Chicago cannot “erase years of built-up challenges” in just four years, Mayor Rahm Emanuel said Tuesday, insisting that the city’s plummeting bond rating is not a poor reflection on his financial stewardship.
Last week, Moody’s Investors Service dropped Chicago’s bond rating for the fifth time under Emanuel — to two levels above junk status — citing Chicago’s $20 billion pension crisis and the $10 billion in unfunded pension liabilities at Chicago Public Schools.
The downgrade — from Baa1 to Baa2 — will make it more costly for the city to borrow money and could force Chicago to pony up $58 million in penalties under so-called “interest rate swap contracts” tied to existing city debt.
On Tuesday, Emanuel said his Chief Financial Officer Lois Scott is “working through some issues right now” in an effort to renegotiate those penalties and, presumably, get Chicago taxpayers off the hook.
And Emanuel categorically rejected the claim made by Jesus “Chuy” Garcia, his challenger in the April 7 runoff, that Moody’s decision was an “objective judgment on Emanuel’s lack of fiscal stewardship” of Chicago.
“In four years, you are not gonna erase years of built-up challenges, but we have worked through each of those,” Emanuel said, pointing to the deal that saved two of four city employee pension funds by raising employee contributions by 29 percent and ending compounded cost-of-living adjustments that have been a driving force behind the city’s pension crisis.
“I’ve said this from Day One: You can’t postpone, delay, defer any longer. Which is why, both on the budget and on retirement security, we’ve worked through all of those issues and we have more work to do.”
Earlier this week, U.S. Sen. Mark Kirk (R-Ill.) sounded the alarm about Chicago’s plummeting bond rating and the perilous position it puts the city in as Chicago voters prepare to go the polls and decide between Emanuel and Garcia.
Kirk warned that Chicago could follow Detroit into bankruptcy if Emanuel is not re-elected because his challenger, whom Kirk did not name, lacks the “gravitas with the bond market” to secure Chicago’s mountain of debt.
“A collapse of Chicago debt, which already happened with Detroit, would soon follow if somebody who was really inexperienced and irresponsible replaced Rahm,” Kirk said.
Emanuel has emphatically and repeatedly rejected comparisons between Chicago and Detroit, citing Chicago’s more diverse economy.
On Tuesday, the mayor was asked whether Kirk had over-stated the case for his re-election by using the D-word.
“If you make the wrong choices — if you don’t have the leadership, the determination to execute a business plan that brings jobs into the city of Chicago — you can go in a different direction. You remember when companies fled. You remember when families left,” the mayor said after announcing another corporate relocation to Chicago.
“Leadership counts. Strength and determination to see through a set of tough issues and build a future by looking Chicago’s challenges straight in the eye, addressing them and making sure Chicago is facing its future and making the best of it for everybody and growing jobs. If you don’t do that and you don’t have that leadership, you can go back to the days when companies and families left.”
Now that there are only two candidates left standing, both are under pressure to be more specific on how they plan to meet a state-mandated, $550 million payment due in December to shore up police and fire pension funds.
Emanuel and Garcia will also be on the hot seat to explain how they plan to meet the city’s increased obligations to the Municipal Employees and Laborers pension funds going forward, when the 56 percent increase in Chicago’s telephone tax that staved off a pre-election property tax hike falls short.
Earlier this week, Garcia pleaded for more time.
“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.
Also on Tuesday, Emanuel tried to keep alive an issue he hopes will undercut Garcia’s support in the African-American community: Garcia’s about-face on using park land for President Barack Obama’s presidential library.
Garcia initially rejected the use of park land and suggested alternative sites no longer in the running. When Emanuel pounced, Garcia reversed field and offered to support any one of the three Chicago sites of Obama’s choosing — even if it means giving up 21 acres of land in Washington Park or 20 acres in Jackson Park.
“I’ve been consistent that the presidential library has to be in Chicago and not in New York, which is why I moved directly to answer any questions that the [library] foundation had as it related to possible sites on the South Side,” the mayor said.
“This is the right decision for Chicago. A presidential library doesn’t come around all that frequently. We could not squander this opportunity. One of the things that people are looking for is leadership that can . . . make the tough decisions so we can bring jobs and economic growth throughout the city.”