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Negotiations suspended for mayor’s plans for Port Authority District

Mayor Rahm Emanuel  September 17 2013. | Chandler West/For Sun-Times Media

Mayor Rahm Emanuel September 17, 2013. | Chandler West/For Sun-Times Media

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Updated: November 2, 2013 6:21AM

Mayor Rahm Emanuel’s grand plan to privatize the Illinois Port Authority District to create hundreds of jobs and capitalize on its vast untapped potential hit a political barge Monday.

The Broe Group, the Colorado company that had pledged to invest $500 million in port facilities over the next decade, “amicably suspended” negotiations on a master lease after being unable to reach agreement with the Port District.

“The Broe Group presented a proposal that had significant economic benefits. We made excellent progress on many details. However, we were unable to come to full agreement in our negotiations with the Port District during our 60-day exclusive negotiation period,” Alex Yeros, managing director of The Broe Group, said in a news release.

“We have a solid vision for the future of the Illinois International Port — one that focuses on creating jobs and attracting new investment. The port holds great potential for a private operator and the city of Chicago and we look forward to continuing our existing business there.”

Although Emanuel considered the port “a valuable asset” that can “drive economic growth” with strategic investment, he is equally determined not to “repeat the mistakes of the past by supporting a deal that does not protect taxpayers and the competitive future of the port,” a spokesman said.

Broe Group’s decision to suspend negotiations on a master lease agreement — even as it continues railway operations at the port and surrounding area in a partnership with OmniTrax — is a huge blow to Emanuel’s efforts to breathe new life into the Port of Chicago.

When the mayor announced his privatization plan in late July, he told reporters that it would create up to 1,000 permanent jobs and 3,000 construction jobs.

The Port District would have received $1 million in annual revenues, along with 10 percent of new revenue that came into the port.

The deal also was supposed to create a new partnership with Olive-Harvey College that includes internships, job placement opportunities and training programs for new hires. That Olive-Harvey partnership will continue.

“We’ve been running a port for a long time. We haven’t made an investment since 1981. Thirty-plus years. And people all across the country — port authorities across the country — were passing us by,” the mayor said on that day.

The Port District is the second major city asset that Emanuel wanted to privatize, only to hit a roadblock.

Last month, the mayor grounded plans to privatize Midway Airport after one of only two bidders dropped out of the high-stakes competition.

The tax-exempt Port District was created by the General Assembly in 1951 to promote commerce at the Port of Chicago, which is at Lake Calumet Harbor on the far South Side. The District connects Chicago to the Atlantic via the St. Lawrence Seaway and to the Gulf of Mexico via Illinois rivers and the Mississippi River.

It owns the Port of Chicago, which has facilities at Lake Calumet as well as on Lake Michigan. It’s self-funded and relies on revenues from its tenants in the form of rent and fee payments.

The district operated at a loss in each of the 10 years prior to Emanuel’s appointment of Forde in 2011. Last year, it operated in the black for the first time in a decade.

Five years ago, the Port District was accused of allowing the nation’s largest inland general cargo port to “stagnate” and focusing on recreation at the expense of commerce.

When Forde arrived on the scene, he moved to return the port authority to its core mission by choosing Kemper Sports to operate the Far Southeast Side’s Harborside International Golf Center, from which the Port District derives more than half its annual revenue.

The board also hired the Bank of Montreal to do a “strategic and capital needs study” of the Port of Chicago. And at Forde’s request, the General Assembly directed Auditor General William Holland to conduct a management and financial audit of the Port District.

All of those moves culminated in the privatization that has now hit a barge.

The Port District also has had a checkered past.

Under four Illinois governors, its chairman was John Serpico, a powerful Chicago labor leader who hobnobbed with mobsters and was subsequently convicted of masterminding a kickback scheme and using union funds to induce crooked bankers to provide himself and an associate with $5 million in personal and business loans.

Gilbert Cataldo, a Serpico associate and former executive director of the Port District, also was convicted of taking kickbacks to arrange a business loan.


Twitter: @fspielman

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