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City board’s hiring raises questions of independence

The five-member board overseeing Mayor Rahm Emanuel’s $1.7 billion Infrastructure Trust has engaged as its pro-bono financial adviser a company that acquired a firm co-founded by Emanuel’s chief financial officer, raising questions about how independent its advice will be.

Public Financial Management, Inc. acquired Scott Balice Strategies on May 16, 2011, the day Emanuel was sworn in as mayor and Lois Scott became the city’s CFO.

Before joining the Emanuel administration, Scott served as senior partner and president of the firm she established in 2003 with partner Dean Balice.

PFM bills itself as the “nation’s leading provider of independent financial advisory services to state and local government agencies.”

The news release announcing the acquisition said Scott Balice had earned a “national reputation in the field of public-private partnerships, including landmark assignments relating to toll roads, parking structures, lotteries, social infrastructure and state-owned alcohol beverage control systems.”

Now, the firm that acquired Scott Balice will be advising the board charged with implementing a revolutionary change that will allow private investors to pump $1.7 billion into “transformative” infrastructure projects the city could not afford to build on its own.

After the Trust launches with $200 million in energy-efficiency projects for government buildings, PFM managing director Tom Morsch, who worked under Scott at Scott Balice, will advise the Infrastructure Trust on what other projects to support and what user fees to impose.

The money is expected to come from five financing giants, the largest chunk from the Spanish-Australian consortium that paid $1.83 billion to lease the Chicago Skyway for 99 years in exchange for pocketing tolls and continuing to raise them.

Former Chicago Inspector General David Hoffman, an Emanuel appointee to the Infrastructure Trust board, said he raised questions behind closed doors about the potential for a conflict-of-interest and came away “totally satisfied” there is none.

“I believe that they’re completely independent . . . There’s no loyalty to the city or to Lois or the CFO’s office that I can see,” Hoffman said.

“I’m very comfortable that we’re gonna get completely independent guidance from them, and that’s really important. Just because they worked for her previously doesn’t mean they’re biased in her favor or loyal toward her or not independent. Those things are possible. It’s worth asking the question. But I know who they are and have heard what they’ve said publicly and privately about their approach.”

Infrastructure Trust Chairman James Bell said he, too is “absolutely confident” that the advice the board gets will be independent of Scott.

“We don’t see that as an issue and the fact that it’s pro-bono really gives us a high level of confidence we don’t have a conflict,” Bell said.

“Quite frankly, they’re the most prominent firm and the best advice we can get.”

Morsch acknowledged that PFM “offered our services” to the Trust at no charge until a nationwide search culminates in the hiring of a full-time executive director.

Asked if the firm would be free to shoot down a project proposed by his former boss, Morsch said, “Absolutely, I wouldn’t even remotely question that . . . I have a reputation of being independent. We have a reputation of being professional. Our firm has that around the country. We will absolutely do that like any other professional would do that.”

Andy Shaw, president and CEO of the Better Government Association, said he trusts Hoffman, a BGA board member, to sound the alarm if things don’t work out that way.

“It has the potential to be troublesome, but the safety valve is David Hoffman,” Shaw said.

“David will make a lot of noise publicly if it looks like the relationship between these advisers and the administration is prompting bad decisions. If the board didn’t have someone I know and trust as a taxpayer’s and citizen’s advocate, I might be worried about this development. But with David Hoffman in place, I feel confident the public has its advocate.”

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