New Cook County CFO Samstein to Issue RFQ for Bond Finance Teams

CHICAGO — Cook County, Ill., has a new chief financial officer who takes the helm as the nation's second-largest county struggles to stabilize after years of declining revenues, a fading reputation for overspending and corruption, and a double-A level rating that is on negative outlook by two of the three major rating agencies.

But Ivan Samstein has a unique perspective.

As a commissioned officer in the Army National Guard, Samstein spent most of 2008 and 2009 "sitting out the credit crisis" in eastern Afghanistan as an intelligence officer. He described the post as a sobering change from his previous job as a public finance investment banker for Bank of America.

Samstein recalls entering a small government building and questioning some men about the location of the district sub-governor, a position equivalent to a county president in the U.S., Samstein says.

"We don't know where he is," the men told Samstein. "But when we find him, we're going to kill him," they said. "Even at the most intense moments here, I know no one is going to kill me," Samstein joked in a recent interview with The Bond Buyer. "It's all a matter of perspective."

County President Toni Preckwinkle tapped Samstein for the top spot when former CFO Tariq Malhance stepped down in February. The full board approved the hire in March, almost exactly a year after Samstein was first hired as Malhance's deputy CFO. Samstein, who is 38, had already made a career in public finance, but the county is his first government job.

One of Samstein's first tasks is hiring a new deputy CFO and updating the county's bond finance teams. He plans to issue an request for proposals to build new pools of financial advisors, bankers, and bond counsel within the next few weeks.

Other than a new team, Samstein said he doesn't expect to make any big changes to the county's borrowing plans or policies. The firms he hires will likely serve three-year contracts instead of two, he said. He is also considering launching a commercial paper program to help avoid negative arbitrage in the county's project fund.

Another early move will be reducing the size of his own office as part of the county's larger effort to save money on its real estate, he said. Samstein's large corner office, decorated with expensive leather furniture purchased by an executive under former President Todd Stroger, will be divided in half to create a new office, he said. The move is part of a plan to reduce the footprint of the CFO's suite of office space by up to 40%.

Before joining the county, Samstein, who is married with a 16-month-old son, was a Chicago-based public finance banker with Bank of America Merrill Lynch. He was cut by the firm in September 2011 as part of the firm's widespread layoffs.

From 1999 to 2004 Samstein worked as a public finance credit analyst at Moody's Investors Service. He moved to Chicago in 2002 to help Moody's open its Chicago office. He covered an array of credits, including Cook County, Illinois, Wisconsin, and Missouri.

Samstein will oversee a $3 billion budget, the county's borrowing plans, and directly oversee roughly 200 employees in the finance department. He says the past year prepared him well for the job.

"Last year was very helpful. Tariq and I worked together very closely to make changes we wanted," Samstein said. "We now have in place the basic building blocks to deal with the county's long-term fiscal stability."

Those building blocks include two years of budget cuts to offset falling revenues; Preckwinkle's emphasis on a transparent and timely budget process; and on-time property tax collections, among other things. But challenges remain. Chief among them — a top concern cited by ratings agencies — is a roughly $4.7 billion unfunded pension liability. On that front, Samstein says, there's not much the county can do until the state of Illinois crafts pension reform legislation.

Other challenges include a massive safety-net hospital system with a $1 billion budget and chronic deficits, and the recent repeal of an unpopular sales-tax increase that would have brought in around $400 million of new revenue annually for the cash-strapped government.

Moody's Investors Service, which maintains a Aa3 rating on the county's $3.8 billion of general obligation bonds, and Fitch Ratings, which rates it AA-minus, both have the county on negative outlook. Standard & Poor's rates the county AA with a stable outlook.

"We're cognizant of the negative outlooks and we're working on the things that will address that," Samstein said. "Pension reform is a major variable, and we're working with all the stakeholders, but ultimately it's the state Legislature's decision."

He added that the county has rebuilt its general fund reserves in 2011 and 2012 despite revenue declines.

On the borrowing front, "We're trying to install a similar level of austerity when it comes to borrowing as we have in the budget," Samstein said.

A $25 million new-money bond deal will finance energy upgrades at county buildings, and refunding transactions will be considered depending on the market, he said. Cook has $295 million of new-money bonds authorized as part of its capital plan through 2016, and it might dip into that in 2014.

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