Once again the US Attorney’s office announces bribery indictments against corrupt developers and City employees.
Reading the press release I was struck by the names of the bribe payers: not the good old boys who’ve dominated Chicago building, but Eastern Europeans and other ethnics. It reminded me of a conversation a while back with a developer complaining about Eastern Europeans “driving down the margins” in the business by selling at lower price points.
So what’s going on here? Is corruption being addressed effectively or did the Feds get duped into protecting Chicago’s more favored developers from price-cutting competitors?
The only thing I know for certain about this story is that there are many untold stories behind it.
A friend has a construction business on the west side
and that is all he hires, I do not stand a chance.
Joe,
I have no doubt that there is a backstory here. Only time will tell how this came to the attention of the US Attorney/City IG. It could be the informant was caught doing something else and decided to play ball with the feds to cut his future sentence.
It doesn’t sound like those indicted were big enough to merit the attention of larger developers. I could be wrong.
I know that in the SW suburbs many of the small Irish builders have been complaining about the Poles for the last decade or so. Same complaint. They sell for less because they do most of the work themselves. There was a large tear down phenomena going on in Oak Lawn, Burbank, and parts of the SW side up until very recently. Many post war ranches were sacrificed so 2600+ square foot homes could replace them. I can close my eyes and picture the standard blueprint as I was shown the damn thing enough.
The amusing thing is that the large developers out there complained about the Irish working out of their basements and pickup trucks with a set of blueprints and no overhead. Then the Poles came along to annoy the Irish.
And so it goes……….
irishpirate,
In addition to price-cutting, these guys seemed to be driving up the price of payoffs, and that would annoy the established guys who were used to the days of buying building inspectors on the cheap.
I was shocked – shocked, I tell you – to read what it costs these days to pay off a zoning guy to declare a unit pre-existing. That price has escalated even faster than the cost of college tuition.
One of my business associates once supplied me 40 Mexicans to work on a job gutting a building. I balked when I got the first payroll because it called for paying only half of the minimum wage. When I told my associate that I had to pay minimum wage she threatened to pull “her Mexicans” off the job because I would be “spoiling them” by paying the minimum wage! Perhaps the Eastern Europeans are spoiling the building inspectors by overpaying them.
It’s all amusing, isn’t it, in our Chicago?
It is extremely common for the polish and irish builders to take a 10% to 15% GC fee for developing a project, which essentially is their profit in the deal, and then selling units at cost to undercut the market. For example: $1,200,000 hard costs to build a 3 flat would mean $160,000 in a GC fee, not to mention the subcontract fees if they provide the subs directly. They can attempt to sell out at 10% – 20% over their costs, but can just sell at cost if they need to and still make a fine profit. on another note, I personally know numerous builders that are basically extorted by certain alderman to get deals done. $10,000 per unit seems a common number.
Simon Deery,
$1.2M hard costs to build a 3-flat?
That doesn’t sound like a true number for construction costs to me, which is what most buildiers mean by “hard costs” and against which contractor fees would be computed.
Are you including land, etc?
How about naming some names on the aldermen?
I meant to say a 6 flat. $120/SF is the typical number used by Irish and Polish builders these days on 3 to 8 unit buildings. (obviously numbers change depending on the neighborhood). As a side note, a guy like Ranquist is about $135/SF.
Unfortunately, I can’t name names. I can tell you that some of the names are very well known. I’m sure that news does not surprise you.
Royko would’ve loved all this stuff – his work from over four decades ago doesn’t look dated at all, unfortunately.