Civic Federation

Analysts: Massive Chicago Property Tax Hike Just The Beginning

“And if Chicagoans think this major tax increase is some sort of one-off, well, I know of a certain bridge for sale out east.”

Survival And Prosperity, September 3, 2015

Chicago readers of this blog have been warned the last couple of years that the City of Chicago’s poor financial health means a sustained hunt for much more revenue (new and higher fees/fines/taxes) for the foreseeable future.

And Tuesday, this grim-yet-likely scenario was the focus of a City Club of Chicago luncheon.

Fran Spielman reported on the Chicago Sun-Times website yesterday afternoon:

A $500 million property tax increase will not be enough to solve Chicago’s $30 billion pension crisis or rid the city of the junk bond rating that has saddled the taxpayers with tens of millions in penalties and borrowing costs, analysts concluded Tuesday.

Civic Federation President Laurence Msall and Matt Fabian, a partner at Municipal Market Analytics, offered the grim assessment during a lively panel discussion on city finances before a packed house at a City Club of Chicago luncheon…

Fabian’s conclusion was that, as tough as it will be for homeowners and their aldermen to swallow a $500 million property tax increase, Mayor Rahm Emanuel and the City Council need to bite the bullet even harder

Msall agreed that a $500 million increase that would be Chicago’s “largest in modern history” is “not the full answer and it’s not going to be enough because we’ve dug the hole so deeply” by underfunding pensions and granting benefits that taxpayers cannot afford.

“We are going to have raise taxes very significantly just to pay the interest on the debt we have built up and it’s not going to be enough to save the city of Chicago,” he said…

(Editor’s note: Bold added for emphasis)

Still interested in that bridge?

Head on over to the Chicago Sun-Times website here to read- no, digest- what looks to be in store for the “Windy City” in the coming years.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Chicago Borrows $1.9 Billion, Piling On More Debt ‘For The Children’

“Mayor Rahm Emanuel closed the books on 2011 with $310 million in cash on hand, $167 million more than the year before, but added $465 million to the mountain of debt piled on Chicago taxpayers, year-end audits show…

The new round of borrowing brings Chicago’s total long-term debt to just over $27 billion. That’s $10,000 for every one of the city’s nearly 2.7 million residents. More than a decade ago, the debt load was $9.6 billion or $3,338-per-resident.”

Chicago Sun-Times website, July 22, 2012

“Mayor Rahm Emanuel closed the books on 2012 with $33.4 million in unallocated cash on hand — down from $167 million the year before — while adding to the mountain of debt piled on Chicago taxpayers, year-end audits show…

The new round of borrowing brings Chicago’s total long-term debt to nearly $29 billion. That’s $10,780 for every one of the city’s nearly 2.69 million residents.”

Chicago Sun-Times website, July 26, 2013

Chicago keeps piling on massive amounts of debt. From Fran Spielman yesterday on the Chicago Sun-Times website:

Chicago will test the bond market for the first time since its bond rating dropped three notches, thanks to $1.9 billion in borrowings added Monday to the mountain of debt piled on Chicago taxpayers.

The City Council’s Finance Committee authorized two massive borrowings: a $900 million general obligation bond issue to refinance old debt, pay for equipment and capital projects and bankroll $100 million for legal settlements incurred last year and a $1 billion borrowing for Midway Airport.

The Finance Committee also agreed to double — from $500 million to $1 billion — a so-called “commercial paper” program used to cover short-term borrowing between bond deals.

The general obligation bond issue includes $200 million in debt refinancing and $130 million in debt restructuring to “better align revenues with our obligations,” as [Chief Financial Officer Lois] Scott put it.

The so-called “scoop-and-toss” technique will stave off even higher taxes and fees, but it will saddle Chicagoans with another decade of debt that should be paid off today

(Editor’s note: Italics added for emphasis)

Mayor Rahm Emanuel’s worn-out line “it’s for the children” comes to mind here.

As well as that saying “you can pay now or pay later.”

Which is what Chicagoans will eventually be forced to do when the city’s “financial reckoning day” arrives.

The Chicago Tribune did a pretty good job illustrating just how serious the city’s debt crisis is becoming. Hal Dardick, Heather Gillers, and Jason Grotto reported on the Tribune website yesterday:

In a move that will add to the city’s mountain of debt, Mayor Rahm Emanuel won support Monday from the City Council’s Finance Committee to issue up to $900 million in bonds backed by property taxes.

It’s the largest request put forth during Emanuel’s tenure and comes at a time when Chicago already has about $7 billion in outstanding general obligation debt, more per capita than bankrupt Detroit or any of the 10 biggest U.S. cities except New York

Monday, aldermen asked few questions about the borrowing as the ordinance authorizing the debt sailed through the committee with virtually no debate.

“It raises questions of how much City Council members understand the financial condition of the city and what the plan going forward will be to meet the debt,” said Laurence Msall, president of the nonpartisan Civic Federation budget watchdog group…

The amount of borrowing sought by Emanuel suggests his administration continues to need huge loans to run the city

(Editor’s note: Italics added for emphasis)

I can’t begin to tell you how depressing it is watching “The Machine” steadily bring the “City of Broad Shoulders” down to its knees. But what does City Hall care? More than likely they’ll have moved on to comfortable retirements or “bigger and better things” by the time the city implodes as a result of “scooping and tossing.”

Ubi Est Mea? (Pulitzer prize-winning newspaper columnist Mike Royko’s suggested Chicago city motto of “Where’s Mine?”)

How about “Not On My Watch,” all things considered?

By Christopher E. Hill
Survival And Prosperity (survivalandprosperity.com)

Sources:

Spielman, Fran. “City to borrow $1.9 billion in first test since rating downgrade.” Chicago Sun-Times. 3 Feb. 2014. (http://www.suntimes.com/news/metro/25360629-418/city-to-borrow-19-billion-in-first-test-since-rating-downgrade.html). 4 Feb. 2014.

Dardick, Hal, Gillers, Heather, and Grotto, Jason. “Mayor seeks to borrow up to $900 million more.” Chicago Tribune. 3 Feb. 2014. (http://articles.chicagotribune.com/2014-02-03/news/ct-met-bonds-new-chicago-borrowing-20140204_1_tax-increases-city-leaders-finance-committee). 4 Feb. 2014.

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Civic Federation: Funding Continues To Decline For Chicago-Area Public Employee Pension Funds

The Chicago-based Civic Federation is out with a new report about the health of Chicago-area public employee pension funds. The independent, non-partisan government research organization that provides analysis and recommendations on government finance issues for the Chicago region and State of Illinois put out the following news release this morning:

Aggregate Unfunded Liability for Chicago-area Public Pension Funds Increased by $4.6 Billion in FY2011

(CHICAGO) A Civic Federation report released today examines the continued funding decline of Chicago-area public employee pension funds. Unfunded liabilities for the ten funds analyzed in the report increased to $32.0 billion in fiscal year 2011 from $27.4 billion in fiscal year 2010, an increase of 16.7% according to the most recent audited data available. For all pension funds supported by the taxes of Chicago residents, including statewide funds, the total unfunded liabilities reached $16,914 per Chicago resident in FY2011.

“Without comprehensive reforms, this staggering level of pension obligations will soon mean dramatic tax increases, significant service cuts or both for Chicago residents,” said Civic Federation President Laurence Msall. “Illinois and local lawmakers owe it to taxpayers and public employees to agree on reforms that will significantly reduce pension costs for our state and local governments and ensure that the funds remain solvent for current and future public employees.” In the report, the Federation urges local governments to develop pension reform frameworks suited to their own employee population, statutory provisions and funding levels. The report cites Cook County Commissioner Bridget Gainer’s OpenPensions.org site as an example of transparently advocating for changes tailored to the needs of the County’s pension fund.

Each of the ten funds analyzed in the report experienced sharp funding declines in the last decade. On average, the ten funds had an actuarial funding level of 50.8% in FY2011, down from 80.3% in FY2002. All ten funds are now funded below 65%, ranging from a low of 28.3% for the Fire Fund to a high of 64.9% for the Laborers’ Fund.

The declining health of Chicago-area public pension funds is due in large part to inadequate employer contributions over a sustained period and recent investment losses. All of the local funds analyzed received their statutorily required employer contributions in FY2011. However, the employer contribution level set by State statute was approximately $1.6 billion short of the $2.5 billion level necessary to cover current costs for the funds and reduce their unfunded liabilities over a 30-year timeframe.

Adequate funding levels are likely to be even more difficult to attain in the future because the funds have fewer employees to support a rising number of beneficiaries. In FY2011 the ten funds had 1.16 active employees for every beneficiary, down from 1.65 actives per beneficiary in FY2002. Six of the ten funds – the Police, Laborers’, MWRD, Forest Preserve, CTA and Park District Funds – had more beneficiaries than active employees in FY2011.

The Federation’s analysis reviews the FY2011 actuarial valuation reports and financial statements for the City of Chicago’s Police, Fire, Municipal and Laborers’ Funds, the Chicago Teachers’ Pension Fund and the pension funds of Cook County, Forest Preserve District of Cook County, Chicago Park District, Metropolitan Water Reclamation District and the Chicago Transit Authority. FY2011 data is the most recent audited data available for all ten funds.

The full 79-page report, available at www.civicfed.org, is intended to provide policymakers, pension trustees, pension fund members and taxpayers with the resources to make informed decisions regarding public employee retirement benefits.

(Editor’s note: Italics added for emphasis)

Even though I’ll be moving out of Chicago very soon, I’ll still be living in Cook County. As such, I won’t be surprised to get hit with more fees and taxes, in conjunction with less government services, as financial challenges grow at the county and state level.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Illinois Could Have Nearly $22 Billion In Unpaid Bills By FY 2018

It’s been a while since I last blogged about the Civic Federation, an independent, non-partisan government research organization that provides analysis and recommendations on government finance issues for the Chicago region and State of Illinois. In late September 2011, the Chicago-based organization had just released its analysis of the enacted FY 2012 State of Illinois budget, and noted the financially-challenged state was expected to end the year with over $8 billion in unpaid bills from vendors, local governments, and others (related to business tax refunds, employee and retiree health care and Medicaid).

Over $8 billion in unpaid bills.

Fast forward to today. From a Civic Federation press release Monday:

Illinois’ Unpaid Bill Backlog Projected to Reach $22 Billion by FY2018

State urgently needs long-term plan to address rising pension and Medicaid costs, loss of income tax revenues

(CHICAGO) – An analysis released today by the Civic Federation’s Institute for Illinois’ Fiscal Sustainability shows the State of Illinois is on track to accumulate nearly $22 billion in unpaid bills by FY2018 unless action is taken to curb rising pension costs and plan for increases in the Medicaid program…

“Nearly $22 billion in unpaid bills.”

Illinois residents, get ready to bust out your wallets.

You can read the entire Civic Federation press release here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Budget Deficits Plague Illinois, Cook County, And Chicago

These are tough times for many living in Illinois. And Cook County. And in the Windy City. Regrettably, individuals residing in these areas are looking at less government services and higher taxes as time marches on. Take a look at the budget deficits being generated by each of these entities. From the Chicago Tribune’s Monique Garcia yesterday:

Despite a major income tax increase, the state of Illinois is expected to end the budget year more than $8 billion in the red, according to a report set to be released Monday by a nonpartisan tax watchdog group.

The Civic Federation analysis found that while lawmakers cut spending for state agencies this year, the reductions were offset by higher pension costs and the growing cost of paying back years of increased borrowing to keep Illinois afloat.

In all, the state will be $8.3 billion short on June 30 if nothing is done, according to the report. The majority of that money, roughly $5.5 billion, will come in the form of unpaid bills from companies that provide everything from meals for the elderly to toilet paper for prisoners. Another $1.2 billion is composed of Medicaid payments the state will push off until the next budget year, while the remaining $1.6 billion is owed to companies for tax returns and health insurance bills for state workers.

(Editor’s note: Italics added for emphasis)

That report, entitled “State of Illinois Enacted Budget FY2012: A Review of the Operating and Capital Budgets Enacted for the Current Fiscal Year,” can be accessed on the Civic Federation’s website here.

Cook County is also in the red these days. From the CBS Chicago website back on July 28:

Cook County Board President Toni Preckwinkle has outlined preliminary budget estimates that show county government still swimming in red ink.

As WBBM Newsradio 780 Political Editor Craig Dellimore reports, Preckwinkle says her budget team projects a $315 million shortfall in the 2012 budget, and a $116 million shortfall for the balance of this year.

(Editor’s note: Italics added for emphasis)

And then there’s my hometown- Chicago. Bloomberg’s Tim Jones reported back on July 29:

Chicago’s budget deficit for fiscal 2012 is projected to be $635.7 million, Mayor Rahm Emanuel said today, and could approach $800 million by 2014…

Chicago’s budget for the current year is $3.2 billion. Emanuel is scheduled to present his fiscal plan for 2012 in October.

Can hardly wait.

Sources:

Garcia, Monique. “Illinois budget deficit to hit $8 billion despite tax increase.” Chicago Tribune. 26 Sep. 2011.

(http://articles.chicagotribune.com/2011-09-26/news/ct-met-illinois-state-budget-report-20110926_1_pension-costs-pension-systems-lawmakers). 27 Sep. 2011.

“Preckwinkle: Cook County Is $315 Million In The Red.” CBS Chicago. 28 Jul. 2011. (http://chicago.cbslocal.com/2011/07/28/preckwinkle-cook-county-is-315-million-in-the-red/). 27 Sep. 2011.

Jones, Tim. “Chicago’s Budget Deficit Widens $50 million to $635.7 Million, Mayor Says.” Bloomberg. 29 Jul. 2011. (http://www.bloomberg.com/news/2011-07-29/chicago-s-budget-deficit-widens-50-million-to-635-7-million-mayor-says.html). 27 Sep. 2011.

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Tuesday, September 27th, 2011 Deficits, Government, Taxes No Comments
Survival And Prosperity
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Christopher E. Hill, Editor

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