The abrupt resignation Friday of Mayor Brandon Johnson’s third chief financial officer in a year could trigger another drop in Chicago’s bond rating — and the events that led to her departure cast a damning, harsh light on Johnson’s leadership as he seeks a second term.
Ashlee Gabrysch’s departure sent shock waves through City Hall and beyond. Her resignation comes in the middle of a budget stalemate and after just three months as the city’s top financial officer. Even more damaging than Gabrysch’s sudden exit is what she said on her way out the door.
A former Wall Street executive, Gabrysch issued a statement saying she was unwilling to compromise her financial integrity.
“As the City of Chicago’s Chief Financial Officer, there is nothing more important than my fiduciary duty to the City and its taxpayers. The Chief Financial Officer’s statements about city finances are not idle chatter: they are relied upon by investors, ratings agencies, City Council, and taxpayers. The CFO must act scrupulously to ensure they are always accurate and complete,” Gabrysch said in a statement released to the media.
“Throughout my career, I have remained committed to upholding the highest standards of financial integrity and transparency, and in my short time as Chief Financial Officer, I have faithfully discharged this duty. It has become apparent, however, that to continue in this role would be to compromise my integrity and professional obligations. I therefore have concluded that I must step down from my role, and hereby tender my resignation.”
A former senior director at Fitch Ratings, Gabrysch was hired in early August to replace Steven Mahr, who abruptly resigned, along with his top deputy, just days before veteran Budget Director Annette Guzman followed both men out the door.
Mahr had replaced Jill Jaworski, who left City Hall in January for a job at Navy Pier shortly after a City Council majority rejected Johnson’s corporate head tax and muscled through an alternative city budget.
The hiring of Gabrysch sent a signal of reassurance to Wall Street, especially since Gabrysch had served as Fitch’s lead analyst for both Chicago and Illinois. That made her familiar with the city’s $36 billion pension crisis and the city’s marathon budget battle.
Civic Federation President Joe Ferguson said the resignation of Johnson’s third CFO is “spectacular, breathtaking and disturbing.”
“Credit to her for holding a line that has been fuzzy at best during this administration and doing one of the most important things that a senior-level person in that position can do, which is to say no when something crosses the line,” Ferguson said. “We don’t know what that line is. We don’t know what she has been asked to say that caused her to draw that line.”
Ferguson urged the City Council to call a hearing, summon Gabrysch to testify and find out what exactly she found so “unacceptable.”
Ald. Bill Conway (34th), a former investment banker who teaches college finance, demanded an “immediate and robust investigation.” Conway called Gabrysch’s resignation letter an “obvious indication that she was asked by the mayor’s office to present false information.”
The mayor’s office turned the tables on Gabrysch — essentially accusing her of wrongdoing serious enough to warrant an internal investigation.
“The City of Chicago is facing a serious budget crisis following decades of mismanagement. It is concerning that, during her short tenure, Ashlee was largely absent during critical periods of the City’s budget preparation process,” the statement said. “Additionally, her decision to direct the City Treasurer to issue a $75 million payment without proper legal authority or following the required processes raises serious concerns.
“Our administration made multiple attempts to meet with her to discuss this action and seek an explanation, including shortly before her public resignation. Those attempts went unresolved. Given the seriousness of these concerns, we will refer the matter to the city’s Office of Inspector General for independent review. We welcome a full review of the conduct at issue.”
Gabrysch issued a statement in response to the mayor’s office’s remarks: “This effort by the administration to deflect from the serious issues at stake and attack those who attempt to hold them accountable is disappointing but not surprising. I stand by my statement and will continue to operate in accordance with my values and integrity.”
On opening day of City Council budget hearings, Gabrysch made a statement that signaled the trouble ahead. She contradicted Johnson’s claim that his $17.6 billion preelection budget was 76% structurally balanced.
Gabrysch said only 56% of the moves the mayor had made to erase a $882 million shortfall were structural, because settlements tied to allegations of police abuse — and the $480 million in borrowing that Johnson ordered to cover those costs — should not count as structural solutions.
“There was a collective gasp in the City Council chamber because no CFO has ever said, ‘Here’s the truth,’ ” said 32nd Ward Ald. Scott Waguespack, the former Finance chair. “However they’re cooking the books, she was not gonna put her name on it. … She probably just looked at it and said, ‘I’m not gonna compromise my integrity and degrees for a political agenda.’ ”
Sources close to Gabrysch said that days before Johnson delivered his proposed budget address Oct. 21, Gabrysch blew the whistle internally after seeing the claim that the budget was 76% structurally balanced.
She fired off a series of emails to acting Budget Director Jonathan Ernst and acting Corporation Counsel Renee Hatcher that there was “no such thing as an adjusted budget gap” and that the 76% figure was “not a truthful statement to investors” in a pending city bond deal.
The sources said Gabrysch “didn’t get a lot of traction,” even after warning top mayoral aides that the failure to factor in the $480 million in borrowing was also a potential Securities and Exchange Commission violation.
Only after Gabrysch sent a letter to chief of staff Cristina Pacione-Zayas and Deputy Mayor for External Affairs Kennedy Bartley that she intended to “testify plainly and transparently” to the City Council, as investors, rating agencies and federal regulations required her to do, did the mayor’s office promise to correct the graphic accompanying the proposed budget.
Sources said Gabrysch was then summoned to a meeting with Hatcher and Pacione-Zayas and scolded for not “staying true to the administration’s message.” She was told there could be “no sunlight” between her and the administration, and that they had better “get on the same page.”
She was also told to leave the percentage of structural solutions out of authorization for the city’s general obligation bonds. After that, Gabrysch told associates that top mayoral aides “started going around” her and “freezing her out.”
Administration officials also started documenting what they contended were mistakes that Gabrysch and her staff had made, including sending a $75 million up-front payment from the New York investment firm that acquired Chicago parking meters to the four city employee pension funds — before the city clerk had published a pamphlet documenting the City Council vote that authorized the payment.
Sources said it became clear to Gabrysch that the mayor’s staff was “looking for things” to sully her reputation and justify firing her. On Thursday, Gabrysch got an email from the city’s Department of Innovation and Technology asking for the tag number on her city laptop and cellphone. That’s when she submitted her resignation.
Finance Chair Pat Dowell (3rd) demanded an outside audit of the city’s finances in response to Gabrysch’s resignation.
“We’ve had three CFOs, two budget directors, two comptrollers. Given the whole thing with the 76% structural [and] the 56% structural, this abrupt resignation — I’d just like to have a transparent analysis of the city’s finances,” Dowell said.
Dowell said she is “very saddened by this sudden resignation,” which she called a “bad look for the city.”
“The rating agencies … are already looking at the city of Chicago with a stricter lens. This is just an additional concern, a potential sign of instability,” Dowell said.
As surprising as it was to hear a CFO contradict the mayor at a public hearing, Ferguson said he suspects that “there is something else that has gone on here that was a point of no return.”
“Her statement in that hearing was really something of a technical correction coming from the technical expert. I don’t think it had great consequence one way or the other,” Ferguson said. “The administration may not have liked that, but there was nothing wrong with what she did. But it did signal that she was not going to lay down for other things that the administration might want. Which is why it’s important that the City Council demand answers.”
No matter what triggered the Gabrysch resignation, the latest spin in a revolving door on Johnson’s financial team sends a chilling message to Wall Street.
“It’s not, in itself, a downgrade. But it’s one more pressure toward a downgrade. It suggests severe organizational stress,” said Matt Fabian, a partner in Municipal Market Analytics, an independent research group focused on municipal bonds. “It’s not so much about interest rates. It’s about thinning the universe of investors.”
Source: chicago.suntimes.com
