Calling it a “no-brainer” the City Council’s new Finance Committee chairman on Friday promised quick action to set up the structure for issuing up to $10 billion in pension obligation bonds.
Mayor Rahm Emanuel urged the City Council last month to sign off on a $10 billion pension borrowing to save beleaguered Chicago taxpayers “as much as $200 million” in his successor’s first budget.
He also argued that there is “not an endless amount of time” for aldermen to act because the window of opportunity created by lower interest rate may soon close.
On Friday, Ald. Pat O’Connor (40th) strongly agreed.
“The pension borrowing, I think, is a no-brainer. I’m hoping to get that through…You’re not borrowing any money. You’re setting the stage to allow the money to be borrowed….The market is what dictates whether we can do bonds or not,” said O’Connor, Emanuel’s City Council floor leader.
“If the market is favorable when a new mayor and a new council come in, it might be favorable in May or June and totally unfavorable in July and August. It takes months to get this in place. So, in order to avail yourself of the opportunity to refinance, you would need to have this thing in place to do it when the new council comes in.”
Standard & Poor’s has warned that pension obligation bonds “in environments of fiscal distress or as a mechanism for short-term budget relief” could threaten Chicago’s BBB+ bond rating. Municipal finance experts have also raised concerns, pointing to pension-bond defaults in Detroit, California and Puerto Rico.
But O’Connor argued Friday that not issuing pension obligation bonds was equally risky and, in fact, a missed opportunity to minimize the pain from another punishing round of post-election tax increases.
“Rather than hamstring a council by not putting it in, we’ll be responsible and give them another tool to fight the pension crisis,” he told the Chicago Sun-Times.
“Frankly, the question should be to the mayoral candidates: Are you gonna use it? Because that’s the more salient question. That’s what Chicagoans need to know. The fact that you have a good kicker doesn’t mean you’re gonna use him in a certain situation in the ballgame.”
By coaxing Ald. Edward Burke (14th) to relinquish the Finance Committee chair that has been his power base for decades, Emanuel hoped to secure the final months of his legislative agenda before the mayor leaves office.
That includes a final contract that would pave the way for visionary billionaire Elon Musk to build a “Tesla-in-a-tunnel” high-speed transit system between downtown and O’Hare Airport.
Transportation Commissioner Rebekah Scheinfeld has warned aldermen to seize Musk’s offer or risk having the mercurial Musk walk away from Chicago and take his idea to another city.
O’Connor strongly agreed.
“I don’t know him. But I’m told that he’s a little quirky and he might decide that it’s not worth the battle. I mean — look what happened with the Lucas Museum. They just decided, ‘I’m not putting up with this nonsense,’” O’Connor said.
“It’s a reason to have a quick hearing. It’s a reason to have a quick discussion. I don’t mean quick in the sense of slip-shod or not complete. I mean quick in time.”
O’Connor said he would have loved to have been among the aldermen who traveled to California to take a bumpy, but exhilarating test ride on Musk’s innovative tunnel system.
“It’s an intriguing thing. Frankly, it saves us a ton of money…This is a significantly different thing than high-speed rail. But it still accomplishes getting people back and forth from O’Hare in a quick way,” he said.
What might not be so quick, O’Connor said, is Finance Committee action on Emanuel’s plan for $1.5 billion in tax-increment-financing subsidies to unlock the development potential of four mega-sites in and around the downtown area, including Lincoln Yards.
“Creating a tool for a future council I don’t think is a controversial vote. Creating a vote that expends…hundreds of millions of dollars –– that’s something the council is gonna have to be deliberate,” O’Connor said.
“I will spend as much time as necessary to determine whether it happens…It’s not that I’m not gonna rush. I’m gonna hold the meetings that would be required to allow it pass or fail. But I don’t have the authority or the ability to make it pass or fail.”
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