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With a city deep in debt, Rahm Emanuel and Jesús ‘Chuy’ Garcia square off in runoff

April 6, 2015 6:00 PM ET

by MARK GUARINO

Besides choosing whom they want for their mayor Tuesday, Chicagoans might be asking themselves a more formidable question: Who would want this job, anyway?

Consider the task at hand for the next mayor of Chicago: Budget shortfalls for the city and Chicago Public Schools are $430 million and $1 billion, respectively. And the city is groaning under a whopping $8.3 billion in bond debt, largely due to nearly two decades of spending sprees and borrowing to pay off old debts from the era of former Mayor Richard M. Daley.

Then there are the pensions. The total unfunded debt to the city’s four pension funds is $20 billion, with payments increasing by $600 million next year. In December the city faces a state-mandated payment of more than $500 million to police and fire pensions — money that it does not have. And the mayor can’t look for relief from the state because Illinois happens to have the most underfunded pension plans in the United States.

The dire financial picture prompted Moody’s Investors Service in late February to further downgrade the city’s bond rating, leaving it just three notches above junk bond status. Among all U.S. cities, only Detroit’s bond rating is lower.

“The fiscal crisis is the overwhelming issue in Chicago. There’s no way the city can move forward without addressing it,” said Paul Green, the director of the Institute for Politics at Roosevelt University in Chicago. No matter who wins Tuesday’s runoff —Mayor Rahm Emanuel or Cook County Commissioner Jesús “Chuy” Garcia — the challenge the mayor will face is to find new revenue, and he will likely have to do it via deep budget cuts and property tax hikes.

Perhaps not surprisingly, neither candidate has broached this reality with voters. Instead, both campaigns have attacked the other for not having a plan, without clearly expressing one of his own.

“Neither candidate can tell the whole truth because the public doesn’t want to hear it,” Green said.

The six-week runoff campaign between Emanuel, a former U.S. representative and chief of staff to President Barack Obama, and Garcia, an Illinois state senator before he became a county official, has largely been framed as a war of perception. Garcia has embraced the two-Chicagos narrative: Emanuel, according to Garcia, has focused all his time on downtown redevelopment, at the expense of the surrounding neighborhoods. Emanuel, for his part, has spent nearly $20 million on attack ads against Garcia, suggesting that his opponent does not have the expertise to solve the city’s financial problems and warning the challenger would just raise property taxes. 

The Chicago Tribune editorial board has seized Emanuel’s narrative, writing that it hasn’t seen Garcia “emerge as the mayor-in-waiting who would attack this city’s financial emergency and deliver solutions. He is a fine man with no coherent agenda for rescuing Chicago, its schools and its future.”

The campaigning has been light on specifics from both sides. Garcia has stoked dump-Emanuel fever — amplified since the mayor closed nearly 50 public schools in 2013. Emanuel has tried to plant seeds in the minds of voters that Garcia is a tax-and-spend amateur in fiscal matters.

And Emanuel’s argument is apparently having an effect.

In February, Garcia forced Emanuel into a runoff election after getting 33.5 percent of the vote, to the mayor’s 45.6 percent. A poll released this weekend from Ogden and Fry shows voters breaking toward the mayor, with 51 percent of likely voters supporting Emanuel, versus 33 percent for Garcia. Nearly 16 percent are still undecided.

Yet according to many economists, the idea that a sellable plan will neatly solve Chicago’s catastrophic financial situation and put it on the road to solvency is at best naive and at worst disingenuous. Much will depend on the national economy, ongoing negotiations with public sector labor unions, relationships with lawmakers in the state capital and the inevitable court battles over pension obligations.

“There’s no magic bullet” to solving the pension crisis, said Edward Stuart, an economist at Northeastern Illinois University in Chicago.

“Cities are too complicated to have one plan. Instead you need to have a philosophy and a general set of objectives,” he said. “Things are not necessarily in the control of the mayor, no matter how detailed or comprehensive their plan may be. Nobody can have a real plan, because it’s not realistic to have a plan.”

But that hasn’t stopped the candidates from trying. The Garcia campaign has proffered a graduated income tax and a broadened sales tax on luxury goods, both of which require approval in Springfield, the capital — which is seen as unlikely. Garcia has also said he would organize a task force to examine budget cuts and, pointing to his overarching campaign theme, stop property tax breaks for wealthy downtown building owners.

Emanuel has proposed a lakefront casino and an expansion of taxes on accountants’ and lawyers’ services.

Unlike Garcia, Emanuel has a record for voters to consider — and his attempts to increase revenue have not been popular. Soft taxes, such as expansive traffic ticketing and red-light camera programs, as well as a telephone tax on emergency services, have been met with disapproval. And measures to get city workers to pay more into their pension plans are being challenged by the Illinois Supreme Court.

Both plans avoid property tax hikes, which, according to Evan McKenzie, a political scientist at the University of Illinois at Chicago, “have to be part of the picture,” no matter who wins Tuesday.

“The overall strategy has to include increasing taxes from those who have profited the most over the last two or three years of economic recovery,” he said. “They won’t fix the city budget issues unless they will do that.”

Those profits are far from universal. A Brookings Institution report released in January showed Chicago still struggling to bounce back from the recession, ranking 51st out of 80 U.S. metro areas in economic growth, behind even neighboring Milwaukee in employment and growth. Neither indicator has returned to prerecession levels in Chicago, said report author Joseph Parilla, a Brookings analyst based in Washington.

“The city has yet to make back those losses,” he said, adding that long-term investments in areas like public transit, infrastructure and education are critical for Chicago’s growth. “These end up being sources of prosperity, so having requisite investment in those sources will certainly matter.”

Tuesday’s election is Chicago’s first runoff for a citywide office, and the Board of Elections expects turnout to be much higher than the 34 percent of registered voters who went to the polls in the first round. More than 100,000 people have already cast ballots — twice the number of people who voted early in February.

One thing is already certain: Tuesday will force the winning candidate to delve into the harsh truths of what it takes to make Chicago solvent. “Then the specifics will come,” Green said. “Until then, you’ll alienate the electorate.

 

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