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Feds urged to investigate city’s use of COVID-19 relief funds

The city was allocated $1.9 billion in federal relief funds through the American Rescue Plan. Some of that money freed up other city money, which was used to pay down debt.

The current Chicago city flag hangs outside City Hall.
The city’s use of federal COVID-19 relief funds continues to draw scrutiny from some critics of Mayor Lori Lightfoot.
Sun-Times file

Community organizers and Ald. Rossana Rodriguez (33rd) are calling on federal officials to investigate the city’s use of COVID-19 relief funds, claiming the mayor’s office wrongly allocated money to pay down city debt instead of helping residents, as intended.

Saqib Bhatti, co-executive director of Action Center on Race and the Economy, accused Mayor Lori Lightfoot of siphoning off hundreds of millions of dollars to large banks rather than investing in public health and safety which would’ve helped the city brace for the emergence of the Omicron variant. This lack of foresight, he said, is the reason schools are closed right now.

“The mayor decided to lock children and teachers out of their classrooms rather than assure that their school buildings were safe.” Bhatti said in an online news conference. “I use the word ‘decided’ intentionally. This is a choice that Mayor Lightfoot made when she decided to give our COVID relief money to JP Morgan Chase and other investors.”

The city was allocated $1.9 billion in federal relief through the American Rescue Plan, which was intended to ease the economic blow that the COVID-19 pandemic had on cities and states across the country.

Lightfoot’s original plan called for using more than half of that to pay off $465 million in scoop-and-toss debt and cancel plans to borrow $500 million more.

That plan drew criticism from some City Council members, and when the U.S. Treasury Department guidelines issued in 2021 nixed that idea, the mayor’s financial team devised an end-run.

Chicago Mayor Lori Lightfoot speaks during a City Council meeting to approve the 2022 city budget at City Hall in the Loop, Wednesday morning, October 27, 2021.
Mayor Lori Lightfoot, shown presiding at the Chicago City Council meeting in October 2021 at which the council passed the 2022 city budget.
Pat Nabong/Sun-Times

Instead, the mayor used hundreds of millions in relief funds to replace revenues lost to the pandemic in 2020 and 2021. That freed up other corporate fund revenues, and that money went toward retiring debt that had been refinanced, often called “scoop-and-toss” because it scoops up existing debt and, by stretching out the payments, tosses that obligation further into the future.

Last week, the Treasury Department issued its final ruling that states or cities can’t use these funds to pay off debt.

“Here’s the thing — Mayor Lightfoot, she already did it,” Bhatti said. “She put off spending the COVID money for half a year, hoping the federal government would change the rules. Our schools and communities lost precious time because the mayor was holding out hope that she would get permission to give our recovery money to America’s largest banks.”

Cesar Rodriguez, a spokesman for the mayor’s office, called the allegations “patently false.”

“Our financial team has been extremely conscious to ensure that we followed the Treasury guidelines,” Rodriguez said. “The City has been leveraging all available funding, whether it is FEMA Public Assistance, CARES, and now [the American Rescue Plan] to ensure that the City has all of the necessary resources that it needs to respond to the changing trajectories of the pandemic.”

As of the fall of 2021, Cesar Rodriguez said, the city has invested more than $1 billion into communities that include $482 million in direct public health response, $206 million in housing assistance and $94.9 million to address pandemic homelessness.

Bhatti and the others urged the Treasury Department to launch the investigation but didn’t say if they had filed anything formal with the agency, despite saying he wants the federal government to “claw back our money” and make the city use the funds properly.

Ald. Rodriguez said she and some Council colleagues opposed the 2021 budget amendment “that would facilitate $1 billion to go to Chase bank and law enforcement.”

She added: “Right now as we see this crisis unfold in CPS, we know that the city could have been investing in a lot of different mitigation strategies — for example, testing centers that are run by the Chicago Department of Public Health.”

Ald. Rodriguez called the maneuvering of city funds to pay down debt a “mystery” that must be examined.

Emma Tai, director of United Working Families, said it was telling that Lightfoot “literally moved mountains” in seeking ways to go against the Treasury Department’s rules.

“She has used her political will and political clout to pay the banks but somehow it’s like ‘Oh, more testing, more [personal protective equipment], I just don’t know how we’re going to do that,’” Tai said. “Somehow we can’t get children testing and PPE but we can pay billions of dollars to Chase Bank.”