Emanuel to end scoop-and-toss borrowing one year early
Chicago will end the costly practice of scoop-and-toss borrowing in 2018 — one year earlier than promised — under a mayoral budget that pleased a taxpayers watchdog group, but not quite as much as Mayor Rahm Emanuel would hope.
Scoop-and-toss is the dubious practice of refinancing existing debt in a way that saddles future generations of taxpayers with borrowing costs instead of paying off the principal.
Emanuel had promised to end the practice in 2019. Instead, it will end next year.
Civic Federation President Laurence Msall said he would be more impressed if Emanuel ended scoop-and-toss at the Chicago Public Schools and stopped several other financial practices at City Hall that are equally troubling.
“A structural deficit still looms over city finances. The pension funds are going to require increasingly large contributions, even with the funding schedule approved by the Legislature. Within five years, very significant increases. And the city does continue to borrow for operational costs, such as [legal] judgments,” Msall said Monday.
“The Chicago Public Schools have also been using scoop-and-toss an extensive amount,” he said. “Borrowing and pushing out your principal when you’re not making payments on your debt has a very expensive impact on the cost of the government. . . . We’ll be impressed when . . . everyone stops doing it, rather than talking about plans to stop doing it.”
Ald. Brian Hopkins (2nd) recalled the debate that surrounded Emanuel’s original plan to phase out scoop-and-toss borrowing over four years.
“If we’re gonna do it, take the Band-Aid off, deal with the short-term pain and get it over with, rather than drag it out,” Hopkins said. “We’re slowly trying to claw back from the depths of junk, but we’re locked into some of these long-term deals at high rates and we’ve got to get out of it.”