Chicago Mayor Rahm Emanuel outlined plans for handling the city's debt Wednesday, telling the Civic Federation the city should put a stop to "unsustainable financial practices."
"For a little over a decade, the city was paying its legal settlements and judgements by issuing 30 year debt instead of using the money from its annual budget like other cities," Emanuel said, reports WBBM. "In addition, the city engaged in a series of bad financial deals and transactions where risks were clearly underestimated that are now requiring large, lump sum payments from taxpayers."
Emanuel also called for an end to "scoop and toss" budgeting practices, which occur when debt is kicked down the road by a tactic that pays off current balances with new bonds. The mayor also detailed other planned financial fixes for the city, including moving $900 million in variable-rate debt to fixed-rate debt, getting rid of a repayment delay scheduled for 2019, and bolstering the rainy day fund. The mayor also plans to stop borrowing money to pay the city's legal settlements.
"I think that the rating agencies, while they're not usually in the tone of applauding, I think they would be positively disposed to the steps we are taking because they are the right things to do to right the ship financially," Emanuel added.
Chicago's credit rating was downgraded to Baa2 in February by Moody's Investors Service -- such a rating is two steps away from junk. The credit rating agency also maintained its "negative outlook" for the city.