Improper bid award procedure on $52M Kane County bond issue?
Kane County officials considering a $52 million bond issue to pay down pension debt got a no-nonsense rebuke from the state's attorney's office about staying within legal guidelines in approving a law firm to do the work.
Handwritten notes, principally from county board Chairman Chris Lauzen, on the evaluation forms of eight firms indicated his willingness to allow a "finder's fee" to one of the bidders, a criterion not normally allowed, Michele Niermann, deputy chief of the Kane County state's attorney's office civil division, said in an email to the executive committee.
Any such inclusion, she wrote, is "disconcerting and, at first blush, could be interpreted in a way that may appear improper or indicate a conflict of interest." She added that any person who knowingly awards a contract based on undisclosed criteria, such as finder's fees or negotiated discounts, is guilty of a Class 3 felony.
But Lauzen said Tuesday the opinion from the state's attorney's office stemmed from notes that were "badly misconstrued" and "inaccurately misinterpreted."
The evaluation sheets, obtained by the Daily Herald, show a review panel that included Lauzen and county Treasurer David Rickert were to judge the eight firms on four criteria: qualifications, experience, references and cost.
Lauzen's sheet shows the chairman scratched out the category labeled "Experience" and substituted "My Experience w/Them." Under that category, the law firm of Ice Miller LLP received Lauzen's highest possible score, more than double that he awarded any of the other firms.
Also, a notation in the "Cost" category shows a $45,000 bid from Ice Miller. A line with an arrow from that bid on Lauzen's sheet reads "Finder's Fee + negotiate $40,000, best and final (clarification of services)."
The $45,000 bid was the second highest, and $17,000 more than the low bid by Chapman & Cutler LLP. Ice Miller was Lauzen's No. 1 choice.
Rickert also had a notation showing he initially ranked Ice Miller seventh out of the eight companies. But he changed the firm's ranking to No. 1 during the meeting. His note reads, "Higher fee acceptable since they did a significant amount of the work up front to present to the county. 'Finder's Fee.'"
Lauzen said Ice Miller first pitched the idea of issuing pension obligation bonds to save the county money. And the firm shouldn't be penalized for that.
"To think that there's some bad thing for giving consideration for people who are helping us ... there is nothing nefarious about it," Lauzen said.
As far as any negotiations on the bid price, Lauzen said he made a note about negotiating to remind himself that "certainly we want the best price."
"I wanted to make sure I checked on it," he said. "So I wrote down 'negotiate.' That's the whole story."
County officials are considering issuing $52 million in bonds to pay off an outstanding pension obligation to the Illinois Municipal Retirement Fund. The county is paying 7.5 percent interest on that debt right now, and based on projected earnings on IMRF investments, the county could save $160 million on its pension obligations by the time they're paid off in 2188.
In response to the warnings from Niermann, the county board formed a new evaluation committee. On Tuesday, its members voted 14-10 to award the bond counsel contract to Chapman & Cutler.
IMRF's roller coaster investment history
The Illinois Municipal Retirement Fund has a long-term investment goal of annual 7.5 percent returns. But the fund has seen wild ups and downs in its actual investment returns in recent years. On Tuesday, Kane County officials took another step toward betting on IMRF hitting that long-term goal.
IMRF investment returns:
2011: -0.5 percent
2012: 13.5 percent
2013: 20 percent
2014: 5.8 percent
2015: 0.2 percent
Source: IMRF 2015 Popular Annual Financial Report