So when was the first time you heard the term “Scoop and Toss”? You’re probably aware by now that the City’s apparently been scooping and tossing for years, but can you actually define the process? The Tribune’s Hal Dardick can, and it isn’t pretty.
“Scoop and Toss is where you you have debt coming due. You have the final interest and capital payments, but at this point it’s mostly interest because it was backloaded – on your long-term debt. Your previous 20-30 year bonds. It’s coming due, and because you don’t have the money to pay it with the current revenue coming in, you say, guess what? We’ll take out another loan and pay off the old loan. You scoop up the debt and you toss it into the future.”
At yesterday’s City Council meeting, Mayor Emanuel sought, and obtained, authority to enter into 1.1 billion in new debt, adding to the mountains of existing debt the City already has. But a lot of it is kind of like refinancing your lousy high-interest home mortgage.
“The biggest chunk of it,” explains Dardick, “$338 million, is to finish off the restructuring of variable-rate debt to fixed-rate debt to please the markets that, as we know – one major agency downgraded the city’s credit worthiness to junk status recently. So the Mayor’s trying to soothe the markets by doing that. And it’s a sound move that everybody’s in favor of.”
But that’s only about a third of the loan.
“The Mayor was trying to emphasize that part of it,” Dardick explains, “but then there are also some of the old bad practices that got us into trouble in the first place included.” And one of them is $171 million dollars in the aforementioned “scoop and toss”.
So if scoop and toss is so bad, why do it then?
“Because you have no choice,’ he says. “Because you don’t have the money otherwise to pay for it. …It’s old bonds. Old fixed-rate bonds. They have a certain amount of money to pay debt, but it’s already used up. There is no more room.”
“And the other thing they’re doing – it’s also $170 million dollars – they’re taking out $170 million to pay the first two year’s interest on this loan. Because they don’t have that money, either.”
Both Dardick and panelist Ted Cox from DNAInfoChicago confirm that, yes, you read that correctly. The City doesn’t have enough money to pay the first two years of this huge loan, so it’s borrowing $170 million more, and will use that money to pay off the first two years’ interest on the loan.
“To be fair,” asserts Dardick, “I think the the Mayor deserves some credit. He’s trying to reduce these practices, and believe it or not, he is doing less of this sort of thing than had been done in the past, and he’s trying to slowly phase it out. He was dealt a very bad hand. But it’s just a sign of the horrible shape that this city is in financially. And there’s a lot more to come in terms of taxes and cuts.”
Ted Cox continues with the cataloging of the various portions of this massive loan.
“They had privatized the (Millennium) garages, and part of that agreement was that there’d be no competition with the garages. Then Jeannie Gang is building the Aqua Tower and they said they needed a parking garage, and Daley said, – go ahead”
Lawsuts ensued, followed by arbitration, and even an attempt to override the arbitration. But in the end, the courts said the new managers of the Millennium garages had been harmed by the Aqua Tower garage- to the tune of more than $60 million – and the City had to pay. Again, it didn’t have the money.
“And the thing about that is the city should have a certain amount of revenue on hand to deal with issues like this,” Dardick tells us. “That’s considered by the analysts as an annual expense and instead they’re taking thirty years to pay it off.”
The City faces a crushing deadline in just twelve days. CPS is required to make a pension payment of more than $600 million, and there’s no indication that the money will be there. The Mayor says the State has the primary responsibility for funding the schools, and it’s derelict. The Governor and the legislative leaders are at odds. If they don’t come to a resolution, the state may begin shutting down on July 1. Governor Rauner has reverted to campaign mode, partnering with his fellow billionaire friend Sam Zell to fund a new PAC that’s firing up TV commercials around the state blaming everything on Democrats Mike Madigan and John Cullerton. It’s a new kind of politics never before seen in Illinois.
“We do have to ask, though, what kind of an effect this is having on democracy, this campaign by checkbook, which – this is just an extension of the campaign in November,” Cox opines. “There are a lot of people who believe that Rahm won the election because he outspent Chuy Garcia by millions of dollars, ditto Rauner and Quinn – although Quinn had his own issues. This is now continuing (campaigning) into he actual act of governing.”
The Mayor has said he wants the City budget released to the public a month early, to allow all interested parties to make suggestions for cuts and new revenues, according to Cox.
“Rahm did say that any ideas had to be ‘implementable’. That was like a clear signal to the progressive sorts who’ve said we want a LaSalle Street tax, or a commuter tax or a change in the state income tax, all of which would require action, again, back in Springfield, where nothing ever gets done.”
But one idea that’s been floated for months and so far hasn’t been seriously considered in Springfield is expansion of the sales tax to include certain categories of services, such as hair cutting.
“The governor’s in favor of it,” says Dardick. “The Mayor’s in favor of it. There’s a strong argument for it. Thirty years ago, the sales tax applied to fifty percent of the economy, today it only applies to twenty. Most other states are doing it. It would help both the state and the city, and the suburbs and the downstate communities that are in similar pension crises but just don’t get a lot of attention.”
And we end with our conversation about the Stanley Cup that actually began the show.
“I was wondering last night,’ Ted Cox mused, “where would we be if Bill Wirtz were still alive? I don’t know, but there’s no doubt about it, that things have turned out better.”
He’s referring to son Rocky’s decision to make Hawks games more accessible on TV, thereby raising the team’s public profile.
“Going back to baseball, even Bill Veck missed out on the importance of free TV,” says Cox. “And a do-nothing owner like Phil Wrigley said, go ahead, put it on TV, who cares? And it turned out to be, long-term, the wise move.”