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In the wake of Chicago's recent credit downgrade, Mayor Brandon Johnson's administration has proposed issuing up to $830 million in general-obligation bonds. This move, which comes just days after the city's first credit-rating downgrade in a decade, raises significant concerns about financial prudence. While the bond issuance aims to fund capital projects within the mayor’s five-year infrastructure plan, it also includes provisions for legal settlements and escrow accounts. The City Council must carefully scrutinize this proposal, ensuring that new debt is justified and used solely for infrastructure improvements.

The timing of this bond issuance is particularly sensitive given the recent budget debates and Standard & Poor’s downgrade, which highlighted Chicago's structural budget imbalance. Despite these challenges, the administration argues that infrastructure maintenance cannot be delayed, as doing so would lead to higher costs in the future. However, the proposal raises several red flags, especially concerning the amount of debt and its intended use.

One major concern is the scale of the borrowing. Last year, the city issued $646 million in general-obligation bonds, and now it seeks a 28% increase. Given the current economic climate and the city's already substantial debt load—exceeding $29 billion as of 2023—this request seems overly ambitious. Additionally, with interest rates likely to be higher due to the credit downgrade, the cost of this new debt could be significantly more expensive than previous issuances. In 2025 alone, nearly 17% of the city’s budget will go toward debt service, making it one of the highest ratios among major U.S. cities.

Another issue is the allocation of funds. The proposal suggests that some of the bond proceeds may be used for legal settlements, which have historically been a significant expense for the city. In 2023, these settlements cost Chicago $151 million, primarily related to police matters. Using borrowed money to cover such expenses is not a sustainable practice and could further strain the city's finances. The City Council should insist that all bond proceeds be dedicated exclusively to infrastructure projects, rather than being diverted to other expenditures.

General-obligation bonds are riskier for investors compared to revenue bonds, which are backed by specific revenue streams like sales taxes. As a result, the city may face higher interest rates, especially following the S&P downgrade. With property taxes already a contentious issue among voters, the prospect of increased borrowing costs could exacerbate public dissatisfaction. The administration must demonstrate a commitment to fiscal responsibility by addressing operational inefficiencies before pursuing additional debt.

To ensure responsible governance, the City Council must play a crucial role in evaluating the bond issuance proposal. It is essential that they demand clear justifications for the amount of debt and its intended use. By prioritizing infrastructure investments while avoiding unnecessary financial burdens, the council can help guide Chicago toward a more stable and sustainable fiscal future.