Rahm Emanuel I want Money
Rahm Emanuel I want Money
Mayor Rahm Emanuel’s administration is making preparations to issue up to $900 million in bonds this year to lower some of its borrowing costs, push other debt off into the future at an overall higher cost, cover legal settlements and pay for construction, building maintenance and equipment.
At the same time, the administration is making plans to double the city’s short-term credit line to $1 billion, Chief Financial Officer Lois Scott told aldermen at a City Council Finance Committee meeting.
The committee recommended giving the administration authority to put together two major bond deals and double the city’s the line of credit to $1 billion, even as the city carries an outsized debt burden in comparison to most other major cities. Chicago carries a high debt level for bonds previously issued, and it also owes more than nearly all other major U.S cities to its pension plans to cover current obligations
The Tribune’s “Broken Bonds” highlighted the city’s habit — both under former Mayor Richard M. Daley and Emanuel — of kicking its debt obligations down the road, at a higher cost to future generations. The city took out loans, some of which won’t come due for three decades, to cover short-term costs.
On Monday, Scott said the city plans to issue between $400 million and $450 million in bonds in March and the rest in the second quarter. Between $180 million and $200 million would be used to refund bonds, a move that could save the city money over the long haul.
But the city also would restructure up to $130 million in debt “to better align revenues with our obligations,” Scott said. That would push debt off 10 years further into the future and increase the overall costs.
At the same time, the city would take on between $90 million and $100 million in debt to pay off legal settlements made last year. The bulk of those settlements were made in connection with police misconduct cases.
Some of the borrowed money would be used to pay for the so-called aldermanic menu-money program, Scott also said. The 50 aldermen each get $1.3 million a year to spend at their discretion on local projects like repaving streets, reconstructing sidewalks or installing new lights.
Critics say legal costs and menu money projects should be funded out of annual revenue because they are basic yearly operating costs, rather than from money borrowed on a long-term basis.
No aldermen asked Scott for specific details on why the city needed to double its limits on taking out “commercial paper,” a way to meet financial obligations over the short haul that is akin to an individual putting costs on a credit card.
“The commercial paper program allows us to fund capital and equipment needs on an interim basis between bond deals,” Scott said. “The program will ensure the city has liquidity for unseen needs, such as retroactive salary payments and (legal) judgments.”
The city still is in talks with the police and fire unions about contracts the expired in mid-2012. If those are settled, the city could end up owing perhaps hundreds of millions of dollars in back pay.
Many aldermen, however, did ask about how much minorities and women in the financial industry would benefit from the transactions.
“These transactions are the largest opportunities for people to make money off of government, and so we want to make sure that everybody is included,” Ald. Walter Burnett, 27th, said. “It’s a lot of money. It’s enough for everybody. Folks should make sure everybody is included.”