Olympics 2016

CHICAGO (CBS) ― Talks aimed at building a $1.1 billion Olympic Village on the campus of Michael Reese Hospital have broken off, in what amounts to a major hurdle for the city's plans for 2016 Olympics.

As CBS 2's Joanie Lum reports, the plan for the Olympic Village at Michael Reese was a key component of the city's Olympic bid, and without it, the bid will be incomplete.

The plan was for the city to borrow $85 million to buy the campus of the hospital at 29th Street and Cottage Grove Avenue, close to McCormick Place and the lakefront. The hospital, which has announced plans to close by the end of the year, would have been demolished to make way for the Olympic Village.

Ald. Toni Preckwinkle (4th) and Mayor Richard M. Daley said the Olympic Village could be built on solid ground at the site at a low cost, and they said it could later become housing for the Bronzeville community.

But the deal apparently broke down when the owner of the property, Medline Industries, broke off talks with the city.

The original plan called for demolition and cleanup costs to come out of Medline's pocket, at a cost of $20 million that the city characterized as a "charitable contribution." In the proposed deal, Mayor Daley wanted to roll the dice that the depressed real estate market would come roaring back.

The $20 million was supposed to be enough to cover demolition, environmental cleanup and five years of interest payments on the loan at a rate of 5 percent. But costs to raze the 37-acre campus came back 60 percent higher, at $32 million. Chicago 2016 Chairman Pat Ryan tried to salvage the deal by renegotiating the purchase price, but Medline apparently wouldn't budge.

Now it's back to the drawing board -- either by reviving the original plan to build the Olympic Village on air rights over a truck staging area for McCormick Place or building it south of 31st Street on a massive parcel being developed by Draper & Kramer.

"We just reached an impasse at this stage as to what is appropriate when you consider the value of the land cleaned environmentally and cleared of existing facilities that make it available for development," Ryan said Tuesday.

"We've been keeping the taxpayers of Chicago paramount in our minds. We're not willing to have an investment in the future of that development that's not the appropriate value. We don't want to burden the taxpayers with anything at all. That's been the plan from the beginning -- that this be a village that stands on its own for private development."

A top mayoral aide, who asked to remain anonymous, added, "We were trying to come up with a transaction that protected the integrity of the [Olympic] bid and balanced all that with a financially viable transaction. We couldn't get to the 'financially viable transaction' part."

Medline spokesman Jerreau Beaudoin could not be reached for comment on the stalemate.

Ryan said the city has until Feb. 2 -- when the final 2016 Summer Olympic Games bid book must be in the hands of the International Olympic Committee -- to refine its original plan for the village and pursue "alternatives."

"I wouldn't define it as a blow. We have a plan that works and has passed review, but we've wanted to add to it to improve the impact on the community ad the development opportunity…for the Near South Side," Ryan said.

The mayoral aide added, "Our original plan made a lot of sense. We were talking about under-utilized property on the lakefront. It was attractive to athletes, very close to the Barcelona model."

The Reese deal has been controversial from the outset.

At a time when Daley is poised to lay off well over 1,000 city employees to erase a $420 million budget shortfall, aldermen have wondered why City Hall was willing to take an $85 million gamble that the depressed real estate market would make a rapid recovery.

Although the loan would have been backed by property taxes, Ryan and City Hall had insisted that taxpayers would not be holding the bag. Long before the principal is due, the city had hoped to recoup its costs by selling the property to a developer.

CBS 2's Joanie Lum and the STNG Wire contributed to this report.

(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)

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