Lois Scott is one of the four founders of Women in Public Finance.
“I feel like we had an extremely successful first term and want to leave on that high note,” said Chicago’s departing CFO, Lois Scott

CHICAGO - Lois Scott, Chicago's departing chief financial officer, says there's really no good time to exit city government as she prepares to move on after four challenging years.

Scott, whose departure coincides with the start of Mayor Rahm Emanuel's second term, voiced pride in Chicago's fiscal accomplishments during her watch even as she leaves with the city's most burdensome fiscal ill - its unfunded pension liabilities - still unresolved.

"I feel like we had an extremely successful first term and want to leave on that high note," Scott said, citing pension reforms enacted for two of the city's four pension funds and the Chicago Park District, as well as trimming the city's structural budget gap in half.

When it comes to problems the city still needs to solve, "there's never a good time to leave government service and the things you believe in," Scott, 54, said in an interview Friday.

Scott told Emanuel of her resignation plans last month after he won a re-election runoff in which the city's dismal fiscal condition took center stage. The decision to leave became public Friday after she informed her staff inauguration day, May 18, would be her last.

"When I asked Lois Scott to serve as my chief financial officer, I asked her to stay for one year but she ended up staying for four," Emanuel said in a statement. "She has been an essential member of my economic team and Chicago has without question benefitted from her strong financial expertise."

Scott said serving in the post "has been the honor of a lifetime and the highlight" of her career.

Scott wins high marks from market professionals for improving investor relations and expanding disclosure. While some bankers may bemoan their level of business, most have high praise for Scott's accessibility, knowledge, and fairness.

"Lois came across as a real professional in the best kind of way," said Richard Ciccarone, president of Merritt Research Services LLC, who added he was impressed with her "direct knowledge of what's important for credit quality."

Scott has changed the tone the city sets for investors, said Shawn O'Leary, manager of Nuveen Asset Management's municipal fixed income research group.

"It used to be really difficult to get time with someone at the city and even then it was tough to get on the same page about what you identify as the problems facing the city, particularly pension funding," he said. "Lois didn't dodge any of the tough questions and was upfront about the issues facing the city."

The city faces a $550 million spike in its annual contribution for police and firefighter pensions next year, and city leaders are banking on state legislative help on yet-to-be negotiated reforms that will allow Chicago phase in the payment spike to bring the city to actuarial funding levels. The city's already battered credit ratings will tumble further if there's no pension fix.

The reforms to the city's municipal and laborers' funds, as well as retiree healthcare subsidy cuts, face an ongoing legal challenge.

Scott said she is eyeing opportunities, but has not settled on one and is looking forward to a "new chapter" in her professional career after stints as a financial advisor, banker, and White House fellow in the Clinton administration.

The administration said a replacement would be named at a later date. Other key fiscal officers include Budget Director Alexandra Holt, and Comptroller Dan Widawsky.

"The CFO is a critical position right now and the next one will have to have some of the same skills and an understanding like Lois had of the market," Ciccarone said.

O'Leary said he hopes Scott's successor will continue her "legacy of transparency, accessibility, and accountability."


When Scott stepped into the post, the city's pension reckoning was still several years away but it was foremost on her mind, along with the city's structural budget woes as a $700 million deficit loomed.

Important, but less urgent, was the challenge posed by the city's "legacy" debt load and structure.

"I think we've made meaningful progress on all three," Scott said.

On the budget, the city halted the use of reserves the administration of former Mayor Richard Daley relied on to balance his last several budgets. Officials renegotiated contracts, undertook management changes, and scaled back on other non-recurring items to help trim the city's structural budget gap in half.

On pensions, the city reached agreement with a majority of unions representing municipal employees and laborers last year and won state passage of reforms that raised contributions and cut benefits. The reforms face a legal challenge. The city also helped the Chicago park district obtain a reform package that has yet to be challenged.

The city has not said how it will cover future pension payment increases required by the reforms or the $550 million public safety pension spike in a roughly $9 billion budget.

Negotiations with public safety unions have been on hold as all parties await the Illinois Supreme Court's ruling on the constitutionality of reforms approved in 2013 to the state's pension system.

While trimming the city's use of one-shots, the city kept up some debt management practices utilized by Daley's administration that analysts frown upon.

The city continued to use refinancings to push off some principal payments as they came due with the goal of holding level the escalating debt service from a backloaded debt service schedule. The amount increased during Scott's tenure, reflecting growing debt service demands.

The city also continued rolling the costs of some judgments and legal settlements into long-term, more costly, taxable debt.

Capping Scott's tenure, Emanuel on Wednesday announced Scott-designed debt policy changes aimed at ending or sharply curtailing those practices.

The city also will convert all of its $900 million of floating-rate general obligation and sales-tax backed bonds to a more conservative fixed-rate structure and shed related swaps at a cost of $200 million in swap cancellation fees that will be rolled into long-term debt.

By shedding GO floating-rate paper and swaps, the city staves off the potential for further downgrade-related headaches from bank support and counterparty contracts. The city's latest credit hit from Moody's Investors Service in late February resulted in termination events on four derivative contracts. The latest changes follow the previous termination of derivatives on $1 billion of floating-rate debt.

While overshadowed by the city's pressing pension woes, the debt practice changes "were not insignificant," Ciccarone said. "Those were very big vulnerabilities for the city."

Scott is proud of her work on improving investor relations and her launch of an annual investor conference to "change the dialogue with investors," she said. Scott considers her role in organizing the CFO Forum with the University of Chicago Harris School of Public Policy Studies as a particular source of pride toward fostering a dialogue among big city CFOs on municipal challenges.

During her tenure, the city also increased bond work that went to minority, women-owned, and veteran-owned firms.

Some endeavors had mixed results.

With great fanfare and a visit from former President Clinton, the city announced the creation of the Chicago Infrastructure Trust in 2012 to leverage private investment in "transformative" projects. The trust has kept busy with more modest project financings after a slow start. "I think the trust is doing important work. It's tough as a start-up," Scott said.

The city sought to resurrect a proposed privatization of Midway Airport abandoned by Daley during the financial crisis. With only one bid in hand, the city dropped the effort in 2013, citing a lack of competition to determine the value of the deal.

The city renegotiated some financial changes to the much-maligned parking meter lease struck by the Daley administration, a success Scott also puts on her accomplishment list.

The most glaring negative during Scott's tenure has been the city's credit rating erosion, primarily at the hands of Moody's, and primarily due to the weight of $19 billion of unfunded liabilities on the city's books.

When Emanuel took office, the city carried Moody's Aa3 rating and stable outlook, a AA-minus rating from Fitch Ratings and an A-plus rating and stable outlook from Standard & Poor's.

Today, Moody's rates the city's $8.3 billion of GO debt two notches above junk at Baa2; Fitch rates it A-minus. The Standard & Poor's rating has held steady although its outlook is now negative. The city's has added a rating from Kroll Bond Rating Agency, which assigns it an A-minus. All but Kroll assign a negative outlook. The city's cost of borrowing has dramatically jumped and some of the city's GO maturities are trading in junk territory.

"The rating agencies have changed their approach. I think that gets lost" in the discussion over the city's ratings, Scott said.

O'Leary said that Scott, while making headway, also faced political constraints. Emanuel chose not to raise property, sales or gasoline taxes during his first term, limiting the Chicago's ability to use revenue to help with its fiscal problems, and the city faces union and state legislative challenges.

"All investors who hold Chicago debt would love to see the city further along in dealing with the pension issues and structural budget issues but it would be unfair to say it's her responsibility they haven't met those challenges," he said.


Emanuel courted Scott four years ago after his first election, convincing her to join his team.

Her banking experience includes positions at L.F. Rothschild & Co., Donaldson, Lufkin & Jenrette Securities Corp., and later at BA Securities Inc. Scott left banking to be a White House Fellow during the Clinton administration.

Scott returned to Chicago in 2002 and worked on Rod Blagojevich's transition team after he was elected governor. In 2003, she co-founded the financial advisory firm Scott Balice Strategies. Public Financial Management Inc. purchased Scott's interest after she joined the city.

Perhaps the toughest public trial Scott endured came during the summer of 2013 when former city Comptroller Amer Ahmad was charged with federal corruption crimes tied to his past tenure as deputy Ohio treasurer.

Scott's ties to Ahmad came under scrutiny and some questioned whether there was a conflict of interest. Scott's financial advisory firm had done business with the Ohio treasurer's office during Ahmad's tenure and she was among those who suggested him for the comptroller's position after his boss - then Treasurer Kevin Boyce -- lost his re-election bid.

Further fueling the scrutiny was underwriting work done on several city bond deals by a firm - Rice Financial Products -- that Boyce had joined in Ohio, although the firm has a long track record doing Chicago bond work. Scott was not accused of any wrongdoing and Emanuel stood behind her.

The now national Women in Public Finance, an organization Scott co-founded in Chicago in 1997, gave Scott its lifetime achievement award in 2012. The Northeast Women in Public Finance last year gave a Freda Johnson Award for Trailblazing Women in Public Finance to Scott.

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