Mayor Johnson's plan to borrow $1.25 billion hits another roadblock

Mayor Brandon Johnson’s revised plan to borrow $1.25 billion to bankroll economic development and affordable housing projects — and wean the city from its long-standing addiction to tax increment financing — hit an unexpected roadblock on Monday amid continued demands for more City Council oversight.

The Finance Committee was poised to approve a plan recommended by aides to former Mayor Lori Lightfoot and embraced by Johnson, but only after the mayor agreed to put up “guardrails” to give alderpersons more information about specific projects designated for bond funding — and more input into selecting them.

But the plan went sideways after Ald. Bill Conway (34th), one of Johnson’s most outspoken critics, came close to amending the mayor’s ordinance in fundamental ways. First, by shrinking the borrowing from $1.25 billion to $350 million. And second, by lowering the threshold for Council approval of specific projects from $5 million to $1 million.

Both amendments were tabled, but by the relatively close 18-13 vote.

After that vote, Finance Chair Pat Dowell (3rd) called for a brief recess and adjourned to a closed-door area behind Council chambers. She was joined by officials from the Mayor’s Office of Intergovernmental Affairs.

When the meeting resumed a few minutes later, Dowell called off the showdown vote. She later recessed the Finance Committee until 9:15 a.m. Wednesday, when she hopes a vote will be taken, possibly after additional tweaks.

Ald. Brian Hopkins (2nd) said Dowell rightly recognized there was “too high a risk to force a vote.”

“She did the right thing, which is to buy this administration more time,” Hopkins said, adding that the ordinance cannot pass without “further compromise.”

That sets the stage for what he called “furious negotiations” between now and Wednesday.

Dowell, meanwhile, said later she expects a vote to be taken Wednesday — without any reduction in the overall bonding authority that “was thrown in…without my knowledge” by Conway, the Finance Committee vice-chair.

Conway said he appreciates the mayor’s plan to build affordable housing, but “we need to walk before we can run, by starting with a smaller” bond issue.

“There’s so many unknowns we face,” Conway said, such as the effect on TIF reassessments of converting some LaSalle Street office space into residences.

“How will this affect our ability to use TIF surplus in the future to support the budget? This year, we used $434 million. What impact will this have on our bond rating, with the outlook just lowered a couple of weeks ago?” Conway said.

“It’s also no secret that there are a lot of trust issues between City Council and the mayor’s office,” Conway added, citing a litany of examples “just to name a few off the top of my head” — including the ShotSpotter contract extension, the NASCAR race in Grant Park and the abandoned plan for a migrant camp in Brighton Park.

In a text to the Sun-Times, Ald. Ray Lopez (15th) said the mayor’s forces clearly were “nervous they don’t have the votes to defend from amendments.”

Monday’s setback may be only temporary, but is significant.

In response to initial resistance, Johnson already had agreed to require Council approval of all projects over $5 million. That would include “essentially all” multifamily projects and large community development grant projects bankrolled by the two city departments — Housing and Planning and Development —that would split the bond issue’s proceeds equally — $625 million apiece, spread over five years. Housing would use its share to build and preserve affordable housing. Planning and Development would make neighborhood development grants and support small business and job training.

The Council also would get quarterly reports on bond allocation and spending with help from an online database on specific projects. There would be an annual update on bond financing and on the revenue flowing back to the city from expiring TIF districts.

Monday’s delay is another sign of a restive Council emboldened by the defeat of Johnson’s binding referendum, which would have raised the transfer tax on high-end property transactions and used the proceeds to reduce homelessness.

When alderpersons sense political weakness, they tend to push back even harder, and that appears to be what’s happening now.

Budget Committee Chair Jason Ervin (28th) was in the storage closet huddle with Dowell and the mayor’s staff. Afterward, Ervin played down Monday’s setback.

“I don’t foresee this being a deal-killer or anything,” Ervin told the Sun-Times.

Ervin was asked if his colleagues are pushing back because they sense mayoral weakness.

“I don’t look at that way. I just think that people have got some additional questions we need to get through,” he said.

Although the city plans to borrow $1.25 billion, interest would cost the city $2.4 billion over 37 years. Top mayoral aides have insisted that money would be more than recouped by property tax revenue flowing back to the city’s coffers from expiring TIF districts.

Conway isn’t the only one pushing back on the massive borrowing.

Former Finance Chair Scott Waguespack (32nd), replaced when Johnson reorganized the Council, also has sided with Conway.

At a Rules Committee meeting last month, Waguespack said the massive borrowing that would wean the city off its heavy reliance on TIF subsidies is not happening “in a vacuum,” since many expenditures now in the pipeline could have a major impact on city finances.

Council briefings focused only on “how we were going to spend the money, but not on the fiscal impact or implications” of borrowing so much money in one fell swoop, he said.

“Making sure that we hear Ald. Conway’s ordinance is imperative before we march along this path of, ‘Here’s how we’re gonna spend this money that we bring in,” Waguespack said on that day.

“We have the Bears asking for public funding. We have the Sox asking for public funding. We have probably other teams out there as well. We have a real estate transfer tax proposed. And we’re spending a lot of time talking about how we’re going to spend those funds, but not about the fiscal impacts,” he said.

At that same meeting, Ald. Brendan Reilly (42nd) voiced similar concerns.

“Based on my read, this leaves a whole lot up to interpretation in terms of how this money will be spent and the justification for the size of the program and the dollar amount,” Reilly said. “It also requires the taxpayer to pay a substantial amount of money back on the back end at the time when our bond ratings are faltering.”