Peoria Standard

Jim Dodge would not blame Chicago Mayor Rahm Emanuel for feeling a little apprehensive at the prospect of borrowing more money to rescue the city from its ongoing pension crisis.

“These schemes almost never work out as promised,” Dodge told the Peoria Standard. “Basically, they always end up being the equal of using your credit card in some misguided way and ending up in worse shape than you were in when you first started out.”

The Chicago Tribune reported Emanuel’s plan starts with the city taking on billions more in debt to pay toward the $28 billion it already owes in pension liability. From there, the city will issue bonds at lower interest rates, using the funds that remain to help erase the outstanding debt. The pension funds would then invest bond proceeds, with the hope being that early returns would outpace interest already owed on the bond debt.

Illinois State Treasurer Michael Frerichs

City financial officer Carole Brown said Emanuel hopes to make a final decision on the proposal before the end of the year, or just before annual pension contributions are expected to rise by at least $900 million over the next four years.

Meanwhile, Dodge, running as a Republican for state treasurer against incumbent Michael Frerichs, fails to see the wisdom in taking such high risks.

“This only works if the investment can return more than the cost of borrowing, which is hardly a guarantee,” he said. “If the market suffers any kind of decline, this loses every chance of looking like a great value. The thought of taking on this chance is all about the people of Chicago. In the real world, where investments often don’t return what you want or expect the return could be, no one would want this even bigger headache.”

The issuance of so-called pension obligation bonds would be a first for the city, which over the last three years has been forced to borrow nearly a billion more dollars as part of an effort to prop up the city’s other four worker pension funds.