CHICAGO - The Cook County, Ill., Board of Commissioners Friday passed a nearly $3 billion 2009 budget that whittles down board President Todd Stroger's proposed $740 million of borrowing to just under $300 million.
The compromise spending plan reduced Stroger's proposed budget to $2.9 billion from $2.94 billion and includes across-the-board spending cuts, no tax increases, and $47 million in expected federal stimulus funds.
The 14-to-3 vote approving the budget comes after months of debate over the proposed debt. The borrowing was a key piece of Stroger's budget, introduced in late November, and attracted criticism chiefly because it followed a 1% sales tax increase that pushed Chicago's sale tax to the highest in the nation.
The proposed $740 million borrowing would have included $109 million for a 2007 pension payment, $260 million for self-insurance costs, and $380 million for already-approved capital projects. The compromise plan eliminates the pension and self-insurance bond issues and scales down the proposed project borrowing to $294 million.
"This was a rare victory for taxpayers of Cook County," said Commissioner Forrest Claypool, one of the most vocal opponents to Stroger's borrowing plan. Claypool is also expected to run for the president's office in 2010.
"Under the original budget they would have had to pay for $740 million in unnecessary borrowing that would have come back to haunt the county," he said.
Eliminating much of the borrowing will save the county more than $200 million in interest costs, according to the Civic Federation of Chicago, a fiscal watchdog group. But there is still a lack of clarity about which capital projects will be financed, according to federation president Laurence Msall.
"While it's potentially reasonable to use borrowing for capital improvements and equipment purchases that have a useful life that matches the bonds, recent meetings have pointed to a great deal of confusion and lack of clarity as to what capital projects would be included in that borrowing," Msall said. "That is concerning because it shows a lack of comprehensive planning and reasonable assessment of priorities."
The county is expected to make its self-insurance payments with cash, though it's still unclear how it will make the pension payment, which is a leftover payment from a special employee buyout in 2007 and is not part of the county's annual pension payments.
The board's spending cuts total around $40 million - an amount that probably won't head off a deficit going into 2010, according to Msall.
"The modest cuts that were imposed across the board ... are likely not going to be enough if the economic downturn continues," he said. "The county will be faced in the coming year with a need to re-evaluate its spending."
While the new budget authorizes borrowing for capital projects, the board last Friday postponed voting on a finance team to issue the bonds. The board has repeatedly postponed a vote on final approval of the administration's hand-picked finance teams, largely as a way to block the administration from entering the market with the bonds, and not because of a problem with the team itself, according to Claypool.
The team assembled for the capital improvements bond issue includes Loop Capital Markets LLC as senior manager and Samuel R. Ramirez & Co. as co-senior manager. Co-managers are Citi, SBK Brooks Investment Corp., Siebert Brandford Shank & Co., and William Blair and Co.
Mesirow Financial Inc. would be lead financial adviser, and A.C. Advisory Inc. and Davis Financial co-financial advisers, according to the county ordinance.
Chapman and Cutler LLP is bond counsel and Perkins Cole LLP is co-bond counsel.