CHICAGO — A reckless pattern of borrowing by Chicago leaders has undermined the city’s future by ignoring the most basic tenets of municipal finance and piling billions of dollars of debt onto the shoulders of future generations, a Chicago Tribune investigation has found.
Chicago officials abused a powerful financial tool intended to build for the future — issuance of bonds backed by property taxes — as they spent nearly $10 billion in 13 years with few restrictions and virtually no oversight.
The Tribune’s unprecedented examination of city finances reveals that Chicago built mountains of long-term debt from thousands of problematic short-term purchases including software that was soon obsolete, spare parts for vehicles and items you might find on a weekend shopping list: trash bins, flowers, even bags for dog waste.
It’s equivalent to taking out a 30-year mortgage to buy a car and making your children — or grandchildren — pay it off, with interest.
Hundreds of millions more went to push off upcoming bond payments by refinancing old debts. The delay tactic, nicknamed “scoop and toss,” often wound up costing taxpayers more money.
That left relatively little cash for bricks-and-mortar projects and other tangible improvements that will still be around when the loans are fully paid off decades later.
“All you’re doing is saddling some future unknown taxpayer with responsibility for something that’s already been used up,” said Ben Watkins, Florida’s director of bond finance and chair of the debt committee for the Government Finance Officers Association.
General obligation bonds are intended to help governments achieve lasting public works, such as libraries and bridges, that are too costly to pay for all at once. But records show Chicago’s city leaders exploited a loophole in federal tax law and pushed the boundaries of Internal Revenue Service rules that prohibit using this type of borrowing for day-to-day expenses.