Tuesday, April 19, 2011
Politics / Clout City / News Emanuel's Pick for City CFO From Firm Known for Privatization Work
Posted by Mick Dumke on 04.19.11 at 03:15 PM
Rahm Emanuel signaled throughout his mayoral campaign that he's open to all sorts of ideas for fixing the city's budget problems. Still, while not ruling out privatization deals, Emanuel said repeatedly that they should only be executed within the framework of a "formal policy," which he did not detail.
But his pick for the city's new chief financial officer suggests he's more open to privatization than he mentioned previously to reporters and voters wary of another parking meter mess.
Greg Hinz is reporting at Crain's that Emanuel's CFO will be Lois Scott, president of the financial advisory firm Scott Balice Strategies. Among other things, the firm is well known nationally for its work on government privatization deals, including proposals to privatize parking facilities in Pittsburgh and Los Angeles that were later put on hold. The firm was also hired by the administration of convicted former Illinois governor Rod Blagojevich to explore the possibility of leasing the state lottery.
In addition, the firm's leaders have been frequent donors to city and state officials, including Blagojevich, city treasurer Stephanie Neely, and current and former aldermen.
Scott Balice was not hired to work on Chicago's now-notorious parking meter lease deal. But when the deal provoked an initial wave of interest in other cities around the country, Scott Balice was tapped to provide analysis to Pittsburgh and Los Angeles. As Chicago's lease agreement came under intense scrutiny, the city councils in both cities slowed up their privatization plans. As of now, both appear dead.
But other deals are in the works. A year ago the New Jersey Transit system hired Scott Balice as a financial adviser, and in October the agency announced plans to lease its parking lots for up to 50 years.
Last summer the city of Harrisburg, Pennsylvania, hired the company to help it cope with its budget woes. From a story in the local Patriot-News:
"City officials have said they need an independent adviser to help them through the complex issues, and [Mayor Linda] Thompson said Tuesday that the Scott Balice team will leave the city on an equal footing for talks with bond insurers, suitors for parking garages and other city assets, and other stakeholders."
Members of the Harrisburg city council, concerned about potential privatization plans, have expressed reservations about some of the firm's ideas. "Their end result is always the same: Sell assets, sell assets," councilman Brad Koplinski told the Wall Street Journal.
In 2006 the Blagojevich administration hired the firm to help Illinois privatize its lottery, and last fall Governor Pat Quinn announced that Northstar Lottery Group had been picked to run the system after a selection process "guided by a team of external advisors" including Scott Balice.
The firm's leaders are known to local politicians for their generosity as well as their financial work. Scott herself has donated to a number of office-holders through the years, including Neely, the city treasurer; former county commissioner Forrest Claypool, whom Emanuel just picked to head the CTA; and Blagojevich. Scott gave $500 to the ex-governor in 2007, but Dean Balice, the firm's senior managing partner, was more charitable, contributing more than $15,000 to Blagojevich between 2000 and 2007, state records show.
Balice has also chipped in to the campaign coffers of state attorney general Lisa Madigan, outgoing Mayor Richard M. Daley, and City Council mainstay Richard Mell.
The city's current CFO is Gene Saffold, whom Daley lured from JP Morgan Chase in 2009—just in time to take heat for the parking meter lease deal. Saffold didn't work on the deal but has been compelled to call it a winner for two-plus years in the face of all evidence to the contrary.
Comments (13)
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I would have to assume that Emanuel is fully aware of the huge fallout that resulted from the parking meter lease deal and is determined to never let something remotely approaching that happen on his watch. Privatization deals per se are not bad. The problem only arises when the city's short term interests are put ahead of long term interests and when everything is not carefully considered to ensure that Chicago is getting as much value as it possibly can. Many aldermen got booted out in the last election (or decided not to run because they realized they faced a tough odds of being reelected) because they failed to take their consideration of the parking meter deal seriously. I think the city council has learned their lesson about this type of stuff. They and Emanuel will ensure that only solid privatization deals that benefit the city will be approved in the future. Otherwise, they will face enormous scrutiny and criticism.
Hopefully, the horrific nature of the parking meter lease deal hasn't made it impossible for attempts at privatization to ever happen again. City governments normally are not set up to operate as efficiently as possible. This drives up taxes higher than they need to be and curtails the ability for the city to offer as many beneficial services as possible. Normally left unspoken in these discussions is the strong opposition to privatization from labor unions because these deals threaten the inflated salaries and benefits of city workers. Ironically, of course, the parking meter lease and other privatization deals ended up helping them because it allowed the city to use the proceeds to put off necessary reforms creating a leaner, more efficient government.
It's hard to understand how Scott Walker and Paul Ryan have any time for their Wisconsin constituents with all the time that they spend advising Emanuel on policy and sending him hiring recommendations.
See, that's what I'm talking about. Much of the opposition to privatization of city services or assets results from pro-union views. But it is almost always left unspoken. You can see it all over Andrew's comment but he doesn't say it explicitly.
"Much of the opposition to privatization of city services or assets results from pro-union views."
Yeah, we are all upset about the parking meter union being busted.
No, not that deal. I'm talking about the blanket opposition from some people towards the consideration of any attempt to privatize any city service or asset. That's obviously a separate thing from opposing a particular deal on the merits. Clearly the parking meter lease agreement was atrocious.
"Clearly the parking meter lease agreement was atrocious."
But we should give the benefit of the doubt to the private sale of other city assets?
Pass.
-- MrJM
Huh? I have no idea what you are trying to say, MrJM. Obviously, the best thing would be for the people to scrutinize every deal to see whether it is financially sound and would benefit the city in the long run. If that is done, then there normally wouldn't be any doubt to decide who to give the benefit to. With the parking meter lease deal, the aldermen failed to do their job looking over the terms and deciding what drawbacks the plan would have. The political fallout from this was enormous. You can see that in the last election. So I think you can be sure that the same thing is not going to happen anytime soon. One could make a strong argument that Mick Dumke (along with Ben Joravsky) single-handedly brought Chicago into a new era of political accountability by exposing the outrageous process and terms of the deal.
"One could make a strong argument that Mick Dumke (along with Ben Joravsky) single-handedly brought Chicago into a new era of political accountability by exposing the outrageous process and terms of the deal."
Heh.
"The new city comptroller Amer Ahmad seems to have ties to terrorism, and neopotism shakman [sic] type favoritism in hiring practices from his time in Ohio."
Sounds like a pretty sinister character.
http://crcc.usc.edu/initiatives/amcli/amer…
Amer Ahmad is the deputy state treasurer and chief financial officer for the State of Ohio Treasury. In addition to overseeing all operational functions of the Ohio Treasury, Amer is responsible for managing over $11 billion in state investments, including a $6 billion long-term fixed income portfolio, a $2.5 billion short-term liquidity portfolio, a $7 billion local government investment pool, and over $150 billion in custodial assets for Ohio’s pension systems. Amer’s team also manages over $9 billion in state debt obligations and collects over $16 billion per year in revenue on behalf of the state.
Prior to becoming a public servant, Amer was a vice president at William Blair & Company, LLC, an investment banking firm headquartered in Chicago, where he worked in the corporate finance department for seven years. He has also served as an advisor to the president of Estonia and worked at Wasserstein Perella & Co. in both New York and Tokyo.
Amer received a master of business administration from Harvard Business School and a bachelor’s degree in political science from Columbia University. As a college senior, Amer was a semi-finalist for the Rhodes scholarship.
Water privatization usually causes rates to go up and water quality to decline. CAPOW! (Citizens Act to Protect Our Water) has organized a conference on April 30, called "Facing Our Water Crisis", on the threats of water privatization, toxic pollution, and possible solutions. It will take place at Loyola's Flanner Hall, 1068 West Sheridan Road, 9:30-4. See http://www.protectourpublicwater.net for details.
In hindsight, the final sentence of my last post is probably a bit of an overstatement. I had forgotten about the Inspector General's report on the deal. Mick Dumke was not the only person who uncovered its outrageous nature. But the Reader's articles were an important part of it.
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