City Borrows Another Billion Dollars To Pay Down Debts

By aaroncynic in News on Jun 18, 2015 5:20PM

Chicago will now borrow even more money to pay down its debt and bills after Mayor Rahm Emanuel’s $1.1 billion borrowing plan sailed through the City Council yesterday with no debate.

On Monday the Finance Committee approved Emanuel’s long-term borrowing plan, the largest bond of his tenure in office, in the hope of avoiding massive tax increases or spending cuts, The Chicago Tribune reported.

"We are technically in default," said Carole Brown, Emanuel’s new Chief Financial Officer. “There would be the potential that we would have to come up with close to $900 million to pay back the banks."

Among a laundry list of other things, the bond issue will cover:

• $35 million for a loan payment former Mayor Richard M. Daley used to pay for the purchase of the vacant Michael Reese Hospital during the Olympic bid that was never used.
• $75 million for back-pension payments and a retroactive pay raise for Chicago Police officers.
• $62 million for a legal settlement in a dispute with private operators of four city owned parking garages.
• $192 million to terminate interest-rate swaps.
• $170 million in “scoop and toss” debt restructuring.

“This is a step that is necessary to re-fund existing debt and begin to take steps to claw out of the financial condition that we’re in,” said Alderman Ed Burke, chair of the Finance Committee. Though Burke supported the measure, the Sun-Times reports he abstained from the vote. Also abstaining was newly elected Alderman Patrick Daley Thompson, who has multiple conflicts of interest, including a cousin who helped ink the contract with Morgan Stanley, which serves as “senior underwriter” of the agreement. Morgan Stanley stands to collect $2.6 million in fees from the deal.

Only a handful of Alderman—Scott Waguespack, John Arena, and Carlos Ramirez-Rosa—voted against the borrowing plan.

“Are we just shuffling the deck chairs on the Titanic,” Arena asked at Monday’s Finance Committee meeting. “We don’t hear anything about new revenue. We get fines here and fees there and everybody knows it’s not enough. When we have $1.1 billion put in front of us and say, ‘Approve this’ without at least a plan for revenue — this is irresponsible.”

Alderman Waguespack, the only member of the Finance Committee to cast a “no” vote, said that it was another instance of “kicking the can down the road.” “We need to find hundreds of millions to pay off what we’re borrowing here today,” he said.

Emanuel has said he would end “scoop and toss” practices by 2019, but between now and then he plans to use it for more than half a billion dollars.