After months and months of begging, pleading, and cajoling by the public—and harassing calls and e-mails from the Reader—city officials finally came clean with the God’s honest truth about how and why they entered into the parking meter lease deal.
These revelations were offered during a four-hour hearing held by the City Council’s finance committee on July 2, when many Chicagoans were preparing to park their butts at home for a long weekend of eating, drinking, and watching the neighborhood kids blow things up. Public servants that we are, we’ve distilled the hearing for the edification of anyone who may have missed it, using a question-and-answer format similar to the one used by aldermen last week. Enjoy.
What did Paul Volpe say at the hearing?
You mean Paul Volpe, Mayor Daley’s chief of staff, who used to be his chief financial officer and oversaw the parking meter deal from start to finish, then briefed aldermen and lobbied them to vote for it?
Yes, that Paul Volpe.
He wasn’t there.
Well, where was he?
When alderman Joe Moore asked that question—since he and several colleagues had specifically requested Volpe’s presence—finance committee chairman Ed Burke said, “Mr. Volpe had a conflict today.” When asked what the conflict was, Burke said he didn’t know.
So who did speak for Mayor Daley?
Gene Saffold, the city’s current chief financial officer, who wasn’t involved in the parking meter deal. He came on about three months ago; the meter agreement was forged in 2008 and went into effect this past February.
Let me get this straight: the guy who didn’t work on the deal was there to talk about it and the guy who did was nowhere to be found?
You got it.
So what did aldermen ask Saffold about?
All kinds of stuff, such as whether the city got its money’s worth in receiving $1.157 billion for giving up the parking meter system for 75 years.
And what did Saffold say?
You mean when he wasn’t saying he didn’t know because he was just hired three months ago?
He said, “This is a good financial deal for the city.” He added that the $1.157 billion the city got was at the upper end of what officials thought they were worth.
Did he at least say who came up with the idea of privatizing the meters, and when?
He started to, but then Alderman Burke cut him off.
Why was Alderman Burke answering questions asked of administration officials?
I’m not sure. But he repeatedly jumped in to help Saffold and other city officials answer some of the most detailed questions about the origins and consequences of the deal asked by independent-minded aldermen like Moore and Scott Waguespack.
For instance, when Moore asked Saffold, “Whose idea was this in the first place?” Burke responded, “If I can butt in, I would say the idea germinated as far back as Walter Knorr.” Walter Knorr was once Mayor Daley’s top financial guy. He used to talk generally about leasing public assets. He hasn’t worked for the city since 2002.
So the idea of privatizing parking meters was just floating around City Hall for seven years?
Hard to say. When Moore ignored Burke and repeated his question, Saffold responded, “The city Department of Finance.”
When Moore followed up, asking, “Who in the city Department of Finance?” Saffold said, “A wide variety of individuals there.”
And then Moore interrupted him to say, “But ultimately there’s one person who had the ‘germination.'”
Did the question ever actually get answered?
Yes and no. Just when it looked like Saffold might have to provide a direct response, Burke chimed in to say, “Perhaps Mr. Lanctot can comment on that.”
Who the hell is Mr. Lanctot?
That would be Thomas Lanctot, a top official with the Chicago-based investment firm William Blair & Company.
Why is some dude from one of the nation’s largest investment firms answering questions on behalf of the city at a hearing on selling the meters?
Because, according to Alderman Burke, “he was involved in the process from the very beginning.” As Lanctot went on to explain, his firm approached the city with the idea of selling the meters, then got a contract to oversee the process of determining what it was worth, finding qualified bidders, and picking a winner.
You mean this huge operation—which will affect the price and availability of street parking as well as the amount of money flowing into the city budget for the next 75 years—was initiated by someone at a private, for-profit company?
Looks that way.
So when did the city initiate the bidding process that awarded William Blair this contract?
Actually, there was no bidding process.
You mean the city simply assigned this task to William Blair without seeing if anyone could do it more efficiently for less money?
Why them? Does any other firm have this sort of expertise?
During the hearing Burke asked Lanctot if it was true that “practically every investment firm in the county” has a division that works on asset privatization deals like this. And Lanctot said, “That’s correct.”
So why William Blair as opposed to, you know, any other investment firm in the country?
Saffold said they were selected based on their “documented success” and the city’s “comfort level” with them. That and the fact that in 2006 they helped the city lease out its downtown parking garages for 99 years.
The city has a policy in place to make sure contractors that help it conduct a bidding process don’t have any relationships with the bidders. How were city officials certain that William Blair didn’t have a relationship with any of the parking meter bidders, including Morgan Stanley, the winner?
Apparently they weren’t certain, since William Blair did have business dealings with Morgan Stanley. During the period the meters were being bid on in 2008, William Blair worked alongside Morgan Stanley on a $2 billion bond deal for the CTA.
And that was OK with the city?
Good question—and one that Alderman Moore asked at the hearing.
And what was he told?
Saffold said, “I don’t see an inherent conflict.”
Lanctot added that there was no conflict of interest because William Blair and Morgan Stanley are big companies and different wings of each were working on the different deals.
“The bankers and salesmen for Morgan Stanley,” that is, the individuals who worked on the bond deals, “to my knowledge had nothing to do with the bidding on the parking transaction, and none knew what the others were doing,” he said.
How does he know? Doesn’t he work for William Blair, not Morgan Stanley?
Another good question. But none of the aldermen asked it, and Lanctot refused to talk to us after the hearing.
So the aldermen were satisfied with his response?
Well, they stopped asking questions about it, and Burke said he wasn’t worried about any conflicts of interest. “I don’t see it,” he said.
Uh, all right. Tell me this: when did William Blair start working on the deal and how much did they get paid?
July 2007, according to Lanctot. They were paid $4.3 million.
What was their hourly rate?
Actually, they were paid a share of the final amount the city collected on the deal: 0.375 percent. That’s according to the agreement they made with the city in January 2008.
Wait—I thought you just said they started working on the deal six months before that.
That’s what they said. But before January 2008, they “were engaged by oral agreement,” city budget department spokesman Pete Scales told us in an earlier e-mail.
So one of the biggest investment firms in the country worked for free for half a year?
Lanctot said: “That’s pretty typical in our industry, to bring ideas forward and work on them in anticipation of being awarded compensation.”
Or as Scales put it: “It is not uncommon for firms like William Blair to do a certain amount of due diligence in public sector investment banking prior to obtaining an engagement letter.”
Just curious: Do you think Ed Burke would perform any of the legal work he does on the side—you know, like property tax appeal work—on the promise of being paid later?
I’m told he can be generous with his friends.
OK, if there were no conflicts of interest, how exactly was it determined that Morgan Stanley submitted the winning bid?
We don’t know.
William Blair put together an agenda for the bid-opening meeting, but the copy of it that the Reader obtained under the Freedom of Information Act was blacked out, so you can’t see who was there or what was said.
Who blacked it out?
We don’t know. During the hearing Alderman Waguespack asked Lanctot and one of the city’s lawyers about this. They said they weren’t sure either, but assured him that whatever was blacked out wasn’t a big deal. “I don’t think you’re going to find any anything nefarious,” Lanctot said.
Well, why did they black it out then? And what did it say?
More astute questions. But at the hearing, nobody knew nothing.
Is it just me, or does it seem like the more we’re told about this deal the less we really know?
You’re new here, right? v
Care to comment? Find this column at chicagoreader.com. Ben Joravsky discusses this column weekly with journalist Dave Glowacz at mrradio.org/theworks. And for more on Chicago politics, see our blog Clout City.