Mayor Rahm Emanuel acknowledged Thursday that Chicago has “more work to do” to solve its $30 billion pension crisis, but he told investors the city is not getting the credit it deserves for its financial turnaround.
Emanuel was careful not to say, “Mission accomplished.” Not after imposing a nearly $2 billion avalanche of tax increases just to begin to climb the pension mountain.
Not when the city’s contribution to all four pension funds will rise by nearly $1 billion by 2023, making another round of punishing post-election tax increases inevitable.
But the mayor did tell investors he has confronted those challenges head-on, cleaned up the mess that he inherited and eliminated “financial engineering that masked the true cost” of government.
A structural deficit that stood at $635 million in 2011 has been reduced to $97.9 million, Chicago’s smallest in a decade.
All four city employee pension funds now have dedicated sources of revenue.
Swaps and variable-rate debt are out. So is scoop-and-toss borrowing — one year ahead of schedule. No longer are valuable city assets like Chicago parking meters being sold or reserves being raided.
“I am proud of the fiscal work we have done. I believe we should get more credit as it relates to how you make your investments for what we’re doing,” the mayor said, without mentioning Chicago’s junk bond rating by Moody’s Investors.
“You guys have done well because you know that the growth of the economy, the strength of the economy, the fiscal discipline we’ve shown — both on pensions and on operating costs — should have a different view. And in each case, you have done well on a city that is not only doing well, but investing in its future.”
Still, Emanuel portrayed Chicago finances as a “work in progress,” adding, “We’re not spiking the ball on the 20-yard line — whether it’s on pensions or the operating budget — to say we’re done. We know we’re not done.”
But he told investors there’s one thing they can take to the bank: As long as he is mayor, Chicago will have the “political will to face problems that used to be denied or deferred.”
“We have never taken a challenge and punted. We may not have kicked as far as you wanted. But we never punted. … You cannot find any time that we’ve had a challenge and we said, `You know what? Forget about it. That’s hard. Wouldn’t want to do that one,’ ” Emanuel said.
“Olympic contracts. Scoop-and-toss. Health care. Variable debt. Interest rate swaps. Shortest school day in the United States of America. No full-day kindergarten. No full-day pre-K, no money for pensions. Every challenge the city had. I’m not saying we’re done and I’m not saying we’ve done it exactly the way you would have done it. But you don’t have to run for office.”
Last year, Emanuel appeared before investors to unveil his plan to isolate sales tax revenue in a special fund and use it to refinance $3 billion in city debt.
Emanuel is counting on that new financing structure to generate about $94 million in savings both this year and next.
The “securitization” structure dramatically reduces borrowing costs, because bondholders get paid first, even if the worst happens and the city goes bankrupt. Only after debt service is paid would sales tax revenue start to flow back to the city.
This year’s address was more like a financial showcase for an embattled mayor about to embark on an uphill battle for a third term.
For the first time, Chicago Public Schools CEO Janice Jackson also addressed investors meeting at the Museum of Contemporary Art.
Police Superintendent Eddie Johnson had lunch with investors and led some off them on a tour of the strategic deployment center in the Englewood police district.
A question about Chicago’s unrelenting violence threatened to turn the upbeat mood into a downer.
But Emanuel turned his answer into another sales pitch about his efforts to modernize and professionalize the Chicago Police Department.
“If all you do is focus on the police — and I could give you data points on robberies and burglaries — you’re missing what after-school [programs] and summer jobs do,” he said.
“Am I proud of the fact that we’re adding 1,000 officers? I am. Am I proud of the fact that we’re getting to a level of one sergeant for every eight officers? I am. I’m equally proud … that we went from 14,000 kids to 32,000 kids in summer jobs. Our responsibility to our kids does not end when the bell goes off either at 3:30 or in June. That’s key to public safety.”