Aldermen Arena turn up heat on CPS’ bond deals; public jeers school board chief

Aldermen Arena turn up heat on CPS’ bond deals; public jeers school board chief

http://www.chicagotribune.com/news/watchdog/chi-cps-bonds-city-council-probe-20141119-story.html

The issue also surfaced at a Chicago Board of Education meeting Wednesday evening where Fioretti and other speakers called on city and school officials to bring action against banks or renegotiate borrowing deals.

The Tribune found that CPS’ 2003-07 issuance of $1 billion in auction-rate bonds, paired with interest-rate swaps, could cost the district $100 million more than traditional fixed-rate bonds would have.

“They were gambling with our children’s future,” Fioretti said Wednesday in a Tribune interview.

Thomas said she had yet to see the resolution but was willing to explore the issue at committee level. Thomas, unlike Fioretti, typically sides with the mayor on major issues.

No hearing date has been set.

Attempts to reach the mayor’s office and CPS officials for comment were unsuccessful Wednesday.

CPS has not entered into any auction-rate bonds or interest-rate swaps since 2007, records show.

During the public comment period at the school board meeting Wednesday night, Fioretti cited the Tribune’s findings and called on the mayor and school board to bring either a lawsuit or an arbitration claim against banks that are party to CPS deals.

Francine Greenberg-Reizen, who identified herself as a Spanish teacher at Marshall High School, told the board it had the “obligation and the opportunity” to try to renegotiate or seek monetary damages for the deals.

“As a teacher I help my students see that some of the richest opportunities for learning come from our past mistakes,” she said.

The Chicago Teachers Union has repeatedly criticized the district’s use of swaps, which are one component of the deals the Tribune analyzed.

At one point during the public comment period, Vitale began to speak about the district’s borrowing deals, telling one speaker “your facts are not correct.” But after several audience members interrupted with shouts blaming Vitale for the lost funds, he stopped and signaled for public comments to continue.

Vitale, appointed as school board president by Emanuel in 2011, was a main architect of CPS’ risky borrowing strategy, the Tribune series found. Vitale served in key administrative roles at CPS from 2003-08 and encouraged the district to move away from traditional fixed-rate debt.

“In the municipal market, there were more creative things being done,” he told the Tribune. “More floating-rate options at cheaper rates that you could fix with swaps. So, yes, we were going to take advantage of all those new instrument opportunities to finance the debt.”

Tribune reporter Hal Dardick contributed.