But to Summers, who grew up on the South Side, violence is only a symptom of the community’s real dilemma. “We don’t have a violence problem in Chicago, we have an economic problem in Chicago,” he tells the crowd of about two dozen residents, who applaud in agreement. Normally a deliberate talker, Summers feeds off the crowd, his speech driven by their energy and attention. “It’s like you’re sick and you have a runny nose,” he continues. “Everybody wants to run and give you a tissue for the runny nose but they don’t want to solve the sickness.”
He tells them he wants to focus policymakers’ attention on small businesses, the economic building blocks of any community. As the streetlights turn on outside the half-papered-up storefront windows, he outlines his hopes for an investment fund that will give locally owned businesses the financial help that big banks won’t. He tells them of his efforts in the legislature in Springfield to make Illinois the first state to go after predatory lending to small businesses.
When he works a room, Summers might be taken for a city alderman with well-honed political ambitions. On this night, he happens to be in the neighborhood where Barack Obama got his political start as a young community organizer. But Summers doesn’t exactly hold political office; as treasurer he runs a rather obscure outpost of city government, one responsible mainly for managing Chicago’s investments and cash flow.
Nevertheless, Summers easily connects with this crowd. As an African-American leader in a city where blacks are feeling more and more marginalized, his upbringing in a poor neighborhood in a nontraditional family links him to many poorer Chicagoans, including the ones he’s talking to tonight. “I lived in [a neighborhood] where everybody was involved in a gang, involved in drugs, on their way to jail or the cemetery,” Summers says. “And I was lucky I had a hedge of protection around me of elders who said, ‘We’re not going to let you go that route.’”
But Summers is equally comfortable with the city’s elite. He graduated from high school at 16, from college at 20 and has an MBA from Harvard. At 36, he already has a long résumé. Summers worked on Chicago’s bid to host the 2016 Olympics and spent time in private capital management. Prior to being tapped by Mayor Rahm Emanuel to fill the vacated city treasurer post in late 2014, he was best known locally for being chief of staff to Cook County Board President Toni Preckwinkle.
“All of us sort of forget how young he is,” says John Rogers, chairman of Ariel Investments, who worked with Summers on Chicago’s Olympic bid. “He has a presence and maturity about him that people just assume he’s 10 years older than he is.”
Summers has made it a point to reach out to residents in every part of the city, including the South Side where he grew up.
The city treasurer has traditionally been a backwater job in Chicago. These days, it’s closer to the center of the city’s most glaring problems -- overly burdensome debt, massive pension liabilities and a school system that can’t afford to pay for its operations. Even so, Summers has limited influence over policy decisions: The real power belongs to the mayor and his CFO. But Summers is finding ways to make himself heard.
Just months into his job as city treasurer in early 2015, Summers had to deal with the matter of actually running for election. He decided to commission a poll. There was no political reason -- he had no opponent. But he wanted to know what his personal starting point was. He asked the city’s voters what they knew about their treasurer. Three-quarters of them had no idea Chicago had an elected treasurer.
Summers saw that as an opportunity. Previous treasurers in Chicago had typically been bankers or fixtures in the business community. They stuck to managing investments and talking to citizens about financial literacy. Summers didn’t want to settle for that. The city’s fiscal and economic strength, he says, are directly connected to crime, neighborhood vitality and education. To him, the treasurer’s office was Chicago’s most underused asset when it came to addressing its larger problems.
The problems, particularly the financial ones, are complicated. Many feel Chicago is a city that shouldn’t be in the financial chokehold it finds itself in today. It is the Midwest’s only global city, a place with a vibrant, thriving center that draws visitors from all over the world. Its economy continues to grow, if not quite as fast as those of other big cities. It has long touted itself as more affordable and lower in taxation than other cities such as Los Angeles or New York.
But Chicago essentially subsidized its growth over several decades by borrowing habitually to pay for its operations. That’s caught up to it, leading to credit rating downgrades, budget deficits and unpopular tax hikes. The city has about $34 billion in outstanding debt, with roughly $20 billion of that coming from its five pension systems. By comparison, its total annual budget is a little more than $9 billion. The pension debt, in combination with state-approved benefit increases, has led to a huge unfunded liability that is now threatening to take over the city’s budget.
The public school system has similar problems and may be facing a state takeover. The teachers’ retirement fund is short about $9.6 billion and owes an additional $6 billion to bondholders. The system’s outstanding bonds alone exceed its $5.8 billion annual budget, and both the city’s and the school system’s credit ratings have been downgraded to junk status. In April, the city’s teachers went on a one-day strike to protest failed contract negotiations and the overall level of funding.
Getting out of this situation will likely require another tax increase. The city imposed a historic 70 percent property tax hike last year, but that half-billion revenue boost is just the opening act to a story that seems destined to end with Chicago giving up its long-held claim to being a low-tax city.
In concert with all this are a spike in crime and a deepening racial divide. Murders were up 50 percent during the first four months of this year compared with April 2015. Shootings increased by even more. Dissatisfaction with the city’s leadership is common among residents but dramatically greater among residents of color.
Summers has strong opinions on all of these issues. He has to choose -- carefully -- where to insert himself in the city’s larger problems. Earlier this year on Facebook he praised a post by a local clergyman who slammed Emanuel for the way he handled the police shooting of an unarmed black teenager. The post prompted questions from the local media, and Summers had to walk a fine line that avoided direct criticism of the mayor while responding to public outrage over the administration’s slow response. More recently, he urged city pension funds to consider suing banks over money lost from interest-rate swaps, a stance that puts him directly at odds with the mayor.
Summers’ formal distance from the center of power does have advantages: It shields him from direct blame if and when things worsen in any given area. But it also shines a spotlight on the limitations of his position. “Some of his work is certainly impressive,” says Laurence Msall, president of the Civic Federation of Chicago. But that work has failed to get much attention, he says, “due to the severity of the overall financial crisis, crime and public safety, and the threatened closure of Chicago’s public schools from either financial collapse or strike.”
Take the city’s pension funds. As treasurer, Summers sits on five boards that oversee 11 pension funds. His primary influence is on the funds’ investments, not on the more fundamental issue of how to address their shortfall. But he has made changes that add up. One of his first major moves in office was to tackle the $142 million in annual fees that the plans had been paying to investment managers. Less than a year into his first term as treasurer, most of the funds agreed to join an online database and clearinghouse so they could share information on the fees and work together to reduce their cost. Summers estimates the collaboration could save as much as $50 million a year, or $1 billion over the lifetime of all 11 pension plans.
When it comes to areas outside the traditional treasurer’s role, Summers approaches issues from a financial standpoint and seeks out advocates on his behalf. He is addressing the city’s troubled neighborhoods by positioning himself as a small business champion. During his first three months in office, he visited all 77 Chicago neighborhoods in as many days to hear directly from community leaders about their concerns and problems with the city. His office checks in via regular conference calls with those leaders, who have become a surrogate voice for the treasurer’s agenda across the far reaches of the city. His careful cultivation of neighborhood leaders has served only to heighten speculation about his political ambitions.
The way he has changed the job of city treasurer has fueled speculation that Summers has higher aspirations.
Summers set an aggressive management tone early on when he closed more than 200 bank accounts and hundreds of dormant funds and seized untapped bond proceeds to net more than $100 million in what he said was essentially “found” money for Chicago. He decided that the city’s nearly $3 billion in short-term cash -- roughly three times what is recommended by the Government Finance Officers Association -- could be put to better use. He took a little more than a billion from that stash and invested it. Last year, the investments under Summers’ management earned about $58 million, beating the previous year’s returns of a little less than $50 million. The office has instituted quarterly earnings calls, a practice designed to improve confidence in the city’s financial wherewithal at a time when newspaper headlines are creating doubt.
Summers’ office has been leaning hard on banks. In particular, he has demanded that they release information on their neighborhood loans and investments. He wants to track the investments as a way of helping to decide how much of the city’s money these municipal depositories will be given to work with. Meanwhile, banks have pushed back on his effort to obtain passage of a statewide law regulating online lending to small businesses. The bill, which seeks the same kind of transparency requirements that have restricted predatory loans to individuals, appears to exempt bank loans. But the banks are concerned the exemption is ambiguous. Business groups including the state chamber of commerce say the proposal would dry up lending to small businesses, rather than facilitate it. Days after the bill was introduced in Springfield, more than a dozen lobbyists were hired to kill it.
Then there is the campaign to create an independently run investment fund that would pump money into neighborhood economic development. It’s common for major cities to have a revolving loan fund to give local businesses a leg up. But what would basically amount to an economically targeted investment pool run by an independent board is fairly unusual. Summers envisions that founding partners would include various private and institutional investors. He suggests that banks’ participation in the fund would be a way for them to show the city they are investing in local communities without having to take on the risk of underwriting a loan themselves.
Inside his office in city hall, where his power goes a lot further, the cultural change has been swift and fierce. At one time, the treasurer’s office was a place for money managers who chose to escape the rigors of the private financial world. That is no longer true. Summers believes he can attract the talent he wants by touting his office as a training ground for future investment bankers and fund managers. The investment staff is filled mostly by people in their 20s who are making thousands of trades a year.
Summers thinks of his office as a training ground for future investment bankers and fund managers, most of whom are in their 20s.
In 2013, the Chicago Park District agreed to let the treasurer’s office manage its portfolio. Summers wants to expand on that deal and make the same arrangement with other local agencies. This effort has achieved mixed results. The Public Building Commission agreed to it, but the much larger public school system has yet to take him up on the offer.
Summers says the offer to the school system is still on the table, but he also realizes he needs more advocates on his behalf, just as he has done with the neighborhood leaders. During a recent meeting with the parents’ organization Raise Your Hand, Summers reiterated his desire to manage school system investments, and asked them to bring up the idea during their meetings with school administrators. Here, the limitations of his office are glaring -- Summers has not gotten help from the Emanuel administration on this particular quest. “Look, I get it,” he says. “When you’re dealing with a half-billion or a billion-dollar problem and someone’s saying, ‘Hey I might find $20 million here,’ it’s hard to get them to prioritize it. That doesn’t mean it’s not worth pursuing. In fact, it’s all the more reason you have the obligation to take nickels, dimes and quarters.”
All this chipping around the edges at billion-dollar problems has another result: It builds goodwill in bite-sized, digestible chunks. The average city resident may not be able to swallow a half-billion savings in, say, pension liabilities. But $20 million, as one Raise Your Hand parent noted to Summers, saves teaching jobs at a time when teachers are feeling overworked and underpaid. A $100,000 loan to a South Side business owner rejected by local banks is a gesture that makes a statement about local government priorities.
A poll Summers recently ran provides some tangible proof that this flurry of activity is making an impression. One year after they elected him, he again asked Chicagoans what they knew about their city treasurer. This time, half of them remembered him.
The aggressive way in which Summers has approached his role has driven murmurs in Chicago about whether he’s priming himself for a mayoral run. When asked, he doesn’t answer directly but laughs and says it’s not the first nor will it be the last time he’s asked that question. Then he redirects the focus to his current mission. He’s convinced it’s the right mission, given his upbringing and his ability to walk between the worlds of high finance and some of Chicago’s grimiest streets. “A year-and-a-half before, I couldn’t have seen this coming,” he says. “A year-and-a-half from now, who knows? But what I do know is, I’m in this role for a reason. And for at least a defined period of time, I’m going to have all the impact I can.”
