Sanctuary city order won’t threaten Chicago bond rating — yet
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President Donald Trump’s decision to authorize a federal funding cutoff to sanctuary cities is “unlikely” to impact Chicago’s shaky bond rating — “at least in the near-term.”
In an advisory issued Wednesday, Standard & Poor’s said its preliminary analysis of Trump’s executive order is that it’s “unlikely to immediately affect federal funding streams” to sanctuary cities because of “established statutory limitations of the executive branch withholding or deferring such funding.”
But the bond rating agency threw in a caveat.
“If the executive order is subsequently backed by congressional action authorizing the withholding or deferral of funding, and that action withstands judicial scrutiny, the impact of the funding reduction could be more pronounced in the absence of any financial mitigation,” the report states.
With S&P, Chicago’s bond rating stands at BBB-plus with a stable outlook. The outlook was changed from negative to stable after the City Council approved Mayor Rahm Emanuel’s plan to slap a 29.5 percent tax on water and sewer bills to save the largest of four city employee pension funds.
Last week, Trump signed a series of executive orders to begin to deliver on his campaign promises on the volatile issue of immigration.
The orders authorized construction of the wall Trump promised to build along the Mexican border and empowered his Departments of Justice and Homeland Security to follow through on his threat to cut off funding to sanctuary cities where immigrants can access city services and live without fear of police harassment.
The executive order declares that “jurisdictions that willfully refuse to comply [with immigration laws] . . . are not eligible to receive federal grants, except as deemed necessary for law enforcement purposes.”
Chicago receives well over $1 billion in federal funding for all purposes, including transportation, law enforcement, housing and public health.
But S&P noted that federal budget laws “limit the executive branch’s authority to withhold or defer funds that Congress has appropriated.”
“In order to withhold such funding, the executive branch must receive congressional authorization to such effect. Furthermore, courts have ruled that the threat of withholding funding may not be used to coerce states,” S&P analysts wrote.
The rating agency pegged grants from the U.S Departments of Justice and Homeland Security at “highest risk” of being cut off because those grants are “directly tied to immigration enforcement.” But those grants comprise less than 1 percent of municipal budgets analyzed so far by S&P.
Citing “external sources,” the rating agency declared more than 200 sanctuary jurisdictions across the country could be in jeopardy of a federal funding cutoff.
The rating agency noted that enforcement of the executive order “could result in legal, law enforcement, and criminal justice costs that could impact the financial position” of sanctuary cities. That’s why the situation is fluid.”
“S&P Global Ratings is in the process of gathering additional data and speaking with issuers that have a higher exposure to federal funds. We expect to publish a more thorough analysis over the coming weeks,” the report states.
Last week, Mayor Rahm Emanuel responded to Trump’s executive order by declaring that Chicago will remain a sanctuary city.
The mayor refused to say how much, if anything, it will cost Chicago to remain a sanctuary city. Nor would he say how much money he was prepared to lose.
“The notion in the public domain is that there will be resources withdrawn unless you change your status,” Emanuel said then.
“The president has offered and repeated that he wants to offer federal help as it relates to public safety. I’m gonna take him up on that offer which I have talked about as it relates to where the federal government can be a partner.”
The mayor’s promise — and the $1.3 million Legal Protection Fund he has created to support immigrants threatened with deportation under Trump — were not enough to satisfy immigration activists.
They’re demanding that Emanuel “strengthen” Chicago’s Welcoming City Ordinance “by removing carve-outs and loopholes.”
Chicago Police officers are permitted to cooperate with Immigration and Customs Enforcement if targeted individuals are in the city’s gang database; have pending felony prosecutions or prior felony convictions; or if they are the subject of an outstanding criminal warrant.
At a City Hall news conference last week, immigrant activists joined forces with the Black Youth Project to demand that Emanuel eliminate all of those exceptions.
“The carve-outs . . . make it so that there [are] immigrants who can be targeting for deportation. Someone who is in the gang database, for example, because a police officer decided that they look like someone who’s in a gang can be targeted for deportation without them having any chance to defend themselves,” said Tania Unzueta, legal and policy director for Mijente, a national Latino organization.
“What we want is a city where everyone is protected, regardless of whether they’ve had negative interactions with police. Regardless of whether they have been targeted or criminalized by police. With those carve-outs in place, immigrants don’t feel safe in Chicago.”