Chicago Sun Times
Under fire, Emanuel defends ‘payday loan’ plan to borrow $389M for CPS
“Borrowing against uncertain and late categorical funding from the state … may allow the district to remain open through the end of the school year and make its statutory pension payment, but it will come at a heavy price, both in terms of a high borrowing cost and the reputation of CPS. Worst of all, it does not help with the Chicago Public Schools’ budget shortfall next year and will, indeed, make it worse,” Msall said.
Matt Fabian, a partner at Municipal Market Analytics, said CPS is already the “main risk to the city from a triage perspective” and, therefore, the city would have been better off “giving” the district the short-term money it needs.
He suggested the city either borrow the money for CPS or raid the tax-increment-financing (TIF) surplus yet again, just as Emanuel did to the tune of $87.5 million to stave off another teachers strike.
“That’s a better option than paying 8.5 percent interest and taking more risk. There’s no reason to assume that the state grants are gonna be provided anytime soon,” Fabian said.
“The problem for Chicago and CPS is that the state is simply not going to help or the state is unwilling to help. So, the city and the school district need to work out plans of their own. Because they continue to rely on the state, they keep winding up in this same situation.”
Fabian urged Emanuel to move quickly to identify a permanent, local source of revenue for the Chicago Public Schools.
“Speaking for Wall Street, the street is impatient to get to a full-funding scenario. Investors want the long-term solutions produced in the short-term. As far as figuring out what taxes to raise and what spending to cut, full speed ahead,” he said.
The Chicago Sun-Times has reported the mayor is considering taxing high net-worth individuals, downtown businesses or both to generate the $400 million-to-$600 million needed to put CPS on more solid financial ground.
“That is one of the easiest things for Chicago to tax because they have had strong growth downtown. That would seem one of the more resilient areas of the economy to tax. It’s not unreasonable to look there first,” Fabian said.
“There isn’t much tax capacity in the neighborhoods and, from a national perspective, Chicago’s economy is very healthy. So, it could handle a higher tax burden, especially downtown.”