City for sale | Feature | Chicago Reader

City for sale 

The city has put a price tag on everything from parking meters to CTA stops, billboards to city departments. But what's the real cost of plastering our public space with ads?

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Scott dismissed such concerns: "This has nothing to do with public-private partnerships or privatizations per se," she said. "The trust is about finance, and finance only. It's a tool."

In the meantime the municipal marketing plan was speeding along.

Responses to the city's request for pitches were due in December 2011. City officials later said they received thousands of ideas, some more viable than others. Among the most compelling, they said, were five proposals to create a city-owned digital billboard network along expressways.

The city could have set up a bidding process to open competition to other firms, especially since the November solicitation never mentioned billboards. Instead, Scott and other city officials held separate, closed-door conversations with the five entities who'd pitched the idea.

Over the next few weeks, Scott and other city officials evaluated the proposals based on their apparent "value to taxpayers," their ability to preserve "the city's visual integrity," and the experience of the firms. They also received input from an advisory council picked by the mayor and made up of veterans of marketing and architecture, but not finance.

But the city never disclosed how they reviewed the proposals—was there a formal scoring or evaluation system, or simply a series of conversations?

A couple of weeks ago I submitted a FOIA request to the city's finance department, asking for what specific proposals were made, who made them, and what, if any, outside studies were performed to ensure taxpayers are getting their money's worth. The city denied the request, citing a loophole in the state FOIA that lets officials keep contracting records out of the public eye before the deals are finalized. So the public can't see the terms of the deal until after it's in place, by which time it's too late to do anything about it.

Somehow, officials decided by February 2012 that two of the proposals were better than others. Those two firms—Interstate Outdoor Advertising and another company the city hasn't named—then engaged in a seven-month, "intense head-to-head competition," Scott said.

Yet it wasn't as simple as that.

One of the firms initially eliminated from the competition was JCDecaux, an outdoor ad firm that knows its way around City Hall. In 2001 the company cut a 20-year, $308 million deal with former mayor Daley to build and advertise on bus shelters. Among JCDecaux's City Hall lobbyists are Reyes Kurson, a firm led by one of Daley's top political aides, and Greenberg Traurig, which the city has paid at least $1 million in legal work since 2007.

The details are relevant because in August, after JCDecaux's billboard proposal was deemed inadequate, the firm got back into the competition by forming a partnership with Interstate. A month later city officials awarded the billboard contract to the partnership, though the new entity wasn't formalized and registered with the state until November.

The city says nothing was unfair. "The question came up during that process, 'Can we bring in a partner?'" said Steve Holler, the city attorney who did much of the legal work on the deal. Both finalists "were told yes, because we want them to be as strong as possible."

The contract guarantees the city $155 million for the rights to put up 34 billboards along the expressways over the next two decades. At the same time, it includes a complex revenue-sharing structure that it claims could bring the city's total take to $276 million. Interstate and JCDecaux would get even more than that—after expenses.

But there are a lot of buts. For example, the city gets half of all ad revenues for the first $25 million collected in any year, but it only gets 30 percent of anything above $30 million.

Additional millions are at stake in the first few years based on formulas like this:

"The Contractor shall from time to time pay to the City an initial license fee applicable to such site in an amount equal to the product of (A) a fraction, the numerator of which is the Category Coefficient (as defined in Exhibit 2) assigned to the value of the applicable sign face, as set forth on Exhibit IC, and the denominator of which is one hundred eighty two (182), times (B) Twenty-Five Million and No/100 Dollars . . . "

Right.

Mayor Emanuel formally introduced the contract to the City Council on October 31. He dismissed concerns about the closed-door process that produced it, saying he was confident the city was getting a good deal. "I didn't need to go to Harvard Business School to know."

Two weeks later the City Council voted 46-3 to approve Emanuel's 2013 budget, which counts on $15 million in proceeds from the billboard deal. Though most aldermen hadn't even glanced at the billboard contract yet, they had, in essence, already agreed to approve it.

On December 1 the Sun-Times reported that Mayor Emanuel was planning to launch another attempt at privatizing Midway airport before the end of the year. Two days later, the council's budget and zoning committees held a joint meeting to consider the billboard contract. Alderman Burke set the tone early on.

"I have to admit that as I tried to go through these pages of documents over the weekend, I don't have the expertise to really understand them."

A number of his colleagues said they wanted to be sure the city was getting the best deal it could. "Was there any independent financial analysis for this particular proposal?" asked 46th Ward alderman James Cappleman.

"Not directly," said Scott.

Which is to say: no.

Other aldermen wondered if there was an escape clause over the next two decades, in case projections turn out to be way off.

Again: no.

Scott Waguespack (32nd) noted that the city had announced it was hoping to bring in at least $25 million a year, but the guaranteed payouts are far below that—the most per year is $15 million, in 2013.

"We did set the bar pretty low," Waguespack said. "We basically told them what we wanted. It's the opposite of what we should do."

Nevertheless, most aldermen were convinced that it's great news to come upon millions of dollars that the city didn't have before. What could be a better deal than that?

"Can we use this money to hire more police officers?" wondered 11th Ward alderman James Balcer.

Scott was happy to answer. "A hundred percent of what we're getting from municipal marketing is going into the corporate fund to be used for things like keeping our libraries open and meeting the needs of our police and fire departments."

"So this can be used for hiring more police officers, which is what we need," Balcer said. He leaned back with a look of deep satisfaction. "I rest my case."

The contract was approved 20-3, clearing the way for full council approval on December 12. At the same time, the city has reissued its solicitation for more privatization pitches, and Scott says they'll continue to do so.

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