Chicago aldermen delayed a vote last week on Mayor Brandon Johnson’s proposed $830 million bond sale after several raised concerns over the terms of the loan.
A new vote on the loan was tentatively scheduled to take place Feb.26.
As proposed, the city would make only interest payments until 2045 and a lump sum principal payment in 2045.
Yearly loan payments would increase from $47.6 million in 2028 to $136.9 million until the debt was retired, according to online news and current affairs magazine Newsbreak. The repayment structure was estimated to bring the total cost of the loan to about $2 billion.
Some aldermen opposed the loan’s passage without amendments, calling it a bad deal for the city, while others said it was business as usual and called for its passage.
Opposed
Ald. Ray Lopez (15th) is opposed because of the 20-year delay in paying the general bond loan back. A member of the finance committee, Lopez noted the similarity to a “balloon mortgage payment that got so many people in trouble.”
“Various investment firms will purchase these bonds again, at [a] 15% discount. They will give the City of Chicago 85% of the value of the bond,” Lopez said. He said that means investors will get to keep 15 percent of the loan for themselves when the loan is paid off.
Before being passed by the city’s Finance Committee, Lopez proposed cutting the discount investors who underwrite the loan will receive in half by 7.5 percent, keeping more money for taxpayers and bringing loan fees closer to national borrowing standards, he said.
“Today, we stand at a pivotal moment for the City of Chicago. Our financial situation is dire and demands responsible action,” said Ald. William Conway (34th), vice chair of the Committee on Finance, said. “Recently, two prominent credit agencies Standard & Poor’s as well as Kroll downgraded Chicago to just above junk status. Chicago carries the largest debt load of any city in the United States.”
Conway stated the structure of the bond loan strategy would increase the city’s debt in the future due to disadvantageous terms. In addition to potential federal funding cuts by the Trump administration, the resulting financial fallout caused by the loan’s current terms for Chicago would be catastrophic and did not take existing economic hardship for families and businesses into consideration, he said.
Conway said the proposed payment schedule would add over $2 billion payments from 2025 until Jan. 1, 2055 with the period between 2050 and 2055 costing the city just over $821 million for that six-year period only.
“It is downright ludicrous for us to borrow an additional $830 million with this proposed debt structure when our financial challenges are so evident,” he said. “I support capital investments in our infrastructure. The question before us is not the what but rather the how. Investment is vital but the proposed debt structure is fiscal insanity and not normal.”
Ald. Scott Waguespack’s (32nd) agreed with Conway and Lopez about the loan’s term but spoke to the method of loan information delivery to the council which he found troubling.
He stated a group of aldermen discussed a “yes” vote to acquire monies from the loan to repair infrastructure and to purchase new police and fire vehicles amongst many other city needs before discovering the loan’s terms at the last minute.
“We have a fiduciary duty to make sure that we have all the information available to us to make a good decision,” Waguespack said. “I hope everybody saw the email. I didn’t see it until the last minute because it was well after the vote, tucked into another email that didn’t have this information in the header or the subject line and it didn’t have it in the base of the email, and was tucked between a few other documents. I’m talking about this one that is sitting on your desk.”
“I found that very disturbing and it really sits wrong with me to see that we don’t have that transparency, we don’t have that honesty, we don’t have that trust that we should and that’s been a hallmark of administration,” he said. “It absolutely goes to the fundamentals of managing the city, to be open, to be transparent and predictable about what we’re doing.”
In favor
Ald. Jason Ervin (28th) countered Waguespack’s comments with his differing perspective about the longtime need for infrastructure upgrades and repairs in communities of color that continue to be ignored.
“This same body doesn’t want to deal with revenue. This same body doesn’t really want to deal with expenses other than to keep doing them,” Ervin said. “We talk about kicking the can down the road. As the chairman stated, it’s not this that caused the challenges. It’s the decisions that some members of this body made on not making pension payments. We got almost a $3 million pension payment that is due this year and going forward.”
Ervin questioned why barricades were put in the way of the pending loan when passage of bad deals were the status quo in the past echoing Mayor Johnson’s comment that the city is in bad shape due to past decisions.
Ervin said that due to needed critical improvements for South and Southwest Side wards it is not the time to “pump the brakes.”
“Get the hell out of here, this makes no sense,” he said. “If we’re in an environment where we do not want to look at revenue and want to keep spending money, the only options you do have are again, to structure the debt, in a manner which does not raise property taxes but also allows for the assets that we’re using to pay for the time they’re going to be in use. This is not different. This is not un-transparent. This is how you do financial planning and debt; over time.”
Ervin asserted he would not wait while other wards continue receiving support and flourishing while Black and Brown communities continue to get nothing.
“I can’t stand for that,” he added.
Alderman Pat Dowell (3rd), chairman of the Finance Committee, provided her take on the intense debate over the general obligation bond loan ordinance that took place in the council on Feb. 19.
“This ordinance represents a continued commitment to the people of Chicago that we hold their standard of living paramount,” Dowell said. “Improvement projects that continue to keep our streets up to snuff, our street lights lit, our bridges standing and our sidewalks walkable go beyond just daily maintenance. They represent the wealth of infrastructure that makes Chicago the city that it is.”
Delaying repair to Chicago’s aging infrastructure either under construction or in failing condition creates a knock-on effect due to an overburdened city construction schedule,” she said.
“Any delay in the passing of this bond deprives Chicagoans of the infrastructure they rely on every day,” Dowell stated.
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