Mayor Rahm Emanuel got the go-ahead Monday to issue $900 million more in bonds to refinance old debt and continue the massive rebuilding of Chicago’s crumbling water and sewer system.
Shortly after taking office, Emanuel doubled water rates over a four-year period – followed by annual increases to match the cost of living – to modernize the water and sewer system, instead of privatizing it.
That water bill has since become a catch-all for two other fees: the $9.50 a month garbage fee and 29.5 percent utility tax used to fund pensions.
On Monday, the City Council’s Finance Committee authorized yet another round of borrowing to continue the rebuilding process.
The $400 million in “second lien wastewater transmission revenue bonds” and the $500 million in “second lien water revenue project and refunding bonds” will raise to $5.2 billion the level of outstanding debt tied to Chicago’s water and sewer systems.
Bond ratings on that debt are higher than they are on Chicago’s general obligation bonds because the bonds are retired by water and sewer rates, a dedicated and steadily-rising source of revenue.
They range from A-plus with a stable outlook from Standard & Poor’s on both the water and sewer bonds to AA- from Fitch.
Chief Financial Officer Carole Brown said the new round of borrowing is intended to fund “new money projects” and will also be used to “re-fund outstanding water revenue bonds for interest cost savings” estimated at $8 million.
The Department of Water Management will also be authorized to enter into Illinois Environmental Protection Agency loans for an amount not to exceed $400 million for water and $200 million for wastewater.
“The water IEPA loans provide low-cost funding for water capital projects, including meter installation, water main construction and pumping station improvements,” Brown said.
“The sewer IEPA loans provide low-cost funding for wastewater capital projects, including flood abatement, sewers replacement and lining and auxiliary outlet sewers.”
Noting that Chicago is the largest borrower from the revolving fund of IEPA loans, Brown said: “Because it is such a favorable rate, to the extent that the projects qualify and the term works for us, we will first go to use the IEPA loans before bonding the debt.”
Mesirow Financial and Williams Capital will serve as joint senior managers for both bond issues.
Reaffirming the city’s commitment to what she called “diverse and robust underwriting teams,” Brown said she anticipates that firms owned by women, minorities and military veterans will together earn 62.5 percent of total underwriting revenues.
Ald. Scott Waguespack (32nd) asked whether any of the new money being borrowed would be spent on lead abatement.
He didn’t get an answer from Karen Bielarz, director of legal services for the Department of Water Management, but she promised to get back to him.
“It’s a pretty significant issue still. And if we’re not spending any money on that, it would seem that, if we’re gonna be looking for $500 million in these bonds, that would be a good place for some of the funds to go,” Waguespack said.
Ald. John Arena (45th) added: “The issue of lead in our water that we’ve seen the reports on — hopefully, the message is getting through to the Water department that we need to address that. We would like to see how a portion of this money might go to have a positive impact on that situation.”
According to Bielarz, the massive rebuilding has a 10-year goal of replacing 880 miles of water mains and installing 204,000 water meters in homes without meters at a cost of $314 million.
South Side Ald. David Moore (17th) has railed about the racist, sexist and homophobic emails in the Department of Water Management and about the discriminatory hiring and promotion process in that scandal-plagued department.
But Monday, he had only praise for the diverse underwriting team and for the water and sewer rebuilding process he sees taking place across the city.
“I see where that money is going. … I see it — not only in my community, but whether I’m driving up north or driving west. You see the work that is being put in in terms of fixing our systems,” he said.
“Also from our 311 calls. When we see sinking street holes, they’re getting out there and repairing it. There’s a cost to all of that. The Water Department, I have to admit, has been very, very responsive to that and getting things done in that manner.”