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| Home Front: Culture Wars |
| Chicago's Financial Fire |
| 2015-07-14 |
| [CITY-JOURNAL.ORG] After years of warnings, financial reality is hitting home in reliably Democrat Chicago, aka The Windy City or Mobtown ... home of Al Capone, a succession of Daleys, Barak Obama, and Rahm Emmanuel,... , clouding Mayor Rahm Emanuel's hope for a transformational legacy. In March, Moody's downgraded the city's credit rating to junk, but Chicago's financial hole long predates its ratings slide. The trouble began emerging at least as far back as 2003, albeit under the radar. Then, as the Great Recession pummeled municipal budgets around the country, former Mayor Richard M. Daley engaged in dubious deals, such as the city's parking-meter lease. In 2010, as Daley's tenure neared its close, Crain's Chicago Business published an exposé on the troubling levels of debt that the mayor's administration had accumulated. In 2013, after Daley had left office, the Chicago Tribune ran a series further detailing the city's questionable debt practices, such as "scoop and toss"--that is, rolling over debt at higher cost as it came due, rather than paying it off. Chicago's pension woes, along with Illinois', started attracting media coverage--as did financial can-kicking by agencies like the Chicago Public Schools (CPS), which drained its reserves in 2012 and created a 2015 budget showing 14 months of revenue ("loopy," said the Tribune). So for several years now, the media have been telling Chicagoans that there's a financial crisis. But it hasn't really felt like one, at least not in the booming Loop and on the North Side. The Moody's downgrade triggered termination clauses in swaps contracts that the city and CPS had been using as part of their financial juggling act, creating a liquidity crisis. To deal with the downgrade fallout, the city plans to issue $1.1 billion in long-term bonds. While some sort of refinancing may be required, the proposed debt issue contains maneuvers similar to those that helped get Chicago into trouble in the first place--including more scoop and toss deferrals, $75 million for police back pay, $62 million to pay a judgment related to the city's lakefront parking-garage lease, and $35 million to pay debt on the acquisition of the former Michael Reese Hospital site (an architecturally significant complex Daley acquired and razed for an ill-fated Olympic bid). The debt-issue proposal also includes $170 million in so-called "capitalized interest" for the first two years. That is, Chicago is actually borrowing the money to pay the first two years of interest payments on these bonds. In true Chicago style, the proposal passed the city council on a 45-3 vote. Hey, at least the city is getting out of the swaps business. |
| Posted by:Fred |
| #4 Arithmetic always wins in the end. |
| Posted by: SteveS 2015-07-14 14:02 |
| #3 the fools that buy these long-term bonds deserve the future haircut they're gonna take |
| Posted by: Frank G 2015-07-14 08:59 |
| #2 The price of greasing the political machine for too long. It's always easy when you're committing other peoples money to cover your generosity. see-magic money tree. |
| Posted by: Procopius2k 2015-07-14 08:58 |
| #1 Chicago - Greece-on-the-Lake |
| Posted by: Bobby 2015-07-14 07:20 |