By: Mark Glennon*
Bailout first, reform later. That story may play out again this week for a unit of Illinois government called the Illinois International Port District. The port facility the IIPD runs is on Chicago’s south shore on Lake Michigan.
The IIPD, sometimes called the Chicago port authority, owes about $15 million on a loan the state made in 1981 to construct improvements. House Bill 1791 would forgive that loan. Governor Rauner vetoed it but the veto may be overridden.
The loan is repayable from revenue and profits of the facility it financed, nut nothing has ever been paid on it. The rationale for the bill, laid out in its preamble, is that there’s no hope of every paying off the loan, so it’s best written off so new lenders and investors won’t be scared off.
That seems illogical on its face. If the loan is truly worthless it would have no impact; if there’s potential for some payment then it would. In other words, the value is probably something more than zero, but how much is unclear.
Far more importantly, no coherent plan for the future of the port is on the table. Why start writing off its obligations until a plan is in place?
The money maker for the authority isn’t cargo it all. It’s a golf course — the authority owns the Harborside International Golf Course. Cargo activity is limited to a small amount of bulk, raw materials, not the containerized freight now dominant. The Chicago Sun-Times had a nice piece a couple months ago describing the emaciated condition of the once important port.
For decades and decades the IIPD has been a cesspool of mismanagement and political patronage. “Port of Cronyism” is how the Chicago Tribune described it over thirty years ago.
The Civic Federation in 2008 called for the authority to be dissolved with port operations transferred to the city and the golf course to the Chicago Park District. The Illinois Auditor General issued a scathing report on the authority four years ago, though some reforms have been made since, as noted by the Sun-Times two years ago.
Today, the authority’s ambitions are scattered and vague. A hotel and marina are among them, but a big future in cargo is still envisioned. Earlier this year, one of its board members described how the new, wider Panama Canal will reinvigorate shipping coming up the Mississippi, through St. Louis and on through the Chicago port.
But whether any of that makes sense is unknown without a properly vetted plan, which nobody has.
In the meantime, at least some of the authority’s old ways persist.
The authority is run by a nine-member board. Each is paid $20,000 per year. It appears there are more board members than workers at the authority. It’s most recently published financial statements show year-to-date board compensation of $102,000 but other compensation of just $245,000.
One member appointed two years ago by Mayor Emanuel is Ray Suarez. No, not the Ray Suarez you hear on NPR. He’d probably have been fine. This is former Chicago Alderman Ray Suarez. Suarez was “like a dear in the headlights” according to the Sun-Times, when asked about the future of the port. Alderman Millie Santiago said the appointment was political payback to Suarez and his political patron, Cook County Democratic Party Chairman Joe Berrios, according to the Sun-Times.
As you’d expect, the IIPD also has its own pension that’s a mess. It has just $3 million in assets and $11.7 million in accumulated benefit obligations, according to its most recent annual financial statements. It appears to me that most of its obligations are owed to past and present board members. Count on the authority to look for a bailout of some kind for its pension, eventually.
That $15 million note, basically owed to Illinois taxpayers, isn’t huge in the grand scheme of things, but come on, General Assembly. The port and the rest of the land the IIPD own are worth a closer look — something more than just forgiveness of the note.
Rauner got this one exactly right. In his veto message he said,
Illinois taxpayers deserve transformational changes at the International Port Authority before we should consider forgiving this debt. Internationally, new port management models have been created to deliver greater private sector participation and investment in ports. New management models could increase port utilization and create new jobs, while reducing operating costs and eliminating risks to the taxpayers. I look forward to working with the International Port Authority and the City of Chicago to find a solution to benefit the people of Illinois and our economy in the near future.
*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.