5-to-1 spending advantage, the big labor backers of Illinois Constitutional Amendment 1, a measure constitutionally shielding forced union dues as a job condition and protecting and expanding union bosses’ monopoly privileges in a host of other ways, secured the votes they needed to win.

But no sensible person should regard the adoption of Amendment 1 as a victory for workers. Instead, by locking in a system that already foisted on Illinois a net loss of nearly 300,000 residents in their peak-earning years from 2011 to 2021, Amendment 1 can be expected to lead to even greater out-migration in the future.

ILLINOIS LOOKS EVEN WORSE MATCHED AGAINST THE 22 STATES THAT HAD RIGHTTO-WORK LAWS.

Mark Mix is president of the National Right to Work Committee.

Iryna Lendel is senior director of regional economic and community development at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich.

Independent GE HealthCare sees growth ahead, despite heavy debt and costs

Company executives gure that an independent GE HealthCare, free to control its own destiny and invest as it chooses, can deliver 5% to 7% annual growth in organic revenue, which excludes the e ects of acquisitions and foreign exchange rates.

Growth plans hinge on technology innovations and precision care, which often means equipping products like radiology and ultrasound devices with machine-learning and arti cial intelligence capabilities. at, in turn, requires more spending on research and development. e company boosted R&D spending to $1 billion in 2022, up from about $800 million in 2021. GE HealthCare hasn’t announced R&D spending plans for 2023 yet.

e COVID-19 pandemic ushered in a widespread labor shortage, increasing the demand for hospital equipment that’s smarter, faster and can help support smaller care teams, a trend driving medical device manufacturers to develop tech-forward products.

“In the next couple years, we won’t have literally any products coming out that don’t have embedded (arti cial intelligence) in them,” CEO Peter Arduini recently said at a J.P. Morgan Healthcare Conference. “It’s just the way things are going.”

GE HealthCare says it now has 42 AI devices approved by the U.S. Food & Drug Administration, more than any other company in the world. To support its ongoing tech ambitions, GE HealthCare recently hired a chief technology

o cer from Amazon.

Arduini’s growth strategy also includes acquisitions, mostly socalled “tuck-in” deals that enhance existing product lines. Less than a week after the spino , GE HealthCare paid an undisclosed price for Imactis, a French radiology startup with precision care capabilities.

Still, GE HealthCare’s growth targets are a leap for a company that has historically posted lowsingle-digit sales increases. Yearover-year revenues rose just 2% in 2021, well below the rate it’s projecting for 2023.

“ ere’s a portion of the market that is really skeptical that they’ll only continue to grow low-single digits and they won’t hit those targets,” says Joshua Aguilar, a senior equity analyst at Morningstar.

“ ey’ll have to prove that they can make up that ground.”

Meanwhile, German rival Siemens Healthineers grew 5.9% to 21.7 billion euro, or $23.5 billion, in 2022. Another competitor, Amsterdam-based Koninklijke Philips hasn’t yet reported fullyear 2022 gures but said sales slipped 1% to 17.2 billion euro, or $18.7 billion, in 2021.

MACRO CHALLENGES

An independent GE Healthcare will need to boost pro ts along with revenues. e company hasn’t disclosed full-year 2022 gures yet, but net income fell 19% to $1.4 billion for the nine months ended Sept. 30, 2022, for a pro t margin of 10.2%.

A big debt burden and high costs will weigh against GE HealthCare’s e orts to boost pro tability and invest in growth. In the spino , GE

Uber Freight cuts 150 jobs, hitting Chicago headquarters

BY JOHN PLETZ

Uber Freight, which is headquartered in Chicago, laid o 150 people, or about 3% of its sta .

Most of the cutbacks are in Chicago, sources familiar with the layo s say. Uber Freight, the trucking unit of ride-hailing and food-delivery company Uber, recently employed about 1,000 people in Chicago.

e layo s at Uber Freight are the latest to hit the tech sector, including cuts announced last week by SAP and IBM.

SAP said it’s cutting 3,000 jobs, or about 2.5% of its workforce. e Berlin-based software maker recently employed about 1,800 people in Chicago and the suburbs. Much of the cuts are likely associated with Qualtrics, which SAP acquired in 2019 and now wants to sell.

IBM will cut 3,900 jobs, or about 1.5% of its workforce, largely related to spino s of Watson Health and a unit involved in technology-infrastructure outsourcing, Reuters reported.

e layo s add to a growing list of job cuts across the technology sector that are signi cant in absolute numbers—more than 10,000 each at Google, Microsoft, Amazon

GE HEALTHCARE INITIAL STOCK PERFORMANCE

In its first few weeks of trading, GE HealthCare’s stock was up 28% as of Jan. 23 from its opening price of $54.13, trading now at about $70, or 15.02 times projected 2023 earnings per share.

GE HEALTHCARE ANNUAL REVENUE AND PROFITS

GE HealthCare revenue and profits have ticked up over the last four years, a trend it intends to accelerate as an independent company. The company has a market capitalization of $31 billion.

and Facebook parent Meta—but small in relative terms.

Uber Freight’s cutback is half the 6% reduction at Google and less than 5% at Microsoft. Many tech companies have said they hired too aggressively after sales surged during COVID. Most of the companies also are battling sharp downturns in their stock prices, which is causing them to cut costs as they pay closer attention to pro ts and make trims in non-core areas.

Uber Freight faces headwinds that are hitting the trucking space, where demand soared during COVID. J.B. Hunt recently reported a 29% decline in volume in its freight-brokerage unit in the fourth quarter. Most of Uber Freight’s cuts were in the digital-brokerage part of the business, a source familiar with the cuts says. Uber Freight also has a growing technology team in Chicago.

Logistics technology has been one of the bright spots of the Chicago economy, and Uber made a splash in Chicago in 2019 by leasing 460,000 square feet in the Old Post O ce and moving the headquarters of Uber Freight to Chicago, with plans to hire 2,000 workers. It has since o ered to sublease nearly one-third of its space at the Old Post O ce.

saddled its former subsidiary with $10.25 billion in debt and about $5 billion in pension liabilities, according to a December Securities & Exchange Commission  ling. Chief Financial O cer Helmut Zodl told investors in December that the company plans to pay down debt, “speci cally in the early years.”

GE HealthCare also intends to cut costs by trimming its product line and real estate holdings. Zodl said the company is targeting more than 100 sites where it could reduce rent and operating expenses.

“ is will reduce cost as well as optimize our footprint and supply chain,” he explained.

Asked about the possibility of layo s in Chicago or elsewhere, the company said it does not “anticipate workforce changes,” but added “we will continue to review our businesses and monitor market conditions to ensure we are positioned for growth and global

competitiveness.”

GE HealthCare also faces macro challenges a ecting most medical equipment manufacturers. Over the last several years, the hospital industry has consolidated into a number of large chains with growing leverage to demand price concessions from suppliers like GE HealthCare.

“Any time you have a consolidated buyer group, that gives them great bargaining power,” Aguilar says.

Another source of pricing pressure comes from government and private insurers looking to rein in rising health care costs across the country. National health expenditures more than doubled from 2011 to 2021, according to analysis by the Centers for Medicare & Medicaid Services.

“It’s certainly a big pressure and one that they’ve had to contend with for a while,” Aguilar says. “And you could argue it’s getting worse.”

Montgomery says GE HealthCare keeps health care cost concerns in mind when making new products. “As we think about designing any device or any software solution, what we’re thinking about is solving for time, cost, quality and access,” he says.

UNLOCKING VALUE

In the end, GE HealthCare’s fortunes as a public company depend on investors’ view of its performance and prospects. Since its debut, GE HealthCare stock was up 28% to $69, or 15.02 times projected 2023 earnings per share, as of Jan. 24. Siemens and Philips traded at $26, or 24.15 times earnings, and $16, or 16.76 times earnings, respectively.

“ e argument usually for spinning o is to quote, unquote ‘unlock value,’ ” Aguilar says. “ ey’ve got a lot of shots on goal . . . so we’ll have to see. e question is open.”

GE HEALTHCARE from Page 1

CLASSIFIEDS

To place your listing, contact Suzanne Janik at (313) 446-0455 or email sjanik@crain.com .www.chicagobusiness.com/classi eds

CAREER OPPORTUNITIES

CAREER OPPORTUNITIES

CAREER OPPORTUNITIES

A contrarian bet on suburban office buildings

CAREER OPPORTUNITIES

CAREER OPPORTUNITIES

BA is swimming upstream as bigger real estate rms ee a market beset by soaring vacancies, corporate cutbacks and rampant loan defaults that make it a perilous time for o ce landlords. Its latest purchases came at pandemic-era discounts and included buildings updated with amenities that will help them lure tenants, limiting the risk compared to outdated, mostly empty properties. But another key piece of the thesis reveals clues about the future of o ce work: BA is almost exclusively targeting buildings teeming with companies leasing less than 10,000 square feet apiece.

the 73% average for top-tier, or Class A, buildings in the suburbs, according to brokerage Jones Lang LaSalle.

“We’re not faced with the risk of one tenant going out” and dramatically hurting a building’s cash ow, says Elbaum, who started his real estate career with Bernstein as o ce leasing brokers in midtown Manhattan before they moved to Chicago and formed leasing brokerage Bradford Allen Realty Services in 2003. “And the nature of local private companies—they tend to be (led by) an individual or individuals that you can build a relationship with.”

vibrant with their foot tra c. “ e amenity is the community,” he says.

CAREER OPPORTUNITIES

eir thinking upends the conventional, pre-COVID wisdom of o ce landlords that long prized the strong balance sheets and tiptop credit pro les of large, publicly traded companies that rented out most or all of the space in an o ce building. But many of those companies, under pressure to allow employees to work from home, are slashing their o ce footprints.

Smaller companies, by contrast, are bringing workers back to the o ce at relatively higher rates. Bernstein and Elbaum gure that makes buildings full of such tenants a good investment. If they’re right, it could not only pay o handsomely for their venture, but also provide a road map for other investors seeking opportunities in an otherwise bleak suburban ofce market.

“We were believers at the outset of the pandemic that o ce space was not going to go away, it was just going to be used di erently,” Elbaum says. “We saw something that made sense to us.”

SHOWING PROMISE

Results so far look promising. e rm has renewed or expanded leases with a slew of tenants at 570 Lake Cook Road in Deer eld and Edens Corporate Center in Northbrook. Elbaum says the two properties have more than 50 tenants combined and are now more than 80% leased. at’s well above

Small tenants typically aren’t as well capitalized as larger ones, and buildings full of them require persistent attention to leasing. Dividing up buildings among dozens of smaller users also makes it more di cult for such rms to expand when they need to.

But as e ects of the pandemic fade, such rms are having an easier time getting employees back into the o ce regularly. December surveys of o ce tenants nationwide by JLL found that companies with 150 employees or less are seeing signi cant use of their o ces 3.1 days per week, whereas companies with more than 500 employees average 2.2 days per week.

e o ce “is a lot more personal when you’re a smaller or midsized company,” says Megan Mackinson, who regularly surveys hundreds of JLL clients on their o ce strategies as senior vice president of workplace planning and projects. “ e mandates haven’t had to be as strong as (those of) some larger organizations to get people back because the culture is, ‘We want to be here, that’s how we work’ versus having a lot of global o ces and working with teams across the country.”

Elbaum says smaller suburban tenants also aren’t counting on workers to make long train commutes—one of the steepest hurdles for companies trying to get workers back to the o ce—and collectively make buildings more

Suburban o ce buildings with larger corporate tenants, meanwhile, have seen some of the worst pain since the onset of COVID-19. e owner of an o ce property at 3800 Golf Road in northwest suburban Rolling Meadows anchored by Capital One was recently hit with a $26 million foreclosure lawsuit as the credit card giant scales back and consolidates its Chicago-area o ces downtown. A 300,000-square-foot ofce building that UnitedHealth Group subsidiary Optum is mostly vacating at 1600 McConnor Parkway in Schaumburg was sold this month for a fraction of its pre-pandemic value.

OTHER PLAYERS

BA isn’t the only one betting on a post-COVID o ce renaissance in the suburbs. New York-based real estate rms Group RMC and Opal Holdings have also paid large sums over the past two years for suburban o ce buildings that are well leased.

But the list of buyers is small as some major investors shun o ces entirely, let alone vacancy-plagued suburban properties. at poses the biggest risk for rms like BA, which are counting on that trend slowing or reversing to ensure they’ll be able to eventually sell for a pro t. A recent study by professors at Columbia University and New York University projected that the value of o ce buildings nationwide could drop by an average of 39%—or $454 billion—by 2029.

Elbaum says he and Bernstein are happy to be long-term owners and contends buyers will always pay for well-leased o ce buildings. He also predicts more companies will follow small tenants’ lead as COVID memories fade and employers rediscover the bene ts of face-to-face work.

“I think time is going to prove that companies will change and start seeing the value of having ofce space again,” he says.

SUBURBS from Page 3

COSTAR GROUP

BA Investment Advisors has had a series of leasing wins with smaller tenants at 570 Lake Cook Road in Deer eld.

Illinois State Rep. Kam Buckner

U.S. Rep. Jesus “Chuy” Garcia

Ja’Mal Green

Cook County Commissioner Brandon Johnson

Alderman Roderick Sawyer

Paul Vallas

Alderwoman Sophia King

The Bellevue, the restaurant replacing Tavern on Rush, will open this spring

which has long been a magnet for old-school Italian restaurants and steakhouses.

“ e building needed to be renovated and rehabbed,” Barbara said. “We decided if we have to spend all this money, let’s do it ourselves.”

Barbara and Banks will own the restaurant through their management company, FJ Management. e two completely renovated the building with new wiring, plumbing, a new kitchen, windows and doors—”everything top to bottom,” Barbara said.

ere will be a bar and lounge area on the rst oor, and a restaurant on the second with an open kitchen. e same food will be available in both spots, but the downstairs menu will be focused on appetizers and upstairs on entrees. e faux balconies on the second oor will open to let the breeze in for diners, but the al fresco dining will occur downstairs on the patio.

Barbara and Banks are excited about the patio, and they think potential customers will be, too. Tavern on Rush’s patio was a favorite spot, and some say a main draw. e restaurant’s location at Rush and Bellevue near Mariano Park gave diners a good view

down the street and, as one former patron said, meant the spot was drenched in sunlight when neighboring patios had fallen into shadow.

e Bellevue’s patio similarly will take advantage of that situation and feature new furniture, awnings and more, Banks said. It’ll seat more than 100 people.

“In our view, it’s the best outdoor seating in the city,” Banks said.

Banks and Barbara declined to disclose how much they spent on the renovation.

e Bellevue’s menu is still in the works. e landlords were going to a tasting after a call with Crain’s last week.

ROLE IN NEIGHBORHOOD

e goal with e Bellevue is to create an approachable restaurant someone from the neighborhood could eat at multiple times a week, said Banks, who raised his daughter on the Near North Side.

“We’re very conscious of the role that this restaurant plays in the neighborhood,” he said. “Between us, Gibsons, we’re the anchors there, and it’s important to make sure this is right and do the right thing for the neighborhood.”

Tavern on Rush was the rst to fall in a new era for the busy dining locale, long home to a

handful of old-school steakhouses and Italian joints. Next door is Carmine’s Bar & Lounge at 1043 N. Rush St., which is set to temporarily close in a couple of months while the new landlord demolishes and rebuilds the restaurant’s longtime home. Its

new digs will be more modern and include an expansive second-story balcony.

e area earned a nickname as the Viagra Triangle in the 1990s, for the older men who ocked to the establishments there to court younger women—and vice versa.

e Bellevue landlords said that nickname is outdated—and a little insulting, especially with the new digs coming.

“It needs something new there, and we’re going to be the guys to bring something new on the corner,” Barbara said.

A rendering of The Bellevue’s planned exterior.

Angular 1990s house by noted architect for sale in Evanston at just under $1.5M

Thomas Hickey, who previously worked with Chicago architectural

take on the historical homes—Tudors, Georgians and others—nearby on Sheridan Road I

An Evanston house that a prominent architect designed to evoke its historical neighbors in the eccentric style of the early 1990s is on the market at less than the seller paid for it 15 years ago.

Vicki Truax is asking a little less than $1.5 million for the four-bedroom, 4,800-square-foot house on Sheridan Road. It’s represented by Ann Boyle of Berkshire Hathaway HomeServices Chicago. In 2007, Truax paid nearly $1.8 million for the house.

Completed in 1993, the home’s interior has ceilings that tilt at varying slopes; many triangular windows; countertops and handrails that curve; a pyramid skylight above the glass and metal staircase; and other playful ourishes.

e facade’s triangular forms, visible beams and expanses of stucco are meant to be “a modern take on one of these old Evanston houses,” said omas Hickey, the architect who designed it.

“I tried to blend with the neighbors (using) 21st-century architecture without losing 19th-century values,” he said. Nearby houses include stately Tudors and Georgians, among others.

Now retired and living in western Michigan, Hickey rst worked with Chicago architectural icon Harry Weese and then his brother and sister-in-law, Ben Weese and Cynthia Weese. He designed several North Shore and Lincoln Park houses as well as apartment developments on the city’s West and South sides. Two of his notable projects are Friendship Baptist, a hexagonal church in the Austin neighborhood designed to evoke an African hut, and the Bradford Exchange headquarters in Niles that resembled a huge white circus tent. (In later remodelings, it lost that look.)

Hickey had his own Chicago rm, omas Hickey & Associates, when a couple tapped him to design the Evanston house for their family of four. A few years later, they moved into the city, where Hickey designed two more houses for them.

Although the design has elements of postmodernism, including wacky angles, Hickey said he wouldn’t describe it that way because “postmodern is too trivial and mocking. I would consider the style contemporary.”

Truax, who in the 1990s was a morning radio personality married to sportscaster Tim Weigel, told Crain’s in an email that after her husband died in 2001 and she was ready to move out of their Evanston house, she found this one on Sheridan Road. “I was awed by the light” from the numerous large windows, she wrote.

e house has a triangular internal courtyard that “can be viewed by virtually every room in the house, green year-round, and, with the pond and waterfall, is not only picturesque, but calming especially with the windows open in the summer,” Truax wrote.

Truax had the house on the market previously, at higher prices.

BY DENNIS RODKIN

icon Harry Weese, says he designed the house as a modern

CHICAGO HOME PHOTOS

AND HUNGER AFFECT US ALL.