Civic Federation: Rahm budget ignores ‘elephant in the room’
Mayor Rahm Emanuel’s feel-good final budget is a “reasonable one-year financial plan” that keeps the city’s hand out of taxpayers’ pockets but ignores “an enormous elephant in the room,” the Civic Federation warned Wednesday.
Civic Federation President Laurence Msall identified the “elephant” as the $1 billion spike in pension payments that will confront the next mayor and City Council. It will nearly double the city’s contribution to four city employee pension funds over the next five years.
Msall also cited other concerns adding to the weight of that elephant. They include Chicago’s “high and growing” debt, projected increases in the city’s corporate budget shortfall in 2020 and beyond, and the $1.3 billion in debt Chicago plans to issue to re-fund existing general obligation bonds through a structure known as “Sales Tax Securitization.”
In an analysis released Wednesday before his testimony at the only public hearing on the budget, Msall noted that the general obligation bonds the city plans to refinance would have matured “no later than 2044.” But the new sales tax plan includes $1 billion in debt maturing “between 2044 and 2053.”
That could hamstring the city’s ability to issue debt for capital projects in the 2040s and 2050s, Msall warned.
“The Civic Federation is concerned that the city continues to rely on transactions that extend the maturity of debt to achieve shortterm budgetary relief,” the analysis said.
Msall urged the city to develop a long-term financial plan for operations and pensions, hammer out “sustainable collective bargaining agreements” and re-evaluate the use of tax-increment-financing (TIF) districts.
“This budget continues to incorporate many of the prudent financial practices prioritized by Mayor Emanuel and the City Council in recent years,” Msall was quoted as saying in a news release.
“However, there remains an enormous elephant in the room — a projected doubling in required pension contributions over the next five years — that the next administration and City Council must tackle.”
Emanuel’s $10.6 billion budget for 2019 holds the line on taxes, fines and fees not previously approved and still invests heavily in police reform, crime fighting, housekeeping services and mentoring and summer jobs for at-risk youth.
The Civic Federation’s concerns mirror the red flags raised by Standard & Poor’s, a Wall Street rating agency.
Days after Emanuel delivered his final budget address, Standard & Poor’s talked about the problems Emanuel chose to ignore in his eighth and final budget.
They include the $1 billion spike in pension payments; police and fire contracts yet to be negotiated that will undoubtedly include tens of millions of dollars in retroactive pay increases to cover raises dating back to June 30, 2017 and rising debt service costs.