Aldermen raise serious questions about billboard deal, then advance it anyway

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Despite intense study, not even Alderman Ed Burke could figure out what the hells up with the city's latest privatization deal.
  • Al Podgorski / Chicago Sun-Times
  • Despite intense study, not even Alderman Ed Burke could figure out what the hell's up with the city's latest privatization deal.
You know they did.

A Chicago City Council committee signed off Monday on Mayor Rahm Emanuel's latest privatization deal—even though, after nearly five hours of testimony, aldermen still didn't quite know how it added up for taxpayers, what its shortfalls might be, or exactly which companies were included in putting it together.

In more than a few places, they weren't even sure what the contract said.

"As I tried to go through these documents over the weekend, I have to admit, I don't really have the expertise to understand them," said Ed Burke, who's read a few contracts in more than four decades as an alderman and attorney.

Mayoral aides were happy to help.

As they explained, the deal involves renting out public space to a private billboard company in return for some of the proceeds. The firm, Interstate JCDecaux, will pay to put up digital billboards on 34 sites along expressways in Chicago. In return, the city will collect a guaranteed $155 million over the next 20 years, with an option to extend it for nine more.

The city will also get a share of the advertising revenues—though there are pages of complex formulas and footnotes that determine the exact amount. For example, taxpayers will essentially pay back some of the millions they're receiving up front, since over time Interstate JCDecaux will recoup the costs of building and maintaining the billboards before sharing proceeds with the city.

The city's chief financial officer, Lois Scott, says if all goes well, the city could reap as much as $276 million over the life of the contract. Interstate JCDecaux will get even more than that—after expenses.

Scott said she was confident this was the best deal the city could get, though officials didn't conduct a formal bidding process. Instead, they negotiated with five companies that proposed the billboard idea last year. An advisory council picked by the mayor—made up of veterans of marketing and architecture, but not finance—then helped winnow the field to two before city officials chose the winner.

Aldermen asked if members of the advisory council could explain how they analyzed the worth of the deal. Scott shot down the idea. "The expertise on the advisory council was not about valuation."

In fact, the only people who crunched the numbers in the deal were city officials and interested contractors.

"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.

Scott said the city's own financial team researched what kind of money billboard companies have been making, and then told potential contractors that Chicago hoped 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," said Scott Waguespack (32nd). "We basically told them what we wanted. It's the opposite of what we should do."

Waguespack and Ameya Pawar (47th) asked why the city couldn't simply keep everything "in house''—issue a contract to have the billboards built and keep all the money. But Scott said the city doesn't have the upfront cash or expertise, making it necessary to split the profits with a private company for decades to come.

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

After four and a half hours, when the aldermen who hadn't left the meeting were openly yearning for lunch, a vote on the measure seemed imminent.

But Alderman Robert Fioretti (2nd) messed everything up by asking for a head count to see if they had a quorum.

This was a shocking development, as committee meetings regularly proceed without anything close to half their members present, which is technically what they're supposed to have. But under the council rules it doesn't matter unless a member of the committee raises a stink about it.

Such stink raising is not common.

In fact, Carrie Austin, chair of the budget committee, was deeply irked that such a disgraceful thing was happening on her watch. She tried to turn Fioretti to stone with an infuriated stare. "I find it awful strange that you would call a quorum now, after you know so many people have left."

"I think it's entirely appropriate," Fioretti replied, plopping down in his seat as if to say, what are they going to do—map me out of my ward?

Austin recessed the committee and, along with mayoral aides, got on the phone to round up some more warm bodies.

A half hour later the roll was called again, and 23 aldermen were counted as present and more-or-less awake—one more than needed for a quorum, and plenty more than needed to sign off on the billboard deal. It passed 20-3, with only Fioretti, Waguespack, and Pawar opposing.

The full council is set to approve the deal next week. And you know they will.

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