Inside Rahm's privatization economic team | Bleader

Inside Rahm's privatization economic team


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Steve Koch, the latest member of Rahm Emanuels investment banking team at City Hall
  • Steve Koch, the latest member of Rahm Emanuel's investment banking team at City Hall
When the newest member of Mayor Rahm Emanuel's economic team sat down for an extended interview on Chicago Tonight earlier this week, he shared the following information about how the administration will close the city's annual budget gap, rebuild our infrastructure, and employ enough staffers to churn out newspaper columns about their extraordinary success—all without raising taxes:

Um, hold on—I'm watching again . . . I'm sure it's coming . . . Got a few minutes more . . . Any time now . . .

Wait, this might be it: "I think this administration, this mayor, are really committed to trying to do the right thing . . ."

OK—maybe it'll come in the next interview. I'm sure it will. Because somehow, despite the best effort of Chicago Tonight's Elizabeth Brackett for 15 minutes, incoming deputy mayor Steve Koch managed to say nothing about his plans or the mayor's plans for him or anything else they've talked about. Unless you count this:

"Everything's on the table."

Everything includes a lot of things. All of them, in fact.

That's interesting to note, since Koch's arrival means that all three of Emanuel's top financial aides come from the same circle of firms known for their privatization work.

Keeping track of all the overlapping names and financial interests is sometimes like reading about who begat whom in the Old Testament, but here's a start.

The city's chief financial officer, Lois Scott, was previously president of Scott Balice Strategies, a financial advisory firm that worked on parking lease deals around the country.

Budget director Alex Holt was an attorney for the group of investors that was poised to take over Midway airport until the credit crunch stalled the deal in 2009. Chief among them was Citi Infrastructure Investors, which, more recently, Emanuel and Scott have lined up as potential investors in public projects through the city's new infrastructure trust. That's the entity the mayor created to finance public projects by turning over future city revenues to private investors—though he swears it's nothing like the parking meter deal.

Speaking of Midway, the city's chief financial adviser for that deal was Credit Suisse. That's the investment bank where Koch serves as a vice president.

Airport privatization is one of the bank's specialties: it was part of a team that bought Gatwick airport in London in 2009; it advised Puerto Rico on the 40-year lease of Luis Munoz Marin airport this year; and, along with Citi, it's currently advising Portugal on privatizing its airport system.

Credit Suisse has also profited from Chicago's parking meter deal. Two years ago, Chicago Parking Meters LLC, the private firm that controls street parking, hired the bank to help it issue bonds based on the cash it's collecting from city drivers.

From 1998 to 2001 Emanuel also worked for an investment bank involved in privatization deals, but as mayor he's had mixed feelings about them.

He doesn't like them when they're called privatization deals, and he doesn't like the ones that Daley cut, especially since most of the money from them was spent before Emanuel got into office.

Emanuel really loves to hate the parking meter deal. No one said he wasn't smart. Given the fact that the deal sucks, who doesn't like a mayor who says the deal sucks?

On the other hand, Emanuel has also ordered city lawyers to defend the deal in court, since backing out of it would send the wrong message to other investors who want in on city revenue streams. "Every contract with a private party has some terms that benefit the private party," city lawyers argued earlier this year. "Otherwise, there would be no incentive for the private party to enter into the agreement."

And there will almost certainly be more agreements.

In May, Scott told aldermen that leasing out Midway was still a real possibility—even though Emanuel had promised not to do it during his mayoral campaign. "We don't want to turn off anything that could potentially produce a benefit for our taxpayers," Scott said.

In other words, everything's on the table.

Koch, it must be said, is a widely respected 30-year banking veteran. He's also been in the mayor's political network for years. Koch donated to Emanuel's campaigns for Congress and served on President Obama's economic recovery advisory team. After Emanuel was elected mayor, he named Koch to his transition team and then put him on the board of World Business Chicago, a city-funded economic development agency that serves as Emanuel's shadow cabinet.

Though Koch pleaded ignorance in the Chicago Tonight interview, he's been talking with the mayor about the city's finances for months. The mayor's appointment calendar shows that last fall Koch stopped by City Hall for a 45-minute "meeting regarding infrastructure bank" with Emanuel and several other mayoral advisers.

So far, City Hall won't say what projects, investors, or financial deals will come out of the infrastructure trust except retrofitting buildings. This will conserve energy, but the cost savings will be shared with the private companies that fund the project. In other words, it isn't free money.

Koch will earn $1 a year as Emanuel's deputy—a serious cut in salary, though, as he acknowledged on Chicago Tonight, he can afford it.

"Does this mean that this position can only be filled by wealthy friends of the mayor?" Brackett asked him.

"I don't think so," Koch said. "It's just sort of a coincidence that we're able to give back in that way."

Actually, it's not. Their circles are the mayor's circles as well.


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