The city's Finance Committee approved Mayor Rahm Emanuel's request to borrow $1.1 billion Monday in an attempt to deal with the mounting short-term debt, according to Fran Spielman of the Chicago Sun-Times.
The loan is far from a "fix" for Chicago's debt problem, but it will temporarily relieve the repayment of debts, while also adding to the long-term debt.
"We are technically in default... There would be the potential that we would have to come up with close to $900 million to pay back the banks if we did not execute this transaction,” the newly appointed Chief Financial Officer Carole Brown told the Finance Committee, according to the Sun-Times.
The loan signifies the largest amount of money the mayor has borrowed during his time in office. Much of the $1.1 billion will be used to pay off debts from the Daley administration as well as to pay for Emanuel's debt restructuring plan, police backpay and major court judgment.
Among the outstanding debts from Daley's time as mayor are $35 million on a loan the former mayor used to purchase the site of the old Michael Reese hospital for an Olympic Village that never came to fruition and $62 million owed for Daley's decision to authorize a parking garage at the Aqua building, according to the Sun-Times.
Oddly, the amount of money on the loan is the same amount that former Mayor Richard M. Daley earned for Chicago in 2008 under the 75-year lease he negotiated with the private Chicago Parking Meters LLC. Incidentally, that money is all but gone by now. To be fair to Emanuel, most of that money was gone before he even took office in 2011, according to the Chicago Tribune.
The city's financial problems have been growing for years, but they have been thrown into the spotlight even more lately after Moody's downgraded the city's bond status to junk level as well as downgraded Chicago Public Schools, the park district and the Cook County Forest Preserve.
Furthermore, Chicago Public Schools faces the possibility of filing for bankruptcy if it cannot pay $634 million to the Chicago Teachers Pension Fund by June 30.
Now that the Finance Committee approved the loan, the measure next goes to City Council for a vote.