Last month, a divided City Council authorized another round of federal coronavirus relief despite the political furor triggered by Mayor Lori Lightfoot’s decision to use $281.5 million from earlier funds to cover police payroll costs.
It looks like aldermen must wait a while for Round 2 of what is certain to be a battle royal over the $1.8 billion avalanche of federal money on its way to Chicago.
“I would expect that we probably won’t be taking a package to City Council [until] at the earliest, May, and it may not be ’til June,” the mayor said Monday.
Lightfoot’s timetable did not sit well with downtown Ald. Brian Hopkins (2nd).
“We need to have more involvement in the preparation of that package. Nobody wants a done deal dropped in our laps at the last minute and then say, ‘Take it or leave it. Vote it up or down,’” Hopkins said.
“All the aldermen I’ve talked to about this have expressed an interest in being involved in the prioritization of it. … There’s gonna be a healthy disagreement among the various caucuses within the City Council about what a top priority should be. But we should be a part of that debate.”
Lightfoot signed off on $500 million in short-term borrowing — for less than a year at an interest rate of 1.95% — to buy time for Congress to ride to the rescue of pandemic-ravaged cities.
Now, the mayor’s gamble has paid off.
The $1.8 billion federal infusion includes money to replace revenues lost to the coronavirus and would allow the mayor to cancel, or at least minimize, the scoop-and-toss borrowing that was one of the most controversial elements of her 2021 budget.
That plan calls for refinancing $1.7 billion in general obligation and sales tax securitization bonds and then claiming $949 million in savings in the first two years.
That approach would extend the debt for eight years and return Chicago to the bad borrowing days ended by then-Mayor Rahm Emanuel — though not ended nearly fast enough to satisfy Wall Street rating agencies.
But when asked Monday whether she would cancel the refinancing, Lightfoot was non-committal.
That didn’t sit well with Hopkins either.
“The interest costs — the finance charges — compound rapidly. That’s the nature of scoop-and-toss. You wind up paying interest on interest. It’s just such an expensive financing tool,” Hopkins said.
“The sooner we can get out from under it, the better. … It’s addictive, and it’s hard to break out. It’s very much like credit cards in a household budget. Once you start doing that, it becomes a hole that you dig deeper.”
Civic Federation President Laurence Msall noted that, during the budget planning process, Lightfoot’s financial team “indicated that, if additional federal stimulus funds would come to fruition, those funds would be used to avoid scoop-and-toss financing.”
“Since interest rates are currently very low, the city could also convert the restructuring into refunding for economic savings, instead of taking savings upfront to help close the deficit,” Msall wrote in an email to the Sun-Times.
The $1.8 billion avalanche on its way to Chicago is certain to trigger a furious political debate — one previewed at last week’s City Council meeting.
That’s when a seemingly harmless resolution calling for the city to use $30 million of the new federal money to launch a universal basic income pilot turned into an emotional debate about reparations.
Ald. Jason Ervin (28th), chairman of the City Council’s Black Caucus, said that plan to give 5,000 needy families $500 a month was a “slap in the face” to aldermen, given that talks have just begun about reparations for Chicago descendants of slavery.
On Monday, Lightfoot would only repeat her vow to avoid mistakes made after the 2008 recession.
“The city got a significant amount of money back then. Spent it all on short-term fixes. And then was out of money and had to go to the parking meter deal, which we all know was a disaster and continues to be. And then, after that money was quickly spent, had to have the highest property tax increase in the city’s history,” the mayor said.
Lightfoot vowed to use the discretionary portion of the $1.8 billion to confront Chicago’s “structural fiscal challenges” and to help people “hurting all over the city.” That includes undocumented residents who “haven’t gotten any money from stimulus,” she said.
“Striking that right balance, doing that in partnership with members of the City Council is something that we are continuing discussions about. But we haven’t arrived at the specific formula that we will use in spending our discretionary dollars,” she said.
“We’ve got to make sure we’re using the money strategically to really kick-start the economy but doing it in a fiscally responsible way.”
