The Free Press, Mankato, MN

State, national news

November 6, 2013

Spending in Chicago marked by desperation, political expediency, little oversight

(Continued)

The judgment won’t be paid off until 2019 at the earliest; by then, the total cost will have grown to $53 million.

City officials eventually switched to paying judgments with taxable bonds, which are even more costly in the long run.

Emanuel’s finance team brought back the extraordinary-expense exception last year. About $54 million from a tax-exempt bond helped cover a legal judgment awarded to African-Americans who were denied a chance to become firefighters by a 1990s entrance exam that favored white applicants. An additional $8 million in tax-exempt bond money went to pay legal fees related to the case, records show.

By using bond money, the city created an irony for many of those awarded damages, as their future property taxes will help pay interest on the debt. In 2033, when the city starts paying down the $54 million, interest will have more than doubled the total cost.

Randolph Bradshaw, one of about 6,000 plaintiffs in the case, was surprised to hear that the settlement will cost the city interest for years to come.

“I’m a taxpayer,” said Bradshaw, a corrections officer at Cook County Jail. “It’s ridiculous, constantly paying for somebody else’s mistake.”

———

Chicago’s mayors have accumulated tremendous power over the years, but they can’t make bills go away. Growing bond debt and pension burdens leave little room to balance the budget, while increasing taxes and reducing services carry political risks.

But the city can make bond debt disappear — if only temporarily.

The Tribune found that officials regularly put off paying bonds with a tactic known as “scoop and toss.” This strategy has cost the city millions in added interest and piled more debt onto future generations, but it has one clear benefit: Voters don’t get mad because nobody notices.

The nicer name for scoop and toss is refunding, a version of refinancing. Unlike with mortgages, in which even the earliest payments chip away at the principal, with bonds years may go by before principal payments come due.

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