Last year, the Chicago Tribune's investigative series "Broken Bonds" reported that, since 2000, Chicago had issued long-term bonds to spend nearly $10 billion, much of it for short-term operating expenses. Hundreds of millions of dollars went to delay bond payments by refinancing old debts, a tactic known as "scoop and toss" that extends payments far into the future. Was this borrowing justified? Going forward, how should City Hall change its finances to pay down existing debts and provide services? Will you argue primarily for cuts in spending or for tax increases? Please be specific.Budget
The financial problems we inherited four years ago are due to decades of substantial borrowing, pushing debt obligations out into the future, ignoring the growing billions in shortfalls in our city pension funds, and utilizing long-term reserve funds like those gained from the parking meter deal to balance budgets and pay for short-term operating expenses. When I took office we immediately began the work of turning these practices around and strengthening the city's finances. First, by actively managing our spending and revenues and implementing structural and long-term reforms to our budget, we have cut the city's structural operating deficit in half in just three years. At the same time, we added to the city's rainy day fund with each of my four budgets instead of raiding long-term reserves. Second, we achieved landmark pension reform that will address half of the city's billions in underfunded pension liabilities. Third, we have eliminated hundreds of millions of dollars of taxpayer risk by terminating seven swap and swaption contracts of more than $1 billion and renegotiating an additional 11 totaling $1.25 billion. Finally, we have substantially slowed the growth of the city's long-term debt from 8% in the three years before taking office, as compared to 3% in the last three years. Decades of risky financial decisions cannot responsibly be undone overnight without substantial negative impact on residents and taxpayers, but my administration has made significant progress in aligning expenses with revenues to balance our budget and continue providing critical services, actively managing our long-term debt portfolio, and addressing our billions in underfunded pensions. Going forward, we will take this same approach to continue righting the financial ship of our city and ensuring the economic strength of Chicago.
This year, working with President Preckwinkle, I helped pass a County budget that the Civic Federation praised. They called us "accountable and efficient" stewards of public resources. Unfortunately, the City of Chicago continues to move in the opposite direction. Getting City finances back on track will take new leadership, and it is one of the principal reasons I am running for Mayor. The City's use of long-term bonds to fund operations and short-term expenses -- "scoop and toss" -- is not justified. The practice is unsustainable, and it is expensive. Instead of paying off $120.8 million in bonds as scheduled in 2015, the City refinanced them at an additional total interest cost of $229 million over 30 years. In other words, poor financial decisions cost the City $229 million that could have been used to create new jobs, educate our children or make our streets safer. As a City, we have to find better ways to fund infrastructure and operations. We cannot keep borrowing money to pay debts, and leaving the looming financial problems to future generations. That kind of approach will bankrupt local government and destroy our City's future. One possibility is finding better efficiencies in cooperation with the County. This has not been aggressively pursued by the current City administration, but it can lead to reduced costs and savings, while providing improved and expanded services, especially in transportation and health care. We cannot cut our way out of the structural deficit but we can and must operate more efficiently as part of the solution. In addition to better coordination of services among local governments, efficiency means cutting waste and looking for new revenue sources. At the same time, I will also oppose proposals to raise revenue by means of increasing regressive and harmful taxes, as I did when as a newly elected County Commissioner, I voted to repeal the local sales tax increase that had been passed by the previous administration.
As a new candidate I have to access the problem with my business expertise.
As Mayor, I will strictly prohibit the use of the costly practice nicknamed "scoop and toss." This maneuver which premised upon the issuance of new more expensive bonds has enabled previous mayors to delay making massive principal payments. Analysts at Fitch, which recently downgraded the city of Chicago's debt rating by three notches to A- from AA- on general obligation bonds, said in their report that such restructurings continue to marginally weaken the city's debt structure. This measure was completely unjustified, and only allowed us to spend beyond our means. I will reduce the City of Chicago debt service by transitioning Chicago from the current "Debt to Fund Services" revenue and expenditure system into a "Pay As You Go" revenue and expenditure system. This debt to fund Services system, which is like using your credit card to pay rent, is too reliant upon Municipal Bonds that result in an obligation to pay interest. I will reduce our debt incrementally, over a period of six-years. Year one we will utilize the $1.7 billion dollars in unused TIF funds; Forego $500 million worth of currently scheduled nonessential Infrastructure improvement projects; and Increase the number of contractors with the capacity to submit bids on city projects to reduce contracting costs by an estimated $600 million. Repeating these measures wil enable us to pay down the debt by $1.1 billion dollars, during each of the ensuing five years. When this transition is complete, the city of Chicago will save more than $900,000,000 in interest, annually. Additionally, this will result in the city of Chicago having a constant reserve fund and ultimately result in an increase in the City's weakening Bond Rating. As mayor I will opt for additional spending cuts. I will offer city employees the option of a ten hour a day, four day a week, forty hour work week. This would reduce daily start-up costs as well as reduce personal and public energy consumption. This would allow the city to avoid city employee furlough days. As Mayor, I will work to develop trade agreement to enable Chicago businesses to access Global and National economies. Through Public-Private initiatives we will empower these local businesses and enable them to place their products, goods and services into the National and International stream of commerce. The creation of jobs and opportunities will result in the expansion of our revenue base. As businesses share more in the costs of city services, the burden on homeowners and general taxpayers will decrease, significantly. Currently, the city of Chicago relies upon seven primary sources of revenue, including Real Estate tax, Income tax, Sales tax, Federal aid, State aid, Motor Fuel tax, Public Utility tax and Fines, fees and assessments. I will utilize "Naming Rights" as a non tax form of revenue. Excluding City Hall, we will provide opportunity for companies and individuals to rename public buildings, facilities, and other city assets according to their wishes. Unlike Privatization, the city would retain complete control over these assets.
I have been vocal in my opposition to "scoop and toss" and that was one of my reasons for voting NO to the most recent budget. Kicking the can down the road is not responsible. I have proposed ways to increase revenue and believe we need to have a healthy debate on commuter and LaSalle Street taxes. We also need to streamline city government and cut waste in order to get our financial house in order. Establishing confidence in city finances is essential, and we do not get there with more fines and fees on the middle class. It is time for people to pay their fair share.