Category Archives: Chicago

Chicago Tribune scrutinizes CPS bond deal

The Chicago Tribune published an extensive, front page feature on the Chicago Public School District’s use of innovative borrowing strategies over the last decade, which appears to have backfired and inflated borrowing costs by $100 million.

Appearing in the Sunday print edition of the newspaper, the story centers around the district’s practice of issuing auction-rate bonds, paired with interest rate swaps, to reduce the cost of borrowing money. In contrast to more traditional, fixed-rate bonds issued by school districts and municipalities, the variable rate instruments were subject to future market conditions and in this case, ultimately moved against the district. Servicing the debt became more costly, and breaking out of the contract required large lump-sum payments.

Several academics, financial professionals and public officials contacted for the story said greater consideration should have been given to the potential risks involved. The district’s financial advisors who crafted the deals defended them, disputing the newspaper’s analysis that concluded that they cost the district $100 million.

A couple notes: first of all, reporters Jason Grotto and Heather Gillers did a great job with this story. It’s a serious, in-depth piece on a local topic of real civic importance, showcasing one of the strengths of newspaper journalism. That’s not to say I endorse every sentence or every shade of tone and nuance in the article, but that’s beside the point. The point is that this is important, engaging reporting. Definitely worth my Sunday subscription price.

Secondly, it should be noted that the district and its financial people weren’t crazy or irresponsible for considering the new type of deals that were being used more often during the early 2000s. Innovation occurs in the financial industry just like every other industry, and just because something is new and more complex, doesn’t mean it’s wrong or irresponsible.

Thirdly, that being said, I believe (and I think most reasonable citizens would believe), that a school district should generally take a conservative approach to resource management and financial planning. That might mean you don’t try to shake a point or two out of every deal, if it means incurring an unpredictable future liability stream.

Fourthly and finally, I thought that the reaction of the CPS advisors in response to this article was lacking, at least in terms of what was published. The competing analysis they submitted in response to the Tribune analysis omitted key information, leaving their defense of the deals less credible. Again, it’s not always wrong to take calculated risks, but if the deals don’t work out, just say that, rather than stretch or skew an analysis stating that they did.

But worst of all was Adela Cepeda‘s attempt to strike back at the newspaper for investigating the public school district’s finances. “I consider the slant of the reporters for this article to be absolutely biased and outright sexist,” she said in a letter to the Tribune. She also criticized the paper for consulting a New York firm to review their own analysis before publishing, only to then use a New York firm herself to submit her own analysis.

Cepeda earned an MBA at the University of Chicago, and was in banking for ten years, according to the article. She married into a politically connected family on the city’s South Side, and very shortly after forming her firm won contracts with CPS. Her partner, David Vitale, is a former Chicago Board of Trade president and currently serves as president of the school board.


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First glimpse of Tilt at 360 Chicago

A glimpse of Tilt at Chicago 360 ( formerly the John Hancock Observatory).

A glimpse of Tilt at Chicago 360 ( formerly the John Hancock Observatory).

While its opening date keeps getting pushed back (the second week of May is now apparently the target), Tilt at Chicago 360 is looking impressive.

While most of  the work remains hidden to public view, there are small peepholes allowing for a glimpse at the new attraction, which promises to give customers a downward-facing view of Chicago from 94 stories above street level.

Here’s a sneak peek at the city’s newest coming attraction. Experiencing Tilt will set you back $5, but I’ll definitely try it at least once.

One of the cool things about Tilt is the way it is designed to blend in to the John Hancock’s exterior. The Montparnasse 56 Group, the company which owns Chicago 360, has a snazzy little video of what Tilt will look like in action.

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Ventra Privacy issues?

I’m surprised – maybe I shouldn’t be – that I’ve not seen or heard much about potential privacy concerns surrounding the rollout of Chicago’s new public transit payment system, Ventra. There is still a dwindling band of last-adapters, those of who cling to our old-school all-you-can-ride passes paid for and used the good old fashioned-way: with cash at the counter, and a quick in-out at the turnstile. But much of the city now uses Ventra, the fancy new touchless swipe system, and soon all of us will be swiping our cards at the baby blue readers whether we like it or not.

I’m all for progress, and it seems touchless is a good way to go. Fast, modern, clean, etc. Or at least in theory – in practice it’s a little different when you’re waiting to load the bus behind riders who cannot successfully swipe their cards without several attempts. Most of that can probably be chalked up to new user unfamiliarity with the system. There are other supposed advantages to the system as well.

What concerns me though, are the privacy issues surrounding Ventra. For instance, to get a card, you must provide a set of personal information. To order on, shipping information is required along with an email address and primary phone number. Why email and phone are required is unclear. You are then required to create an account, which includes a mandatory field for a purchaser’s birthdate. So at this point, to ride the subway you need to submit your address, email, phone and birthday to CTA and by extension, its third party vendors. Seems a little strange. Then, of course, you need to pay for the card, so you provide your credit card information.

A screenshot taken from

A screenshot taken from

You also must agree to the terms and conditions of the card, which includes gems like this:

  • “Users must present their Ventra Card for inspection by authorized representatives of participating transit agencies’ security, or law enforcement personnel upon request.”

So presumably a CTA agent can ask you for your card, anytime. I’m not assuming this would occur in abusive ways, but the fact is that that authority is written into the program and users are required to agree if they want to participate. Reminds me of the South Park episode “The Human Centipad,” which is a great riff on EULAs (End User License Agreements) in our modern age.

I’m looking into other ways of signing up for the card (you can buy online but also in the stations, I believe, and at places like The Currency Exchange). They may require less information, and if so, I think that’s a good thing.

Another nuisance: Customers are charged a $5 fee to purchase a Ventra card. The only way this is rebated as ridership credit is if you agree to proceed and register your card (by providing certain pieces of personal information).

The biggest potential threat to privacy is this: Can users’ cards be tracked? Does the system have the ability to see that John Doe scanned his Ventra card at 7:42 a.m. on 11/14/13 at the Chicago & Grand Red Line Station, then again at 12:03 p.m. the same day as he boarded the 151 Bus? Is that kind of capability built into the network of card readers and central servers? We don’t know. It’s very possible that there’s no such capability. Maybe that’s obvious to people familiar with the technology. But it’s something Chicagoans should know for sure, and so far I haven’t seen anybody talking about it.

More on this in the coming days…

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