Chicago could follow Detroit into bankruptcy if Mayor Rahm Emanuel is not re-elected, Sen. Mark Kirk (R-Ill.) warned Monday.
Without mentioning Jesus “Chuy” Garcia by name, Kirk said Emanuel’s challenger lacks the “gravitas with the bond market” to secure Chicago’s mountain of debt and prevent Chicago from going the way of Detroit, which recently emerged from bankruptcy.
“Rahm’s re-election is essential to maintaining the value of Chicago’s debt market. We need a strong capable leader… I would worry about the value of the Chicago debt if Rahm was not re-elected…. It’s a concern if we have some of the less responsible people running against him,” Kirk said.
“None of them could command the respect of the bond market. A collapse of Chicago debt, which already happened with Detroit, I think would soon follow if somebody who was really inexperienced and irresponsible replaced Rahm.”
The moderate Republican was asked whether his remarks should be interpreted as an endorsement in the April 7 runoff.
“You’ve got to have a strong, capable leader. The people that I’ve seen running against him are not that leader,” Kirk said after joining Emanuel and Garcia at at Pulaski Day ceremonies at the Polish Museum of America, 984 N. Milwaukee Ave.
“It’s just the fact of the matter. We’re in a dynamic environment in which Detroit hangs over the future of Chicago’s economy.”
Garcia dismissed Kirk’s warning as “partisan politics” from Illinois’ junior senator, who served together with Emanuel in the U.S. House.
Emanuel has emphatically rejected comparisons between Chicago and Detroit, citing Chicago’s more diverse economy.
“It’s a non-partisan election but it sounds like a political comment. He’s entitled to it,” Garcia said.
“This is a serious issue and we’ll continue to address it head-on.”
Now that there are only two candidates left standing, both are under pressure to be more specific on how they plan to solve Chicago’s $20 billion pension crisis and the $10 billion in unfunded pension liabilities at the Chicago Public Schools.
On Monday, Garcia pleaded for more time.
“We’re stepping back to take a look at all of the financial implications of where we are. We’re looking at the operating budget as well. When I win, we’re inheriting a very challenging situation. I can’t make any specific commitments right now. We’re trying to wrap our heads around it. We’re consulting with the foremost experts in municipal finance and pension questions also. We’re doing our homework,” he said.
Last week, Garcia called the latest downgrade an “objective judgment on Emanuel’s lack of fiscal stewardship” of Chicago.
On Monday, he continued to hammer home that point. That’s even though Cook County’s bond rating has been dropped for the same reason: unfunded pension liabilities.
“This is very concerning news. It certainly gets to the core of a promise made four years ago that the mayor was going to put our fiscal house in order. It presents a host of new challenges that we are looking into to understand all of their implications but it certain worsens the dire financial straits we’re in,” he said.
Last week, Chicago’s plummeting bond rating took center stage in the race for mayor after Moody’s dropped it another notch — to two levels above junk status — citing Chicago’s $20 billion pension crisis.
Moody’s decision to drop Chicago’s rating for a fifth time under Emanuel — from Baa1 to Baa2 — may cost the City of Chicago tens of millions of dollars.
As a result of the downgrade, the city is on the hook to pony up $58 million under agreements covering existing debt, according to Laurence Msall, president of the Civic Federation. City officials can try to renegotiate those agreements.
In addition, the taxpayers “will pay a significant premium for future debt,” including both short-term debt used to fund operations and long-term borrowing used to fix and build city infrastructure.
But the entire cost of the downgrade “will not be known until the city issues new debt,” Msall said.
He noted that even before the downgrade, the state of Illinois had the lowest credit of all 50 states, and the city of Chicago had the worst credit rating of any major municipality except Detroit.
“Today’s downgrade by Moody’s is a wake up call to anybody who’s still asleep as to the city’s deteriorating financial condition,” Msall said.
During Round One debates, Emanuel ruled out a post-election property tax increase but confined the guarantee to the city’s $300 million operating shortfall.
That prompted Ald. Bob Fioretti (2nd) to warn of a “massive” property tax hike for pensions if Emanuel is re-elected.
“Is it on the table? Yes or no. Tell us now. Are you going to raise property taxes?” Fioretti hounded Emanuel during a two-hour, debate-style endorsement session before the Chicago Sun-Times Editorial Board.
“Not for the operating budget,” Emanuel said.
What about to solve Chicago’s $20 billion pension crisis?
“I don’t know yet,” the mayor said.
That prompted Fioretti to offer a dire warning to beleaguered Chicago homeowners.
“He’s raised it with the Board of Education. He’s raised it with the Chicago Park District. And now, he’s talking about, ‘Well, it’s not gonna be for the operating budget.’ We all know what that signals: Everybody better be very ready if he’s the mayor for a massive property tax increase,” said Fioretti, who wants to tax commuters, transactions at La Salle Street exchanges and bring back a modified version of the employee head tax that Emanuel eliminated.