After years in the starting blocks, Mayor Lori Lightfoot looks to jump-start Chicago Community Catalyst Fund, which could invest $100 million in struggling neighborhoods
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Sep. 26–City Treasurer Kurt Summers announced the Chicago Community Catalyst Fund in 2016 with much fanfare — the city would earmark $100 million to jump-start investments in struggling neighborhoods, providing the seed money needed for ventures in places where many banks had been reluctant to put their money.
None of it was spent. In fact, it wasn’t until Summers was about to leave office this May that he moved $75 million of the earmarked money into a bank account where it could be administered. But upon taking office, Mayor Lori Lightfoot deemed that move improper and pulled the funds back, while not accusing Summers of doing anything illegal.
Now, Lightfoot herself is looking to reboot the program and finally deliver on its promise. Last month, she was given the names of possible people to fill vacancies on the fund’s board, and along with new Treasurer Melissa Conyears-Ervin is looking to fund projects on the city’s South and West sides.
Questions remain, however, about how the Catalyst Fund, also known as Fund 77, was set up to begin with.
When the program was conceived, the plan was to have the board invest in at least five established for-profit firms that would in turn make loans to projects and businesses — with no more than 20 percent of any loan financed by city money.
After Summers and then-Mayor Rahm Emanuel publicized the idea in fall 2016, the City Council approved an ordinance that November to allow the treasurer to immediately transfer up to $35 million into the fund, and follow with another $35 million in 2017. Up to $30 million could go into it in 2018.
When Lightfoot took office, she learned that Summers had moved the $75 million out of the city’s coffers and into the Northern Trust bank. The new mayor ordered the money returned to the city’s coffers.
“The city discovered $75 million was transferred to Northern Trust bank and the funds have since been recovered, with the exception of $171,000, which the Chicago Community Catalyst Board chose to leave in the account for fiduciary reasons,” Lightfoot spokeswoman Lauren Huffman said. “Mayor Lightfoot and the current treasurer have committed that this money will be returned to the Catalyst Fund to fund projects on the South and West sides of the city, consistent with the original intent of this program.”
Communications from the days after Lightfoot’s term began show administration officials and city attorneys discussing why Summers shouldn’t have moved the $75 million.
In a May 29 letter the Tribune obtained through an open records request, Deputy Corporation Counsel James McDonald told new Chief Financial Officer Jennie Huang Bennett the $75 million appears not to meet the definition of “eligible funds” as laid out in the city code governing the Catalyst Fund because the city comptroller did not join Summers in determining its eligibility. “It would be advisable to reverse this transfer as soon as possible,” McDonald wrote.
Summers says he acted correctly in moving the money, and that he’s happy Lightfoot wants to make the fund work as he intended.
Conyears-Ervin recommended to the mayor last month 10 names of potential new members on the seven-member Catalyst Fund board. Lightfoot is set to pick four people from the list of nominees to join the board, which oversees its investments.
But the program has had detractors on the City Council.
To begin with, a handful of aldermen argued there wasn’t enough oversight built into the ordinance to ensure the money was going to worthwhile programs in under-invested communities. And, if investments started flowing from the fund, there were some who worried about whether the money would make it to the struggling West and South side neighborhoods that needed it, said Ald. Scott Waguespack, 32nd, who voted against it.
“I never thought it would succeed,” Waguespack said. “We thought it was going to be a bust, and I guess it was.”
Rather than go forward with the once-ballyhooed Catalyst Fund program, Waguespack said Lightfoot should consider ending it. Instead, Waguespack said, the city should keep the funds within its financial structure, where it would be subject to the usual checks and balances.
“There was no oversight. It took accountability for how the money was spent out of the hands of anyone but the mayor or the treasurer,” he said of the fund. “It was shaping up basically to be a slush fund for the mayor to play with. There was nothing stopping that money from being invested in projects in the (North Side) 43rd or 47th wards, which really don’t need that kind of boost.”
Former Ald. Ricardo Munoz at one point tried to redirect $25 million from the fund to citywide anti-violence efforts, saying that would be a better use of extra city revenue than Summers’ plan.
In September 2017, Emanuel got the City Council to vote to push all the money transfer dates back a year because the fund’s board of directors still hadn’t been named.
Summers and Emanuel finally announced the mayor’s four appointees to the Catalyst Fund board that October.
“When I became treasurer two years ago, I traveled to all 77 neighborhoods of Chicago and asked what our residents needed,” Summers said when the members were named. “The overwhelming response to my question was loud and clear: access to capital. Today’s announcement is yet another significant step in answering that call by engaging a group of esteemed and highly talented business leaders.”
But the capital wasn’t forthcoming.
Summers said the Catalyst Fund had been growing in a segregated city account, and the next step was to move it to a bank to hold it until it could be invested. He moved the money on May 16, and Conyears-Ervin recovered it from the bank at Lightfoot’s behest.
“The City Council voted on it and it was approved in 2017 to set aside the money. We did that, and the move to Northern Trust was simply the next step, the creation of the account to hold that money,” Summers said. “Just as the city has accounts at many financial institutions for various purposes.”
As for the timing, four days before he left office and Conyears-Ervin took over as treasurer, Summers said that’s just how long it took for the fund’s board to come together and be ready to make the move. “I think it was a first-of-its-kind investing vehicle, and these things take time,” he said. The program “was never a priority for Mayor Emanuel,” which also slowed things down, Summers added.
It was proper to move the money to Northern Trust as was planned, rather than to leave it sitting in a segregated account within the city coffers for Conyears-Ervin to find when she took over, he said.
And it’s appropriate now for Lightfoot to keep the program moving. “I’m delighted she’s committed to it,” he said.