On the face of it, the Johnson administration’s plan to float up to $830 million in general-obligation bonds, unveiled just a day after Chicago’s first credit-rating downgrade in a decade, seems extraordinarily imprudent. On closer inspection, the move isn’t as bizarre as it appears. But aldermen, whose approval is needed before the city tests the bond markets following the credit hit and the recent confidence-sapping budget debate, should ask hard questions before giving Mayor Brandon Johnson’s team the green light. And if those answers aren’t satisfying, the council’s answer should be no. Regardless, the amount of new debt should be scaled back. The new bonds primarily would finance capital projects included in the mayor’s five-year, $16.3 billion program dedicated to infrastructure investments and upgrades. Many of these projects are worthy, and even a city government as financially stressed as Chicago should give priority to keeping as current as possible with infrastructure maintenance. As anyone who owns a home or a car knows, delaying work on deteriorating appliances or equipment usually makes the problem more costly to correct in the future. But … Given the messy budgeting process over the last two months of 2024, which led Standard & Poor’s last week to downgrade the city’s credit, there’s reason to urge extreme caution in taking on any new debt. And there are several red flags in this proposal that must be addressed. The first is the amount the city wants to borrow. Last year around this time the administration issued $646 million in general-obligation bonds in support of the capital-improvement plan. Requesting authority to float bonds totaling a 28% increase over last year, at what surely will be a significantly higher interest rate, is highly questionable. There’s no justification to go even bigger on borrowing when S&P just chided Johnson and the council for doing nothing to improve “a sizable structural budgetary imbalance that we expect will make balancing the budget in 2026 and outyears more challenging.” The second is that the proceeds won’t be only for infrastructure. Team Johnson in its request to the council said proceeds also could go for “judgments, settlements and escrow accounts payable by the city.” The cost to the city of legal settlements, mainly (but not only) tied to police matters, was $151 million in 2023 and remains alarmingly high. The mayor budgeted $82.6 million for settlements in 2025, and the actual total likely will be much more. Is any of that $830 million going toward a cost that in any responsible budgeting exercise wouldn’t be debt-financed? If aldermen don’t get a satisfactory answer, this bond issuance shouldn’t go forward. Before approving any new debt issuance, the council should ensure that all proceeds go to infrastructure and none to legal settlements. As of 2023 Chicago’s total debt load exceeded $29 billion, according to the Civic Federation. Servicing that debt in 2025 accounts for nearly 17% of the city’s total appropriations. Debt costs and pension contributions combined make up about 40% of what the city spends each year. No other major U.S. city comes anywhere close to spending so much on financial obligations, which explains the yearly struggle to fund basic city services. By comparison, New York and San Francisco are considered fiscally stretched, with about 22% of their budgets going to pensions and debt — just about half Chicago’s load, according to the New York Times. We also should explain, too, that general-obligation securities are riskier for investors than revenue bonds, which make up the majority of Chicago’s outstanding debt and are backed by dedicated revenue streams — sales-tax receipts, for example. Money for interest on general-obligation bonds generally comes from revenue sources like the hated property tax. When the city’s credit worsens, as it just has with S&P’s downgrade, the interest needed to entice buyers of general-obligation bonds rises. The city issued last year’s bonds at yields around 4.2%, meaning the city is paying about $27 million in annual interest on that debt alone. Interest rates in general have risen since a year ago, and the downgrade plus the general lack of confidence in the Johnson administration’s fiscal management surely would make this new debt considerably more expensive than 4.2%. Chicago voters have made it clear they won’t tolerate higher property taxes. Out-of-town bond investors are absolutely fine with higher property taxes. In fact, they cheer them because it means the cash is more likely to be there to cover the debt. By all means, Chicago needs to make capital investments. But, to do so affordably, the Johnson administration must cut costs on the operating side of the ledger — something it has shown no willingness to date to do. Something has to give, and the City Council is the only entity with the power to force the mayor to face reality. Submit a letter, of no more than 400 words, to the editor here or email [email protected].