City officials became so reliant on bond money that they even turned to it to cover retroactive pay and pension contributions. It also has been used to pay for mistakes, including cases of racial discrimination and police brutality that resulted in expensive legal judgments and settlements.
Most of Chicago’s debt woes can be traced to the long reign of former Mayor Richard M. Daley, but the borrowing he relied on so heavily has continued under Rahm Emanuel as his administration gropes for ways to deal with the financial problems it inherited.
When the Tribune analyzed $9.8 billion in proceeds from general obligation bonds issued from 2000 to 2012, it found that nearly half of the money went to paper over growing budget problems. Among the findings:
—City officials used about $3 billion to settle one-time legal expenses, cover closing costs on the bonds, pay off short-term bank loans and buy vehicles and other relatively short-lived equipment.
—Even more money went to refinance old bonds. That’s smart if it saves money. But the city put $1.8 billion toward deals that will end up costing taxpayers millions more in the long run by racking up years of extra interest payments.
—Less than a third of the total borrowing — $3.2 billion — went to capital improvements that might benefit future generations. Even in this category, the newspaper found hundreds of millions of dollars in questionable spending on short-lived items.
In many suburbs, officials who want to issue bonds to build schools or swimming pools must provide detailed spending plans and put their proposals to a popular vote. Referendums also are held in Philadelphia, Los Angeles and other major U.S. cities.
But Illinois law allows Chicago to borrow billions without asking residents’ permission or providing much information about how the money is spent.
There is no limit on the city’s general obligation debt, and the sole check and balance is the City Council, a body that rarely pushes back on major mayoral decisions. Since 2007, aldermen have authorized $7.6 billion in general obligation bond issuances without a single dissenting vote. And each year they get millions in bond proceeds to dole out for projects in their wards.