Harvey Warehouse Purchase Costs Metra $18 Million

Metra, Chicago’s primary commuter rail system, finds itself entangled in a financial debacle following its first-ever real estate purchase—a hand sanitizer warehouse in Harvey, Illinois. Originally intended to serve as a central hub for storing railroad parts, the project has unexpectedly escalated to a costly and controversial venture.

Background of the Harvey Warehouse Project

In May 2020, Metra’s board approved the purchase of a warehouse at 17010 Halsted Street in Harvey for nearly $6.8 million. This decision was part of the state’s Rebuild Illinois bond fund initiative. Metra aimed to consolidate scattered equipment across its rail yards into one location, improving operational efficiency.

However, the project, which was supposed to provide much-needed storage space and repurpose employees during the COVID-19 pandemic, has since cost taxpayers approximately $18 million, with substantial additional funds required to complete the project.

Financial and Operational Challenges

At a public board meeting in May, Metra officials disclosed that the warehouse remains vacant and non-operational. The transit agency is simultaneously facing significant financial difficulties, exacerbated by pandemic-related shifts in commuting patterns. The agency anticipates a looming fiscal cliff due to reduced ridership and revenue losses.

Board members expressed frustration and confusion over the escalating costs and questioned the project’s management. Kenneth Koehler, Metra’s Board Director and Treasurer, criticized the lack of clarity and oversight, questioning the necessity of such extensive expenditures for a warehouse.

Purchase Decision and Oversight Issues

Metra’s CEO and Executive Director, Jim Derwinski, explained that the warehouse was purchased as-is without prior inspections—a decision driven by urgent pandemic-related needs and the agency’s inexperience with real estate acquisitions. Derwinski admitted that this was a learning experience, highlighting the need for improved processes in future real estate transactions.

The 153,000 square-foot warehouse, situated on 10.5 acres, was built in 1972 and previously owned by Summit Laboratories, a company that produced hand sanitizer. Notably, Metra had purchased hand sanitizer from Summit Laboratories shortly before the warehouse acquisition, raising questions about the relationship between the transactions.

Investigations and Board Reactions

Inquiries into the purchase revealed no prior contractual relationship between Summit Laboratories and Metra staff. However, the lack of detailed records on who initially proposed the warehouse purchase to Metra’s Executive Leadership Team remains a point of contention.

Board Chair Romayne Brown emphasized the need for transparency and accountability, comparing the investigation to peeling an onion, with new layers of complexity continually emerging.

Current Status and Future Prospects

To date, $17.9 million has been spent on the Harvey Warehouse Project, covering the purchase price, roofing repairs, office space creation, and storage rack installations. Completing the project is expected to require tens of millions more and potentially two additional years.

Board Director Melinda Bush highlighted the need for a cost-benefit analysis to determine whether continuing the project is financially viable. The possibility of selling the property to mitigate further losses was also discussed.

Moving Forward

Metra staff have outlined several potential paths for the project’s future, which will be reviewed at the next board meeting in July. Despite the financial challenges, Derwinski maintains that the warehouse is essential for Metra’s operations, particularly for the efficient storage and management of railroad equipment.

The ongoing financial strain and operational challenges underscore the importance of strategic planning and oversight in public infrastructure projects. Metra’s experience with the Harvey warehouse serves as a cautionary tale for other transit agencies navigating similar initiatives.

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