Thursday, June 15, 2006

Questions About Denny's Drive-Thru

I don't know Denny Hastert's spokesman Ron Bonjean, so I can't tell you whether he holds the public in contempt or if he thinks we are all fools. But this story from your Chicago Tribune about Denny's windfall profit for flipping land near his Prairie Parkway indicates it is one or the other:
Republican House Speaker Dennis Hastert and two partners turned a profit of more than $3 million on property they accumulated and sold in just over three years near the route of a proposed controversial freeway on the western fringe of suburban Chicago, according to land records and financial disclosure reports released Wednesday.

Hastert spokesman Ron Bonjean rejected the notion that the land, located 5 1/2 miles from the proposed Prairie Parkway route, rose in value because of the highway project. The speaker long has been an aggressive proponent of the highway and helped secure more than $200 million in federal funding through an earmark in federal transportation legislation.
Of course he has. But the question is not whether the Prairie Parkway was a new idea. The question is whether Denny's personal profit of more than a million dollars was due to some abuse of his position as speaker.
The property near Plano, Ill., was sold three months after the transportation bill was signed into law. It was purchased by a real estate developer who is planning to build more than 1,500 homes on the land.

Kendall County, where the land is located, has one of the fastest-growing housing markets in the nation, and there has been a corollary rapid rise in land values. ***

Hastert received five-eighths of the proceeds from the land sale, said Dallas Ingemunson, one of his partners. That indicates a profit of more than $1.5 million for Hastert. ***

Bonjean said the speaker had fully complied with financial disclosure rules for members of Congress and had simply profited from a well-timed real estate investment.

"For 26 years, the speaker has been a proponent of the Prairie Parkway to address the transportation challenges in northeast Illinois," Bonjean said. "None of the properties purchased by the speaker are near enough to the Prairie Parkway to be affected by the proposed highway."
That's right. Mr. Bonjean thinks you will believe that having an expressway built five miles away has no effect on a property's value. As I said above, I don't know if he thinks you are stupid enough to believe that load of bull or if he doesn't give a damn if you believe it or not.
Kendall County land records show the 138-acre parcel was transferred to a real estate developer in a sale valued at $4,989,000 in December 2005, about three months after the highway legislation was signed into law.

The land had been accumulated in phases. The first 69-acre parcel was part of the purchase of a larger 196-acre farm made under the name of the speaker's wife, Jean Hastert, in August 2002. According to land records, she paid $2,125,000 for the property. On a per-acre basis, the original prorated cost to Hastert of the parcel included in the later deal was $868,000.

The remainder sold to the developer was purchased by a land trust in which Hastert shared a quarter-interest in February 2004. The partnership paid $1,033,000 for the parcel, according to land records. In addition to Ingemunson, the other partner was Thomas Klatt, a local trucking company owner who also has been a long-time supporter and campaign contributor to Hastert, Bonjean said.

Bonjean said he could not immediately determine how the partnership divided the proceeds. He added that the value of the two parcels was enhanced by combining them because the land purchased by the partnership gave the property direct access to a roadway.
So Mr. Bonjean apparently understands that transportation availablity enhanced the value of Denny's property -- but doesn't seem to understand that the transportation opportunities offered by a 200 million dollar expressway would also enhance the value of that property.
The developer who purchased the land said the proposed Prairie Parkway was not a deciding factor in making the deal.

"We would have done the transaction whether it [the parkway] was proposed or not," said Arthur Zwemke, a partner in Robert Arthur Land Co. who also has been a donor over the years to Hastert's campaigns.
Once again, this misses the point. I don't doubt that Mr. Zwemke might have purchased the property even if the Pairie Parkway had not been funded. The question that needs to be asked is, "Would he have paid as much if Denny hadn't secured federal funds to put in the nearby expressway?"
More important than the planned freeway are the land's location in the fast-growing western exurban Chicago corridor, a favorable political climate for growth, and the availability of good infrastructure like water and sewer, he said.
Again, he might have purchased it, but would that purchase -- without the expressway -- have resulted in such a windfall profit for Denny?
Zwemke said he inherited the financial terms for all of the land in contracts acquired from another developer, who decided not to pursue the project.

He acknowledged that he paid a price well above what Hastert and his Little Rock partners paid in assembling the property in less than four years, but said, "We have a fair deal. Everything was market value."
But what would the property's market value have been if Denny had not seen to it that an $200M expressway was built nearby?
The site is attractive, Zwemke said, because the land for it was assembled in just two transactions, the one with Little Rock and another concluded last August with the owners of an adjacent 589-acre farm.
Say it with me: The question isn't whether the site is attractive or if the parcels of land would have been sold if Hastert's Prairie Porkway had not been federally funded.

The question is: Could the Speaker of the House and his partners have flipped the property for such a huge profit, in such a short time, if not for Denny's using his power as Speaker to earmark $200 million dollars of taxpayer money to build a freeway nearby?

Unlike Mr. Bonjean, I think you are smart enough to figure out the answer.

UPDATE: Think Progress has a "graphic timeline explaining how House Speaker Dennis Hastert (R-IL) used a federal earmark to turn a $1.5 million profit"


Anonymous said...

Anytime a public official makes a huge profit on real estate by flipping in just two years, it's going to look very, very fishy, at best. More so when the land in question is impacted by hundreds of millions in Federal spending sought by the official in question.

The serious ethical questions raised on the face of such a deal is why no official who's not joined at the hip to Dallas Ingemunson seems to be doing it.

Remember how Republicans had kittens over Hillary Clinton's cattle futures deal several years ago? And she herself wasn't even a public official yet, just the wife of one.

Wonder if Denny or his people had anything to say on that back then. The spin from Hastert's camp certainly sounds similar to the "justifications" for Hillary spouted by James Carville back then, that's for sure.

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Diana said...

Kendall County is a county located in the U.S. state of Illinois. As of 2000, the population was 54,544. According to Census Bureau statistics released in March 2007, its 2006, sportsbook, estimated population of 88,158 makes it the second-fastest growing county in the United States between the years 2000 and 2006. Its county seat is Yorkville, Illinois. This county is part of the Chicago metropolitan area.


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