Borrowing money to bankroll neighborhood improvements is normally routine for big cities like Chicago with crumbling streets and aging equipment.
But there’s nothing routine about City Council votes under Mayor Brandon Johnson.
That was clear again Wednesday, when Johnson struggled to pass his $830 million general obligation bond issue — featuring a back-loaded repayment schedule that raises the overall price tag to $2 billion.
Johnson’s 26 to 23 victory was secured only after the mayor was forced to cast the third tie-breaking vote of his 19-month tenure — this time, to table a motion by Ald. Brendan Reilly to postpone the vote until May 21.
It was yet another nail-biter for a mayor who already has been forced to cast three tie-breaking Council votes, settle for his second choice as Zoning Committee chair and endure a marathon budget stalemate before the mid-term benchmark.
And in another twist, for the first time in anyone’s memory, the massive borrowing was initially called for a vote without a word of debate.
Finance Chair Pat Dowell (3rd) described the minor tweaks Johnson made to tighten liberal language impacting the Chicago Public Schools, then moved quickly for a roll-call vote on the substitute ordinance.
That confused at least some alderpersons, who apparently thought they were voting to accept the substitution of a new proposal but would still have an opportunity to debate the issue when the main question was called.
Ald. Anthony Beale (9th) then rose to insist that the bond issue be debated, calling the move for a quick vote a “travesty.”
Instead, Johnson proceeded with the roll call before agreeing to stop it when the tote board showed the bond issue trailing, 17 to 14.
When debate did resume, Zoning Chair Walter Burnett (27th) made passing reference to the 1980’s power struggle known as “Council Wars” that saw 29 alderpersons, mostly white, thwarted Mayor Harold Washington’s every move.
“Wow,” Burnett, the Council dean said, laughing. “I haven’t seen this in a long time man — since I was looking at TV when I was younger.”
Burnett said general obligation bond issues to rebuild Chicago’s aging infrastructure are supposed to be routine.
“This isn’t the first time. It happened under Daley. It happened under Rahm. It happened under Lori. And I never saw the shenanigans that’s going on right now when those things were being voted on,” Burnett said.
“I don’t understand why everything we try to do the way it has been done for years is such a big deal.”
Beale said he would vote against the bond issue because he is “concerned about my kids and grand-kids having to foot this bill.”
“This is a bad deal. If you reduce it and change the terms, you’ll get a lot more votes. I’m one of them,” Beale said.
“When we are selling our vote for a couple extra streets, it’s a problem.”
Johnson’s victory came only after ignoring demands to shrink the borrowing and abandon the end-loaded repayment plan.
The mayor also fought back with a parade of opinion pieces in the Sun-Times and Tribune to counter newspaper editorials urging the Council to say “No.”
Finance Committee Vice-chair Bill Conway (34th) led the charge against the massive borrowing he called “fiscal insanity.”
On Wednesday, Conway introduced his plan to shrink the bond issue to $508 million — $108 million for each ward’s “menu money” and $400 million for other capital projects—and replace the back-loaded repayment schedule with a something “akin to a standard 30-year home mortgage.” Annual payments would have maxed out at $34.5 million, potentially saving Chicago taxpayers $1 billion in financing costs.
Johnson’s plan calls for the city to make only “capitalized interest payments” — using borrowed money — for the first two years and make interest-only payments until 2045. Annual payments on the debt will balloon from $47.6 million in 2028 to $136.9 million in 2050, remaining there until the bonds are fully retired in 2055.
“My wife and I are raising a 2-year-old, a 4-year-old and a 5-year-old….They will be in their 30’s and on the hook for an irresponsible decision I cannot stomach making for them today,” Conway said during Wednesday’s debate.
“When my 5-year-old is 30, we will be paying $820 million over a period of six years on this very bond. They won’t be able to spend that money on safety. They won’t be able to spend that money on schools, but on debt that we voted on today. That’s the future.”
State Comptroller Susana Mendoza called Wednesday’s vote a “huge mistake for the city” that could have costly consequences.
“If this deal goes through as structured, that last downgrade will likely not be the last. Those are not my words. Those are the words of the market analysts,” said Mendoza, a potential 2027 mayoral challenger.
Mendoza said Johnson was “tone deaf” to introduce the $830 million bond issue within 24 hours after Standard & Poor’s downgraded Chicago’s credit rating to BBB — to two notches above “junk bond” status. And the repayment structure approved by the Council on Wednesday is “completely asinine,” she added.
“It’s a terrible deal and it essentially sells out the city right now and future generations of taxpayers for a quick buck,” said Mendoza, a potential mayoral challenger in 2027.
“Not paying the first two years and only paying interest for the first 20 years — that is not normal at all. Anyone who tells you that’s normal is lying.”
During public comments before the vote, Fraternal Order of Police President John Catanzara warned Council members who dare to vote for the $830 million bond issue that the FOP’s “giant PAC fund” would be used against them.
“You will all be on the target list. We will recruit candidates and we will not take, maybe, all of you out, but we’re certainly gonna target anybody who votes ‘yes’ for this,” Catanzara said.
“You’re gonna say, ‘What has this got to do with the police?’ We are taxpayers. And many of us are the primary taxpayers in this city. My members are sick of getting a decent contract, then having it stolen out of their back pocket in the same sentence. It will end — or your political careers will. I assure you of that.”
Municipal finance experts have warned Johnson’s “exaggeratedly back-loaded” schedule for repaying $830 million in general obligation bonds more than doubles the cost of the borrowing — to $2 billion.
Chief Financial Officer Jill Jaworski has called the back-loaded repayments schedule “standard practice” for the city.
“There’s a mismatch between the timing of when we authorize the bond issue and authorize the associated property tax levy and actually collect revenues that would be available for repayment of the bonds,” Jaworski told the Sun-Times this month.
“So we capitalize interest for the first couple of years,” she said then. “Depending on when the bonds are actually issued, it will likely be less than two years. … We’re planning to pay the principal starting in about 20 years. … We are wrapping it around the principal payments that the city already has for existing debt service.”
When someone buys a home, their annual mortgage payments are “level for the entire time,” Jaworski said. When the city issues bonds, it doesn’t have “just one mortgage” — it has many, Jaworski said.
“These bonds are being wrapped around the existing debt service we have so the amount of debt service that is being paid annually in the city’s budget is affordable and reasonable for the city,” Jaworski said.
“If we were to take every debt transaction and amortize it with principal starting with year one, the debt service would be much higher, and the city would need additional revenues and tax increases in order to pay for that type of rapid repayment.”