Crain's Chicago Business by crainschicago

EQUITY: Apprenticeships and job training can help narrow the wealth gap. PAGE 12

AIRLINES: Southwest’s debut at O’Hare may be just the start. PAGE 6

CHICAGOBUSINESS.COM | FEBRUARY 15, 2021 | $3.50

5 STEPS

TO FASTER

VACCINATIONS

IN ILLINOIS Experts weigh in on how state can catch up BY A.D. QUIG

ILLINOIS IS UNDER PRESSURE to accelerate COVID-19 vaccinations. Although the state is improving, it still lags the nation on key metrics. According to Bloomberg’s vaccine tracker, as of Feb. 12, only 9.8 percent of Illinoisans have received a first dose of vaccine, compared with 10.9 percent nationally; 2.7 percent of Illinoisans are fully vaccinated, compared with 3.6 percent nationally; and Illinois has administered just 65 percent of the vaccines it has received, below the national average of 70 percent. A quicker pace would protect more people from COVID-19 and stop the spread of the virus sooner by reaching herd immunity faster. “This is the time to be vaccinating and vaccinating quickly,” says Dr. Julie Morita, the former commissioner of the Chicago Department of Public Health who served on President Joe Biden’s COVID-19 transition task force. But speed shouldn’t come at the expense of equity, she says. See VACCINATIONS on Page 22

INSIDE: GETTY IMAGES

How one doctor is profiting from the pandemic. PAGE 3 These manufacturers are bringing the vaccine to the shop floor. PAGE 7

Jenner & Block: Venerable but vulnerable

How taxpayers helped Potbelly— and its bank BY STEVE DANIELS They say money is fungible. Nowhere is that more evident than at Potbelly. In the past six months, the publicly traded sandwich chain tapped the taxpayer-subsidized Paycheck Protection Program and later new and existing stock investors while paying millions back

to JPMorgan Chase, its longtime bank that clearly wants less exposure to this client. The Chicago-based chain on Feb. 10 disclosed a deal to raise $16 million in equity through a private placement. Simultaneously, Chase continued its effort to lessen its risk from the borrower by cutting Potbelly’s line of credit to $25 million. Less

BLOOMBERG

The sandwich maker’s latest equity raise renews questions about its PPP infusion

than a year ago, that credit line was $50 million. The equity raise was positive news for a company in need of some since the pandemic sharply reversed the beginning stages of a turnaround and threw Potbelly into crisis mode, beginning last spring. But it also raised See POTBELLY on Page 23

This Chicago legal heavyweight is losing muscle. Here’s why. BY STEVEN R. STRAHLER

When Craig Martin quit last year as chair of Jenner & Block and then bolted the law firm less than a month later to set up shop for a competitor, it wasn’t Jenner’s first in-house row. A power

struggle two decades ago triggered the lawyered-up departure of a big-shot attorney. But Martin’s (likewise lawyered-up) exit was unlike any other, measured against the piece it carved out of Jenner’s hide. So far, 22 attorneys have fled Jenner to join Martin at Willkie Farr & Gallagher. With them went 10 to 15 percent of Jenner’s billings, or at least $45 million, according to former insiders. See JENNER on Page 9

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JOE CAHILL

BOOTH INSIGHTS

Travelers seem willing to give the 737 Max another shot. PAGE 4

What’s the best way to launch your product? PAGE 8

2/12/21 4:09 PM

2 FEBRUARY 15, 2021 • CRAIN’S CHICAGO BUSINESS

What kind of political shape is Pritzker really in?

with a decent but not mind-boggling job approval rating of +5, with 50 percent of voters approving and 45 percent disapproving. Another survey Republicans are talking about has Pritzker now below 50 percent but not too far below. One GOP strategist terms that “incredibly weak.” One Democratic strategist says those numbers are OK if Pritzker tweaks a few things. Says Team Pritzker officially, “The governor is focused on containing COVID-19, effectively distributing vaccines, strengthening our economy and responsibly running the state. While Repubcontinue to deny HIS NUMBERS MAY NOT BE BAD, BUT licans science and hamper our THEY AREN’T WHAT THEY ONCE WERE. economic recovery . . . we are confident that the people of Illinois recognize the two readies to face voters again? distinct choices of leadership and The limited amount of polling support the governor’s response.” that’s been done recently suggests It’s too soon to tell for sure. But that his numbers aren’t bad, but here are four things to watch. they aren’t what they once were, eiThe first is whether Pritzker finally ther. For instance, one survey in Jancan rid himself of the taint of Mike uary taken for the Democratic GovMadigan, now the former speaker of ernors Association showed Pritzker hen a politician loudly cancels a widely expected tax hike, you know something’s up. That something often starts with the calendar, as in the onset of re-election season. You can bet your ballot box the calendar at least partially explains why Gov. J.B. Pritzker a few days ago announced he’s not going to raise your income tax after all—just as his re-election campaign begins to come into focus. What kind of shape is the billionaire hotel scion and investment guru turned politician really in as he

the Illinois House but still chairman of the Democratic Party of Illinois. The Madigan hangover—why should we trust crooked Springfield with more money?—probably is what killed Pritzker’s graduated income tax amendment in November. Republicans will still try to wrap Madigan around Pritzker’s neck at every possible opportunity. The governor needs to put more distance there—fast. Trust me, Madigan will understand why he’s under the bus. A second item worth watching is Pritzker’s upcoming new budget. Despite his decision not to raise the current flat income tax, there’s still a lot of budget detail we don’t know, notably whether Congress will come to the state’s aid with a big check from President Joe Biden’s pending $1.9 trillion COVID relief bill. If Biden delivers, Pritzker will be able to breathe much easier. If not, some distasteful spending cuts and other revenue enhancers are on the way. Of course, Pritzker could have avoided much of this nastiness if he’d acted like the bean-counting

GREG HINZ ON POLITICS

businessman he is and moved to slash overly rich state pensions, one way or another. But that, sadly, does not appear to be in the cards. A third area to watch: COVID, and whether the administration properly handles a pandemic that threatens every voter. Polling shows Pritzker actually gets pretty good numbers for his handling of the pandemic, markedly higher than his overall job approval rating. But the state has stumbled getting unemployment aid out the door, and his partial economic shutdown has been extremely unpopular in some regions of Illinois. Meanwhile, distribution of COVID vaccines got off to a slower start than it should have, though the state’s numbers have been improv-

ing lately. Voters surely are tired of the pandemic. I know I am. But if Pritzker can point to relative success and a return to relative normalcy this summer, lots of political problems will melt away. One more: A state GOP that’s a shadow of its former self needs to find a candidate. I doubt U.S. Rep. Adam Kinzinger, Cubs co-owner Todd Ricketts or other big names will take the plunge, and the only known declared candidate, Schaumburg roofing firm owner Gary Rabine, is politically known only in pro-Trump circles. Bottom line: There are issues to exploit. And a governor with a few billion dollars waiting to whack anyone who dares. But it’s still pretty early.

Illinois’ corruption most hurts low-income residents

or almost 40 years, Illinois’ per capita corruption convictions were on average 40 percent higher than the rest of the nation, according to data from the Public Integrity Section Criminal Division at the U.S. Department of Justice. Regression analysis reveals that if Illinois had the same level of corruption per capita as the national average during that same period, the state’s poverty rate would have been lower by roughly 0.7 percentage points—that’s nearly 88,000 fewer Illinoisans living under the Census Bureau’s poverty line. The poorest Illinoisans tend to be younger, Black, unmarried with young children and less likely to have a college degree. Corruption in the city of Chicago can be traced back decades and earns the city recognition as the most corrupt in the nation. Illinois is consistently ranked second-most corrupt state in the country. Four Illinois governors have gone to prison since 1973. So why does that matter to the average Chicagoan? Even with vast quantities of federal aid checks working their way toward individuals, as well as state and local government, corruption will continue to erode the foundations of Illinois’ economy. Economic research shows corruption leads to lower investment, thus lowering economic growth. In addition, higher levels of corruption raise income inequality and poverty, because high levels of corruption result in rent-seeking activity that hurts the poor. Corruption often benefits a narrow range of interests at the expense of everyone else. Public corruption also leads to governments wasting resources that

could otherwise be used to provide and improve services that actually benefit most residents, such as education and social services. For decades, Illinois’ ethics laws made it possible for former House Speaker Mike Madigan to prioritize personal and political interests for profit and power. That power was used to further the careers of his allies, such as former Cook County Assessor Joe Berrios, who was sued for violating civil rights and housing laws by knowingly producing inaccurate assessments that punished poor and minority homeowners across the county. In the more recent Commonwealth Edison case, the utility company secured legislative wins that resulted in higher profits for it at the expense of consumers. Whether it is higher property taxes because of unfair, error-riddled assessments or higher utility bills, the real victims of corruption are low-income Illinoisans. So what to do? Corruption thrives when institutions are weak. The end of the Madigan era is an opportunity for the new Springfield leaders— House Speaker Chris Welch and Senate President Don Harmon—to prioritize low-income Illinoisans, those who have been mostly ignored by Springfield’s culture of corruption. So far, proposed ethics reform legislation has gone nowhere. One of those reforms would require lawmakers to provide detailed statements of economic interest and require them to recuse themselves from voting in the case of a conflict of interest, with real penalties for violating this rule. In addition, Illinois must draw

CORRECTION Citadel and/or affiliates are defendants in at least 11 lawsuits filed around the country by Reddit investors over losses in GameStop and other heavily shorted stocks. The number reported in the Feb. 8 issue was incorrect.

P002_CCB_20210215.indd 2

a clear line of separation between lobbyists and the lawmakers they lobby to keep Illinois clear of the kind of corrupt entanglements it has seen under Madigan. That means banning lawmakers from lobbying state agencies and local governments and requiring a two-year cooling-off period between when lawmakers leave office and when they can lobby the Illinois General Assembly. Currently, Illinois is one of only 14 states without a law to stop the “revolving door” between being a lawmaker and a lobbyist. Lastly, the Illinois General Assembly needs an empowered watchdog who can open inves-

ORPHE DIVOUNGUY ON THE ECONOMY

tigations, issue subpoenas and publish findings of wrongdoing without first seeking the approval of lawmakers on the Legislative Ethics Commission. Currently, the legislative inspector general needs permission from the politicians to open investigations or to publicize findings in most cases of wrongdoing.

Changing the guard by ousting Madigan was only the beginning. Illinois has much more work to do to end public corruption—and after nearly 40 years, it is about time it did. Crain’s contributor Orphe Divounguy is chief economist at the Illinois Policy Institute.

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2/12/21 3:37 PM

CRAIN’S CHICAGO BUSINESS • FEBRUARY 15, 2021 3

Weed licensees face use-itor-lose-it pressure

Justin Brown, president and CEO of Skender

Sawdust flies as owners race to finish new stores by the end of next month

CONSTRUCTION SECTOR SHOWING SIGNS OF LIFE After a brutal 2020, year ahead looks a bit brighter for builders WHEN RAHM EMANUEL WAS MAYOR, he would tout a simple metric as evidence Chicago was on the path of progress: the number of construction cranes on the city’s skyline. By 2017, the count had risen to 33. Today’s tally? Just 12, according to the Chicago Department of Buildings. Attribute the decline to the coronavirus pandemic, which interrupted a building boom that transformed the skyline and urban life in Chicago with new luxury apartment towers and trendy

hotel and office projects. Construction starts in the Chicago area fell 25 percent in 2020, representing $10.1 billion in projects, according to Dodge Data & Analytics, a Hamilton, N.J.-based research firm. But after being knocked down last year, the local construction industry is starting to get back on its feet. Some developers have shelved plans for big projects, unable to secure financing. But See CONSTRUCTION on Page 23

JOHN R. BOEHM

BY JOHN PLETZ

BY ALBY GALLUN

“THERE’S GOING TO BE A LOT OF ACTIVITY IN THE NEXT SIX MONTHS. YOU’RE JUST NOT GOING TO SEE IT UNTIL 2022.” Justin Brown, president and CEO, Skender

Weed companies are scrambling to meet an impending deadline to open new pot shops. The law passed in 2019 that allowed recreational weed sales in Illinois gave the operators of existing medical marijuana stores the option to open an additional store for each license they held. They have until March 31 to receive final inspections from the Illinois Department of Financial & Professional Regulation or lose the licenses, which can be worth $10 million to $20 million. “Everyone I work with is pounding nails and painting,” says attorney William Bogot, co-chair of Fox Rothschild’s cannabis practice group, who represents several marijuana companies. “Every client has incentives built into their contracts to get it done. I don’t think anyone is going to voluntarily let that (license) pass by.” So far, just 31 of 55 new weed shops have been approved. If the licenses go unused, it means less marijuana sales and less tax revenue for the state of Illinois. Cannabis sales more than doubled from $39.2 million in January 2020 to $88.8 million last month, in part because of new store openings. For the owners of existing marijuana stores, any unused licenses mean less competition and more sales. Because of limited licenses, Illinois has been more lucrative than other states for marijuana retailers. See WEED on Page 18

How one doctor profits from fighting the pandemic After spotting opportunity in testing, Khare moves into vaccinations Dr. Rahul Khare knows what some people are saying about him—that he’s opportunistic. And to some extent, he says, they’re right. The Innovative Express Care CEO built a large-scale COVID-19 testing program early in the pandemic that has turned out to be quite lucrative. Now, as one of the only private practitioners in Chicago with access to coveted vaccines, he says he’s

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inking a deal with Chicago Public Schools to inoculate tens of thousands of teachers and staff. “Are we profiting from a pandemic? Yeah, I am. I have mixed feelings about that,” says Khare, 46, who left Northwestern Medicine to launch his first clinic in 2015 with only a handful of patients—one of whom was his mother. Before COVID hit, the North Side primary care, urgent care and behavioral health practice was seeing about 200 patients

a day and raking in $1 million a year, Khare says. Now, with eight locations, it’s up to about 3,000 patients a day and $15 million. He used some of the funds to open four new sites in the last six months and aims to continue expanding. “People think of me as opportunistic,” Khare says. “Yeah, there was an opportunity to test a lot of people. There’s opportunity for me to give vaccines to See KHARE on Page 18

JOHN R. BOEHM

BY STEPHANIE GOLDBERG

Dr. Rahul Khare, CEO of Innovative Express Care

2/12/21 4:13 PM

4 FEBRUARY 15, 2021 • CRAIN’S CHICAGO BUSINESS

JOE CAHILL

CHICAGO COMES BACK

ON BUSINESS

ample opportunity to avoid the 737 Max. They’re highlighting plane models more prominently in the booking process and allowing nervous types to rebook on another plane at no charge. Of course, switching to a different plane may involve considerable inconvenience. There’s no guarantee a seat on another model will be available when a passenger wants to travel. For most passengers, it appears that any worries about flying on a 737 Max aren’t serious enough to justify the hassle of switching flights. That suggests Boeing has all but cleared the last major hurdle in redeeming the latest version of its top-selling jet. Boeing’s main contender in the lucrative market for single-aisle jets, the 737 line generated 33 percent of revenues and 50 percent of profit in the company’s commercial aviation unit before the grounding. Any lingering drag on the plane’s marketability would give archrival Airbus a long-term competitive edge. Travelers’ willingness to give the 737 Max another chance is good news for airlines, PASSENGERS ARE THE FINAL KEY too. Carriers prize the plane’s range, seating caCONSTITUENCY TO BE WON OVER. pacity and fuel efficiency. Before the crashes, 107 airlines had 4,500 737 Maxes on March 11, with 32 flights to 15 order. cities. The Dallas-based carrier From the beginning, airline says it will expand 737 Max flights economics left little doubt that throughout its network by midpassengers would find themApril. selves on 737 Max flights again. “Southwest has continued The question was how much surveying customers to underresistance carriers would face stand their confidence in the 737 and how long it would last. Not Max,” a spokesman says. “A small much and not long seems to be percentage of customers indicate the answer. they are not comfortable flying Boeing hasn’t even needed onboard the aircraft, but, of those to change the jet’s name—there individuals, the vast majority was talk of dropping the “Max” indicate their comfort level will suffix—to coax travelers aboard. improve once the aircraft has Bloomberg reports that seven been flying again for a period of airlines around the world plan time.” nearly 4,000 737 Max flights Initial passenger reactions this month and almost 8,700 in shed light on one of the last big March. Even Ethiopian Airlines, unknowns surrounding the 737 which operated one of the jets Max, which was grounded for 20 that crashed, says it will resume months after regulators blamed 737 Max flights in July. flawed flight controls for the In another encouraging sign, two crashes. To get the groundairlines are taking delivery of 737 ing order lifted, Chicago-based Maxes again. United, American Boeing had to convince aviation and Southwest plan to take dozofficials around the world that the ens this year. Boeing delivered 48 problems had been fixed. Next, 737 Max models to various carriBoeing had to win over pilots and ers in December and January and airline executives. expects to reduce its inventory of Travelers are the final key about 400 by roughly half in 2021. constituency for Boeing and the Yet the 737 Max is returning airlines. There has been concern to an aviation market that’s that passengers might balk at far worse than the one it left. flying the 737 Max after years of COVID-19 has crushed air travel news stories about shortcomings and demand for new jets. But in the design and development of as more people get vaccinated, the jet. At one point, polls showed they’ll feel safer flying. And it also 50 percent of passengers saying appears they’ll feel safe aboard a they would avoid the jet. 737 Max. Carriers are giving customers They might be swallowing hard, but passengers are boarding 737 Max jets again. As airlines resume flying the Boeing jet after a nearly two-year hiatus, there’s no sign that large numbers of travelers won’t trust their lives to a model involved in two fatal crashes that killed 346 people. “Bookings on the 737 Max are comparable to other aircraft, and we aren’t seeing data to suggest customers don’t want to fly the aircraft,” an American Airlines spokeswoman says. Fort Worth, Texas-based American has flown the 737 Max about 900 times since December, serving 38 destinations from its hub in Miami. Chicago-based United Airlines resumed Max flights Feb. 11, offering two dozen flights from Denver and Houston. A spokeswoman says United plans to ramp up to 200 weekly 737 Max departures across its domestic route network this month. “At this time we haven’t seen a notable trend of booking away” from the 737 Max, she says. Southwest Airlines plans to return the 737 Max to service on

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What coming back means for Chicago’s youth

GETTY IMAGES

Travelers seem willing to give 737 Max another shot

The founder of Chicago Beyond talks about how the past year has focused attention on inequity and how philanthropy can have an impact on whole communities. BY EMILY DRAKE AND TODD CONNOR Chicago Comes Back is a weekly series on ChicagoBusiness.com providing leadership insights to help your business move forward, written by leadership consultants Emily Drake and Todd Connor. Drake and Connor facilitate Crain’s Leadership Academy. Drake is a licensed therapist, owner of the Collective Academy and a leadership coach. Connor is the founder of Bunker Labs and the Collective Academy and is also a leadership consultant. Check out previous installments at ChicagoBusiness.com/comesback. This week we sit down with Liz Dozier, former Chicago Public Schools principal turned social entrepreneur and founder at Chicago Beyond, who has been a driving force for catalytic change for our young. To date, Chicago Beyond has invested more than $30 million in community-led initiatives and individuals to help all youth to achieve their full potential here in Chicago, and beyond. As we think about Chicago coming back, we wanted to check in with her for perspective on what recovery means and needs to look like for our young people. TODD CONNOR: Liz, you’ve been at the forefront of preparing our young people for life beyond school, from your time as principal at Christian Fenger Academy High School in the Roseland neighborhood to your role now leading Chicago Beyond. Can you give us your perspective on the state of the system, as it were? How are we doing as a city? LIZ DOZIER: Systemic racism still acts as an underlying driver of the state of the system. We have evidence of how that driver impacts everything from health care to our education. This last year made a huge difference in the acknowledgement of that reality. Rightly so, this time period has forced us to examine and begin to reform our city, state and national practices and policies in order to create a system that is equitable and allows access and opportunity for all people.

EMILY DRAKE: You’ve been in direct service as a principal and in other roles supporting our young people, and now in a different role as a funder and co-creator of solutions—from grassroots ideas and narrative shifts to system-level changes in our city. What is your view of philanthropy? Are those in positions of power doing enough? LD: Philanthropy sits in an incredible position of power. It has the opportunity to influence and drive agendas that set the stage for massive change. Somewhere along the way, community-based philanthropy in particular lost sight of its role as a driver in this change and instead became more concerned with investing dollars in “safe bets.” It lost a deep-rooted connection to those it serves. However, over this last year, the philanthropic landscape of our country has positively shifted and made efforts to re-center itself on addressing some of society’s biggest barriers to freedom and equity. TC: Chicago Beyond invests in organizations that are positioned to change the lives of young people, and you in turn are making investments in everything from education, to youth safety, to health and wellness and beyond. Tell me about the “beyond”—how are you positioned to impact youth not only in our city but nationwide? LD: Our approach at Chicago Beyond is called “whole philanthropy.” It centers the life experiences of those we are trying to impact.

It was born out of my time as a principal, where we invested in the whole child—from providing trauma and mental wellness supports to academic interventions— simply to meet our students where they were. We are excited to see others in the national philanthropic space think more holistically about how to significantly impact entire communities. ED: You have spent your career working tirelessly to disrupt the culture of inequity that is often pervasive in urban neighborhoods. What has changed, and what hasn’t? LD: Our country is in the midst of an incredible shift. We are coming into an awakened understanding of our country’s history and policies that led to the culture of inequity that I often saw as a principal. The exciting part of this moment is that with this awakened new lens, we can reimagine and actively reshape our world. TC: Too often as we go through life, we tend to stick to our own surroundings, never traversing the rich neighborhoods that make Chicago distinctive. Can you help us put a face and a name to this work, and what success looks like? LD: Losing sight of the individual lives we seek to impact will ultimately disconnect one from this work. Success looks like my former student, Savon, a young man who just a few years ago was in immediate, life-threatening danger. But because of some incredible work and the creation of a safe house that we built in partnership with Chicago CRED (Create Real Economic Density) and IMAN (Inner-City Muslim Action Network), he is now thriving, with a full-time job and access to opportunities. The success of one young man creates a ripple effect in his family and community that are almost impossible to measure.

2/12/21 3:36 PM

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Southwest Airlines, which began flying from O’Hare International Airport on Valentine’s Day, has long been sweet on the city’s dominant airport. The discount carrier, which has operated from Midway Airport for 36 years, is starting small at O’Hare with a handful of daily flights to Baltimore, Denver, Dallas, Phoenix and Nashville, Tenn. But Southwest has bigger long-term plans, hoping to target more business customers and maybe find a way to connect to all that international traffic that comes through the city’s largest airport. Adding service at O’Hare will give Southwest a chance to capture even more of the Chicago travel market, offer more options to passengers and increase pressure on competitors United, American and Delta. Southwest has long wanted to fly from O’Hare, but the gates haven’t often been available under the exclusive agreements that have long determined which carriers could use gates to access terminals. The city had a limited number of socalled common-use gates. “We’ve been talking about O’Hare for well over a decade,” says Dave Harvey, vice president of business sales for the Dallas-based carrier. “One of the things has been access (to gates).” The COVID-19 pandemic that all but eliminated international travel demand and wiped out more than 60 percent of domestic bookings provided an opportunity. “Other carriers had to give up gates, which allowed us to get our foot in the door,” Harvey says. “We had looked at it over the years, but a single gate never worked for our model.”

SMALL START

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To start, Southwest will use three gates at O’Hare’s Terminal 5 to operate 16 daily flights, compared with the 100 to 200 daily flights it averages at Midway. Before the pandemic, Southwest operated about 250 daily flights from the South Side airport. Two other factors are working in O’Hare’s favor: The drop in demand from the pandemic means that Southwest has planes and crews to start new service. And the company is moving aggressively to capture more business travel, the bread and butter of O’Hare. Its home at Terminal 5, which is dominated by international carriers, could also provide long-term options to get more business from overseas travelers. “It’s going to be very convenient being on T5,” says Harvey. “I know travelers are savvy and looking for the best deal. I know there will be customers getting off some international flights, walking over to Southwest to jump on a Southwest flight to finish their trip.” Unlike United or American, Southwest doesn’t have formal

code-share partnerships with foreign carriers. But it’s considering the option. “That is on our intermediate road map,” Harvey says, though he didn’t define the time frame. “Absolutely Chicago is a great market for partnership activity that could be down the line. “We fast-forward a few years, just given the footprint of international carriers at ORD, it rises much more in the consideration. You wouldn’t expect to create that kind of connectivity over Midway with an international partner.”

‘A VERY DIFFERENT APPROACH’

Southwest accounts for about 95 percent of the traffic at Midway. Henry Harteveldt, president of Atmosphere Research Group in San Francisco, says that the discount carrier’s interest in the international market “is an acknowledgment by the airline that business as usual pre-COVID will not necessarily be the process they follow in recovery.” “Their move into O’Hare, combined with their presence at Boston, their entry into Miami, their strong presence at Los Angeles International and a handful of gateway airports, you realize that Southwest is certainly considering a very different approach to how it will operate going forward,” he says. Having a partnership with an international carrier would increase the appeal of Southwest’s frequent-flyer program. The importance of frequent-flyer programs has been highlighted during the pandemic as airlines such as United and Delta have used them as collateral to borrow billions of dollars. Southwest has hinted at international partnerships before. “The big question is: Does Southwest feel that the additional connecting passengers would produce enough revenue to offset additional costs?” Harteveldt asks. “It’s one thing to talk about, another thing to do it. How long will it take from Southwest to move from talk to action? We’ll see.” Even if Southwest doesn’t act on its international ambitions, its presence will have a big impact at O’Hare. “Entry into O’Hare is a big deal because it puts the largest domestic airline at one of the largest gateways in the U.S. and greatly increases its appeal to Chicago-area travelers,” Harteveldt says. “I don’t suspect they’ll operate a true hub at O’Hare or have more flights there than they have at Midway. “Southwest’s entry into an airport makes passengers cheer and other airline executives curse. At first it won’t make (competitors’) lives more difficult. Because of the COVID pandemic, pricing is soft anyway. With Southwest you never look at today, you look at tomorrow and the day after. There’s always a plan to expand the operation, adding more frequency or more destinations.”

2/12/21 3:36 PM

CRAIN’S CHICAGO BUSINESS • FEBRUARY 15, 2021 7

Bringing the vaccine to the shop floor BY ALLY MAROTTI Manufacturing companies across the state are working to vaccinate their essential workers on site, with the help of their county health departments. In Lake County alone, three large companies are vaccinating their eligible employees, and 16 others— among them medical device maker Abbott, drugmaker AbbVie and medical products company Baxter International—are in some stage of planning. Officials say it is one of the most efficient ways to get shots into essential workers’ arms and could bring a swifter end to the pandemic. However, with companies responsible for determining who is eligible and vaccine supplies limited, the process is subject to the same tumult rippling through Illinois’ broader vaccine rollout. The process for on-site employer vaccinations varies by county. Generally, here’s how it works: The federal government gives vaccine doses to the state, which distributes them to counties. County health departments then inoculate people themselves or pass out the doses to the hospitals, clinics and others that have registered with the state to be COVID vaccinators. Companies can register to become vaccinators if they have medical staff on hand. If not, they can partner with a vendor to give the shots on site. Some companies may already have such partners from annual flu drives. The Illinois Department of Public Health did not immediately respond to requests for comment. Cook County is allowing companies with in-house medical providers to become vaccinators and offering on-site vaccine events to others. Otherwise, it is telling companies to refer workers to the county’s website to sign up for a vaccine. Chicago requires businesses with fewer than 250 employees to fill out a survey for vaccination at a Chicago point of distribution site. The city’s health department did not respond to a request for comment. In most cases, health departments leave it up to companies to ensure nonessential workers aren’t jumping the line.

OCCUPATIONS

Under the Illinois vaccination rollout plan, those over age 65 and front-line essential workers are eligible. That includes workers in manufacturing, public transit and grocery stores as well as first responders, teachers, postal workers, corrections workers, inmates, staff at shelters and day cares, and workers in food and agriculture. The state does not break down those categories further, so the Kankakee County Health Department tells manufacturers that anyone working in close quarters could be eligible, says Kayla Pacton, health

P007_CCB_20210215.indd 7

promotion coordinator. At the Del Monte Fresh Produce facility in Kankakee, all of its 200 to 250 employees were eligible. Employees there have been coming to work for the entirety of the pandemic. The facility had some positive cases, but never shut down, says general manager Morgan Tracy. Initially, only 30 percent of employees said they wanted the vaccine, Tracy says. The company tried to educate workers, and ultimately, 50 percent got a first dose. Health care workers from Jewel-Osco administered the shots and will return early next month to give second doses. “It was our top priority to do this,” Tracy says. Other companies might run into gray areas regarding who is eligible, says Buddy Hargett, liaison officer for Lake County Health Department’s COVID response. The age determination is easy, but is the IT worker who goes onto the manufacturing floor to fix equipment eligible? Hargett says the state collects data points on who is getting the vaccine, such as age and other demographic information, but it does not drill into details of whether that person works on the assembly line, for example. Few health departments have the manpower to police who gets the shots. “We try to trust them,” Hargett says. “Whenever we bring up the conversation on eligibility and equity, all of (the companies) have been really great at wanting to be partners that come to the table and help the community.” Getting employers involved is a key part of the county’s vaccination strategy. “It’s not this linear path where it’s just we set up a site and everyone comes there. We need a lot of different sites and partners,” Hargett says. The employer sites “are really a huge part of how we’re going to be able to get over COVID and get our lives back to normal.” The same is true in Boone County, where factory settings have been the main sites of exposure, says Amanda Mehl, public health administrator for the county’s health department. It’s typically easier to send health care workers to a site and vaccinate hundreds of people than to have those people schedule their own hard-to-find vaccine appointments. Plus, it results in higher vaccination rates. Boone County piloted an on-site vaccination event this month at the Stellantis Belvidere Assembly Plant, where Jeep Cherokees are assembled. SwedishAmerican, which operates a health center for workers near the plant, administered the vaccines. “It went really well, and now we’re working with the rest of our manufacturers,” Mehl says. The plant vaccinated 1,200 peo-

JOHN R. BOEHM

With the encouragement of local health officials, manufacturing companies are taking charge to get essential workers inoculated as efficiently as possible

Morgan Tracy, general manager at Del Monte Fresh Produce in Kankakee. ple, or about one-third of its workers. The company has facilities in other states, including Ohio, Michigan and Indiana. Each state has varied vaccination plans. “Illinois was first up for us and our first opportunity to vaccinate our employees,” says Mike Bennett, manager of external affairs. “We are actively in the planning stages of how we want to go about this in other states.”

VACCINE HESITANCY

Employers are encountering some vaccine hesitancy. Illinois Manufacturers’ Association members who poll their workers say 40 to 70 percent want the vaccine, says CEO Mark Denzler. Some might not want it through their employer or could want privacy regarding health care. Only 42 percent of employees in the Midwest said they were “very willing” to provide proof of vaccination to employers, according to a recent study from consulting firm PwC. Some employers are offering incentives to get the vaccine. McDonald’s promises four hours of paid time to corporate employees

and workers at corporate-owned restaurants who get the shot. Aldi’s offers two hours of paid time per dose, and Grubhub says it will pay drivers for time spent getting shots. Food company Mondelez and beverage giant Beam Suntory said they would cover out-of-pocket expenses and give workers flexibility for appointments. Obviously, it is in a company’s best interest to have as many vaccinated workers as possible. Vaccines

will reduce work stoppages, and more broadly, help get the economy moving again. It also can help a company’s public image, and build goodwill among workers, says Tim Calkins, clinical professor of marketing at Northwestern University’s Kellogg School of Management. “If you’re a company leader, one thing that makes a lot of sense is to have the vaccine readily available on location,” he says.

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8 FEBRUARY 15, 2021 • CRAIN’S CHICAGO BUSINESS

What’s the best way to launch your product?

ntrepreneurs dream of developing products and brands that become household names. Ideally, business grows steadily, your products are on the shelves of every major retailer and delivered to customers’ homes every day, while your profits soar. Many of the success stories that inspire us go something like this: The company founder developed a product in the garage in his spare time, sold it online for a while,

essarily good, but attracting a customer base is just really difficult.

PARTNERSHIP

An alternative is to consider finding a channel partner. That’s what GT’s Living Foods did when it brought kombucha into the mainstream. Its founder, GT Dave, was making small batches of kombucha in his parents’ kitchen and selling it in California health stores. He decided to partner with Whole Foods, which had exactly the customer base the product needed and brought a niche prodIF THE VALUES OF YOUR COMPANY uct into the mainstream. AND YOUR PARTNER’S DON’T ALIGN, GT’s Living Foods is now estimated to be worth THAT CAN BE TROUBLE. $900 million. Direct-to-consumer found a way to make the product and channel partnerships have their pros and cons. Here’s how I go viral and watched sales climb. see them. That’s certainly one way to do it, Direct sales offer the ability to but as a business adviser, I tell my clients they should remember that build your brand name from the start. It also gives you the opportufor every story like that one, there are countless others where the nity to control your customer relationships, which is difficult to do business just never gains traction. It’s not that the product isn’t nec- when you’re making a product that

Ram Shivakumar is an adjunct professor of economics and strategy in the University of Chicago’s Booth School of Business and president of RS Business Advisors.

Advice for small businesses and entrepreneurs in partnership with the University of Chicago Booth School of Business.

carries your partner’s name. This model is costly, however, because you have to make significant upfront investments to fulfill orders. You also have to bank on low customer-acquisition costs, and while you control your customer relationships, you also put yourself at the mercy of e-tailers such as Amazon. Channel partnerships allow you to align with a known entity that may have a significant customer

GETTY IMAGES

Know the differences between direct sales and channel partnerships

give you the opportunity to use your partner’s name and customer base to build buzz for a product and then set off to build your own brand. Channel partnerships aren’t right for everyone, but there are benefits that many people overlook to focus on building their brands from day one. In the end, what you really want is growing sales, and knowing your options gives you the best shot of achieving your goals.

base. Whole Foods was a great partner for GT’s Living Foods because the stores have loyal customers willing to pay premium prices for healthy products. You don’t control your own customer relationships, however, and if the values of your company and your partner’s don’t align, that can be trouble. A potential middle ground is a limited channel partnership that ends after a set period. That could

2021

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2/12/21 3:38 PM

CRAIN’S CHICAGO BUSINESS • FEBRUARY 15, 2021 9 SPONSORED CONTENT

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Why legal heavyweight Jenner is losing muscle JENNER from Page 1 Jenner’s local attorney headcount has declined by 30 percent since the mid-2000s as the legal industry, like others, divides into a top tier of super-players and the rest. Jenner risks being left behind. Its profit ratios have flatlined since 2010, as other Chicago law firms have doubled theirs or come close to doing so. These financial metrics impose market discipline on law firms because they’re crucial to attracting partners who bring the kind of high-end business that in a virtuous cycle spurs the numbers ever upward. Counting the Crown family, United Airlines, Northern Trust and Ulta Beauty as clients, Martin corralled choice opportunities for himself and his crew, creating friction inside Jenner that whittled his clout. Martin, 57, wouldn’t comment on what happened at Jenner. In a statement, he said Willkie Farr, a Wall Street law firm, “presented a once-in-a-lifetime opportunity to provide a full panoply of A-plus legal services.” For decades, Jenner has been trying to balance its litigation-heavy portfolio with higher-margin, more-repeatable transaction work

Randy Mehrberg. But talent flows with the dough. Willkie Farr’s profits per equity partner in 2019 were double Jenner’s, Kirkland’s more than triple. Mehrberg says Jenner for 2020 will report 10 percent higher profits per equity partner, though not enough to surpass 2016’s high-water mark in the wake of a lucrative General Motors investigation. He says Martin’s team accounted for less than 10 percent of revenue, which has been recouped elsewhere. “There are a lot of couples who have been married many, many years, and then go in a different direction,” Mehrberg says of the split. In Martin’s wake, Jenner is emphasizing teamwork and narrowing pay ranges for lawyers. Mentioning Martin’s Washington-based successor, Mehrberg adds, “Tom Perrelli is always about supporting others.”

PANDEMIC POSITIVES

In general, law firms are doing better than feared at the pandemic’s onset (Jenner 5000 hasn’t laid off or furloughed employees, though it has been sued for unpaid rent). 4000 Expenses melted away as meetings were canceled and travel curtailed, 3000 and with Zoom more business got done—and billed—than expected. 2000 & Winston Strawn “OUR STRATEGY IS NOT TO BE THE mounted only two trials in the last1000 six months (versus BIGGEST OR TO EVEN BE THE MOST the customary dozen), but 0 revenue dipped only slightPROFITABLE.” ly, says chairman Tom Fitzgerald. Profits per equity Randy Mehrberg, co-managing partner, partner rose 5 or 6 percent. Jenner & Block The Financial Times reported Kirkland’s revenue could but has been frustrated by the fact soar as much as $850 million, to it sues banks and other would-be $5 billion, for 2020. That increment corporate clients. would be almost double Jenner’s Jenner has a do-gooder repu- overall 2019 revenue of $448 miltation of taking on headline-pro- lion. Kirkland didn’t comment. ducing and sometimes thankless Joseph Gromacki, a Kirkland causes, successfully challenging alum who chairs Jenner’s corpoanti-sodomy laws in Lawrence v. rate practice, says its chief client, Texas, for example, and jury-se- defense contractor General Dylection bias in a death penalty case namics, last year relied on Jenas far back as 1960. Albert Jenner ner more than ever. Assignments advised both the Warren Com- included a $4 billion debt offermission and House Republicans ing. After Martin left and the panduring the Nixon impeachment demic took hold, “the firm really proceedings. realigned itself around its values,” “Our strategy is not to be the big- Gromacki says. “The firm came togest or to even be the most profit- gether.” able,” says co-managing partner Exelon is another long-stand-

P009_CCB_20210215.indd 9

ing client offering repeat business. The firms recently swapped high-level legal personnel after Exelon reached a settlement in a federal probe of the state lobbying practices of its subsidiary, Commonwealth Edison. (Mehrberg is a former Exelon general counsel and says Jenner started an energy practice in 2016 that now has more than 20 lawyers.) Still, Jenner hired 29 attorneys from other firms but lost 80 in the 12 months ended in early February, according to industry consultant Leopard Solutions. As it concentrates on New York and Washington matters, Jenner has seen its Chicago attorney headcount wither to a bare majority of the firm’s total, compared with 84 percent in 2006. Jenner isn’t unique. Excepting Kirkland, Chicago’s 10 largest law offices in the mid-2000s are nearly 25 percent smaller today. Better-performing immigrants like Willkie Farr have poached lawyers, and local firms are applying more rigorous productivity requirements even to their once-cozy home offices. Jenner has continued to land prestigious assignments, representing Apple during congressional antitrust hearings and serving as an independent monitor for the Trump-embroiled Deutsche Bank. It also has snagged government stars, such as a former acting solicitor general and an aide to special counsel Robert Mueller, each of whom returned to Jenner. The firm expects to gain as a result of increased antitrust scrutiny from a “reanimated” Justice Department under a new administration, says Katya Jestin, Jenner’s New York-based co-managing partner. Closer to home, Jenner has another reliable pipeline in Chicago politics. Former chair Anton Valukas, who brought in the bacon as the examiner in the Lehman Brothers bankruptcy case—allowing Jenner to apply 130 attorneys and another 70 contract lawyers—says at 77 he isn’t working as hard as he used to. Even so, in addition to advising corporate boards, the former U.S. attorney has been retained by an indicted target of his old office: Ald. Ed Burke.

Lisa Bombacino Morales Director, Supplemental Health Products Lisa.BombacinoMorales@ Cigna.com 708-420-0305 Cigna

Lisa Bombacino Morales directs the Midwest division of supplemental health products for Cigna, a global health services company.

Employers can easily add a supplemental plan through a carrier. The premiums are generally paid for by the employee at affordable rates available via a payroll deduction. Coverage can result in big savings for employees and ease their worries. Someone who suffers a broken leg in a car accident, for example, could receive as much as $500 for a trip to the hospital. The tax-free benefit can be used however the person chooses. Supplemental health benefits typically cover extra expenses associated with an unexpected accident, critical illness or hospital stay. Employers can offer a plan to cover one, two or all three situations at several different premium price points.

While supplemental health benefits have historically been used for critical illnesses such as stroke, heart disease, and cancer, the types of covered conditions are changing. That’s important to younger workers.

“Supplemental health benefits can help employees pay for unexpected60costs not covered by medical insurance.” 50 60 analyzed five Cigna 40years of claims data to find the illnesses with out-ofpocket expenses of $5,000 or more. As a result, Cigna’s supplemental critical illness includes neonatal intensive care, and conditions such as 50coverage now30 Crohn’s disease, advanced obesity, and advanced sepsis. Hospital care even pays 20 are flexible to match the employee’s needs. for maternity. The plans 40 10

Check 30 with your carrier to see if supplemental coverage pays for COVID-19 testing and related expenses. 0

Cigna folds some COVID-19 costs into a wellness benefit. It is added to the supplemental plan and incents employees to get preventative care. The wellness 10 benefit actually pays employees and their dependents to have a virtual doctor visit, COVID testing, screening for antibodies, the vaccination, and an annual virtual doctor’s visit. For a family of four, this can be an extra $200-$400 in the employee’s pocket. Look for enrollment flexibility. Employees can easily suffer information overload when it’s time to pick a medical plan. There’s a lot to consider. By offering a supplemental health benefit at a different time of year, employees have a chance to understand the coverage and its advantages. It’s important when an employee buys a plan that they file a claim when eligible. Cigna reaches out to employees to let them know they may be eligible. Ask your carrier how they will ensure that individuals can use their plan to the fullest extent. Supplemental benefits cost the employer nothing but can help ease anxiety among workers about rising medical costs at a very stressful time.

2/12/21 4:09 PM

10 FEBRUARY 15, 2021 • CRAIN’S CHICAGO BUSINESS

EDITORIAL

Don’t fire John Lausch, Mr. President admitted it had engaged in a longtime effort to bribe Illinois House Speaker Michael Madigan. Lausch’s team also indicted ComEd’s former CEO and a handful of the company’s key lobbyists, including Michael McClain, a close confidant of Madigan’s. Lausch’s work is far from done. Illinoisans eager to see state government cleaned up from the top down, however,

John Lausch

THE WORK HE IS OVERSEEING IS TOO IMPORTANT FOR BIDEN TO ALLOW THE UNNECESSARY DISTRACTION OF A CHANGE OF LEADERSHIP NOW.

AP IMAGES

hen the presidency changes hands, it isn’t unusual for the incoming administration’s Justice Department to ask U.S. attorneys appointed by the previous president to submit their resignations. The thinking, it seems, is that each president is entitled to have his or her own team in place. So, in general, the Biden administration on Feb. 9 was following established precedent when it requested resignations from 56 Senate-confirmed U.S. attorneys nationwide. Biden made two notable exceptions, keeping in place the Delaware U.S. attorney overseeing the tax probe of the president’s son, Hunter Biden, and John Durham, the special counsel appointed to trace the origins of the probe into President Donald Trump’s dealings with Russia. Illinois U.S. Sens. Tammy Duckworth and Dick Durbin were quick to press Team Biden to make one more exception: John Lausch, the U.S. attorney for the Northern District of Illinois. In a Feb. 9 letter asking Biden to let Lausch remain in his position until his successor is confirmed, they noted that there is precedent for U.S. attorneys in this district to remain in office across administrations, and they also noted that Lausch is overseeing “highly sensitive investigations.” What the senators didn’t say, of course, is that those investigations involve rooting out the rot and corruption that has involved members of their own party

here in Illinois. Lausch has coordinated a multi-pronged probe that has led him and his investigators very nearly to the uppermost levels of Illinois government, has driven several public officials from office, has indicted powerful officeholders such as Ald. Ed Burke, and has shone

a harsh spotlight on Springfield’s lobbying culture. In the wake of the ongoing investigation, Lausch’s office has entered into a three-year deferred prosecution agreement with Chicago utility Commonwealth Edison—a deal in which ComEd

can take some measure of comfort in the Northern District’s reputation for independence as well as the fact that Lausch was able to carry on the office’s tradition for hard-hitting investigations after Zach Fardon, his predecessor, was abruptly dismissed not long after Trump took office in 2017. But we shouldn’t have to be seeking consolation—we should instead look forward to keeping Lausch on the job. The work he is overseeing is too important for Biden to allow the unnecessary distraction of a change of leadership now. Keep John Lausch on the job, Mr. President.

YOUR VIEW

The state needs to do more for small business While the stock market soars to new heights and large corporations with enough capital and technological infrastructure find ways to survive and even consolidate into larger entities, small businesses are left wondering what the future holds and who they can ask for help. We do not yet have a full picture of the impact coronavirus and related shutdowns have had on small businesses, but many have been unable to survive, and others are still uncertain about their future. The federal government has taken measures to provide some level of relief, including multiple rounds of the Paycheck Protection Program and access to capital through Economic Injury Disaster Loans. As President Joe Biden’s administration and Congress consider further assistance, can struggling small businesses look to the state for help in surviving the economic impact of this pandemic? Gov. J.B. Pritzker and the state have taken some steps to help small businesses. The Business Interruption Grant program gives the Illinois Department of Commerce

face the difficult task of balanc& Economic Opportunity the ing the loss of tax revenue and ability to provide $275 million growing budget shortfalls with to small businesses through alsupporting an economic recovmost 9,000 grants. ery by providing economic reA separate grant for the hoslief for businesses. This dilempitality industry awarded $14 ma plays out no clearer than in million in small grants to 700 Pritzker’s decoupling proposal. bars, restaurants and hotels. The governor is asking lawTo help businesses take admakers to prevent a federally vantage of federal relief proapproved change to the tax code grams like the PPP, the state that would allow certain busihas invested $3.4 million in ex- Karim Lakhani is diness losses to be deducted immepanding community navigator rector of operations outreach programs and provid- and development for diately from 2020 taxes from aphis family’s hosplying to state tax bills. Although ing technical assistance. small businesses would benefit And the DCEO and state pitality company, Treasurer Michael Frerichs Lakhani Hospitality, from the additional capital of applying losses immediately inhave created some resources based in Skokie. stead of over several years, the for small businesses to apply for below-market loans to help stabilize governor argues that the state “cannot afford to expand tax breaks to businesses that althose that may be in need of capital. But has the state done all in its power to ready receive tax breaks.” Some states have passed initiatives aimed help small businesses survive? The pandemic and the slowdown of the at helping small businesses stay afloat. California is looking to expand the recently economy have exacerbated Illinois’ financial woes. The governor and Legislature passed Main Street Small Business Tax Cred-

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Chicago Business, 150 N. Michigan Ave., Chicago, IL 60601, or email us at letters@chicagobusiness.com. Please include your full name, the city from which you’re writing and a phone number for fact-checking purposes.

P010-P011_CCB_20210215.indd 10

it, which provides small businesses with a $1,000 tax credit for each employee they hire since the start of the pandemic. In Oregon, small businesses received penalty and interest waivers on 2019 personal and corporate income taxes, giving them additional time to pay without incurring a fee. In New York, the state Senate advanced legislation that would freeze unemployment insurance ratings for businesses for one year, preventing what could have been a large cost increase for small businesses. And in Pennsylvania, the state Senate recently passed a $145 million relief plan for grants to small businesses that would be temporarily funded through the state’s Workers’ Compensation Security Fund. Illinois’ small businesses will play a crucial role in the state’s economic recovery. As the state balances budget shortfalls with the need for further assistance, small businesses hope their governor and state Legislature will prioritize their survival and give them the assistance they need to reopen, rehire, and lift their communities in a post-pandemic economy.

Sound off: Send a column for the Opinion page to editor@ chicagobusiness.com. Please include a phone number for verification purposes, and limit submissions to 425 words or fewer.

2/12/21 3:39 PM

CRAIN’S CHICAGO BUSINESS • FEBRUARY 15, 2021 11

LETTERS TO THE EDITOR One Central plan needs to fit Chicago While Landmark Development already owns certain rights for some development over the train tracks in the South Loop, the potential for dramatic expansion from what was agreed to previously is remarkably out of touch with the needs of the neighborhood and, increasingly, of the city of Chicago more broadly (“$20 billion One Central megaproject resurfaces,” Jan. 25). The significant economic impacts of the pandemic, the economic inequalities made even more evident by this summer’s protests and the increase in crime all directly point to the need to strengthen our city. Those strategies must include investing in underserved neighborhoods and re-investing in the backbone of the city’s economy—the Loop and Magnificent Mile—to make those areas

vibrant for businesses, tourists and our communities. Adding this curtain of new buildings, as One Central’s earlier presentations and the prior coverage in Crain’s describes, would thwart the ability of the core downtown areas to retain occupants and to refill office and retail space left vacant. Especially as companies may dramatically reduce office footprints in favor of remote work arrangements and individuals may continue to shop online rather than in-person, the city should devise strategies that promote repopulating existing buildings and corridors. Without that, small businesses and franchises will not survive. Further, instead of a transportation hub that does not serve our neighbors on the South and West sides, the city should work with federal, state, industry and civic partners on infrastructure that creates access and thereby offers eco-

nomic mobility. I urge city leadership—Mayor Lightfoot, Ald. Dowell and her colleagues and the Department of Planning & Development—to work together on a way forward for a One Central development at a scale that makes sense for our city as a whole. ELIZABETH BRAUN RUSH South Loop

Data doesn’t equal communication Thank you for putting in print what so many Chicago residents are feeling (“Confused about the vaccine rollout? You’re not alone,” Jan. 22). How many press conferences do you need to announce something will be coming soon, and to complain about the uncertainty of the number of doses that

will arrive? Other states have set up vaccination locations and easily navigated sites for appointments. Enough with the excuses and complaints about the federal government’s ineptitude. We seem to have plenty of that here in Chicago also. Put someone in charge who knows how to roll this out like the best states have, or even follow their lead. I believe national statistics show we are close to the bottom of all states on what we have achieved to date with the vaccinations we have been allocated. There have been press conferences galore, but a barrage of data isn’t equivalent to clear communication and relevant action that will save lives here in Chicago. TIM CALLAHAN Chicago

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12 FEBRUARY 15, 2021 • CRAIN’S CHICAGO BUSINESS

WORKFORCE TRAINING SOURCES: Nonprofits, colleges and vocational programs, union training for trades, and government organizations. PAGES 14-15

CRAIN’S CHICAGO BUSINESS EDUCATION AND TRAINING

COMMUNITY VOICES: The head of One Million Degrees on apprenticeships as the catalyst for opportunity. PAGE 16

ALTERNATIVE PATHS TO GOOD JOBS How apprenticeships and vocational training can help narrow the wealth gap

AON’S CORPORATE OFFICE AT 200 E. Randolph St. is only three blocks from Harold Washington College in the Loop, but it might as well be in another time zone. The insurance giant never hired from the two-year community college. But after collaborating with the school on curriculum, Aon devised an apprenticeship program that provides paid en-

try-level jobs to 25 Harold Washington College students while they attend school. “We realized that unless we bring these students in for full-time jobs, we’re never moving the needle on diversity,” says Bridget Gainer, chief commercial officer for Aon’s public-sector partnership who also is a Cook County commissioner. Aon has teamed with other

large employers to establish an apprentice network to promote more diverse hiring—an association that’s expanded to more than 40 area companies. It’s one initiative in a sprawling ecosystem of training that includes union programs, community colleges, nonprofits and government agencies. Diversity in workforce training historically has been stymied in

terms of supply and demand. Corporate employers like Aon routinely recruited at four-year colleges for entry-level positions and didn’t consider alternative pipelines. Meanwhile, workers looking for training that leads to good-paying jobs face obstacles such as access to transportation and child care. Some candidates can’t afford to enroll in a training program that doesn’t pay a

JOHN R. BOEHM

BY JUDITH CROWN

salary or stipend. Just making sense of the options available can be daunting—both for job seekers and employers. When high school students are considering college, they can turn to a national guide such as Barron’s to research a school’s costs and majors, says Matt Bruce, executive director of See JOBS on Page 14

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TAX STRATEGIES Q1 2021 AND BEYOND

TACTICS FOR BUSINESSES AND INDIVIDUALS

While 2020 was a difficult year for many, tax filing in 2021 may hold opportunities for organizations and individuals that plan accordingly. As the new year began, three Chicago-area tax professionals shared their latest insights and advice with Crain’s Content Studio. What types of tax services does your organization provide? Barbara Webb: MGO provides specialty tax services, including R&D credits, transaction tax impact modeling, M&A document review, equity compensation review, transfer pricing, international tax and tax due diligence. Of course, we also offer tax compliance for all entity and return types. Our clients range from emerging to publicly-traded companies and portfolio investment vehicles in industries such as life sciences and tech to the rapidly growing cannabis industry. Nicole M. Szczepanek: Baker Tilly pairs the technical expertise and global resources of a large advisory CPA firm with the responsive service and competitive pricing of a small firm. Our tax professionals deliver forward-thinking services that help clients manage emerging risks and opportunities. We provide a robust suite of tax planning and compliance solutions, including federal tax, state and local tax, tax advocacy and controversy services, credits and incentives, M&A, international tax, transfer pricing and tax accounting. Edward J. Hannon: Polsinelli’s tax attorneys provide creative solutions and legal guidance on international, federal, state and local tax laws to entities in all major industries and tax status classifications. Our attorneys partner with clients to deliver solutions regarding business transactions, tax controversy and litigation, entity formation, tax practice financial services and international tax. What impact will the recent elections likely have on taxes or tax reform? Szczepanek: Expectations are that our new administration will increase corporate and individual tax rates and inflict further international tax reform. President Biden’s proposed tax legislation does not mention possible changes to either Paycheck Protection Program (PPP) loans or Employee Retention Credits (ERC), both of which have provided significant

cash assistance to private companies suffering from the pandemic. Webb: Business owners considering an exit and sellers in stalled or pending M&A transactions have a significantly higher degree of tax certainty regarding a transaction that closes in 2021 versus 2022. The elimination of like-kind exchanges is also possibly in the cards for tax reform, so real estate investors and manufacturers planning to defer gain though such an exchange may want to step up the search for that suitable replacement property to finalize the swap in 2021. Hannon: Many clients are concerned about completing transactions prior to year-end to avoid any potential increase in capital gain rates. Corporate clients with non-U.S. subsidiaries are focused on how the increase in U.S. corporate rates would affect tax costs under the Global Intangible Low Tax Income category, created under the Tax Cuts and Jobs Act of 2017. Other than the impact of the recent election, what’s the number one tax question or concern you’re hearing from clients?

Shareholder Polsinelli ehannon@polsinelli.com 312-463-6244 Similarly, many private companies are focused on state and local tax issues that must be addressed in relocating businesses out of high-tax states. Szczepanek: Clients are wondering when they’ll get their refund from the IRS. While it’s a typical question from any client, the pandemic has placed many companies in a position where there’s a need for cash now. Since the

NICOLE M. SZCZEPANEK Tax Partner Baker Tilly

nicole.szczepanek@bakertilly.com

312-729 8163

majority of my clients are private-equity owned businesses, they’ve not been able to take advantage of the PPP. In turn, the receipt of refunds tied to prior year returns or recent carryback claims takes on a larger focus. The CARES Act created the ability to carryback net operating losses five years through the 2020 tax year. Historically, the receipt of a refund tied to a carryback claim through the quick refund or amended

BARBARA WEBB

Tax Director MGO LLP bwebb@mgocpa.com 312-488-8293 return process takes approximately 90 days or four to five months, respectively. Due to the pandemic, the IRS is significantly backlogged in processing refunds, creating an additional stress for many businesses. What steps can businesses take now to plan for possible tax reform under the new administration?

Webb: Clients are asking about taxefficient business structures and exit plans. They all want to know if they’ve missed something, or if there’s a better way to operate from a tax perspective. These questions often lead to discussions of tax filing groups, entity choice, related company transactions and transfer pricing. When planning an exit from a business, clients of course want to model out the different options and verify that the tax result is something both buyer and seller can live with. Hannon: Our small- and mediumsized business clients are focused on how to utilize the tax savings opportunities created by the CARES Act. Meanwhile, our private equity and strategic buyers involved in M&A activities are focused on how changes in the Tax Cuts and Jobs Act impact how transactions are structured, and the pressures created by the accelerated depreciation rules.

“DUE TO THE PANDEMIC, THE IRS IS SIGNIFICANTLY BACKLOGGED IN PROCESSING REFUNDS, CREATING AN ADDITIONAL STRESS FOR MANY BUSINESSES.” — NICOLE M. SZCZEPANEK, BAKER TILLY

P019_021_CCB_20210215.indd 19

EDWARD J. HANNON

We focus on the numbers behind the numbers behind the numbers.

But only after we focus on building relationships. At Baker Tilly, it’s our dedication to people over spreadsheets that allows us to understand your business and build value where others can’t. It’s a way of thinking we call now, for tomorrow. So let’s get to know one another; and let’s get to work.

bakertilly.com

2/9/21 12:31 PM

TAX STRATEGIES Q1 2021 AND BEYOND TACTICS FOR BUSINESSES AND INDIVIDUALS Hannon: Businesses should assume that tax rates will increase at some point in the future. For example, future tax costs that would potentially apply to earnouts and payments of deferred purchase price in the sale of a business has become top of mind for clients contemplating M&A transactions in 2021. Similarly, for businesses facing financial distress because of the pandemic, a thorough examination of how the various tax-oriented debt modification/ cancellation rules will affect current and future tax liability should be at the top of their to-do lists. Szczepanek: There are so many unknowns that can impact future tax reform, from economic conditions to the state of pandemic-related stimulus. With that being said, businesses should focus on maximizing how they can benefit from current tax legislation. Working with their tax service provider will allow them to quickly identify what opportunities they qualify for and take action before the known opportunities expire.

Webb: Businesses should identify all anticipated decisions and transactions that could have a significant tax impact, then work with an advisor to analyze which are best to accelerate or delay and which are subject to too much uncertainty to judge right now. In general, all the calculations and tax modeling undertaken in response to the Tax Cuts and Jobs Act will have to be revised to consider whether what appeared to be tax-efficient strategies in 2018 will still hold true in 2022 or 2023. What accounting method changes are your clients most benefitting from? Szczepanek: With the passage of the CARES Act, corporations can now carry back tax losses for five years through 2020, incentivizing clients to leverage accounting methods to not only maximize tax deductions, but generate tax losses eligible for carryback. Typical accounting methods that drive deductions are prepaids, bonus depreciation on qualified improvement property (QIP)

“THE TAX BENEFITS FOR OPPORTUNITY ZONE DEVELOPMENT HAS BEEN A SIGNIFICANT DRIVER FOR SOME OF OUR CLIENTS.” — EDWARD J. HANNON, POLSINELLI

and bonus depreciation. The CARES Act corrected an error in the Tax Cuts and Jobs Act, which had made QIP ineligible for bonus depreciation. For many corporations, bonus depreciation on QIP can generate a substantial deduction. Significant refund opportunities can be gained through the use of accounting methods to drive tax losses. Webb: Many clients are jumping on the expanded availability of the cash method of accounting for tax purposes instituted as part of the Tax Cuts and Jobs Act, which the IRS has further extended in recently issued regulations. Under the Act, businesses with gross receipts averaging $26 million or less could change to the cash method, except in the case of a partnership with a significant number of limited partners in loss years. The new regulations allow a partnership with an occasional loss year to elect to use the prior year’s positive income to meet the test for the current year. As a result, eligible businesses that were putting off electing the cash method due to the potential back and forth may now face less tax uncertainty and feel freer to make the move and benefit from income deferral. What tax-related challenges or opportunities has the coronavirus economy created?

getting beyond big challenges As strategic partners who understand the complexities of international, federal, state and local tax laws, Polsinelli Tax attorneys offer legal guidance to help you make informed business decisions. Ranked No. 30 for “Client Service Excellence” among 650 U.S. Firms 2020 BTI Client Service A-Team, Dec 2019 Ranked No. 10 for Strongest Client Relationships 2017 BTI Industry Power Rankings, Aug 2017

real challenges. real answers.SM Am Law 100 firm with 900+ attorneys nationwide 21 offices from LA to NY 170+ services/industries polsinelli.com

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Szczepanek: A tremendous amount of legislation has been passed in the past several months focused on assisting businesses, including deferred payroll taxes, tax-free loans, enhanced interest expense deduction limitations and carryback claims. The pandemic has also accelerated companies’ assessment of growth strategies, restructuring and process efficiencies, with tax implications and tax strategy taking center stage. Proactive tax planning can position companies to efficiently repatriate earnings, lower state income taxes, lower effective tax rate and minimize cash taxes. While the pandemic has created many obstacles, tax planning can create additional benefits. Webb: The new prevalence of remote working arrangements has the potential to exponentially increase the complexity of a company’s payroll, income and sales tax reporting requirements. Employers may find themselves with reporting responsibilities in states where they’re completely unfamiliar with the rules and procedures. Some states—but not all—are expanding grace periods and loosening reporting requirements to accommodate employment situations created by COVID-19. Since many new working arrangements may be permanent, companies will eventually have to understand how to comply in states where they now have a physical presence. Hannon: Many of our clients in the financial services and real estate industries have been focused on potential tax issues that must be addressed in loan workouts, foreclosures and loan and lease modifications. Clients have also approached us looking for advice on whether to seek a PPP loan and how to avail themselves of the other tax relief provisions of the CARES Act. On a positive note, we’ve helped several clients form funds to purchase troubled loans and distressed properties. What should businesses understand about the tax provisions included in the most recent coronavirus relief bill? Webb: The Consolidated Appropriations Act of 2021 (CAA), passed on Dec. 27, clarified that business expenses paid with PPP loan proceeds are, in fact, tax-deductible even if the loan was forgiven. Furthermore, such deductions may also count toward any related tax credits, such as the R&D credit and the Work Opportunity Credit, a federal tax credit available to employers for hiring individuals from certain groups who’ve consistently faced significant barriers to employment. The IRS had already issued guidance on both counts to the contrary that’s now been rescinded. Given the significant amount of

confusion that’s surrounded tax issues related to PPP funds from the very beginning, businesses should work with their tax advisors to verify that all eligible expenses are being deducted for tax purposes and that forgiven PPP debt is not being included in income. The bill also extends many types of credits and incentives, so I would recommend reviewing that list in case an applicable credit that was assumed to have been phased out is actually still available. Hannon: The CAA also included a second round of PPP loans. Additional guidance has been issued on what’s being called PPP2, including eligibility rules that are somewhat different that those set forth in the CARES Act. Many of our clients that took out loans under PPP1 have contacted us seeking guidance on the various issues they may create if they also seek to obtain a PPP2 loan. Szczepanek: The amount of legislation passed over the past year can be overwhelming for many businesses to digest and understand. I encourage businesses to work handin-hand with their internal tax team or tax service provider to identify which legislative changes they can benefit from and begin taking action. Has the pandemic impacted how your teams serve clients? Hannon: Because our firm’s tax practice includes attorneys spread across several offices, when the pandemic caused us to work from home, we already had the technology in place to communicate internally and with clients. Szczepanek: While my teams and I have worked remotely since midMarch, the level of service, quality of work product and communication with our clients has not suffered. With the majority of my client base spread across the country, my teams have essentially been supporting our clients remotely since day one of our relationship. While I do miss being able to hop on a plane to visit a client, we have continued to “see” our clients through the use of Zoom and Microsoft Teams. I am proud of how my teams and clients who have juggled unique demands and supported each other throughout the pandemic. Webb: In a way, the pandemic situation validated our national tax practice service model that matches clients to professionals from around the country who are most suited to their needs. Pre-COVID, our service teams already transcended geographical location—my own engagements included professionals from our Chicago, Florida, New York and California offices. Now many months into this pandemic, clients view a remote service arrangement as viable and normal. Some potential

2/9/21 12:31 PM

SPONSORED CONTENT clients have told us that pre-pandemic they would not have been so open to engaging an advisor based in a different city, but now they see it doesn’t really matter. We could not have predicted how the world of work would change so rapidly, but fortunately we were already set up to meet the challenge.

certain gains in excess of the rolledover gain. These tax benefits provide real estate developers with a new, more flexible source of capital.

What federal and state tax credits and incentives are your clients pursuing?

Hannon: For small businesses facing pandemic-related financial distress, the various tax relief measures included in the CARES Act and CAA should be top of mind. In addition to PPP1 and PPP2, the ERC and other tax credits should be examined to confirm eligibility and to identify any collateral tax issues that may arise from claiming these credits.

Szczepanek: A number of our clients are looking to expand their physical presence or employment base within the United States. They’re collaborating with our negotiated incentives team to identify where they can achieve their growth goal and also lock in beneficial property tax incentives and jobs credits. It is an exciting time in this space as the pandemic has also driven movement to consolidate operations. Meanwhile, clients that invest heavily in technology/process improvements are benefitting from federal and state R&D tax credits. Our R&D team is helping clients not only identify and maximize eligible costs, but develop streamlined processes to capture and document eligible costs to capitalize on future credit opportunities. Webb: Businesses in many industries—from tech to health care to construction and even food and beverage—are potentially eligible for federal and state R&D credits. We’ve had many new clients who assumed they weren’t eligible for the R&D credit because their field was not obviously technical. If a business is engaged in experimenting and taking on risk, the R&D credit is definitely worth exploring with a tax advisor. We encourage even tech and life science startups with tax losses to pursue the credit since they may be eligible to apply it against their payroll taxes. The R&D credits can also become extremely valuable in a future transaction. So, it’s best to identify and document the supporting information while it’s available and fresh in everyone’s minds. Four new Illinois construction-related credits created under 2019’s Blue Collar Jobs Act are also generating a great deal of interest. These credits are worth 50 to 75 percent of Illinois tax assessed on construction project income and are based on wage withholding and project location. Each of the four credits has very specific requirements, so eligibility and compliance must be carefully evaluated and tracked. Hannon: The tax benefits for opportunity zone development has been a significant driver for some of our clients. Under opportunity zone rules, investors in a qualified fund can obtain not only tax deferral on rollover gain, but, if certain conditions are met, exclusion from income tax on

For owners of small businesses, what tax provisions should they be aware of?

Szczepanek: With many small businesses focused on taking advantage of the PPP, the ERC, a refundable tax credit, may have gone unnoticed. Significant extensions and enhancements were made to the ERC with the passage of the CAA, including the ability to potentially benefit from both the PPP and ERC. The CAA expanded the applicability of the credit to qualifying wages incurred from Jan. 1, 2021 to June 30, 2021. This included beneficial changes to the definition of a “large” company, reduction of the gross receipts test to 20 percent, and an increase in the maximum credit to $14,000— previously $5,000—per full-time employee. Webb: The list of changes is long, but significantly includes an increase in the value of the ERC from 50 to 70 percent of qualified wages. The details may require some effort to understand and evaluate but will certainly be worth it for many smaller employers. What’s the most important tax issue that high-networth individuals should be looking at in 2021? Webb: High-net-worth individuals should step back and take a comprehensive look at their tax planning assumptions in 2021, as several could no longer hold true within a year or two. Minimizing the current year tax liability may no longer be the best strategy if capital gains and ordinary income rates are predicted to rise. Now is the time to revisit estate planning strategies, as the current lifetime estate tax exclusion may shrink much earlier than anticipated. Spousal lifetime asset trusts and 678 trusts are two options worth exploring for moving wealth out of an estate while maintaining some degree of control over the assets. Hannon: Two issues we’re helping clients with include maximizing long-term capital gain treatment

“NOW IS THE TIME TO REVISIT ESTATE PLANNING STRATEGIES, AS THE CURRENT LIFETIME ESTATE TAX EXCLUSION MAY SHRINK MUCH EARLIER THAN ANTICIPATED.”

ABOUT THE PANELISTS EDWARD J. HANNON is an attorney and certified public accountant at the Chicago office of Polsinelli, an AmLaw 100 firm with 900 attorneys in 21 offices nationwide. He advises clients on tax-savings structures for real estate matters, including joint ventures for development projects and tax-advantaged structures for the investment in U.S. real estate by foreign investors and tax-exempt entities. He is a former chair of the Illinois CPA Society and teaches in the Masters in Real Estate Program at DePaul University Chicago.

NICOLE M. SZCZEPANEK is a certified public accountant and tax partner at the Chicago headquarters of Baker Tilly, one of the largest and fastest-growing advisory CPA firms. She has more than 18 years of experience delivering professional tax services, focusing on tax accounting, acquisition implementation and exit readiness for private companies in the private equity, manufacturing, technology and pharma/ life sciences industries. She is a member of the Ravinia Associates Board and is a two-time Boston Marathon finisher.

BARBARA WEBB is a certified public accountant and tax director at MGO LLP, one of the fastest-growing CPA and advisory services firms in the United States. Based at the Chicago office, which she co-founded in 2020, she guides a national client base through all phases of the enterprise life cycle, from startup to an M&A or go-public transaction. She delivers tax solutions to a variety of industries including technology, life sciences, private equity, construction, marketing and branding, consumer lending and cannabis.

when selling a business or property, and minimizing tax exposure in hightax states. By focusing on purchase price allocation provisions and tax sharing arrangements we’ve been able to address both of these issues on behalf of our clients.

Szczepanek: High-net-worth individuals should consider making taxable gifts to utilize the $11.7 million lifetime exemption that’s currently available, to the extent they are comfortable giving away the assets. As with any financial or tax

decision, it’s important to consult your professional advisors to understand how your personal situation may be impacted and the best planning for your fact pattern.

Accelerate income? Reorganize? Sell or dispose?

Prepare for

TAX REFORM

with atypical solutions from MGO ASSURANCE | TAX | ADVISORY www.mgocpa.com

- BARBARA WEBB, MGO LLP

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2/9/21 12:31 PM

22 FEBRUARY 15, 2021 • CRAIN’S CHICAGO BUSINESS

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5 steps to faster COVID vaccinations in Illinois With that in mind, Crain’s asked public health, logistics and emergency management experts how Illinois can pick up the pace. They offered five key recommendations.

CENTRALIZE CONTROL

Rather than delegating control to counties across Illinois, the state should directly manage vaccinations. Advantages: Centralized control marshals and deploys resources more efficiently across the state, boosting speed. Illinois’ decentralized approach breeds confusion as counties adopt their own standards for eligibility, hours of operation and communication, and inequities arise as vaccines roll out more efficiently in counties with more resources and better capabilities. West Virginia has been a consistent leader in getting its vaccinations out quickly. Rather than feeding supply to county health departments, as Illinois has, West Virginia’s National Guard transports vaccines to five state hubs, who allocate it to clinics. Drawbacks: A centralized approach could lead to unfairness by overlooking vulnerable populations that local organizations might reach. Of course, there’s no guarantee the state would handle expanded responsibilities efficiently. County health administrators criticized the state’s communication and logistics lapses during a Feb. 11 Senate hearing. Given that hard-to-reach populations are also those suffering some of the worst outcomes from COVID, the state has a difficult balance. Deputy Gov. Sol Flores says local health departments know their populations, regions and institutions best. Whether a local or central approach is better is a constant debate in the emergency management community, says Apostolis Sambanis, an assistant professor at the University of Illinois at Chicago’s Emergency Management & Resilience Planning Program. Also important to note: West Virginia is a smaller, less diverse state than Illinois, as are other states that have taken a more centralized approach.

BUILD A BETTER WEBSITE

Create a one-stop, statewide website where people could find appointments, a place in line, or even take a number to get a shot. Advantages: Better technology could improve the frustrating process of making vaccination appointments. Illinois forces people to navigate a bewildering array of county, hospital and pharmacy sites searching for appointment times. The quest can take days. Notification and booking “at best, has been very erratic and highly anxiety causing,” says Northwestern University logistics systems expert Hani Mahmassani. What’s needed is a comprehensive site that will show where and when appointments are available throughout the state. Illinois developed its own system, called EM Track, but most local health departments, hospitals and retailers insisted on using their own internal systems, Flores says. Others have shown technology can be used more effectively. West Virginia allowed everyone above 16 to preregister for a vaccine online,

NEEDS TO IMPROVE Illinois’ COVID vaccination pace lags the national average and top-performing states. SUPPLY ADMINISTERED National average: 69.6%

1. Utah 2. West Virginia 35. Illinois

88.0% 88.0% 65.4%

FIRST DOSE ADMINISTERED

Doses per 100,000 people

National average: 10,188

1. Alaska 2. West Virginia 29. Illinois

15,857 12,629 9,815

BOTH DOSES ADMINISTERED

Doses per 100,000 people

National average: 3,496

1. West Virginia 2. Alaska 45. Illinois Source: CDC

6,386 6,289 2,605 Note: Data as of Feb. 11

and private citizens have stepped in to fill technology gaps elsewhere. In New York, a software engineer spent $50 to build his own free website that compiles availability from city and state vaccine systems. A Massachusetts software developer built a similar website in three weeks and is now fielding requests from across the country about how to replicate it. Drawbacks: This plan would need to be augmented with non-tech solutions for those without internet access. The city of Chicago is pairing its partnership with Zocdoc—an online booking platform that will ping users by email if and when a spot opens up—with “Protect Chicago Plus,” a program that reaches out to people in communities that might be disconnected from the traditional health care system.

REWARD SPEED

Give more vaccines to facilities that are administering doses faster. Advantages: Rewarding speed would accelerate the overall pace of vaccinations, advancing the goal of herd immunity. Some agencies and county health departments are doling out vaccines at a much faster pace than others. Adams County, for example, has fully vaccinated nearly 9 percent of its population. Mahmassani recommends giving them additional doses. The state is allocating more doses to successful counties like Adams, Kendall and Champaign, but on a week-to-week basis, Flores says. Some counties have complained they’re left in the dark about what supply to expect long term. Drawbacks: In addition to potentially impeding equitable distribution, this could prove to be a political flash point that pits counties against each other. Successful rollouts in counties like Champaign are helped by robust existing relationships between community groups and providers that other counties may not have. The state could address these issues with a better program of technical support for places that are running behind.

ENLIST MORE VACCINATORS

Expand the ranks of vaccinators and vaccination sites by adding independent medical practices and

easing the approval process for people who volunteer to administer vaccines. Advantages: More vaccinators and more places to get vaccinated would make it easier to get shots. But while the state allows dentists, EMTs and pharmacists to administer shots, “most primary care doctors don’t have access to doses,” points out Dr. Ali Khan, executive medical director of Oak Street Health, which is vaccinating thousands in metropolitan Chicago. It’s a disadvantage, since primary care doctors are often the most trusted point of entry into the health care system. Including them would create a lot more locations where people can get vaccinated more quickly. The Chicago Medical Society has also complained that roughly 1,200 volunteers who want to inoculate people in the collar counties have hit a bureaucratic wall, forced to redo background checks and fingerprinting. Flores says the state is urging local health departments to reduce red tape but that an executive order to clear the way is unnecessary. Drawbacks: Not all independent or primary care doctors have the cold-storage equipment necessary to store existing vaccines. And Khan points out that doctors might not be financially able to put aside more revenue-generating appointments to give out shots instead.

SIMPLIFY ELIGIBILITY

Pare down the categories of people eligible in each phase of the vaccine campaign. Advantages: Much of the confusion surrounding current vaccination efforts in Illinois arises from the myriad categories of people covered by each phase of the rollout, with counties sometimes differing on who qualifies. For example, Illinois announced it will expand vaccine eligibility later this month to people with underlying medical conditions, but Chicago and Cook County are waiting, citing low supply and tens of thousands still eligible for vaccination. Champaign-Urbana Public Health Administrator Julie Pryde says Champaign County took a simpler approach that resulted in a vaccination rate of 5.09 percent, well above the statewide average. After vaccinating health care workers, it turned to those above 75. When demand waned, the county opened up to those above 65 with health conditions, then all those above 65, with other specified occupations to follow. Champaign also offered “catchup” clinics for stragglers and those who might need more time because they have a disability or need a translator. They got “zero pushback,” locally, Pryde says. Drawbacks: This approach requires extensive communication to inform people when they become eligible for vaccination. Pryde says her agency has an “unbelievable” number of partnerships with community groups that helped spread the word. Not all local health departments in Illinois have such extensive community relationships. Political pushback could be massive as well—disputes have already broken out about how prisoners, librarians and construction workers are classified.

2/12/21 4:06 PM

CRAIN’S CHICAGO BUSINESS • FEBRUARY 15, 2021 23

After a brutal year for Chicago’s construction industry, a nascent recovery begins new ones, wary of putting money at risk at such an uncertain time. the pandemic merely delayed oth- Obtaining a construction loan beer developments. Construction ex- came a lot harder. With little new ecutives are feeling a mix of relief business coming in, contractors’ that the worst is over and hope that pipelines began to shrink. Skender, a Chicago-based cona nascent recovery is already untractor, felt the impact quickly, esderway. “From our little corner of the pecially in its unit that builds out world, it’s certainly a whole lot interior spaces for tenants in office better than it was last year,” says buildings. The interiors business Damian Eallonardo, senior vice accounts for about 40 percent of president of operations at Chica- Skender’s revenue. “It was like someone stole the go-based W.E. O’Neil Construction. battery out of a moving truck,” says The company is even hiring again. The market won’t come back Justin Brown, president and CEO completely this year: Dodge fore- of Skender. Skender’s revenue dropped 6 casts just a 3 percent increase in Chicago-area construction starts percent last year, to $390 million, for 2021. But after last year, even and Brown expects it to fall even a small increase is good news for more this year, to $350 million. the businesses and workers who But construction is a lagging marearn a living by pouring concrete, ket, with revenue trailing bookings welding steel—or operating a tow- by many months. Brown expects Skender’s revenue to surge to $500 million by “WE WERE REALLY EXPECTING THE 2022. going to be a WORST. I THOUGHT WE WERE GOING lot“There’s of activity in the next six months,” Brown says. TO HAVE TO LAY EVERYONE OFF.” “You’re just not going to John Martello, general manager, see it until 2022.” Central Contractors Service The office interiors market remains a big er crane. Construction is one of the question mark: If office tenants area’s biggest industries, employ- continue to ask or allow employees to work from home after the paning more than 120,000 people. When the coronavirus crept into demic is over, will demand for inthe region, it didn’t stop construc- terior buildouts shrink or grow, as tion already well underway. Gov. more businesses reconfigure their J.B. Pritzker and Mayor Lori Light- space for a post-COVID world? foot allowed work to continue on Though the work-from-home existing projects. But investors, trend can’t be good for office landdevelopers and lenders held off on lords, smaller offices don’t autoCONSTRUCTION from Page 3

matically mean less work for companies like Skender. Ironically, office construction starts here jumped 69 percent last year—the biggest increase among all sectors, according to Dodge— mainly because developers broke ground on two huge office buildings that were teed up before the pandemic hit, Salesforce Tower on Wolf Point and BMO Tower in the West Loop. But Dodge forecasts a 39 percent drop for the sector this year. The industrial market has been a major bright spot, as developers stamp out big new warehouses for logistics and e-commerce companies like Amazon. Warehouse starts rose 25 percent in 2020, with a 2 percent gain forecast for this year, according to Dodge.

SLOW SECTORS

Not surprisingly, few contractors are building hotels and retail buildings amid the severe coronavirus-induced slump in those markets. But O’Neil has found some opportunities in the mall business. The company is demolishing a former Sears store at the Hawthorn Mall in Vernon Hills and preparing the property for major redevelopment that will include a large apartment building. Many construction companies are counting on a rebound in the apartment market, a huge growth sector during the boom. But the pandemic hit downtown multifamily landlords especially hard, one reason apartment development fell 56 percent in the Chi-

w MORE CRANES ON THE WAY After falling 25 percent in 2020, construction starts in the Chicago area will rise 3 percent this year, according to Dodge Data & Analytics. CONSTRUCTION STARTS IN THE CHICAGO AREA Nonresidential

Residential

$15.0 billion $5.90 billion

12.0 $9.0

$4.57 billion

6.0 3.0 0

2014

2015

2016

2017

Data does not include public works projects or utilities. *Forecast Source: Dodge Data & Analytics

cago area last year, according to Dodge. For some contractors, the suburbs will offer more opportunity. O’Neil, for instance, recently broke ground on a 17-story apartment building on the former McDonald’s headquarters in Oak Brook. Dodge forecasts a 26 percent increase in local apartment construction in 2021. Construction costs have edged lower over the past year as many subcontractors have reduced their prices, willing to give up some profit margin just to stay busy, says Eallonardo. But costs for wood, steel and other key materials have risen. “We’re not seeing any wholesale reductions in cost like we did in the Great Recession,” he says. Tower cranes, however, don’t cost

2018

2019

2020

2021*

as much as they used to. John Martello, general manager at Central Contractors Service, a crane rental company in Alsip, estimates that tower cranes rent for about 15 to 20 percent less than they did before the pandemic. Contractors rent the contraptions for big high-rise projects, where the cranes’ big booms swing overhead, moving materials into place for workers below. Martello also has had to cut jobs. Central employs about 160 people now, down from more than 200 in 2019, he says. But business is picking up and he’s feeling better about the market—much better than he did last year. “We were really expecting the worst,” Martello says. “I thought we were going to have to lay everyone off.”

Potbelly’s latest equity raise renews questions about its federal PPP loan exercisable at $5.45 per share beginning Aug. 13, 2021. Little noticed after the PPP anquestions about the $10 million Potbelly obtained through the federal nouncement in August was that Paycheck Protection Program just Potbelly repaid Chase nearly $21 before the first round of PPP expired million in the quarter, leaving its outstanding balance with Chase at last August. At the time, Potbelly said in a $12.8 million as of Sept. 29 on what Securities & Exchange Commis- was then a $40 million line, accordsion filing, “The (PPP) loan was ing to the SEC filing. That amount necessary to support the ongoing well exceeded the $14.5 million operations of the company due to Chase required Potbelly to repay in the economic uncertainty resulting a July 17 amendment to their credit agreement, according to the “WE’VE BEEN CLEAR . . . THESE FUNDS WERE filing. The moves USED ENTIRELY TO PROTECT AND SUPPORT together raise questions about . . . HARD-WORKING EMPLOYEES.” whether PotbelRobert Wright, CEO, Potbelly ly did, in fact, “lack access to from the COVID-19 pandemic and alternative sources of liquidity” lack of access to alternative sources when it sought taxpayer aid. The timing of the PPP loan in Auof liquidity.” Potbelly’s stock price on Aug. 10 gust and the substantial paydown when it entered into the agreement of Chase’s loan in the third quarter for the PPP loan was $4.18. Its stock also suggest that Potbelly swapped price on Feb. 9 was $5.34 when the out a forgivable loan from the U.S. private placement was finalized. taxpayer for a large chunk of a loan A little over 3.2 million new shares from the nation’s largest bank that were priced at $4.94 each, and in- was anything but forgivable. The vestors are getting warrants for subsequent equity infusion on Feb. nearly 2 million additional shares 10 raises questions about whether POTBELLY from Page 1

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critics had a point back in the spring when they took Potbelly and other publicly traded restaurant chains to task for accepting PPP loans when they had other ways to raise capital. Potbelly initially accepted $10 million in PPP through Chase in April but then agreed to return it in response to a public firestorm when many smaller privately owned restaurants were left waiting for funding. Potbelly reversed itself again in August and took the cash, but did it through a different bank than Chase. That PPP loan did require Chase’s approval, however, according to an SEC filing. Potbelly didn’t respond to questions about whether it intends to seek forgiveness of the PPP loan or about whether it will need to raise more debt or equity this year. A Chase spokesman declines to comment. In a statement, CEO Robert Wright says, “We’ve been clear since applying for and receiving PPP support, these funds were used entirely to protect and support the hard-working employees and families that rely on Potbelly for their livelihoods.” Indeed, it makes sense for him to reiterate that because the loan

isn’t forgivable under federal rules unless at least 60 percent is spent on payroll for at least eight weeks. Presumably, the $20.7 million Potbelly repaid Chase in the third quarter will have come from other cash sources—at least if and when Potbelly submits its application for forgiveness. Wright, former chief operating officer of Wendy’s, took over as Potbelly CEO in July. He’s overhauled management since then and looked to cut real estate costs and corporate jobs while accelerating sales as COVID-related rules on restaurants gradually ease.

‘STEADY PROGRESS’

On a Nov. 5 earnings call with analysts, he said the business had stabilized and made “steady progress.” “As I sit here today I have full confidence in our team and our strategic plan to restore Potbelly to growth as we exit this pandemic,” he said. “All of the intangibles and competitive advantages Potbelly possesses remain intact and will serve as the linchpins of our path forward.” On Feb. 10, he said in a release celebrating the private placement, “As 2021 progresses, we expect to

see our customers increasingly enjoy Potbelly’s offerings as the pace of COVID-19 vaccinations and dining-room reopenings accelerate across our markets. Thus, the proceeds from today’s offering and the revised credit facility will help bolster our balance sheet and provide the necessary capital to both boost the brand and invest in our future as we return to growth.” Even as Potbelly was tapping PPP cash, it opened three new shops— one company-owned and two owned by franchisees—in the third quarter while reopening another 14 that had been temporarily closed. Wright said in November that the company planned in the fourth quarter to open three more new ones and reopen 10 that had been shuttered. The confidence displayed by institutional investors in this new private placement demonstrates more optimism for the chain’s future. The worst clearly seems to be behind for a company that was forced to issue a “going concern” warning in May when Chase reset loan conditions threatening Potbelly’s viability following the initial PPP controversy. That warning is gone now in company disclosures.

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