CHICAGO - Mayor Richard M. Daley of Chicago yesterday unveiled a plan to issue $300 million of bonds that would be retired with admissions fees from a proposed gambling complex to bail out the beleaguered Chicago Board of Education.
About $120 million of the bond proceeds would be applied to the board's fiscal 1994 budget to help eliminate a projected deficit estimated by the mayor at $325 million. The remainder of the deficit would be eliminated primarily with union concessions, and budget cuts and transfers.
The remaining $180 million of bonds would be applied to the Chicago schools' fiscal 1995 budget, Daley said.
"It's not a permanent solution. It merely gets us through the next two years," Daley said at a meeting of the City Council's education committee. "Gaming revenues are not my preferred way to fund schools. "
Under the plan, the bonds, which would be issued this year and next year, would be backed by the full faith and credit of Illinois, Daley said.
The bonds would be retired in seven years using $71 million in projected annual proceeds from a $6 admission fee if a riverboat gambling complex is approved for Chicago by state lawmakers and Gov. Jim Edgar in a special legislative session, he said.
He said that a special session to approve the plan would have to be held this month in order for Chicago schools to open Sept. 7.
Daley said his is the "only real, concrete plan offered" that will enable the schools to open on time. He said he is willing to consider other plans that could solve the school system's chronic financial troubles. "If the governor, members of the General Assembly, the board, or the unions have a better plan, they should come forward now," Daley said.
Gary Mack, a spokesman for Edgar, said the governor does not favor backing the bonds with the state's guarantee.
"He is not supportive or enthused about putting the state's imprimatur on this plan," Mack said.
However, Mack said the governor has not ruled out a special session to address funding options for Chicago schools. He said that an agreement between the board and its unions is key before the governor will consider calling a special session.
Daley said his administration has talked to rating agencies about his bonding plan and that "they liked it.
But rating agency officials said the plan raises numerous questions, including the reliability of the revenue source.
Todd Whitestone, a managing director at Standard & Poor's Corp., said that any plan that proposes to issue bonds for operating expenses raises a "red flag" at the rating agency.
"It's hard to rely on or sell bonds without a stream of revenue," Whitestone said.
Whitestone said the plan, which plugs the deficit through budget cuts, union concessions, and bond proceeds, does not address longterm balancing of the board's revenues and expenditures.
"We would view [the plan] more positively if they had a long-term [financial] plan," Whitestone said.
Paul Devine, vice president and manager of the Great Lakes region at Moody's Investors Service, said that Daley's plan is "another stop-gap" measure that "doesn't really do much" in the long term to help the board balance its budgets.
David Rudd, spokesman for the school board, said the board is open to the mayor's plan as an alternative to help solve the school system's immediate troubles.
Earlier this week, the Chicago School Finance Authority, the board's financial oversight panel, rejected the board's $2.8 billion fiscal 1994 budget because it has a $299 million deficit.
Board officials have said they are optimistic they can eliminate $145 million of the budget shortfall with concessions from the schools unions. However, they said the $154 million needed to fill the remaining budget gap must come from additional revenue sources that could be approved in a special session of the Illinois General Assembly.
The Chicago Board of Education has $17.9 million of outstanding general obligation debt that is rated Baa by Moody's and BBB with a negative outlook by Standard & Poor's. The board is also obligated to make lease payments on $1.7 billion of insured bonds issued on its behalf by the Chicago Public Building Commission.