In early 2025, the City Council gave Mayor Brandon Johnson’s administration authorization to issue another $830 million in general obligation bonds by the thinnest of margins.
The mayor actually had to cast one of the few tie-breaking votes of his tenure to keep the measure from being sent back to committee before narrowly winning approval.
And why was there such controversy back then? Standard & Poor’s just days before had downgraded the city’s general obligation debt rating, the first such downgrade for Chicago in a decade. Two other ratings agencies since have joined S&P in lowering the city’s creditworthiness, one of them — Kroll Bond Rating Agency — two separate times.
Additionally, the $830 million bond authorization was structured in such a way that the city could delay paying any interest on the securities for a full two years, covering those financing costs with more interest. Aldermen who voted against the authorization noted that the overall cost of the $830 million in bonds would total $2 billion over the years, and that was at the rates that prevailed then — before last year’s budget circus, which further tarred the city in the eyes of investors.
So reasonable aldermen now are pushing for an ordinance that would require a three-fifths majority vote for future bond authorizations. The council’s Finance Committee approved the measure earlier this week on a 21-9 vote over the objections of the Johnson administration.
We strongly support this prudent action, which would apply not just to Brandon Johnson but future mayors as well. As the city’s fiscal condition remains precarious, its reliance on debt has grown alarming, typified earlier this year by the sale of hundreds of millions in city bonds to cover operational costs — back pay owed to firefighters and the growing tab for settlements and judgments, principally tied to past conduct by Chicago police officers.
Under Johnson, the city’s annual cost for debt service — the repayment of principal and interest on bonds — has ballooned. It was a little over $2 billion when he took office in 2023 and is projected to be $2.47 billion next year and $2.5 billion in 2028, according to the city’s most recent budget forecast, released over the summer. In last year’s budget forecast, that 2027 projected cost was $2.25 billion; so in the space of a year, the figure for that year alone grew by more than $200 million.
Some of that increase is from bonds for O’Hare Airport infrastructure work that are backed by airport fees.
More Top Picks How To Help A Child With Adhd Finish Reading Assignments
But the cost of general-obligation debt service, covered by property taxes, also is up substantially, rising to a projected $539 million in 2028 from $323 million in 2024. Total general obligation debt is slated to reach $5.9 billion in 2028, up from less than $5 billion in 2024.
The mayor’s team hopes to add to the IOU pile soon. The city plans to sell $600 million in new general obligation bonds the week of Oct. 19 to fund capital projects, newly appointed Chief Financial Officer Ashlee Gabrysch confirms. It will be most interesting to see what sort of interest rate the city will have to dangle to offload the securities, as well as the structure of repayment.
Will the administration again offer a backloaded payback schedule that inflates the amount of interest taxpayers must absorb over time? At any rate, don’t be surprised if the city ends up paying rates well above what its current credit ratings otherwise should support.
On Sept. 15, S&P reaffirmed its BBB rating on the city’s rating, two notches above junk status, but retained its negative watch with all kinds of warnings about Chicago’s fiscal trajectory. Among other things, S&P noted the slow pace at which the Johnson administration has implemented recommendations for cost savings recommended in last year’s thorough report by Ernst & Young.
Facing an $882 million deficit for 2027, the mayor will release his budget next month. Even with mayoral and aldermanic elections looming, there’s no reason to believe the coming budget debate will be any less fraught than the previous two under Johnson’s watch.
Between the city’s dramatically underfunded pensions and its growing debt load, about 40% of its budget is dedicated just to those two items. That is far and away the highest percentage of any major U.S. city.
So it’s small wonder the City Council wants to take firmer control over these debt decisions that will obligate Chicagoans for decades to come.
Yes, the city has infrastructure needs that must be addressed, fiscal crisis or no. Debt is how such projects typically are financed. But this administration has shown an inability to prioritize needs over wants, and aldermen are right to want more input.
Ald. Marty Quinn, 13th, who originally proposed the bond-authorization ordinance at a two-thirds majority, scaled back the required supermajority to three-fifths of the council. We think that was the right move. A two-thirds hurdle would give just 17 aldermen the power to torpedo future debt financings. A three-fifths requirement means 30 of 50 alders would have to sign on, a reasonable supermajority that encourages compromise over the size of future authorizations and the sorts of expenditures they’re covering.
Such a policy change, we believe, would be viewed as positive by investors and ratings agencies, not to mention taxpayers.
The four credit downgrades on Johnson’s watch don’t give his administration the credibility to argue against this prudent step. There’s a reason these aldermen want more say over the debt load being heaped on taxpayers — because there are few priorities more urgent right now than protecting the city’s wobbly credit from further erosion.
Submit a letter, of no more than 400 words, to the editor here or email [email protected].
More Top Picks Surge Protector