CRE Midwest

Deputy Mayor Koch: Bringing a business pro’s perspective to city affairs

When Chicago Deputy Mayor Steve Koch tackles city issues, he does so from the perspective of a business professional with years of experience in the private sector.

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When Chicago Deputy Mayor Steve Koch tackles city issues, he does so from the perspective of a business professional with years of experience in the private sector.

Before becoming deputy mayor, Koch ran Credit Suisse’s M & A business for about 20 years. However, Koch had an interest in public service and Mayor Rahm Emanuel called him one day after having been elected to recruit him for the deputy mayor position.

“Being a lifelong Chicagoan, when a guy who just got elected mayor calls you, you go see him because if nothing else, I wanted to make sure my garbage kept getting collected,” Koch told a roomful of 900-plus attendees at Wednesday’s 12th Annual Commercial Real Estate Forecast Conference at the Sheraton Hotel & Towers.

Koch eventually ended up accepting the position with a salary of $1 a year.

In a conversation with Cushman & Wakefield’s Shawn Mobley during the Forecast Conference, Koch discussed Mayor Emanuel’s aggressive agenda for the city and his own position as deputy mayor.

Koch said the deputy mayor position is part of a structure of city government that has been used very successfully in New York City for many years. In his position, Koch obviously spends a lot of time dealing with city finances, but he also focuses on the things that will drive the economy of the region forward, such as the city’s effort to revitalize McCormick Place.

One of the things Chicago has going for it is its demographics, according to Koch. He said he would not have wanted to be deputy mayor 20 years ago when “a flood of large corporations” moved their headquarters outside of cities.

“If you were the head of a large corporation today and you told your board of directors that you’ve decided to move the headquarters somewhere 70 miles from a downtown area, you’d be fired,” Koch said, adding that highly educated, younger workers want to be in urban areas today.

Now, he said, younger people in certain Chicago neighborhoods want to have the ability to walk or bike to work. They also want access to entertainment and good schools for their children all within a relatively small area.

Koch added that the city also has to work to attract small businesses as well because small businesses are the driver of most job growth in the U.S. He said bureaucracies have a tendency to make life “overcomplicated,” adding that over the last three years, Emanuel’s administration has tried to strip away regulations, licensing fees and other impediments to small businesses.

“It shouldn’t be a burden to have to interface with government if you’re a business,” he said. “It should be easy.”

Koch pointed to the role that the not-for-profit economic development organization World Business Chicago plays in attracting business to Chicago.

“We have had two or three major corporate moves that have come about because of casual conversation between a Chicago business executive and a company who casually raised the topic of going somewhere else,” he said. “I think WBC has done a very good job of driving that dialogue.”

Emanuel’s administration also has been disciplined in using economic incentives to draw businesses, according to Koch.

“The simple reality is that at this point in time in the City of Chicago, there is not a lot of money,” he said. “To think we’re going to fix our problems by spending money to get people here is not realistic.

“For the most part, governments are incredibly bad at using incentives effectively,” he added. “In the aggregate, I think that as a country and as citizens, we ought to all think that this is a crazy way to do business.”

Koch said city officials will only use incentives in certain areas where they are trying to accomplish a particular goal.

“We think the market will bring jobs to downtown Chicago on its own,” he said.

Chicago also has its challenges, according to Koch. For many years, the city spent more money than it took in, said Koch, who also addressed the city’s pension issue.

“We basically borrowed from our workforce because for many years we made a whole series of promises about employment benefits, mainly pensions, and we simply didn’t fund them,” he said. “Happily, I wasn’t here at the time. At some level, I wish I could understand what somebody was thinking because it’s somewhat inexplicable.”

Koch noted that the city’s solution involves contributions from multiple sources.

“I suspect that if we reach a point where everybody is a little mad, that’s probably about the right spot because it means that everybody has contributed a little bit along the way,” he said.

Koch said the solution entails a mix of revenue, cost savings, efficiency and pension reform.

“We’re paying for past sins,” he said. “This is literally 30 years of financial mismanagement. We’re not going to fix that in a day or a year.”