Will the next mayor get Chicago its cut of a booming economy?
You’ll get an earful from pols and pundits, but you won’t fully understand the significance of Mayor Rahm Emanuel’s decision to step away until you’ve heard from … the municipal bond people. Boring chatter? Nope. They have the power to determine Chicago’s future.
In a state with ruinous finances, Chicago has its own share of money woes. And, like its state, Chicago has to attract billions of dollars in private sector investment.
What keeps the city afloat, and allows it to maintain a robust jobs-based economy, is the ability to borrow money and deliver services. Only cities that manage their finances responsibly can hope to woo the bond market, and that’s what Emanuel has done. In municipal bond circles, he’s seen as a trusted partner whose departure is unsettling.
“I’ve been pretty impressed with the mayor,” Howard Cure of Evercore Wealth Management told The Bond Buyer, an industry publication. “He inherited a very structurally weak budget and I think he’s made a lot of improvements and is striving to achieve structural balance while dealing with pensions and getting rid of bad debt practices.” Nice words, but here’s Cure’s key warning: “I have less comfort in the unknown. There’s a lot of anxiety in the unknown.”
In other words: Who’s going to succeed Emanuel? It has to be someone who campaigns and takes office vowing fiscal discipline, who swears off extravagant spending sprees, who negotiates affordable union contracts, who pays today’s expenses today, and who understands that one of Chicago’s important constituencies is the investment community. Otherwise, Chicago could sink because investors won’t trust Chicago to pay back what it borrows.
Emanuel did enough to earn the market’s trust: “He came into a very difficult position and did some unpopular and difficult things to do as a politician” such as raising taxes, Brian Battle of Performance Trust Capital Partners told The Bond Buyer. He said Emanuel’s departure shocks that sense of equilibrium.
Emanuel was hardly the perfect steward. Chicago is crushed by debt (city pensions are only 26 percent funded), yet budgets ballooned in his tenure from about $6.3 billion to $8.6 billion. And don’t forget “scoop and toss,” the notorious practice of creating new debts to pay off old debt without retiring principal. Always, there were more taxes, more fees, more borrowing — more, more, more burdens on taxpayers.
Overall, though, the city is in better shape than when Emanuel took office. That has allowed the mayor to work at a second vital task: making Chicago vibrant and prosperous.
Under Emanuel, the city attracted major employers, experienced a building boom and boosted tourism. He bolstered O’Hare and Midway airports and kept a shine on downtown, the lakefront and many neighborhoods. He made little progress helping the underdeveloped South and West sides, besides recruiting the oft-mentioned Whole Foods to Englewood.
Yes, he got the Barack Obama Presidential Center for Jackson Park, but that was a gimme — imagine the scandal if Obama had taken his library to New York. Will Emanuel cap his tenure by winning Amazon’s second headquarters? We’ll know soon.
What connects the mayor’s accomplishments as bond salesman and corporate recruitment cheerleader is his commitment to the cause and ability to speak the language of business and finance. Emanuel, who did a turn as an investment banker, made economic and urban development a priority and went hard at CEOs to convince them to locate in Chicago. With each of those HQs came good-paying jobs.
We’ve echoed the desire of Emanuel’s critics to see private-sector investment spread evenly across Chicago. But Emanuel understood that money invested in an already healthy downtown does a lot more for all Chicagoans than if that money went to Atlanta or Dallas.
So how about the next mayor? America’s economy is booming. Will Chicago get its share? Who among the candidates understands the city’s potential, and who can best balance competing needs to achieve the greater good?
The bond market people will have opinions. So will CEOs and developers. But voters, hiring a mayor who can win their trust is up to you.