Chicago aldermen today gave Mayor Rahm Emanuel’s administration its final okay to borrow up to $900 million dollars to pay for city equipment, capital projects, and legal settlements, and to refinance old debt.
The City Council also approved another $1 billion in borrowing for Midway Airport, and agreed to double the city’s short-term borrowing limit from the current $500 million to $1 billion.
The borrowing plans all passed on a 43-4 vote, with no debate.
Alderman John Arena (45th Ward) said he voted no because the Emanuel administration did not give specifics on exactly how the newly borrowed money would be spent.
“Unless we have a real debate on this, a real dialogue, and get real information from the administration in real time -- and enough time to make an educated vote -- then I’m gonna continue to vote no on these types of things,” Arena said after the vote.
Also voting against the borrowing plans were 42nd Ward Ald. Brendan Reilly, 32nd Ward Ald. Scott Waguespack and 2nd Ward Ald. Bob Fioretti. Ed Burke, the alderman of the 14th Ward and chairman of the powerful Finance Committee that held a hearing on the borrowing plans, abstained from voting.
Though the city got the council’s authorization to issue up to $900 million on bonds, the Emanuel administration will likely issue about $650 million, said city Finance Department spokeswoman Kelley Quinn. About $349 million of that would help pay for legal settlements, capital projects, and so-called “aldermanic menu” accounts that aldermen use at their discretion to fund projects in their wards.
But some financial watchdogs have raised concerns about the other roughly $301 million in borrowing, which will be used to restructure debt. At least some of that -- up to $130 million -- could be used to push upcoming debt payments off into the future. That means the city saves money with smaller payments in the short term, but ends up paying more in the long-run.
The city will likely issue $550 million of the Midway Airport bonds for upgrades to runways and taxiways, Quinn said.
The short-term credit extension doubles the amount of so-called “commercial paper” the city can borrow. It is often used to cover city operations.
The first bond issue, set for March, will mark Chicago’s first test of the municipal bond market since July, when Moody’s Investors Service hit the city with a triple downgrade of its bond rating, citing the city’s massive pension problems.
Much like a person with a bad credit score, governments with low bond ratings have to pay higher interest rates when they borrow money.
Emanuel defended his borrowing requests after Wednesday’s City Council meeting as the usual course of government business.
“It’s typical efforts to invest in our streets, our sidewalks, light poles -- all the other infrastructure that improves our neighborhoods,” Emanuel said.
Emanuel added the city’s budget problems are deep enough that it will take time to dig out of them.
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