Mayor Rahm Emanuel ripped Moody’s Investors Service on Wednesday for dropping the bond rating of the city, the Chicago Public Schools and the Chicago Park District to junk status and denied that his negotiating position with police and fire unions has been undercut by an Illlinois Supreme Court ruling overturning state pension reform.
Emanuel portrayed Chicago’s economy as “strong and getting stronger” and said City Hall is making good progress in pension reform talks with police and fire unions. That includes the possibility of lifting the hammer hanging over the heads of Chicago taxpayers: a state-mandated, $550 million payment due in December to shore up police and fire pensions.
“They’re talking to us. We’re having very healthy discussions. And they know they’ve got to be part of the solution. Which is why what Moody’s did is, in my view at this time, irresponsible. Because these are very good conversations happening now and they are very focused because of the financial positions that the funds themselves find themselves in,” Emanuel said during a live appearance on the WTTW-TV Channel 11 program, “Chicago Tonight.”
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“I do not believe the taxpayers have $1 billion-plus in their pocket ready to put into a pension and bear the entire burden. Which is why I said to labor, `If you come forward, I’m ready to step up on the issue of revenue, which no mayor has done before. But, you have to be part of the solution.’ Just saying, it’s all on the taxpayers [won’t fly]. And here’s why: Every one of their members is a resident of Chicago. And if they want to tell the residents . . . that are their members, `You’re gonna bear the entire brunt of saving these pension and the fiscal health of the city of Chicago,’ I don’t think they want to do that. They know it’s not the responsible thing.”
Even before the triple-whammy to Chicago’s finances, Gov. Bruce Rauner was using the b-word, as in bankruptcy, particularly for CPS. That’s a status from which Detroit recently emerged.
Emanuel said Wednesday it would be “irresponsible and reckless to do that” as a first option. But, for the first time, he did not entirely rule out the possibility of bankruptcy. That would free the city and CPS to do things it would not otherwise be permitted to do while unions would lose their leverage.
“It exists. It can happen. [But] rushing there means you haven’t gone to your partners in labor and said, `Do you want to be part of the solution?’ ” Emanuel said.
Pressed on whether a post-election property tax increase was inevitable to solve the combined, $30 billion pension crisis at the city and the public schools, Emanuel insisted once again that raising property taxes was the “last option, not the first option.”
He maintained that the jackpot of revenue from a city-owned Chicago casino would be enough to save police and fire pension funds and that an end to the “double-taxation” of city residents for teacher pensions in Chicago and across the state would go a long way toward solving the $9.5 billion pension liability at CPS.
He also reiterated his contention that previously negotiated reforms that saved the Municipal Employees and Laborers Pension funds would survive a court challenge in spite of last week’s Supreme Court ruling.
Moody’s has argued otherwise. Its double-drop in Chicago’s bond rating was based on the rating agency’s belief that, “The city’s options for curbing growth in its unfunded pension liabilities have narrowed considerably.”
One day after Moody’s put Chicago in a junk status shared only by Detroit among major cities, Emanuel put the onus on them.
The mayor accused Moody’s of trying to “force a decision” on a post-election property tax increase “while we’re in active negotiations” with police and fire unions on cost-saving reforms. And he said it was particularly reckless to tie the decision directly to the Supreme Court ruling in the state pension case without also reducing the state’s bond rating.
Moody’s decision is expected to cost Chicago taxpayers hundreds of millions of dollars in penalties and higher interest rates on the bond issues the city uses to fund infrastructure projects. It could also dry up the market of potential lenders and investors.
But Emanuel said Wednesday that won’t diminish his ability to deliver on his promise to make a host of still unspecified infrastructure improvements at the Obama Presidential Library in either Washington or Jackson Park.
“The library is gonna be hundreds of millions of dollars of economic investment. We want to see it punch way, way, way above its weight class. By making the infrastructure investment, it not only creates the economic engine and job growth. It helps all the community that surrounds it. It’s a good investment in the same way that Atlanta helped when Carter moved his library and foundation, when Little Rock helped Clinton when he opened up his library and in the same way that Texas did it for both Presidents Bush. It would be in our self-interest to make these investments so that the library excels as an economic engine,” he said.
