Preckwinkle flip-flop on sales tax fails to satisfy Wall Street

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Cook County Board President Toni Preckwinkle in January | Richard A. Chapman/Sun-Times

County Board President Toni Preckwinkle damaged her credibility by reinstating the penny sales tax she campaigned against to solve the county’s $6.5 billion pension crisis.

But the $474 million influx in annual revenue wasn’t enough to satisfy a Wall Street rating agency.

On Wednesday, Standard & Poor’s affirmed the county’s AA bond rating, but revised its outlook from stable to negative.

S&P analyst Helen Samuelson could not be reached for comment.

In a news release, Samuelson was quoted as saying that the negative outlook “reflects our view of the county’s challenges in rebuilding its general fund available reserves” this year.

“Further pressuring the rating is the task of maintaining similar reserve levels in 2016 while successfully controlling rising fixed budgetary costs, including its rising pension obligations, public safety, jail, court and enterprise health system,” Samuelson was quoted as saying.

Frank Shuftan, a spokesman for Preckwinkle, chose to accentuate the positive. In an emailed statement, he wrote that county officials appreciate the fact that the S&P reaffirmed the county’s “high-grade AA bond rating” and recognized Preckwinkle’s efforts to ensure long-term financial stability.

“While we disagree with the decision to assign a negative outlook, we are pleased to see S&P acknowledge our actions to address our legacy debt and pension liabilities,” Shuftan was quoted as saying.

“We specifically note their positive view of the county’s action to identify revenues to address growing pension contributions, including our plan to amortize the unfunded liability. We remain committed to stabilizing our financial position and fiscal structure by facing problems head on and we will be introducing a comprehensive budget plan to increase efficiency and decrease expenditures by more than $100 million to responsibly address the county’s challenges and put us on a stable long-term fiscal trajectory.”

In mid-July, Preckwinkle pushed the penny sales tax increase through the county board with no votes to spare to solve what she called a “pension tsunami” that has the county’s $6.5 billion pension liability growing at a rate of $360 million a year.

The vote to raise the Cook County sales tax to 10.25 percent was a head-turning about-face, even by Chicago political standards.

In 2010, Preckwinkle hung the penny sales tax increase around the neck of her opponent, Cook County Board President Todd Stroger, like a political noose with a clever television commercial that featured a Ben Franklin look-alike.

It showed Preckwinkle, a former teacher, in a classroom recalling that she used to teach her history students about Benjamin Franklin’s claim that “A penny saved is a penny earned.”

As County Board president, she promised to “put Ben’s words into action” by ending patronage, fighting fraud and, above all, repealing the “whole” penny sales tax increase imposed by her predecessor Stroger.

“You’ve earned your pennies. I’ll save them for you,” Preckwinkle said, before laughing and shaking hands with an actor dressed like Ben Franklin.

But Preckwinkle argued in June that the pension crisis left her no choice but to do an about-face.

“Sometimes the news is bad. Sometimes you’re not completely honest with your children. You try to protect from the harsh realities and bitter truths. I refuse to consider my constituents as kids,” she told the Chicago Sun-Times in July.

“The fact is every level of government is gonna have to raise taxes. The city has to do it. The state has to do it. There was no way for me to know in 2010 the magnitude of the problem we were gonna face in this pension crisis and the fact we weren’t gonna get the help from Springfield that we need and that every unit of government needs. We’re gonna do what we can to help ourselves and be responsible by, in the meantime, addressing our own problems.”

At the time, Preckwinkle said she had “no idea” whether reinstating the penny would cost her politically, nor was that a factor in her decision-making.

“I don’t have any choice. My job is to do the best job I can where I am. If, in politics, all you care about is planning your next re-election, you’ll always be trimming your sails,” she said.

Asked whether she plans to seek re-election, when she will be 71, she said, “I just got re-elected. It’s a long way off.”

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