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Markham Roller Rink deal riddled with conflicts of interest

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The Markham Roller Rink was past its prime.

The clout-heavy owner struggled to make money and failed to make needed repairs, records show. The rink's appraised market value sat at about half a million dollars — and that was before the real estate market tanked.

Then came the buyout, covered by taxpayers in one of Chicago's most indebted suburbs.

Markham paid $1.7 million for the rink last year, more than three times what that 2008 appraisal said the property was worth.

A Tribune investigation found that it was a deal riddled with conflicts of interest — and one in which the numbers don't seem to add up. The seller was a company led by Markham's city attorney, Steven Miller, who worked for years under the current mayor and backed him politically. Miller is also the son of the suburb's former mayor.

"It appears to be an insider sweetheart deal," said Rebel Cole, finance and real estate professor at DePaul University, who reviewed the sale and appraisals on the deal. "This should be reviewed by the city attorney. Except he's the one who's selling the property. This ethically stinks."

Markham Mayor David Webb Jr., who has no opposition on the ballot for re-election, said the city didn't overpay for the city attorney's property. To prove it, he points to appraisals in 2012 and 2013. Those were completed by an appraiser disciplined twice by the state and also censured by an industry group over an alleged ethical breach.

Miller told the Tribune that the rink was a moneymaker and really worth millions of dollars, assertions that run counter to the 2008 appraisal he submitted to the state.

"It's not like we sold them a pig in a poke," Miller said.

Webb touts the rink as a great community asset, one meant to keep kids off the streets. It is also a key element of a borrowing and spending spree under his watch that has helped drive down the suburb's credit rating as taxes rise.

Community asset

The Markham Roller Rink has long been intertwined with the culture and politics of the town of 12,000 people about 25 miles south of Chicago.

Built five decades ago, the building along Dixie Highway was taken over in the 1970s by a company run by Miller's father, Evans.

Gospel nights drew the faithful to skate to songs of prayer and faith and love of Jesus.

Late-night skaters would pair off hand in hand beneath the mirrored disco ball, some of the earliest couples returning years later with children and eventually grandchildren.

"Going there brings back a whole lot of memories," said Ingrid Redus, 64, who grew up in Chicago's Gresham area, met her husband at the rink and still skates there today.

After Evans Miller was elected Markham's mayor in 1985, he battled with aldermen over appointing his son as a city attorney.

The mayor drew the attention of federal investigators in the late 1990s amid accusations by city officials of missing tax district money. Agents carried away stacks of city records from his office at the roller rink. No charges were filed.

Webb seamlessly took over for the ailing Evans Miller in 1999, until Webb's own election in 2001.

Steven Miller stayed on as city attorney and ran the rink as company president. His father died in 2004, and his mother remained a majority shareholder in the rink.

The numbers

Records show the iconic rink was struggling in recent years.

New, costly air conditioners and furnaces were needed. The interior needed new paint and lights. The whole building needed tuck-pointing. The parking lot was fading and cracking.

From 2005 to 2008, the roller rink didn't even break even, losing almost $9,000.

All of these problems were detailed by Miller and his attorney when the two repeatedly asked the county and state to cut the rink's appraised value, and therefore its tax bill.

An outside appraisal that Miller ordered painted the picture of a run-down building nearing the end of its useful life, choked by a faltering economy in a struggling suburb.

The estimated market value in early 2008: $520,000.

As recently as 2011, Miller was telling county officials that the property was worth no more than that.

The next year, Markham officials moved in to buy the rink. They brought in a second attorney to handle the deal. And they hired their own appraiser, Lawrence Starkman.

The new appraisal didn't detail the negative issues raised in the first one.

In fact, it recorded the building as having another 30 years of life left. Starkman's report compared the rink with regional industrial and commercial properties, many of them not nearly as old.

The estimated market value in 2012: $1.8 million.

The city paid $1.7 million in June. Still, Markham found it necessary to pour money into fixing up the place, addressing the shortcomings raised in the first appraisal.

The city paid about $2.5 million to refurbish the rink, according to an appraisal.

After opening the rink in February, Markham officials ordered another appraisal from Starkman.

The latest appraisal said the renovations effectively turned the rink into a new building. It compared the rink with commercial buildings along the busiest roads in some of the region's richer communities, including Orland Park and Schaumburg.

The estimated market value in 2013: $5.7 million.

The figure is more than the city paid for the property and to fix it up, combined. Starkman defended the appraisal, which was about 11 times higher than the one five years earlier.

"That's just two different people's estimates," Starkman said. "It's not a science; it's an art. There's no exact way of doing it. I believe I was right."

The year before Markham hired Starkman, the Appraisal Institute, a private global association, issued a rare "censure" against him for violating ethics rules, according to records provided by the group. Details on the case were not available. The censure came after a state licensing board fined him $10,000 in 2010 over an appraisal. The state also fined him $1,000 in 2003 over an appraisal he supervised. Starkman declined to comment on the disciplinary actions.

Miller, whose small law firm was paid about $170,000 by the village over the past year, said he stayed out of the city's side of the negotiation. He said it was his mother and sister — not him — who wanted to sell the rink.

"I just happen to have a family that was fortunate enough to own a business," he said. "Cities purchase property all the time."

'A nice place'

Residents from across the south suburbs have greeted the new rink warmly. But most may be unaware of the deal's details, which were buried in reports in government offices.

The smooth, shiny floor was packed on a recent Saturday afternoon with more than 100 glow-stick-waving kids and parents skating to hip-hop music.

"This is a nice place, one of the few places for kids around," said Donette Horton, 49, of Dolton, who brought her 11-year-old son Bennie.

Meanwhile, records show Markham is struggling to pay its bills, even as taxes rise.

The city's borrowing binge started in 2008 after local voters gave officials "home rule" power via a ballot referendum. That power lets city officials borrow as much as they want and raise most taxes as high as they want, without seeking direct voter input.

The first expense was $18 million for a new City Hall and other city upgrades. Then came about $15 million in 2009, mostly for a senior apartment building that city officials named after the mayor. And the most recent was a $5.5 million loan, most of it to buy and rebuild the roller rink.

The borrowing gave Markham a debt rate that is among the 10 worst in Chicago's suburbs, according to the most recently available financial figures. Meanwhile, records show the city's general fund is shedding millions of dollars more than it gets in taxes, year after year.

City property tax levies have risen nearly 40 percent over four years. That is on top of a cent-on-the-dollar sales tax increase. And if the roller rink can't make enough money to cover its debt payment, Markham officials could raise property taxes again to cover the bill.

Citing the suburb's growing debt and budget shortfalls, a top credit rating agency lowered the outlook on Markham's rating to negative last year. The suburb's rating is just two steps above junk status.

Former Markham Ald. Geraldine Dudeck said she fears the city negotiated a bad deal, paying too much for property that needed major renovations.

"I think somebody didn't do their job," said Dudeck, 82, who stepped down from the council before the rink was purchased.

Webb, though, called the rink "the people's project" and said it will better the community.

"I think it's a very good purchase for the city of Markham," he said. "It's providing something for the youngsters to do. An idle mind is the devil's playground."

eleventis@tribune.com

jbryan@tribune.com

Twitter @RyanReport

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