Cook County debt crisis

Message For Chicago, Cook County, And Illinois Readers

Readers of Survival And Prosperity might get the wrong impression that I’m rooting for Chicago, Cook County, and Illinois to “fail” based on my routine blogging about their financial, crime, and political woes.

Actually, I do this because I care deeply about the region and its residents.

It’s been my experience that Chicagoans and Illinoisans are pretty decent people overall. I’ve found many of them to be down-to-earth and quick to lend a helping hand to neighbors and strangers alike.

It’s my personal opinion that these woes (interconnected in my mind) I speak of will only intensify in the coming years. The trend is not our friend here, and if anything, since many of the people who helped bring about this mess are still in charge, is it reasonable to expect they’ll be the ones to fix it?

In the meantime, I predict many Illinoisans will be subject to varying degrees of financial and physical pain while this debacle plays out.

As this is a plausible scenario, have local readers of Survival And Prosperity contemplated what’s at stake should conditions keep deteriorating? What would be your personal exposure if events play out the way I expect them to? Financial vulnerabilities? Personal safety shortcomings? Individual circumstances will undoubtedly vary.

Are the wheels turning in your head?

Good. That’s what I’m trying to accomplish with such posts.

The intent is not to scare. Rather, it’s rooted in care.

It’s my hope that informing Chicago, Cook County, and Illinois residents of the precarious situation at hand and providing food for thought might aid successful navigation through what will likely be unfamiliar territory for most.

Wishing everyone all the best with that,

Christopher E. Hill
Editor

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City Of Chicago’s Total Unfunded Liabilities Grew To Nearly $24 Billion In 2015

It’s been a while since I last blogged about the Illinois Policy Institute, a Chicago-based non-partisan research organization “generating public policy solutions aimed at promoting personal freedom and prosperity in Illinois.” Yet earlier this week, Ted Dabrowski and John Klingner published a sobering piece on the Institute’s website about Chicago’s mounting financial woes that just needs to be disseminated. From their article:

Chicago property owners concerned about their future property-tax bills have had plenty to worry about over the past year- but a new report on the city’s crumbling finances has all but ensured that property-tax hikes will continue to be a painful reality for local homeowners.

The city already passed a $700 million hike in October 2015 to help plug the hole in police and firefighter pensions, and the city is expected to raise property taxes by another $250 million to fund ailing Chicago Public Schools, or CPS, pensions. And with billions more in other health care and pension shortfalls still unfunded, more hikes are on the way.

But the newest debt numbers in the city’s 2015 Comprehensive Annual Financial Report, or CAFR, show that without massive pension reforms, the city’s tax hikes are just beginning. The report found that the total city debt Chicagoans are on the hook for has more than tripled since 2014.

Chicago’s total unfunded liabilities have jumped by over $17 billion, growing to nearly $24 billion in 2015 from $6.5 billion in 2014. The increase is mostly due to new accounting standards and the fact that in March the Illinois Supreme Court struck down the city’s recent attempt to reform its broken municipal-workers and laborers pension funds.

Add to that their share of sister-government and Cook County pension and health care costs and long-term debt, and Chicagoans are on the hook for over $65 billion

(Editor’s note: Bold added for emphasis)

Disturbing stuff. But that’s reality for you.

You know, last week I read an “interesting” anonymous comment on the popular Chicago police blog Second City Cop. From the July 7 post entitled “And There it is….”:

Millennials as they are called are falling over themselves to move here. Look at Ukrainian village, Buck town south loop West loop, Lincoln Park. The city is becoming gentrified. Major companies are moving their headquarters here. City is on the upswing like it or not.

“City is on the upswing like it or not.”

Never mind its financial cancer that’s bound to metastasize in due time…

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

Sources:

Dabrowski, Ted and Klingner, John. “Chicago’s Total Debt More Than Triples To Over $24B In 2015.” Illinois Policy Institute. 11 July 2016. (https://www.illinoispolicy.org/chicagos-total-debt-more-than-triples-to-over-24b-in-2015/). 14 July 2016.

SCC. “And There it is…” Second City Cop. 7 July 2016. (https://www.illinoispolicy.org/chicagos-total-debt-more-than-triples-to-over-24b-in-2015/). 14 July 2016.

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Cook County, Illinois, Faces $174 Million Shortfall

From the Cook County, Illinois, website (under “News) last Thursday:

Cook County Board President Toni Preckwinkle today released the preliminary forecast for the County’s Fiscal Year 2017 budget, signaling that difficult financial choices are on the horizon as the County develops its budget over the next several months.

Preckwinkle announced a projected operating shortfall for FY2017 of $174.3 million…

(Editor’s note: Bold added for emphasis)

Hal Dardick reported on the Chicago Tribune website on June 30:

A year after reversing course and reinstating a hefty sales tax increase that helped spell the political demise of her predecessor, Cook County Board President Toni Preckwinkle on Thursday warned of more potential tax hikes to come.

Without cuts or additional taxes, fines and fees — or some combination of those options — the county expects to fall more than $174 million short of what would be needed to pay the bills in the budget year that starts Dec. 1.

Closing the gap “will not be easy, but residents will be assured that we will do so by making tough decisions required,” Preckwinkle said while presenting her preliminary budget in an annual ritual that invariably includes significant shortfall projections.

The county will focus on cutting costs, but “everything is on the table,” including tax increases and layoffs, Preckwinkle said

(Editor’s note: Bold added for emphasis)

Dardick noted that the Cook County Board President ruled out hiking property taxes this time around.

Like I’ve been warning for a number of years now- Chicagoans, Cook County residents and Illinoisans should expect higher/new fees, fines, and taxes in conjunction with reduced government services going forward.

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

Source:

Dardick, Hal. “Preckwinkle: Tax hike, budget cuts on table as county faces $174M shortfall.” Chicago Tribune. 30 June 2016. (http://www.chicagotribune.com/news/local/politics/ct-cook-county-budget-shortfall-met-0631-20160630-story.html). 5 July 2016.

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More Financial Pain For Many Chicago Homeowners In The Coming Days

When it comes to keeping on top of the latest financial developments coming out Chicago, I’ve been out of the loop lately (no pun intended).

As if that really mattered. Like I’ve been saying for some time now- the writing is on the wall for the “Windy City” concerning its finances.

I’ve also pointed out time and time again Chicagoans should expect higher/new fees, fines, and taxes (in conjunction with less government services) going forward.

Case in point- the next round of property tax bills. Hal Dardick reported on the Chicago Tribune website last week:

Chicago homeowners should brace themselves for sticker shock when they open their mailbox at the end of the month: property tax bills on average 13 percent higher than last year.

The big increase is mostly being driven by the record tax increase Mayor Rahm Emanuel engineered last fall to fix city pension funds for police officers and firefighters.

Cook County Clerk David Orr released tax rate figures Monday, revealing the practical effects of City Hall’s painful decision. The owner of a single-family home with the current average sale price of about $225,000 can expect to see a property tax bill of $3,633, an increase of about $413

(Editor’s note: Bold added for emphasis)

Compare this to an overall 9.3 percent citywide increase over the last three years, according to Dardick.

And just this morning one local TV news broadcast reported that the Chicago Teachers Union is demanding Mayor Emanuel raise taxes even more for school funding.

I think it’s pretty safe to say that more financial pain is heading Chicagoans’ way.

As for the rest of Cook County, the Tribune piece noted:

By comparison, homeowners in suburban Cook County typically can expect more modest increases, averaging 2 percent, although they already are paying substantially more than their city counterparts, according to Orr’s data…

Last I checked County finances weren’t too pretty either, so these suburban homeowners may very well be in the same boat as their city counterparts down the road.

For more information, check out Dardick’s entire article here on the Tribune website.

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

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Size Of Cook County Sales Tax Hike Necessary?

No surprise here. Hal Dardick reported on the Chicago Tribune website yesterday:

Cook County Board President Toni Preckwinkle persuaded just enough commissioners to approve a 1-percentage-point sales tax increase Wednesday — the culmination of a major political about-face, but a move she said was needed to bail out the county worker pension system.

Following weeks of one-on-one lobbying sessions by Preckwinkle, nine of the 17 commissioners voted to raise the county share of the sales tax to 1.75 percent. Add up the state, city and public transit portions, and the total sales tax rate in Chicago once again will hit 10.25 percent — one of the highest rates in the nation

Preckwinkle first rose to power in 2010 on a campaign pledge of repealing what remained of an identical sales tax increase under predecessor Todd Stroger…

(Editor’s note: Bold added for emphasis)

Opponents of the sales tax hike claim the County didn’t perform enough belt-tightening before approving the measure. County Commissioner Bridget Gainer (10th District) penned on the Tribune website on July 1:

Don’t get me wrong, the county has a serious budget and pension cost gap, predicted to be $479 million. The proposed 1 percentage point increase in the sales tax would raise some $474 million annually.

But $130 million of the deficit goes away with pension reform. An additional $50 million in savings has already been identified by the budget staff. Yet another $50 million is in reach if we are finally willing to consolidate our redundant taxing bodies and duplicative services…

(Editor’s note: Bold added for emphasis)

Back on December 5, 2013, I pointed out Illinois has the most units of local government of any state in the country at 6,963 local governments (U.S. Census Bureau).

It’s been reported Cook County is home to 1,300 of these taxing agencies alone.

The sales tax hike goes into effect starting January 1, 2016.

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

Sources:

Dardick, Hal. “Cook County Board votes to raise sales tax.” Chicago Tribune. 15 July 2015. (http://www.chicagotribune.com/news/local/politics/ct-cook-county-sales-tax-increase-met-0716-20150715-story.html#page=1). 16 July 2015.

Gainer, Bridget. “Commentary: Cook County Commissioner Bridget Gainer: I won’t vote for a sales tax hike.” Chicago Tribune. 1 July 2015. (http://www.chicagotribune.com/news/opinion/commentary/ct-cook-county-tax-preckwinkle-gainer-perspec-0702-jm-20150701-story.html). 16 July 2015.

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Cook County Sales Tax Hike Coming?

Cook County, Illinois, could soon have one of the highest sales tax rates in the country (again). The Chicago Tribune Editorial Board wrote on the paper’s website this evening:

Cook County Board President Toni Preckwinkle is weighing the idea of imposing a penny-on-the-dollar increase in the local sales tax to balance the county’s books…

Preckwinkle is lobbying Cook County Board members to raise the county’s portion of the sales tax by 1 percentage point, which would push Chicago’s tax rate to 10.25 percent, among the highest in the nation

(Editor’s note: Bold added for emphasis)

This should come as no surprise to regular readers of Survival And Prosperity. I blogged back on April 10 of last year:

For a while now (last time being earlier this week), I told my girlfriend we were lucky to have escaped the fiscal debacle and revenue grab going on in the city of Chicago.At the same time, I pointed out that as Cook County residents we’re still on the hook for the same type of nonsense.

Brian Slodysko reported on the Chicago Sun-Times website yesterday afternoon:

Hoping to ward off another credit rating downgrade, Cook County Board President Toni Preckwinkle said Wednesday that she will soon present a plan to reform the county’s underfunded pension system.

And she’s leaving the door open to hiking property, sales and other taxes.

When asked repeatedly about the possibility of tax increases, Preckwinkle responded: “We’re looking at all the options. Everything is on the table.”

(Editor’s note: Bold added for emphasis)

According to the local press, it’s the sales tax hike Preckwinkle’s now pushing.

And considering Cook County’s fiscal challenges, it shouldn’t surprise blog readers to hear of hikes on “property… and other taxes” down the road.

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

Source:

Editorial Board. “Editorial: Watch out for the Toni Tax.” Chicago Tribune. 23 June 2015. (http://www.chicagotribune.com/news/opinion/editorials/ct-edit-tonitax-0624-20150623-story.html). 23 June 2015.

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Moody’s Downgrades Cook County’s Credit Rating, Issues Negative Outlook

The following is kind of stale, but the local press didn’t really publicize it and Cook County residents are entitled to know the financial health of the local government unit in these uncertain times. The Global Credit Research division of Moody’s announced on their website back on June 5:

Rating Action: Moody’s downgrades Cook County, IL’s GO to A2 from A1; outlook negative

A2 rating applies to $3.6B of GO debt

New York, June 05, 2015 — Moody’s Investors Service has downgraded to A2 from A1 the rating on Cook County, IL’s general obligation (GO) debt. The county has $3.6 billion in GO debt outstanding. The outlook remains negative…

The Global Credit Research division explained:

The A2 rating incorporates credit pressures associated with Cook County’s unfunded pension liabilities. Based on the Illinois Supreme Court’s May 8 overruling of the State of Illinois’ (A3 negative) pension reforms, we perceive increased risk that the county’s options for reducing unfunded pension liabilities have narrowed considerably. As it currently stands, Cook County-despite its home rule status-has little direct control over its single largest liability. Whether or not the statute that governs Cook County’s pension plan stands, we expect pension-related costs will place increasing strain on the county’s financial operations. Furthermore, approximately half of Cook County’s tax base is highly leveraged by the debt and unfunded pension liabilities of the City of Chicago (Ba1 negative) and the Chicago Public Schools (CPS) (Ba3 negative). We believe that the revenue demands of these entities could place practical limitations on the county’s ability and willingness to increase revenue to fund its pension costs. Other credit challenges for the county include enterprise risks inherent in operating the Cook County Health and Hospitals System (CCHHS)…

As for that negative outlook:

The negative outlook reflects our view that Cook County’s credit quality could weaken given continued uncertainty in the county’s future pension funding framework. Our outlook on the county’s credit is also informed by our expectation of growth in the pension costs of the local governments that share half of the county’s tax base. Finally, the negative outlook incorporates continued pressures in the health care sector, improved financial results for CCHHS notwithstanding…

On June 8, the major U.S. credit rating agency also announced a downgrade of the Cook County Forest Preserve District’s general obligation debt to A2 from A1, with a negative outlook as well.

You can read that entire June 5 Moody’s rating action on their website here.

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

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Wednesday, June 17th, 2015 Credit, Debt Crisis, Entitlements, Government No Comments
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