CHICAGO — A profound shift in debt management and the control of a handful of state related agencies with bonding powers may lay ahead for Illinois as the state ushers in its first Republican governor in 12 years.
Jockeying to hold on to positions of power ahead of the sea change Jan. 12, when Bruce Rauner will be inaugurated, have gone on behind the scenes since the November election.
The jockeying became more public this week.
On Monday, the Illinois Sports Facilities Authority awarded a two-year contract to Lou Bertuca, who ran outgoing Gov. Pat Quinn's failed re-election bid, to serve as the agency's executive director. The board's members include a mix of three mayoral and four gubernatorial appointees, giving the governor the edge in picking a board chairman and building a majority on the board.
"Lou Bertuca's management skills, government experience and legislative expertise will serve the Illinois Sports Facilities Authority and the ballpark very well," board chairman Emil Jones, a Quinn appointee and retired Democratic state senate president, said in a statement. "Lou is a smart, effective leader and we look forward to working with him."
Mayor Rahm Emanuel's board appointees fought the hire, arguing a national search should be conducted.
Rauner, who previously urged a halt to any 11th hour appointments protected by contracts or terms, said he would attempt to reverse the authority's move. "We need talent and integrity. We're not going to be using this old system of recruiting people in the government who worked on somebody's campaign or somebody's brother-in-law, we're going to bring in talented people," Rauner said in a published report.
On Tuesday, the Illinois Finance Authority board appointed its executive director, Christopher Meister, to a new one-year term. Board chairman William Brandt said as a practical matter to ensure the adequacy of bond documents as required by bond counsel, the agency must have an executive director sign off. State statutes allow for only a one-year appointment and no other option such as a shorter term or interim appointment, and Meister's existing term expires this week.
Sensitive to the fact that a new administration is coming, Brandt said he asked Meister to agree to resign if Rauner or an aid asks him to do so. Meister agreed it was a good solution to the timing issue and the provision was included in the resolution voted on by the board. "The new administration should have every right to name its own team and the new governor has been given the absolute power to do that," Brandt said.
At the top of Rauner's agenda are dealing with a fiscal 2015 deficit, crafting a 2016 budget, making decisions on whether to seek an extension of the 2011 income tax hike that partially expires Jan. 1, and preparing for the potential scrapping of a 2013 pension reform package by the state Supreme Court. The state's budget and pension woes have dragged its general obligation ratings to the lowest among states and the debt carries a negative outlook.
Rauner also will soon hold some power over leadership and board appointments at more than 300 agencies, including a handful of frequent borrowers. His choices stand to influence both the management and bonding practices at those agencies, where key positions are often seen as rewards for political support.
The local underwriting, financial advisory, and legal communities will be watching closely to see how the agencies are altered to reflect Republican loyalties and clout, since it could affect their business and change in how firms are picked. Some of those changes would have to wait until the expiration of terms assigned to current pools established after competitive selection processes many borrowers including the state abide by.
While the state's fiscal strains are at the forefront, market participants and the public are expecting change throughout state government sooner rather than later, said Richard Ciccarone, president of Merritt Research Services LLC.
"There should be dramatic changes; a fresh approach is needed at every layer where finances and economic development is involved," Ciccarone said. "It's not about the competence or incompetence of current managers, it's about making a statement that the old way of doing business is over."
Ciccarone said the "fine-tuning" doesn't necessarily mean sweeping out all top level officials, because experienced hands are needed. Still, "Bruce Rauner was elected with a mandate to make changes, and an important way you do that is through the people" you tap for key posts, Ciccarone said.
The organizations that at least partially fall under the governor's purview include the Metropolitan Pier and Exposition Authority, the Illinois State Toll Highway Authority, the Illinois Finance Authority, the Illinois Sports Facilities Authority, the state's public university system governed by individual boards, transit boards, and the Illinois Housing Development Authority.
The shift in administrations stands to shake up the management of those agencies more than usual as party control changes.
Quinn followed Rod Blagojevich into office after the latter's late 2008 arrest on corruption charges. Blagojevich's 2002 election marked a shift to Democratic power after three decades of Republican governors — George Ryan, Jim Edgar, and James Thompson — and that led to significantly more changes than occurred after Quinn took over from Blagojevich.
Rauner has offered few clues about his future financial team or changes that could be afoot elsewhere, including some that could be slow in coming as many agency board members' terms don't expire for several years. Rauner has tapped his Lt. Gov.-elect Evelyn Sanguinetti to lead the transition effort.
Rauner has hired consultant Donna Arduin, of Arduin Laffer & Moore Econometrics to advise his transition team on budget issues, according to a published report. Arduin has held top budget and finance positions for Republican state administrations in California, Florida, and New York. Arduin recently met with state agencies to discuss finances, according to a report from Lee Enterprises.
Unless Rauner seeks an extension, the fiscal 2015 budget must be unveiled by Feb. 18.
The state's debt manager, John Sinsheimer holds the title of capital markets director and serves at the pleasure of the governor. Sinsheimer was a veteran of both private and public sector financial management positions when he took the post in October 2009, steering the state through the rocky terrain of heavy borrowing to support a $31 billion capital program amid steep credit deterioration.
The state issued $3.4 billion last year, a total that may slip as the state winds down its Illinois Jobs Now program. There's widespread support for a new infrastructure program, which Rauner said he supports and could help smooth over his relationships with Democratic lawmakers who hold veto-proof majorities in the General Assembly.
Sinsheimer had previously served for three years as chief financial officer at Illinois Student Assistance Commission. He reports directly to the governor while his predecessors reported to the cabinet level post of director of the Office of Management and Budget. The state's current acting budget director is longtime Quinn ally Jerry Stermer.
The IFA is the state's lead conduit authority that provides not-for-profits access to the municipal market and manages the state's state revolving fund issuance. The agency, created in 2003 by legislation pushed through by Blagojevich consolidating a handful of separate conduits into one, issued $1.4 billion of bonds last year. The agency's first executive director admitted in federal court documents that he received the post as a reward for Blagojevich campaign contributions.
The agency's 15 board members are appointed by the governor and serve staggered three year terms with the board chairman tapped by the governor for two-year terms. Brandt has served on the board since 2008 under both Quinn and Blagojevich's administrations. Meister has held the post since 2009 when he was nominated by the governor and formally hired by the board.
The tollway agency, a frequent borrower currently in the midst of a $12 billion capital program that relies on $5 billion of debt issuance, is managed by 11 board directors, including nine appointed by the governor with the consent of the Senate. The governor and secretary of transportation serve as ex-officio members.
No more than five of the governor's appointment may come from the same party affiliation and they serve four years or until a successor is named with the governor holding sway over the board chairman appointment who serves a four year term.
The board picks an executive director, but the governor typically recommends his pick for the position. Kristi Lafleur has held the post since 2010, leading Quinn's push for the capital program.
The Metropolitan Pier and Exposition Authority, which manages Chicago's Navy Pier and the McCormick Place Convention Center, falls under the auspice of a nine member board serving staggered terms, with four appointed by the governor and four by the mayor and a chairperson appointed by those eight members. The agency is overseeing plans for a new basketball arena and second convention center hotel.
The current chief executive Jim Reilly, whose ties cross political party allegiances, was appointed by the General Assembly as part of legislation revamping the agency and increasing its debt capacity in 2010. Both the mayor and governor supported his reappointment to the post in 2012. He has announced plans to retire as soon as the board finds a replacement.
The governor appoints the nine member board that oversees the Illinois Housing Development Authority. The members serve staggered four year terms with the governor deciding on the board chairman and the governor typically recommends an executive director.
The governor holds sway over three of seven positions on the Chicago Transit Authority board, but the mayor holds more power with four appointments and the pick of an executive director.
The governor weighs in on Chicago regional planning through the automatic appointment of his transportation secretary, tollway executive director, and other key allies from various agencies to the governing board of the Metropolitan Planning Organization Policy Committee and the Chicago Metropolitan Agency for Planning. They hold the federal purse strings for regional transportation projects.
Though his board members on the policy committee, Quinn has won support for the controversial Illiana expressway, a more than $1 billion project linking two major Illinois and Indiana highways with funding expected to come from a public-private partnership. Chicago officials, environmental groups, and local planners oppose the plan and its fate under a Rauner administration remains unclear, as he's undecided on the project.
The governor appoints most members of the governing boards of the state's public universities. The flagship University of Illinois board has nine trustees appointed by the governor and one voting student member designated by the governor. The ratings of many of the state's universities have fallen due to delayed state aid payments and concerns over future cuts to state aid funding levels. They have been warned to anticipate cuts of as much as 20% as they craft budgets, according to published reports.
The sports facilities board manages the U.S. Cellular Field, home of Major League Baseball's White Sox, and served as the issuer for bonds issued to overhaul the Chicago Park District-owned Soldier Field, home of the National Football League's Chicago Bears.
Quinn previously butted heads previously with Chicago Mayor Rahm Emanuel over his choice of former aid Kelly Kraft to serve as executive director instead of an Emanuel-supported candidate. Bertuca replaces Kraft whose contract has expired and is headed to law school.
