Opinion: Chicago's debt is a slow-motion crisis

In a March 22 editorial, the Tribune Editorial Board joined credit rating agencies in sounding the alarm on Chicago’s deteriorating fiscal outlook. Many of us at City Hall also have been banging our heads against the wall about it, but the situation is more grim than most Chicagoans realize. Not because of any single scandal or splashy failure, but rather a quieter, more insidious problem: debt.

Mounting, compounding, ignored debt that operates in the background of daily city life, invisible until the day it isn’t. And that day is coming faster than most realize or want to admit. 

Chicago’s finances present several overlapping crises. We carry a structural budget deficit that requires annual gymnastics to paper over, and this goes into the future at a rate of about $1 billion each year. We have roughly $40 billion in unfunded pension liability, a promise made to city workers that we currently have no credible plan to keep. These are serious problems.

But the biggest and least understood problem is the debt itself: approximately $30 billion and growing. It is easy to be numb to a number that large. What’s another billion when you’re already $30 billion in the hole? The debt has no face. It doesn’t plow the streets or clear the trash. Day to day, most Chicagoans feel nothing from it, which is precisely what makes it so dangerous.

Debt service quietly crowds out everything else: parks, police, potholes and investments in health care, housing and hunger. Every dollar we owe is a dollar we cannot spend on the services Chicagoans deserve and rely upon. And as our credit deteriorates, borrowing gets more expensive, forcing us to borrow more to keep up, which worsens our credit further. This is not a hypothetical spiral; it’s the path we’re already on.

I often hear, “The next mayor will have to make hard choices.” That framing is already too optimistic. If we don’t change course now, leadership won’t be making hard choices, because they won’t have any choices at all. The market will make them for us. And as a finance professor and former investment banker, I can tell you that the public debt markets are not known for their compassion. 

In fairness, the structural problems predate this administration, but Mayor Brandon Johnson has made a difficult situation measurably worse.

It starts with trust. The City Council was recently asked to authorize a debt issuance to cover lawsuit settlements and firefighter back pay. We were told the debt would be repaid responsibly, in equal installments amortizing over three to five years, just like the car loans that working families take out every day. We took the mayor and chief financial officer at their word on how this debt would be structured. Then the bond prospectus arrived. The debt was backloaded, with most of it maturing in 2031. We were shown one repayment schedule and then sold another.

That’s not a misunderstanding. It is a breach of trust. Because these were taxable bonds, Chicago was priced like a corporate borrower, and the market treated us like lower-tier credit requiring a significant premium. We paid for that in future interest costs that will crowd out future spending.

Some have called for changing state law to allow Chicago to declare municipal bankruptcy. But bankruptcy would break promises to retired city workers who had nothing to do with decades of mismanagement. It would also eliminate a key credit backstop: The fact that Chicago legally cannot go bankrupt keeps Springfield implicitly on the hook and keeps our borrowing costs from falling further off a cliff.

What does work is less exciting but more durable. The mayor commissioned an efficiency report and ignored most of it. Real structural savings must come before we ask taxpayers for more. No more back-loaded, interest-only borrowing that flatters this year’s budget at next year’s expense. And Chicago must grow its tax base, because the only clean path out of a debt crisis is growth.

The next mayor will inherit an enormous burden on Day 1 with no room for illusions. The City Council is not a nuisance. The business community is not the enemy. Springfield is not an afterthought. And Chicagoans are not fools. 

The city’s debt may be quiet and inconvenient, but left unchecked, it will dictate our future.

Ald. Bill Conway, 34th, is the vice chair of the City Council Committee on Finance. He is also a Navy intelligence officer and teaches finance at DePaul University.

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