Lois Scott

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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Chicago Pension Funding Gap ‘Could Reach $700 Million In Just A Few Years’

I think most of my neighbors are clueless as to how expensive it’s soon going to get being a Chicago homeowner (like it’s cheap already).

Some really big bills are fast coming due, like state-required payments to fully-fund City of Chicago employee pensions (as if the City shouldn’t have been doing this already).

Hal Dardick wrote on the Chicago Tribune website Wednesday:

One of Mayor Rahm Emanuel’s top aides privately briefed aldermen on the city’s pension woes Wednesday as the mayor’s closest City Council ally prepared for hearings that will put city retirement fund officials in the hot seat.

Chief Financial Officer Lois Scott reminded council members that absent significant changes to pension plans, the city will be forced to drastically cut services, raise taxes or do both to close a funding gap that could reach $700 million in just a few years, aldermen said…

Absent a city pension overhaul, the fund for retired city firefighters would become insolvent in nine years, according to a city report issued two years ago. The police pension would go broke four years later. Funds for city laborers and municipal workers would be broke by 2030.

(Editors’ note: Italics added for emphasis)

A $700 million pension funding gap in “just a few years.” The firefighters’ pension fund broke by 2021. The cops’ pension fund insolvent by 2025. Pension funds for other retired city employees toast by 2030.

Chicago residents shouldn’t kid themselves into thinking cutbacks alone will close the pension funding gap. As things stand, fees, fines, and taxes will be going higher- unless changes are made, or the law is. Dardick added:

A state law approved a couple of years ago requires the city to start making payments by 2015 to fully fund the police and fire funds. The city now uses property taxes to cover pension costs, and without changes, aldermen were told they would have to raise that unpopular tax by up to 80 percent.

(Editor’s note: Italics added for emphasis)

Raise Chicago property taxes by “up to 80 percent?”

Some years ago something called “White Flight” took place in (actually, out of) the city. A similar phenomenon could soon happen again- regardless of skin color- if significant service cutbacks and rising fees, fines, and taxes become the reality for Chicago homeowners.

Source:

Dadrick, Hal. “Aldermen reminded of looming pension crisis.” Chicago Tribune. 26 Sep. 2012. (http://www.chicagotribune.com/news/local/ct-met-chicago-emanuel-pensions-0927-20120927,0,6433883.story). 28 Sep. 2012.

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Survival And Prosperity
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Christopher E. Hill, Editor

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