Emanuel gets green light to refinance $400M in water revenue bonds

Mayor Rahm Emanuel got the go-ahead Monday to save up to $60 million by refinancing $400 million in water revenue bonds at reduced interest rates.

At the same time, the City Council’s Finance Committee authorized the Emanuel administration to enter into Illinois Environmental Protection Agency loans for an amount not to exceed $450 million.

“The IEPA loans provide low-cost funding for water capital projects, including water meter installation, replacement of aging water mains and improvements to the department’s water purification plants and pumping stations,” Chief Financial Officer Carole Brown told aldermen. “This is a continuation of the capital improvement plan that we’ve been implementing since 2012.”

Shortly after taking office, Emanuel doubled water rates over a four-year period — followed by annual increases to match the cost of living — to rebuild Chicago’s crumbling water and sewer system.

That water bill has since become a catchall for two other fees: the $9.50 a month garbage fee and 29.5 percent utility tax for pensions.

Under questioning from aldermen, Brown said she anticipates saving $60 million or 15 percent on the $400 million refinancing.

There’s also plenty of savings associate with the IEPA loans, which are “part of a revolving fund” that the city draws down as needed for individual projects.

“The rate on those loans has been historically about 1.7 percent. It’s much lower than what we would get by doing long-term bonds,” she said.

“When the city first considered its capital program that we did the multi-year rate increase for back in 2012, we had assumed that more would be done with bonds than with the IEPA loans,” she said. “But because of the attractive rate and the availability of these loans, we’ve actually borrowed more under IEPA and less under the bonds. And we would continue to do that for as long as the loans are available from the state.”

Ald. Anthony Beale (9th) questioned why the city is refinancing $400 million in water revenue bonds when it still has “$50 million in uncollected debt from our suburban friends.”

“Are we ever gonna just go out and make them bond to pay us the money they owe us so we don’t have to borrow $400 million? Maybe we can borrow $350 million,” the alderman said.

Brown assured Beale that the city has “met and talked to our legal counsel” about the suburbs that are still delinquent on their Chicago water bills.

“We have payment agreements with them. We continue to work with our legal remedies to try and recover and get them all paying on a timely basis,” she said.

Brown promised to provide information to Beale on the size of the outstanding water bill debt and the amount owed by each suburb.

Two years ago, south suburban Harvey agreed to begin paying back roughly $18.5 million in delinquent water bills out to Chicago provided the city waived $6 million in late fees.

That agreement left in doubt how the financially strapped suburb would make those payments after some of the money it owed to Chicago was used to make payroll and cover massive deficits.