Obama’s first boss has cost Chicago millions. So why does City Hall want to hand him another deal?

As a result of deals set in motion nearly two decades ago, five pension plans for Chicago city employers ended up losing more than $54 million on a risky real estate venture run by President Barack Obama’s former boss, Allison S. Davis, and his business partner Robert G. Vanecko, a nephew of Mayor Richard M. Daley.

Today, Davis owes taxpayers $6 million for a mortgage Daley handed him to build senior apartments — which Davis could lose for failing to pay $270,000 in property taxes, though Mayor Brandon Johnson’s Law Department is trying to block a tax buyer from getting a deed to the property.

Davis also owes City Hall more than $40,000 in unpaid water bills for the apartment complex and more than $360,000 in fees and fines related to those apartments and other projects, according to Johnson’s Finance Department.

But that isn't stopping the Johnson administration from continuing to do business with Davis, 85, a retired lawyer who headed Davis, Miner, Barnhill & Galland, the law firm that hired Barack Obama when the future president was fresh out of Harvard Law School.

Johnson’s Department of Planning and Development has agreed to sell Davis two vacant lots he wants as part of his plans to build a 26-story hotel a few blocks south of the future Obama Presidential Center, hoping to cash in on tourists when the center opens next year.

Davis’ planned hotel has won the backing of the Chicago Plan Commission — the influential advisory panel that Davis headed while Daley was mayor — and Ald. Desmon Yancy (5th), whose ward includes the property at 6402 S. Stony Island Ave.

But now, asked why City Hall's still doing business with Davis given his track record, Yancy says he wouldn’t have given his support if he had known about all of the money Davis owes and has cost City Hall.

“This is a troubling development,” Yancy says. “He owes the city quite a bit of money. It’s over a decade of debt. It would be against our fiduciary duty” to sell the vacant lots to Davis.

“Had any of this been declared before it went to the plan commission, I would have never spoken in support of this," Yancy says. “Unless he pays the debts, I won’t be able to support this project going forward.”

Asked about his support, Yancy points to the tax increases that he and fellow Chicago City Council members have been grappling with in the face of a $1.2 billion shortfall in the mayor’s proposed budget.

Davis and his lawyers, Richard Klawiter and Paul Shadle, didn’t respond to calls and emails regarding the proposed hotel and Davis' debts to the city.

Before City Hall would sell Davis the property he wants, he needs to get financing to build the 250-room hotel and a company to run it, according to Peter Strazzabosco, the city’s deputy planning commissioner. It’s unclear whether the money Davis owes City Hall will hinder his efforts to get financing.

“Once those contingencies are complete, the proposed land sales will be introduced to the City Council,” Strazzabosco says. “Once permits are issued, the sale will close with specified terms.”

Strazzabosco says the city hasn't yet gotten appraisals for the land but estimates that the two lots are worth $143,632.

Davis originally proposed to build the hotel on the three lots that he already owns, but an unidentified person in the planning department suggested that he include the pair of adjacent city-owned lots as well, according to testimony before the plan commission in August.

Davis' old law firm’s clients once included Tony Rezko, a developer and political fundraiser for Obama and other elected officials including former Gov. Rod Blagojevich. Rezko later was convicted of operating corruption schemes under Blagojevich and sentenced to 10 years in prison.

Davis’ shift to developer

During Daley's long tenure as mayor, Davis became a prolific developer, often teaming with other prominent Chicagoans, including Rezko, Leon Finney and Arthur Brazier, on housing projects.

In 2002, Davis hired the Daley & George law firm, run by the mayor’s brother Michael Daley, to help obtain financing to build Auburn Commons, a 71-apartment complex for seniors in the 1600 block of West 87th Street. Davis got a $6 million interest-free loan from Daley's housing department, which doesn’t require Davis to make any payments until the entire loan comes due. That will be on July 31, 2033.

As part of the project, Davis and his Neighborhood Rejuvenation Partners business were paid more than $370,000 in development fees, city records show.

A few years after seniors moved in to Auburn Commons, Davis created a real estate investment company with Vanecko, Daley's nephew. But the only investors they could find were five Chicago city pension funds — for teachers, transit workers, police officers, municipal employees and laborers. Altogether, the city employees' retirement funds invested $68 million with Davis and Vanecko's DV Urban Realty Partners.

Though their real estate deals eventually collapsed, Davis and Vanecko still collected $9 million in management and development fees on the projects they invested the pension money in.

The city workers' pension funds ended up losing a combined $54 million on the projects, including $11 million on a Mariano’s grocery store in East Lake View.

The Davis-Vanecko investments became the subject of an investigation by Chicago’s inspector general and a federal grand jury, but no criminal charges were ever filed.

Unpaid property taxes

Nearly five years ago, Davis stopped paying the property taxes on six of the seven lots that make up the Auburn Commons complex, according to Cook County records.

Davis has failed to pay $270,000 in property taxes on those six lots, plus penalties and interest dating to March 2021, those records show.

It’s unclear whether failing to pay the taxes could breach the loan agreement Davis has with City Hall.

Four tax buyers swooped in and paid the delinquent property taxes on Auburn Commons. That means Davis can pay them back, with interest and fees, or risk losing the deeds to the property.

One tax buyer, Nebraska Alliance Realty Co., filed a petition in Cook County court last July, asking a judge for the deeds to two of the Auburn Commons parcels. Davis could block the transfer by reimbursing the company for the taxes, interest and fees.

City Hall’s lawyers filed an objection on Sept. 2 — 12 days after the plan commission approved Davis’ hotel proposal involving the city-owned property. They warned that giving Nebraska Alliance the deeds to the property could jeopardize efforts to collect the $6 million loan that Davis personally signed in 2002.

“The city objects to tax deed transfers when taxpayer funds have already been invested to improve a property for the public’s benefit,” Law Department spokeswoman Kristen Cabanban says. “In the Auburn Commons case . . . the tax purchaser has petitioned for a tax deed, but the city provided $6 million to support the property, secured by a lien, in 2002.

"That debt remains due. State law requires those funds to be repaid before a tax buyer can take ownership. That law protects taxpayers by ensuring the city is reimbursed for its investment. Without this safeguard, tax buyers could take the value of city-funded improvements without paying for them, essentially a windfall at taxpayers’ expense.”