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Chicago’s Fiscal Storm: With bonds already rated junk, the city considers borrowing billions
City Journal ^ | 08/13/2018 | Steve Malanga

Posted on 08/13/2018 7:38:43 AM PDT by SeekAndFind

When Chicago issued half a billion dollars in new bonds late last year, some investors balked, though the offering was designed to protect them by guaranteeing that they would be paid with tax revenues that Illinois sends to its biggest city. “It’s an untested model,” the research head at Gurtin, a municipal bond firm, said of the offering—Chicago’s first under a new state law. Ominously, he worried that if Chicago defaults, it was unclear how much protection holders of the new debt would really get.

Even as Chicago grapples with nightmarish violent crime, the city faces imposing fiscal challenges. The city, which says that it will collect about $8.5 billion in local revenues this year, is burdened by an astounding $28 billion in unfunded pension liabilities and another $9 billion or so in money that it owes to general-obligation bondholders, as well as billions more in other debts.

Chicago’s bonds, graded as “junk” by analysts, are among the lowest-rated of any major municipality. That forces the city to stretch the limits of municipal finance, seeking innovative techniques that might get new borrowers on board, but at the potential expense of taxpayers and holders of Chicago’s other debts. It’s becoming increasingly difficult to see how this ends well in the Windy City.

Chicago’s latest fiscal scheme is already making headlines at home and in municipal-finance circles. Late last week, Chicago’s chief financial officer and a financier close to Mayor Rahm Emanuel proposed the idea that the city would borrow $10 billion through a bond offering to shore up its pension system, using a dedicated revenue stream in order to persuade investors to come on board.

(Excerpt) Read more at city-journal.org ...


TOPICS: Business/Economy; Culture/Society; News/Current Events; US: Illinois
KEYWORDS: chicago; debt; pensioncrisis
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1 posted on 08/13/2018 7:38:43 AM PDT by SeekAndFind
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To: SeekAndFind

Maybe they should try socialism. Oh, wait - never mind.


2 posted on 08/13/2018 7:44:00 AM PDT by P.O.E. (Pray for America)
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To: SeekAndFind

“Comrades, this is Civic Cloward-Piven in action. Once our useful idiots in all the Democrat led municipalities follow suit, our goal of the universal Soviet will be close!!!” - Some anonymous Socialist


3 posted on 08/13/2018 7:45:01 AM PDT by Jan_Sobieski (Sanctification)
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To: SeekAndFind

One “innovative” and “untested” “fiscal scheme” for Chicago is to begin cutting spending and eliminate the rampant fraud, waste, and abuse.


4 posted on 08/13/2018 7:45:11 AM PDT by FoxInSocks ("Hope is not a course of action." -- M. O'Neal, USMC)
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To: SeekAndFind

Sounds like a fantastic idea! Yes, let’s put more taxes on the backs of suburbanites and farmers to subsidize gang bangers. /s

I weep for my hometown.


5 posted on 08/13/2018 7:47:14 AM PDT by proud American in Canada
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To: SeekAndFind

Who in their right mind would buy these bonds?


6 posted on 08/13/2018 7:48:02 AM PDT by Huskrrrr
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To: SeekAndFind

This absurdity would not (could not) exist, and we wouldn’t be subject to long-term leftist statism, if we had a gold-backed currency.


7 posted on 08/13/2018 7:48:45 AM PDT by PGR88
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To: SeekAndFind

Chicago has done some crazy things. Such as, they borrowed against anticipated parking meter revenues for the next 75 years. They got about $1 billion, as I recall, from that deal.

But that money was all gone within a year.

Chicago cannot blame their problems on Republicans. Democrats have run Chicago for generations, so if Rahm Emmanuel tries to make some political statement, he can’t realistically do so.

I think they have considered some things, such as professional services tax, which would be a tax on your CPA or law firms business. But that probably can’t raise enough revenue to balance their budget.


8 posted on 08/13/2018 7:50:54 AM PDT by Dilbert San Diego
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To: P.O.E.

Yes, to paraphrase Margaret Thatcher,they have pretty much run out of other people’s money.


9 posted on 08/13/2018 7:51:36 AM PDT by proud American in Canada
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To: SeekAndFind

Chicago got the government they deserve.


10 posted on 08/13/2018 7:52:41 AM PDT by mindburglar (I like spelling it Lazers. It looks cooler.)
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To: SeekAndFind

Maybe they could tax the youth gangs, who have laid waste to big areas of the city. They have lots of illegal income from God knows what they are doing.

sarcasm


11 posted on 08/13/2018 7:53:11 AM PDT by Dilbert San Diego
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To: SeekAndFind

“Chicago’s bonds, graded as “junk” by analysts,..”

Chicago is junk.

I’d loan them an anchor if they were drowning.


12 posted on 08/13/2018 7:53:35 AM PDT by Bonemaker (invictus maneo)
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To: Jan_Sobieski
Comrades, this is Civic Cloward-Piven in action

Yup. They bailed out the banks in '08, even though all of us were in their faces screaming no. How do you think they'll respond to the next Chicken Little moment?


13 posted on 08/13/2018 7:53:48 AM PDT by Buckeye McFrog
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To: SeekAndFind

The Dems are setting up a sale of Chicago to muslims by mortgaging the city to them. Who else would pay for something at less than junk bond credit rating? Hussein Obama wants his Presidential Palace to include a mosque there. Soros has the $Billions, and Islam has the mayhem Soros want to implement in the U.S.


14 posted on 08/13/2018 7:54:00 AM PDT by RideForever
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To: SeekAndFind

Subtract out the Chicago metro area and the state of Illinois is actually for the most part financially viable.


15 posted on 08/13/2018 7:54:40 AM PDT by RayChuang88 (FairTax: America's Economic Cure)
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To: Dilbert San Diego

Tobacco Settlement Disease. It ain’t just Chicago.


16 posted on 08/13/2018 7:54:53 AM PDT by blackdog
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To: SeekAndFind

So, the pension debt is three times their annual tax revenues from all sources. And their general obligation bonds are about a year’s revenue.

They need a CPA to study their finances. I’m sure someone has done some studies.

Perhaps the solutions, such as trimming expenditures, which could lead to layoffs of teachers and city workers, is politically impossible?

I think I heard the city owns O’Hare? If so, maybe they could sell the airport,and get a one time infusion of cash?

Then again, one time infusions of cash don’t seem to resolve their nightmarish financial issues.


17 posted on 08/13/2018 7:56:38 AM PDT by Dilbert San Diego
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To: SeekAndFind

Anyone who buys any Chicago Debt should have his/her head examined.


18 posted on 08/13/2018 7:56:54 AM PDT by Don Corleone (Nothing makes the delusional more furious than truth.)
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To: SeekAndFind

Cook county is an excellent place to not live.


19 posted on 08/13/2018 7:57:10 AM PDT by cuban leaf (The US will not survive the obama presidency. The world may not either.)
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To: SeekAndFind

They need more tolls on the roads. And double the price of metered parking. Double all taxes on everyone. No, triple them. Put toll booths on sidewalks so pedestrians have to pay $3 per block walked. Tax the buildings, $10 per square foot of space. Put a $15 tax on every Bear, Cub, Bull, Sox and Blackhawk ticket. Tax joggers. Tax bikers. Tax boaters. Tax everything.


20 posted on 08/13/2018 7:58:29 AM PDT by lurk
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