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There’s a new payday loan outfit in town, and it’s taking up residence in St. Louis City Hall.
It’s called the Bank of Rex.
Borrowers beware: The costs of taking a loan from this bank are significant.
They are outlined in a series of documents obtained by the Post-Dispatch in a Sunshine Law request that show how much consultants who are working under the control of a nonprofit called Grow Missouri will be paid as they advise the city on whether to privatize operations at St. Louis Lambert International Airport.
The costs are steep, up to $800,000 per month or more for the one to two years it might take to make a recommendation on the airport’s future. If that happens, those monthly costs will be paid by city taxpayers out of the proceeds of what is effectively a risky auction of the city’s top asset.
Grow Missouri is controlled by local billionaire and philanthropist Rex Sinquefield and run by lobbyist Travis Brown. It has agreed to front money to at least 14 separate consultants as the city prepares to issue requests for proposals to companies that want to bid on the airport operations.
The monthly cost of those services, are at least $627,776 just in retainers. Expenses could be $270,250 or more. Three different law firms are also being paid between $425 and $575 an hour, with those costs rising as high as $800 an hour if the city closes a privatization deal.
Mayor Lyda Krewson and Aldermanic President Lewis Reed approved the expenses when they voted to approve the contract with Grow Missouri and its consortium of consultants.
Krewson stands by the deal and says no matter how much Grow Missouri pays it won’t cost taxpayers a penny.
“We don’t pay anything,” Krewson says of the city and its taxpayers. She says it is still early in a process that might lead to “nothing,” but that she’s committed to finding out if privatization could improve airport operations.
“I think it is worth considering a different way of doing business at the airport,” she says. “I don’t think this should be alarming to people.”
If the airport is privatized, Grow Missouri will be reimbursed its costs out of the fee paid by a private company for the right to profit off of the airport in coming decades. The city’s cost for, in effect, taking a loan from Sinquefield and allowing his operatives to run the process, is at least four times as high.
When the city sought bids for consultants to advise them on the process, only one other consortium was deemed to be fully qualified, P3Point, based in California.
Its proposed costs were about $200,000 per month, about one-fourth the amount the city agreed to pay the Grow Missouri group. P3Point specifically argued against an arrangement where the consultants were paid a percentage of profits of the deal. So while Krewson says taxpayers aren’t on the hook for any more no matter how much Grow Missouri spends, that’s only true in the context of that single bid.
Other bidders who offered to advise the city, and agreed to be paid on the back end, offered smaller transaction fees than Grow Missouri. And several of them, like P3Point, argued against such commissionlike arrangements.
Were P3Point to have been selected by the city, its total cost to taxpayers after 24 months would have been about $6.8 million. The Grow Missouri contract, if the airport is privatized, will cost between $21 million and $40 million.
Who is making all of this money?
There’s New York-based boutique investment banking firm Moelis & Co., the landing place of former U.S. House majority leader Eric Cantor, who became vice chairman of the firm after losing a Republican primary in 2014. Moelis doesn’t have significant airport privatization experience and doesn’t even mention the issue on its website as an area of expertise. Moelis will be paid $100,000 a month in a retainer and up to $150,000 a month in expenses.
There’s McKenna & Associates, the Virginia-based consulting firm founded by Andrew J. McKenna, who is mostly known as a Republican fundraiser who dabbles in dark money. He, too, lacks extensive airport privatization expertise. His firm will be paid a $125,000 monthly retainer and up to $20,000 in monthly expenses.
Each of those companies will also share in a success fee — in effect a very expensive incentive, $5 million or more — to make sure the privatization deal gets done.
There’s more. Attorney Marc Ellinger, who does much of Sinquefield’s legal work, will be paid $80,000 a month and up to $10,000 a month in expenses. Local political insider and consultant Mike Jones will be paid $12,500 a month.
And the city’s contracted lobbyist, Jeff Aboussie, will also cash in as a consultant paid by Grow Missouri. The city didn’t yet provide his contract with Grow Missouri.
This is no way to do business says Donald Cohen, executive director of In the Public Interest, a nonprofit that studies privatization efforts.
“I’ve never seen a procurement process that was this loaded up with consultants especially since the process ignores some of the basic standards of good public procurement practice that protects taxpayers and the public,” Cohen says.
None of this is news to city leaders.
They knew when they approved Grow Missouri’s bid that several other bidders were critical of the inherent conflicts of interest and misplaced incentives in a so-called “success fee” arrangement.
Krewson dismisses such talk. She says that despite the financial incentives tied to being paid by Grow Missouri: “They work for us. They are our contractors. They are on our team.”
The only city official who voted against the contract with Grow Missouri, the one responsible for the city’s credit rating, disagrees. She says this is a bad deal for taxpayers.
“Contract negotiators missed the mark when it came to fiscal responsibility and controlling costs on behalf of city taxpayers,” says Comptroller Darlene Green. “These numbers are irresponsible and extraordinarily high.”
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