Published Nov. 6, 2013, 9:56 p.m.

With broken windows, leaky roofs and metal mesh to keep loose bricks from falling onto people, the three hulking warehouses rise above West Pershing Road as monuments to the city of Chicago’s indiscriminate spending.

“It’s sort of like a vintage car. It’s got good bones. We’ve got it. Someday we might use it.” David Reynolds , commissioner of Chicago’s Fleet and Facility Management Department

Much of the cavernous complex — equivalent to 26 football fields — remains empty and uninhabitable even after Chicago officials poured $41 million in municipal bond money into the site over the past nine years. Fewer than 80 city employees are stationed there.

Before the spending began, one official warned that the buildings were a “financial sinkhole.” Just last month, a Chicago building inspector used the words “dangerous,” “hazardous” and “damaged” a total of 35 times in his report, and that inspection only covered the exterior of one warehouse.

There’s no end in sight to the work needed on the buildings and no solid plan for making them more useful.

“It’s sort of like a vintage car,” said David Reynolds, head of the department that oversees city-owned buildings. “It’s got good bones. We’ve got it. Someday we might use it.”

This is Chicago’s bond money at work.

Under Mayors Richard M. Daley and Rahm Emanuel , Chicago spent $9.8 billion in bond proceeds over 13 years in ways that threaten the city’s financial future and ignore the most basic tenets of municipal finance, the Tribune reported Sunday. Just a third of that spending, $3.2 billion, went toward capital improvement projects, including the type of lasting infrastructure that bonds were intended to fund.

Even then, as the Pershing Road boondoggle demonstrates, many of the bricks-and-mortar projects suffered from runaway spending, bad planning and a lack of transparency, records show.

Detailed spending plans the city provided to citizens, whose property taxes pay off the city’s general obligation bonds, turned out to be misleading. Time and again, dubious projects came in over budget and behind schedule.

Yet political leaders never had to pay a price. They could always issue another bond.

Rather than sober assessments of what the city needed — and could afford — a buy-it-now, fill-it-later mentality often guided decision-making.

Consider how long it took to make full use of the Goldblatt’s building in the West Town neighborhood. Chicago finance officials borrowed to buy the vacant department store in 1997 after a community group complained that a grocery chain was going to raze the historic building to make way for a supermarket. Daley pacified the neighborhood activists, but the city wound up with a 167,000-square-foot property it didn’t need.

His administration converted part of the first floor into a senior center in 2002 and added a branch library by 2010 but still had four more floors to fill. The rest became offices for city workers — even though the city already had too much office space. It took 14 years to fully fill the building.

The original money borrowed for Goldblatt’s ran out long before the spending did, so the city tapped 10 other bonds. The total price tag was more than $31 million, plus interest.

After neighbors complained about plans to raze a vacant Goldblatt’s building in West Town, Chicago officials used borrowed money to buy it. The city didn’t make full use of the space for 14 years. Abel Uribe - Chicago Tribune

While bond money earmarked for capital improvement paved streets, built fire stations and acquired new parks, the Tribune found that hundreds of millions of dollars also went to more prosaic city expenses, such as painting street-light poles, replacing light bulbs, funding audits and getting rid of pigeons.

Even if the city were flush, officials would be hard-pressed to explain the public benefits of some of the spending. The city, for instance, used bond money to buy a store it condemned and then sold at a loss to a politically connected restaurateur who turned the property into a private parking lot.

And while city officials argued that a spending spree to build police stations and libraries improved city life, their own lack of planning undermined that purpose. Debt payments now eat up more than half of the city’s property tax revenue at a time when the city struggles to balance its budget.

Since 2000, Chicago added 10 new police stations — each two to four times larger than the old one — but now has 1,700 fewer cops on the streets. It built 16 new library branches with bond money but has cut hours by a quarter.

To analyze how the city used general obligation bonds, the Tribune examined thousands of pages of financial documents, tax certificates, land records and City Council proceedings. The city did not provide spending data until the Tribune hired outside lawyers to press for the information.

In most other large cities, officials seek voters’ permission on building projects before issuing general obligation bonds, which are backed by property taxes. But that’s not how it works in Chicago. Illinois law allows Chicago’s leaders to borrow with abandon.

Of the 10 largest cities in the U.S., Chicago is the only one without a limit for these kinds of bonds. And Chicago’s leaders blew through nearly $10 billion without putting a single referendum question on the ballot.

Those ballot initiatives give voters the final say. But Chicago Chief Financial Officer Lois Scott, who issues debt for Emanuel, said she feels referendums can constrain growth.

“In my experience where referendums have been used,” Scott said, “a great deal of financial time and talent gets spent trying to avoid them.”

Parking for a pizza joint

Packed with cost details and construction dates, Chicago’s inch-thick books for its Capital Improvement Program seem like models of public disclosure about thousands of city projects paid for with borrowed money.

But the books often don’t match up with actual bond spending. Many buildings were wildly over budget, opened late and drew from bond funds never mentioned. Some projects never got built, while others that did aren’t even listed.

For instance, in the 1,154 pages of Capital Improvement Program disclosures issued by city finance officials between 2004 and 2006, there is not one mention of Tony’s Liquors, Leona’s restaurants or how Bond Fund 497 was used to turn the store into a parking lot for the restaurant.

The city used funds from the “Neighborhoods Alive!” bond-spending program to purchase a liquor store that it then demolished, making way for a parking lot that serves the Beverly location of Leona’s restaurants. Chris Walker - Chicago Tribune

Fund 497 was part of Daley’s $800 million “Neighborhoods Alive!” bond-spending program, which the City Council approved more than a decade ago along with a property tax increase to help cover the debt payments. At the time, Daley likened his plans to his predecessors’ historic decisions to rebuild the city after the Great Chicago Fire and to reverse the flow of the Chicago River.

“In our hands rests the power to unleash Chicago’s boundless potential,” Daley told the council, “the power to push us beyond any other city in America in terms of quality of life.”

But in one neighborhood, city officials tapped Fund 497 in a way that had very little to do with quality of life — unless you’re a customer of the Beverly location of Leona’s restaurant.

In January 2005, city officials spent $510,000 from that fund to force out a neighborhood store, Tony’s Liquors, condemning and buying the building. Over time, those bonds will cost taxpayers $730,000. The city also paid to demolish the building.

Tony’s Liquors just happened to be around the corner from Leona’s, part of the chain then co-owned by a politically connected restaurateur, Salvatore “Sam” Toia.

A year after the city purchased and knocked down Tony’s, Chicago officials sold the land for just $350,000 to a Toia real estate partnership. That company, at its own expense, turned it into a paved parking lot for Leona’s.

Daley and Emanuel both have appointed Toia to city boards and commissions, including one that uses tax money to help promote economic development along the stretch of Western Avenue where the Leona’s restaurant sits. In his early days in office, Emanuel also appointed Toia to the powerful Zoning Board of Appeals.

Tony Pandolfi, who owned the liquor store property for 30 years, said he was ready to sell but the restaurant chain offered him “a pittance” for his land, so he turned it down. Then the city condemned his property.

“I was double-crossed,” Pandolfi said.

City attorneys told a judge in a court filing that Chicago needed Tony’s Liquors for “public parking.” Land records show that the city required Toia’s company to share the lot with the Beverly Arts Center, a private nonprofit group across the street, for five years.

But arts center patrons who parked there got towed, said Bill Figel, a member of the arts center board from 2002 to 2012.

“People were coming back to the front desk saying, ‘I thought you said we could park over there,’ and then the front desk said, ‘Well, we thought you could,’” Figel said.

Ultimately, Figel said, the arts center told people to stop parking there.

The current interim executive director of the arts center said she reached an agreement with Leona’s when she took over last year and that patrons have used the lot a half-dozen times during large events when the center’s own lot was full.

Toia, through a spokeswoman, said he divested of his interest in Leona’s and its real estate holdings in 2012. The spokeswoman referred questions to an attorney who handled the land deal with the city.

The attorney, Thomas Johnson, said Leona’s didn’t try to buy the liquor store from Pandolfi and that the restaurant did share the lot with the arts center as promised. Johnson said Leona’s only towed the cars of people who were going to nearby bars late at night, not patrons of the arts center.

Nine years after the city’s attorneys said they needed Tony’s Liquors for public parking, warning signs now greet anyone who enters the lot where the store once stood. “LEONA’S PARKING! Customers only please,” reads one. “All others will be towed.”

New stations, fewer cops

On a Saturday in March 2012, with budget cuts looming, police Superintendent Garry McCarthy told reporters at a news conference at Lakeview’s Town Hall station that he planned to consolidate police stations the following day.

“It’s not the buildings that protect the public,” McCarthy said in defending the closings. “It’s the officers.”

Less than two years earlier, when Daley cut the ribbon on Town Hall, the mood was quite different. The station was part of a bond-funded building boom that began before McCarthy became superintendent and has pumped more than half a billion dollars into new city facilities since 2000.

Even though city finances were deteriorating, the Daley administration didn’t rein in the construction costs on these projects.

Four police stations each went more than $10 million over the amounts originally allocated in the Capital Improvement Program. For example, records show that the Bridgeport station opened five years late and cost an additional $25 million. Fire stations also saw their final costs soar. Frequently, officials took more money from new bonds to finish.

Daley, who declined to be interviewed for this story, issued a written statement last week defending his use of bond funds.

Cumulative spending of bond proceeds on new police station in Bridgeport Source: Tribune analysis of public documents

“We built and equipped libraries and schools, police and fire stations among many other improvements not just as a means of strengthening neighborhoods but also because I knew that when you don’t spend significantly on infrastructure and technological advances that benefit generations to come, you condemn your city to be outdated and unable to compete in a global economy,” he wrote.

But, during Daley’s later years in office, payments on Chicago’s mounting debt, together with rising pension and health care costs, put increasing pressure on the city’s operating budget. The size of the police force shrank by more than 12 percent since 2000, even as Chicago spent more than $340 million building 10 new police stations.

After the department consolidated operations to match its shrinking resources, holding cells now sit unused at three of the new stations.

One of those is the $53 million Town Hall police station, which opened two years late and nearly $30 million over its original budget listing in the Capital Improvement Program. Even with 44,000 square feet of space, the station lacked one basic feature: a lockup for women.

That omission wouldn’t have mattered in less lean times, since a station 21/2 miles away on Belmont Avenue was equipped to house women. But last year, to save money, McCarthy decided the department would staff only one of the two lockups. And it couldn’t be Town Hall.

The Town Hall police station in Lakeview opened two years late and nearly $30 million over budget. Today its lockup is not being used, as budget pressures have squeezed police operations. Chris Walker - Chicago Tribune

Now, the new holding cells at Town Hall are mothballed. Officers first have to process both men and women at Town Hall, then make the traffic-clogged drive to the Belmont station to hold them — a routine that adds up to 45 minutes to an arrest, according to Fraternal Order of Police President Mike Shields.

“There’s less guys that are actually policing the street,” Shields said.

Two other new stations paid for with bond money — the $27 million Albany Park station and the $36 million Near West station — also don’t use their lockups.

In the Pilsen neighborhood, served by the Near West station, activist Teresa Fraga is glad the police have a new facility but wonders what difference it has made on the streets.

“That didn’t impact us either way,” said Fraga, a board member of Pilsen Neighbors Community Council.

The Chicago Public Library also went on a building spree and also has struggled to find money for operations. Library officials spent about $70 million in bond money building 16 branches since 2000. That doesn’t include more than $130 million in bond money the library spent on books, technology and supplies during that time.

Library spokeswoman Ruth Lednicer said library construction was handled in a sound strategic manner because it “primarily built replacement branches or consolidated branches, meaning the staffing needs remained the same.”

Still, library leaders have been forced to tighten their budget in recent years, cutting staff and, in 2010, slashing weekly hours at branches by a quarter, from 64 to 48. These reductions came during the economic downturn, when library services — key for job searching — were in high demand.

Midway through the construction boom, the city was already clamoring for more money to run the library system, and in 2007 aldermen voted to raise property taxes at Daley’s behest.

But the city didn’t stop building libraries with borrowed money, opening seven new branches between 2009 and 2011.

‘Good bones’

In their heyday during World War I, the three buildings on West Pershing Road served as a supply depot and housed 6,000 Army workers. But by 1981, the federal government was so eager to unload the buildings, it turned them over to Chicago Public Schools for only $1.