NEWYou can now listen to Fox News articles!
Concern is mounting that taxpayers could be left holding the bag if the Obama Presidential Center runs into financial trouble, as the foundation behind it has yet to establish a promised $470 million safety net to guard against a public bailout.
The scrutiny comes as a Fox News Digital investigation found multiple contractors and subcontractors claiming losses ranging from hundreds of thousands of dollars to millions on the project, with some alleging they remain locked in payment disputes and face financial ruin just days before the center’s grand opening.
Under its agreement with the city, the Obama Foundation pledged to create the fund, known as an endowment, as part of its 99-year deal to take control of the publicly owned 19.3-acre section of Jackson Park for a one-time payment of just $10.
Fox News Digital previously reported that the foundation had deposited just $1 million into the reserve fund in 2021 and that the balance remained largely unchanged in its most recent publicly available filings.
VALERIE JARRETT EARNED $740K AS OBAMA INSIDERS FILLED TOP ROLES DURING $850M PRESIDENTIAL CENTER BUILD
Concerns about the center’s financial state have raged for years, especially since construction delays and costs have ballooned from an original estimate of roughly $330 million to at least $850 million based on 2021 figures. An updated final projected cost has not been made public.
Endowment concerns
“One of their core promises was they were supposed to create an endowment as basically an insurance policy so the taxpayers wouldn’t get stuck with the bill,” Illinois GOP Chair Robert Grogan told Fox News Digital outside the center last week as worker vehicles entered and exited the center.
“They promised hundreds of millions of dollars for it. It’s still sitting at the $1 million mark [where it stood] when they opened it up. So I don’t believe that they’ve kept that promise.”
The contractor disputes have renewed concern of the endowment because critics argue the fund was intended to serve as a backstop if the project ever encountered financial distress. The Obama Foundation disputes suggestions that taxpayers face exposure and said the project is funded through private contributions.
Grogan said reports that contractors and subcontractors remain locked in payment disputes make the largely unfunded reserve even more problematic.
“The fact that they have created this probably unsustainable edifice to an ego and then, eventually, if it goes under, who’s going to be caught with the bill time and time again? It’s the taxpayers of the city, citizens of Chicago and the state of Illinois.”
BUREAUCRATS HIDE TRUE PRICE OF OBAMA PRESIDENTIAL CENTER AS TAXPAYERS HIT WITH INFRASTRUCTURE BILL
Richard Epstein, a New York University law professor who has spent years challenging the project in court, said the reserve fund was intended to protect against exactly this type of uncertainty.
“The whole point of an endowment is to fund future expenses,” Epstein told Fox News Digital, adding that the endowment acts as a financial backup if future fundraising falls short.
“If the endowment hasn’t been filled, the building [could] fall into neglect, it then becomes a safety risk, and it turns out that nobody’s going to pay the bill,” Epstein said. “The city therefore, is going to have to assume additional obligations to make sure that thing is kept in place.”
Grogan said reports that contractors remain unpaid only reinforce the need for closer scrutiny and called for an investigation if allegations that subcontractors were left holding the bag prove accurate.
Subcontractor disputes raise new questions
A Fox News Digital investigation identified multiple construction firms claiming losses ranging from hundreds of thousands of dollars to tens of millions.
Outside the center last week, Adamson Plumbing President Mike Owen provided company spreadsheets to Fox News Digital, which he said showed that his firm is nearly $4 million in the red. He said that unnecessary rework, delays and more than 100 change-order requests left his company absorbing millions of dollars in additional costs.
In addition, Omar Shareef, the president of the African American Contractors Association, told Fox News Digital outside the center last Saturday that several Black-owned contractors are also in financial difficulty due to the project.
The claims raise fresh worries about the center’s long-term financial sustainability because an endowment is intended to provide a permanent source of income that can help fund future operations and cushion against financial stress. Endowments are typically invested, with a portion of the earnings used to support an institution over time.
The Obama Foundation told Fox News Digital that it is in compliance with its agreement with the city, noting that the pact required the creation of an endowment but did not specify a dollar target.
OBAMA PRESIDENTIAL CENTER DEPOSITS JUST $1M INTO $470M RESERVE FUND AIMED TO PROTECT TAXPAYERS
The foundation said the Obama Presidential Center is “fully funded” and that it plans to make “significant investments” in the endowment in the coming years.
“On the eve of our Grand Opening celebrations, we are pleased to reiterate that the Obama Presidential Center is fully funded with generous private contributions,” the Obama Foundation said in a statement.
The $470 million figure emerged during public discussions surrounding the project and was later cited in the Obama Foundation’s 2020 annual report, which featured a fundraising chart stating:
“$470M of our fundraising goal will go toward seeding an endowment that will sustain Obama Foundation activities and the operations of the OPC for generations to come.”
The foundation previously estimated annual operating costs could reach approximately $40 million.
Nonprofit endowments are typically structured so that only a small percentage of the fund — often around 4% to 5% annually — is spent each year while the principal remains invested. The goal is to generate investment income that can help support operations over the long term without relying entirely on future fundraising. The Obama Presidential Center consists of a museum tower, digital library, athletic facilities, conference space and offices for the Obama Foundation on Chicago’s South Side. The Obama Foundation is overseeing its construction and will run its day-to-day future operations.
Epstein disputed the foundation’s interpretation, arguing that an endowment is intended to provide meaningful financial protection and that a promise to raise money in the future is not the same as having a funded endowment in place.
“On their view, putting a penny in an endowment fund covers all the risks,” Epstein said.
“There has to be a pile of cash to fund any particular process and then ensure some kind of robustness against radical changes in the market.”
Read the full article here