The City Council’s Finance Committee approved a $600 million dollar bond offering yesterday to help fund the city’s capital program over the the next two years, but the city amended the maximum allowable interest rate on the general obligation bonds from 18% to 10% at the request of one Progressive Caucus alderman. The Committee also approved a slew of police-related items, and Chairman Burke directly introduced an ordinance establishing a new mental health unit within the police department that he modeled after one of the recommendations on the recently-published Police Accountability Task Force report.
Aldermen Present: Chairman Ed Burke (14), Joe Moreno (1), Pat Dowell (3), Leslie Hairston (5), Rod Sawyer (6), Gregory Mitchell (7), Anthony Beale (9), Patrick Daley Thompson (11), George Cardenas (12), Marty Quinn (13), Raymond Lopez (15), Toni Foulkes (16), David Moore (17), Derrick Curtis (18), Willie Cochran (20), Howard Brookins (21), Mike Zalewski (23), Danny Solis (25), Roberto Maldonado (26), Walter Burnett (27), Jason Ervin (28), Ariel Reboyras (30), Scott Waguespack (32), Emma Mitts (33), Carrie Austin (34), Gilbert Villegas (36), Nick Sposato (38), Marge Laurino (39), Pat O’Connor (40), Brendan Reilly (42), Michele Smith (43), Tom Tunney (44) John Arena (45), Harry Osterman (48), Deb Silverstein (50)
The change on the interest rate cap was made at the request of Ald. John Arena(45) who mid-meeting, asked a representative from the city’s Law Department, James McDonald, if it was possible for the city to reduce the rate. Since the interest rate ceiling is set by the city, not the state, it’s allowed to issue whatever interest rate cap it wants through the authorizing ordinance, McDonald said. So Finance Chairman Ed Burke (14) asked that the ordinance be amended to reflect the new lowered interest rate before the committee approved the bonds by voice vote. Ald. Patrick Daley Thompson (11) and Ald. Rod Sawyer (6) invoked Rule 14 and abstained from voting.
Goldman Sachs will oversee the sale of the general obligation bonds. Most of the money raised will help fund the city’s capital program for 2016 and 2017. No new big infrastructure projects are planned. Instead, the proceeds will help pay for the backlog of repairs to city-owned buildings. According to city Budget Director Alex Holt, money raised through the offering will be paid out on a “worst first” basis, meaning basic capital repairs to roofs, boilers and other smaller maintenance issues to existing buildings will receive priority.
Funding will also go toward other basic capital repairs including sidewalks, bridges, firefighter bunker gear, new ambulances and police cars, and the 2017 Aldermanic Menu program, which gives each alderman roughly $1 million a year to spend on local infrastructure projects. This year’s menu program was paid for by a previous bond offering backed by the city’s sales tax revenue. That offering was approved in January.
The GO bonds will raise a total of $100 million to help fund settlements and judgements for 2016 and 2017. A portion of the $50 million budgeted for 2016 will be used to cover any potential cost overruns from settlements and judgements in 2015. But Holt said she expects that amount to be “well south of $50 million.”
For at least the past three years, the city has under-budgeted settlement amounts and used borrowed money to make up the difference. It was an issue Ald. Arena brought up in yesterday’s meeting. “Is the ultimate goal, and is it reasonable, to get to a place where we are not bonding for settlements anymore? Is that a financial policy that we are trying to get to?” Arena asked.
In 2012, the city budgeted $28 million for settlements, Holt said, but spent $80 million from the operating budget, in addition to $112 million in borrowed money. In 2013, the city budgeted $27 million for settlements, but spent $66 million worth of operating funds and borrowed $137 million to cover the rest of the tab. The same happened in 2014. Even after the city increased that year’s settlement appropriation to $32 million, the city spent $51 million of its operating budget on settlements and used $58 million worth of borrowed money to cover the rest.
Holt said the city has made a “real attempt” at moving routine settlements and judgements off the bonded money and back on to the operating budget. She added that the higher than normal settlement payouts in the previous years were due in part to several cases that had been building up for years, including an expensive discriminatory hiring case brought against the city’s Fire Department.
“With a city this large, we are always going to have routine settlements and judgements. We’d like to get to a point where those are fully well incorporated within the operating budget,” Holt explained.
“I suspect there will always be some extraordinary settlements and judgements in some matter,” she added. “We may resort at some point in time to bonding for those because…of their size. But we would expect that to be the exception and not the rule.”
Holt said the city hopes to phase out the practice by 2019.
Financial Transparency Ordinance
Shortly after aldermen approved the bond issuance, the committee approved an ordinance that would provide more oversight of future borrowing plans. The so-called Debt Transaction Accountability Ordinance was drafted by the Progressive Caucus in collaboration with the city Chief Financial Officer Carole Brown. In her testimony, Brown said the ordinance would provide more opportunities for debate prior to future bond offerings without “unduly inhibiting” the city’s ability to handle its finances.
$3.2M in Police Settlements
At the tail end of the meeting, aldermen approved $3.2M in legal settlements involving officer involved fatal shootings.
The larger payout, $2.2 million, will go to the family of Emmanuel Lopez, a 23-year-old who was fatally shot by police officers during a car chase in September 2005. According to testimony from the Law Department’s Jane Notz, four officers fired 42 shots. 16 of those shots hit Lopez and all but two of those bullets hit him in the back of his head or back.
Notz said the case was pending for close to a decade because the family had refused to lower its original demand of $18 million until last year. If the case had gone to trial, Notz said, the city would have argued that Lopez was driving while intoxicated and the suspect of a hit and run when he was fatally shot. He hit an off-duty police officer who had allegedly drank two beers before the incident occurred. She said if the case had gone to trial, the family would have argued the department fabricated the tire marks on the officer’s pants and that there was no reasonable suspicion to prompt the shooting. The IPRA investigation is pending. No officers involved have been reprimanded, she said.
The second settlement aldermen approved is a $1 million payout to the family of Ryan Rogers, who was fatally shot by police in suburban East Hazel Crest during an undercover operation of stolen cell phones.
According to Notz, in March 2013, the Chicago Police Department was working with FBI and law enforcement officials in the northwest suburbs when two CPD officers in an unmarked vehicle tracked a car believing it had duffle bags filled with stolen cell phones. Rogers, who was driving the car with two passengers, believed the plainclothes officers were attempting to rob them, according to his girlfriend, a passenger.
The officers opened fire fearing Rogers was going to run them over, Notz said. Rogers’ family had originally demanded $2.5 million. If the lawsuit had advanced to trial, it would have rested on whether the jury believed the officers who shot Rogers had reasonable fear for their lives. The plaintiffs would have argued that the officers did not properly identify themselves as law enforcement officials, Notz said.