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  #441  
Old 07-17-2019, 03:11 PM
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https://wirepoints.org/chicagos-ligh...ract-14-raise/

Quote:
Chicago’s Lightfoot demands a state taxpayer bailout, then offers CTU a 5-year contract, 14% raise?
Spoiler:
You have to wonder whether Chicago Mayor Lori Lightfoot really thought she could get away with it.

Just three weeks ago, she was demanding a state taxpayer bailout of her city’s nearly bankrupt pension funds. The problem was so big, she said, she’d risk her “re-election” over it. Eventually, Gov. J.B. Pritzker denied her bailout request for obvious reasons – the state is just one notch from a junk rating.

Now news reports confirm that Lightfoot has offered the Chicago Teachers’ Union a five-year contract that will cost taxpayers another $325 million. That includes guaranteed raises of more than 14 percent over the life of the contract. And that, of course, turns into more pension benefits and an even bigger pension hole for CPS.

That’s an expensive gift for a city that Lightfoot claims is in need of a multi-billion dollar bailout.

That about-face should infuriate every downstate Illinoisan. If the bailout had gone through, here’s what all Illinoisans would have been paying for:

1. Chicago teachers are already highest paid vs. teachers in similar districts.

Chicago teachers are the nation’s highest paid when compared to the largest school districts with traditional salary schedules, according to data from the National Center on Teacher Quality.

For example, a Chicago teacher with a master’s degree receives $80,000 a year after ten years of work. In contrast, an equivalent teacher in New York City makes $70,000 and a Los Angeles teacher makes $60,000.



A big reason for that is due to how fast Chicago teacher salaries grow. The average new teacher with one to four years under her belt starts out with a salary just above $50,000. By the time that teacher reaches 10 to 14 years of service, her salary grows to more than $85,000 annually.



2. The average career Chicago teacher will get $2 million in total pension benefits, far more than ordinary Illinoisans.

High salaries translate into big pension benefits for career teachers. The average CPS teacher who retired in 2018 with 30-34 years of service had a final average salary of nearly $98,000 and a starting pension of over $70,000. Their average retirement age was 61.



That pension will increase automatically by 3 percent each year and by year 25 of retirement, the pension will be double its starting amount. In all, the average retired career Chicago teacher will collect over $2.1 million in benefits over the course of her retirement.

In contrast, an ordinary Illinoisan at retirement would need to have around $1.5 million in his or her account at retirement to collect the same amount of benefits as a career Chicago teacher. Most Illinoisans will never save that amount of money.

3. Taxpayers still “pick up” a majority of Chicago teacher pension contributions.

Not only do Chicago teachers receive millions in pension benefits, they contribute almost nothing towards them over the course of their careers.

Chicago teachers are supposed to contribute 9 percent of their salary every year towards their pensions. But every year since 1981, CPS has paid for, or “picked up” 7 of that 9 percent.

That means Chicago teachers only have to pay 2 percent of their salary towards their own pensions every year. That costs Chicagoans over $100 million a year.

Rahm tried to reform pickups in 2016, but he was rebuffed by the union. Only new workers lost the pickup. And even then, the district gave out extra 3.5 percent raises in exchange.

4. CPS is losing students but spending more on them than ever before.

One of the CTU’s contract demands calls on CPS to spend money to hire more teachers and even more support staff. That might make sense in a dynamic, rapidly growing city with a growing school population.

But CPS is losing students and has been for nearly 20 years. At the same time, the district’s spending per student has jumped.

In all, CPS’ per student spending has doubled since 2000 according to ISBE, even as the district’s enrollment has fallen by nearly 75,000 students, or 17 percent, over the same time period.



5. Near empty, failing schools should be closed and their resources redirected.

Declining enrollment is hitting some Chicago schools particularly hard.

In 2017, the Chicago Tribune examined the demographics of some of the most underpopulated schools in Chicago. It found the enrollment of the 17 worst schools has dropped from nearly 20,000 in 2008 to just over 4,600 today. Their buildings are, on average, filled to just 20 percent capacity.



And the few students that do attend aren’t getting a good education. In those schools, no more than 8 percent of students are ready for college. Despite that, the CPS hasn’t closed the nearly-empty, failing schools.

**********

Lightfoot has landed some great punches when taking on corruption in City Hall, but when it comes to finances, she’s acting just like any other Chicago politician.

She said she’d “risk her political career” to tackle pensions. Making downstate taxpayers foot the city’s pension bills is hardly a “risk.”


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  #442  
Old 07-17-2019, 03:12 PM
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https://fixedincome.fidelity.com/ftg..._110.1#new_tab

Quote:
Chicago inviting buy side to town in September

Spoiler:
Chicago Mayor Lori Lightfoot and her finance team will make their case for the buy side to stick with the city at an annual investors conference set for Friday, September 20.

Lightfoot’s chief financial officer, Jennie Huang Bennett, announced the date Monday and a “save the date” notice was being distributed to the buy side and other municipal market participants.

The annual gathering, launched by former Mayor Rahm Emanuel’s finance team after he took office in 2011, is typically well attended by bankers and advisors as well as investors.


Additional details on the schedule and location are still in the works, but Bennett said the city’s sister agencies, which include the Chicago Transit Authority, Chicago Public Schools, and Chicago Park District, would participate. Lightfoot will also address investors.

The city will have plenty to present. The 2018 comprehensive annual financial report was recently published and the city will release its annual financial analysis laying out the scope of 2020 budgetary strains and a three-year forecast this summer.

"While Chicago's financial challenges loom large for next year and beyond, Mayor Lightfoot's administration is working to address them head-on by developing a sustainable road map to address our liabilities and put our government on track for building stronger, safer communities and economic growth for our city's future," Bennett said.

Lightfoot, a first-time officeholder who took the city's reins May 20, is also expected to have released her plans to address the city’s budget and pensions woes ahead of the conference based on her recent comments. The next year’s budget is typically introduced in October.

Bennett had no update on budget solutions or timing Monday. “It’s a very large gap and so we are still working through the options to address it,” Bennett said, who also said it's too early to rule out or in any options.

The city is eyeing various management efficiencies in an effort to rein in spending before turning to new or higher taxes and fees, but Lightfoot has warned that new revenue will clearly be needed.

The city also likely will conduct tours at the conference. Past tours have included the Chicago Riverwalk, the Jardine water plant on Lake Michigan, and O’Hare International Airport.

Investors have been clamoring for fiscal updates.

“Mayor Lightfoot’s career has centered on the justice system, and while various criminal and enforcement matters are very important to quality of life issues, she does not have a background in the finance and budgets that most concern investors,” said Howard Cure, director of municipal bond research at Evercore Wealth Management. “Therefore, it is important to understand her philosophy toward tackling these concerns and meeting with her various cabinet appointments that will be in charge of implementing her vision as she strives for budgetary stability.

“I think the investment community gained a certain level of confidence in the fiscal management of Mayor Emanuel as he tried to address the city’s operating deficits and long term liabilities, especially pension issues, while successfully attracting businesses to Chicago and expanding the tax base,” said Cure, who has made the annual trek.

The administration used last year’s early August conference to unveil a $10 billion pension obligation bond proposal. It appeared on the fast track before stalling and Lightfoot views the proposal negatively.

The prior administration put the 2020 operating gap at $600 million to $700 million to cover rising debt, pension, and personnel expenses. The structural deficit last year was projected at $250 million.

The city’s CAFR published earlier this month disclosed the net pension liability tab had risen by $2 billion in 2018 to $30 billion but on the positive side the city’s ending balance had risen to $332 million from $288 million.

The city’s GO bonds are rated at BBB-minus by Fitch Ratings, A by Kroll Bond Rating Agency, junk-level Ba1 by Moody’s Investors Service, and BBB-plus by S&P Global Ratings. All assign a stable outlook.


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  #443  
Old 07-23-2019, 11:18 AM
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TEACHERS

https://chicagocitywire.com/stories/...-union#new_tab

Quote:
Wirepoints: Denied pension bailout, Lightfoot makes generous offer to Chicago Teachers Union

Spoiler:
On the heels of asking the state for a taxpayer-funded bailout, Chicago Mayor Lori Lightfoot is offering the Chicago Teachers Union (CTU) a five-year contract and a 14-percent pay raise, according to a Wirepoints report.

"You have to wonder whether Chicago Mayor Lori Lightfoot really thought she could get away with it," Wirepoints said in an online article posted Wednesday. "Just three weeks ago, she was demanding a state taxpayer bailout of her city’s nearly bankrupt pension funds. The problem was so big, she said, she’d risk her 're-election' over it. Eventually, Gov. J.B. Pritzker denied her bailout request for obvious reasons – the state is just one notch from a junk rating."

Illinois Gov. J.B. Pritzker
Illinois Gov. J.B. Pritzker | twitter.com/jbpritzker
Denied the bailout, now Lightfoot is offering CTU a contract that will cost taxpayers an additional $325 million and includes guaranteed raises of more than 14 percent, Wirepoints reported.

"And that, of course, turns into more pension benefits and an even bigger pension hole for CPS," the article said. "That’s an expensive gift for a city that Lightfoot claims is in need of a multi-billion dollar bailout."

Lightfoot defeated Cook County Board President Toni Preckwinkle in April's runoff election for the seat of now former Chicago Mayor Rahm Emanuel. Lightfoot is the first black woman and first openly gay mayor of Chicago and the second woman to be elected to the job. Prior to becoming mayor, Lightfoot was a partner with the law firm Mayer Brown Chicago and held a number of city government positions, including serving as president of the Chicago Police Board and as chair of the Chicago Police Accountability Task Force.

Lightfoot's offer to CTU so soon after asking for a bailout "should infuriate every downstate Illinoisan," the Wirepoints report said.

"Lightfoot has landed some great punches when taking on corruption in City Hall, but when it comes to finances, she’s acting just like any other Chicago politician," the article said. "She said she’d 'risk her political career' to tackle pensions. Making downstate taxpayers foot the city’s pension bills is hardly a 'risk.'"


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  #444  
Old 07-29-2019, 03:07 PM
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https://fixedincome.fidelity.com/ftg..._110.1#new_tab

Quote:
Chicago Public Schools plans up to $432 million of refunding bonds

Spoiler:
The Chicago Board of Education signed off on up to $432 million of general obligation refunding bonds as work continues on a fiscal 2020 budget and negotiations on a new teachers’ contract heat up.

The refunding would be completed “for traditional savings” and not for restructuring purposes, said board spokeswoman Emily Bolton. “While savings are contingent upon market conditions, the district hopes to see $10 million to $15 million in cost savings in fiscal 2020.”


It’s not clear whether all the savings are being taken up front or there’s a net present value savings over the life of the bonds.

Interest rates remain steep for junk-rated Chicago Public Schools but it’s been chipping away at those penalties on both short and long-term borrowings.

The district’s last competitive cash flow note sale drew widespread interest. Yields landed at 1.95% and 2% on two tranches of an unrated $250 million sale of tax anticipation notes that come due in October. Those rates are down from 2.45% and 2.65% in TAN sales late last year. The district paid punishing rates of 4.8% in prior fiscal years.

The long 28-year bonds in the district’s last GO sale in December landed at a spread of just over 200 basis points to the Municipal Market Data top-rated benchmark. The district saw a punishing 480 bp spread on its long 29-year bond in a GO sale just ahead of mid 2017 passage of new state aid.

An infusion of new state operating and pension funding help in 2017 along with several local tax levy hikes helped trim a $1 billion deficit, easing a budget and liquidity crisis that has kept three of the district’s four bond ratings deep in junk territory.

Fiscal pressures still hold a grip on the district heading into the next fiscal year. The budget for the fiscal year that began July 1 is expected to be unveiled and approved later in the summer.

The board last year approved a $6 billion fiscal 2019 operating budget, $1 billion capital program, and more than $2 billion of new money, refunding, and short-term borrowing at its July meeting, but there have been past years where the spending plan was not unveiled until later in the summer.

The recent TAN offering statement warned “the board’s ongoing financial outlook will continue to be determined by factors such as labor, pension, and debt service costs as well as the ability of the board to raise revenues and reduce certain expenditures.”

The district’s 2019 pension contribution totaled $809 million, of which $239 million is coming from the state and $430 million from a special pension levy. The teachers’ fund is at a 50.1% funded ratio.

The district has enjoyed positive rating actions since the state approved new funding. In July 2018, S&P Global Ratings upgraded it to B-plus from B and Moody's Investors Service (MCO) boosted the district to B2 from B3.

Teacher contract negotiations resumed Thursday between the Chicago Teachers’ Union and officials from the district and new Mayor Lori Lightfoot’s administration.

The two sides have butted heads and the union has warned a strike is a possibility. That would put a black mark on Lightfoot’s early tenure. The school year begins the day after Labor Day but the earliest teachers could strike is Sept. 26 based on required legal procedures.

The CTU has slammed a city/district $300 million contract offer that provides a 14% raise implemented over five years and it wants a commitment on additional school nurses and social workers and smaller class sizes.
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  #445  
Old 08-28-2019, 07:47 PM
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https://twitter.com/Caitlindevitt/st...65926412365825

Quote:

Caitlin Devitt
@Caitlindevitt
Chicago Public Schools wins upgrade from S&P to BB- from B+ w/ positive outlook. Upgrade reflects healthier fiscal position in part due to more state aid. S&P says it's waiting for outcome negotiations with teachers' union -- "successful" settlement could spark another upgrade.
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Old 09-03-2019, 07:00 AM
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BUDGET

https://fixedincome.fidelity.com/ftg...d6b60000_110.1
Quote:
Chicago mayor lays out grim budget picture

Spoiler:
CHICAGO — Chicago Mayor Lori Lightfoot is eyeing new taxes, debt refinancing and state action to help close an $838 million deficit that threatens the city’s progress toward a sounder fiscal footing.

“We have some hard choices to make,” Lightfoot said in long-anticipated speech Thursday afternoon that accompanied the release of the 2020 budget forecast. “There is no doubt about that and I will not sugarcoat that reality.”


Lightfoot learned after taking the city’s reins in May that the city faced a “staggering” deficit and “what was worse, we were not left with any credible plan on how to fix this massive problem.” She put the initial number at $1 billion but said her administration has chipped away at it through various belt-tightening measures.

The well-known numbers before this year's election centered on a $280 million increase in pension funding costs and a structural deficit projected last year at $250 million. Former chief financial officer Carole Brown then put the operating deficit at about $700 million.

“The key problem is the decades-long failure to meet our pension obligations and fix the structural problems that have led to this crisis,” Lightfoot said.

The mayor and her chief financial officer, Jennie Huang Bennett, said the city would continue to rein in spending and implementing reforms to chip away at the gap, but they left all options to close the hole on the table.

The gap doesn’t account for any revenue growth, with a slight decline actually projected in the corporate fund to $3.83 billion from $3.84 billion, and it counts as part of a structural deficit some costs not included by the prior Rahm Emanuel administration, which would have driven previous projections up.

Lightfoot said among the ideas she rejected was pushing through another historic property tax or a “massive borrowing scheme,” both hallmarks of Emanuel, who raised property taxes by nearly $550 million to cover rising public safety pension costs. Emanuel last year proposed issuing up to $10 billion of pension bonds to cut the city’s now $30 billion net pension burden.

Despite that comment, Bennett declined to rule out some form of POBs as part of a fix or borrowing to cover operating costs like settlements and judgments which her predecessor eventually phased out along with the city’s longtime practice of scoop-and-toss debt restructuring.

“We are still taking a look at all of our options,” Bennett said after the speech.

“I cannot in good faith promise you that I will take any option off the table to tackle this crisis, whether it's through budget reductions or by raising revenue,” Lightfoot said.

Light on detail
Lightfoot offered a few more details on revenue proposals under consideration but the speech lacked the road map market participants had been hoping to hear.

Lightfoot attempted in recent days to lower expectations that she would offer a detailed financial plan, portraying the speech as laying out the depth of the city’s fiscal woes and the need for state help in raising new revenue and addressing pensions and fixing a flawed casino license tax structure.

Lightfoot spoke of the statewide pension struggles of local governments and the need to be part of a broad solution. A state task force is exploring local government pension consolidation but the administration did not provide details on exactly what the city is seeking. The governor recently rejected the idea of the state taking over local pensions. The administration also did not say whether a reamortization of the current pension funding structure is under consideration.

“This is the beginning of a process” on a dialogue on “the different ways we can be a part of a broader solution,” Bennett said.

Pension funding changes would require state action. Lightfoot said in her speech she would seek “structural” changes while also honoring the city’s pension obligations. Benefit cuts are prohibited under the state constitution.

The city is exploring some form of debt refinancing to save $100 million, Lightfoot said.


Bennett did not offer specifics on what’s being considered, saying only that the finance team was “looking at the different types of structures but it will be some sort of refinancing of higher costing debt for lower costing debt …w e are looking at different structures.”

Lightfoot said she is “committed” to seeking state approval for a graduated real estate transfer tax that would lower the fee on homeowners whose houses sell for under $500,000, while raising the tax on owners with higher-valued homes.

The city is also exploring traffic congestion in a way that would both raise revenue and ease traffic and pollution. Bennett refused to call it congestion pricing or a congestion tax. No state approval is needed.

The city will also push during the state legislature’s veto session in October for changes to the tax structure for a Chicago-based casino approved in a statewide gambling expansion bill last spring. An independent study recently concluded the tax structure is too onerous to attract a private operator to finance and operate the casino.

“If we get the tax structure right, this will represent a structural solution to address long-term problems, not a one-time fix,” Lightfoot said. Profits would go to pay down the public safety pension liabilities.

Even if the tax issues are resolved, casino license fees and other revenue can’t be counted on for 2020. “By way of the financials of the city, it isn’t just about 2020, but what’s the long-term structural balance and what’s the plan for us to get there?” Bennett said.

The need for state cooperation set the stage for Lightfoot’s warning that without it she will be “forced to make painful choices on finding other revenue sources — and we all know what those are, the sources we wish to desperately avoid,” Lightfoot said. Property taxes are at the top of that list.

Lightfoot did not reference a tax on high end accounting and legal transactions that she’s named as a potential revenue source in recent months. State approval would be needed on that one.

Some state lawmakers in recent days have warned that state approval for casino tax changes or any taxes is a heavy lift given since the gambling expansion is a done deal. State Democrats are also worried about tax fatigue ahead of a November 2020 vote on a Democratic-backed constitutional amendment to shift to a progressive income tax from the current flat one.

Gov. J.B. Pritzker’s administration released a statement saying: “In the weeks ahead, as Chicago pursues assistance from the legislature, it will be important for the mayor to reach out to leaders and lawmakers across the state and across the aisle to build a coalition for her ideas. The governor looks forward to working with these stakeholders as the General Assembly weighs all these ideas carefully.”

Deficit
The mismatch in 2020 revenues and expenses is primarily due to personnel, pension and debt obligations, the administration says. The 2020 projection anticipates a $300 million increase for total spending of $2.8 billion of personnel costs for wage increases in place and under negotiation.

The city anticipates a $90 million increase in budgeted settlements, claims and judgments that for years was piled on to the city’s debt load until being phased out several years ago.

The city will owe $277 million more in police and firefighter pension contributions as part of a multi-year schedule to ramp those payments to an actuarial level. The total 2020 contribution for all four funds is projected to be $1.68 billion compared to $1.3 billion this year and will rise to $2.25 billion in 2022 when the muni/laborers actuarial contribution hits.

Reimbursements and financial expenses are also expected to increase by $98 million to $153 million in 2020. That figure accounts for a $114 million increase in debt service, offset by short-term borrowing savings. “The increase in debt service is primarily due to lower savings realized from the Sales Tax Securitization Corporation in 2020 when compared to 2019,” the forecast says. Other expenses on the rise account for the remainder.

“If $838 million sounds big, it’s because it is. It’s the largest in our recent history,” Lightfoot said.

Comparisons to past deficit projections may be hard, however, because the new administration is shifting what costs are counted in the structural figure. Going forward, the city will include long-term liabilities due in future years as part of the structural imbalance.

Future pension contribution hikes and rising debt service were not previously included in the structural deficit figure by Emanuel, who inherited a more than $600 million gap in 2011 that was narrowed to under $100 million heading into 2019.

“Beginning with the 2020 structural budget deficit presented here, the methodology for projecting the structural budget deficit includes known long-term liabilities such as pensions and debt service. This projection does not reflect new revenue sources, new investments to be added in the upcoming budget, or unanticipated long-term liabilities for future years as these are not current structural budget imbalances,” the budget forecast says.

The administration will host investors at an annual investors’ conference Sept. 20 and Lightfoot will unveil her 2020 budget in October. The 2019 budget totaled $10.67 billion.

Lightfoot inherited one junk-bond rating, from Moody’s Investors Service, which rates the city Ba1 with a stable outlook. Kroll Bond Rating Agency last year raised the city’s rating two notches to A. S&P Global Ratings rates the city BBB-plus and stable and Fitch Ratings rates it BBB-minus and stable.


https://federalnewsnetwork.com/gover...udget-deficit/
Quote:
Chicago’s mayor faces sobering reality _ huge budget deficit

Spoiler:
CHICAGO (AP) — Chicago Mayor Lori Lightfoot, who swept into office five months ago on a promise of wholesale reform, presented a sobering reality Thursday — the city faces a massive budget shortfall and major tax increases may be necessary.

Lightfoot said the nation’s third largest city will have an $838 million budget deficit for the fiscal year that begins Jan. 1, adding that her predecessor, Rahm Emanuel, did not leave a credible plan to deal with the mess.

“And if it means that I sacrifice myself politically, so be it in pursuit of the right thing,” she said in her first State of the City address.

Lightfoot, the city’s first black female and lesbian mayor, didn’t say exactly how the deficit will be filled and said she wants to avoid property tax increases in a budget plan she’ll unveil in October. The deficit has ballooned in part because of rising pension costs for city workers and interest on debt.

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A former head of the board that oversees Chicago police, Lightfoot came to prominence as tension between police and residents exploded in protests following the 2014 fatal shooting of 17-year-old Laquan McDonald by a white police officer. The officer was sentenced earlier this year to fewer than seven years in prison for second-degree murder.

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Never before elected to public office, Lightfoot defeated the leader of the Democratic Party in Cook County in April with a promise to end political corruption and be a voice for low-income and people of color.

But the city’s dire financial state could endanger her efforts to revitalize underprivileged neighborhoods where jobs are scarce and violence is persistent.

Lightfoot said she has begun efforts to deal with the deficit by changing the way the city conducts its business. She said she has identified savings and efficiencies including the elimination of $1.4 billion in short term borrowing and unauthorized overtime and absenteeism by city employees. She also noted the city’s workers compensation program has been taken out of the hands of an alderman facing federal corruption charges and is now under professional management.

She also imposed a city hiring freeze last week across all departments, including police.

Lightfoot said that her two guiding principles in trying to resolve the financial mess would be to avoid raising revenue on the backs of those least able to pay and to do nothing that would drive businesses out of Chicago.

Instead, she said the city should get increased revenue when Illinois legalizes recreational marijuana next year and from a Chicago gambling casino approved by the Illinois Legislature. But she noted a study has shown a casino wouldn’t be viable in the city because of high taxes imposed by the state, adding if the problem isn’t solved “we will be forced to make painful choices on finding other revenue sources.”

Subscribe to Federal News Network's In Case You Missed It newsletter for updates on the most important stories of the day.

“As your mayor, I cannot in good faith promise you that I will take any option off the table to tackle this crisis, whether it’s through budget reductions or by raising revenue,” she said.

Lightfoot also faces major problems with persistent street violence and the possibility of a strike by the powerful teacher’s union.

While the number of homicides has fallen 21 percent in the first six months of the year and shooting incidents fell below 1,000 for the first time in four years during the period, violence remains a major problem in some of the poorest neighborhoods.

School is about to start next week and teachers are without a contract. The Chicago Teachers Union has rejected a 16 percent raise over five years offered by the city and recommended by an independent fact finder and the union has laid the groundwork for a strike.

Since taking office, the former federal prosecutor has concentrated on cleaning up corruption at City Hall. She has signed an executive order aimed at limiting aldermen’s power and passed an ethics reform package that includes expanded oversight powers, stricter rules on lobbying and heftier fines for ethics violations.

She has also started overhauling the city’s fees and fines system that she says hurt many Chicagoans and has created the Office of Racial Justice and Equity.

A solution to the city’s financial problems will require sacrifices from everyone, said Laurence Msall, president of the Civic Federation.

“Organized labor is going to have to contribute, city taxpayers are going to have to contribute, businesses are contributing and will need to continue to contribute.”


https://abc7chicago.com/politics/not...03126/#new_tab
Quote:
Lori Lightfoot's team says 'nothing off the table' in addressing $838M budget deficit

Spoiler:
CHICAGO (WLS) -- Politicians including some of Mayor Lori Lightfoot's former opponents are reacting to her first State of the City address, in which she said the city is facing a deficit of $838 million.

WATCH: Full State of the City address


Mayor Lori Lightfoot spoke about ways to address Chicago's budget deficit in her first State of the City speech Thursday.



The mayor made it clear Friday that she is not looking at a commuter tax on those coming into the city, but different ways to address congestion. She also pushed back at progressive council members asking for a corporate head tax.

A primary concern is that Lightfoot will have to raise property taxes. She suggested in her speech Thursday night that there will be hard choices that have to be made in order to fill that $838 million hole.

"If we don't secure this casino and the revenue it creates, we will be forced to make painful choices on finding other revenue sources and we all know what those are -- the sources we wish to desperately avoid," she said.

CLICK HERE to read Mayor Lightfoot's full State of the City address

"To raise property taxes to the level that we would need to address our budget deficit for the next year would be devastating to the city," Lightfoot explained Friday. "I can't take that off the table, but boy oh boy would want to avoid that."

ABC7 political analyst Laura Washington noted that Lightfoot didn't explicitly say she'll raise property taxes, but the mayor likely won't rule anything out.

"She kind of issued a veiled threat to Springfield by saying, you know, 'I don't want to have to do this, I don't want to have to make this tough choice, but if I don't get help from you I'm going to have to go back to that,'" Washington said.

Dr. Willie Wilson, who ran against Lightfoot and threw his support behind her after the primary, urged the mayor to avoid raising taxes.

"People didn't vote for her to come into office to raise taxes on them and make them leave the city of Chicago," Wilson said.

Lightfoot said the $838 million deficit was trimmed down from a $1 billion deficit she inherited. She's looking at a graduated real estate transfer fee and some form of congestion tax to help address it, but made no mention of TIF reform, which some progressives are pushing for.

"We need to ask the big powerful corporations to pay their fair share. We can do that as a city by reinstating the corporate head tax that Mayor Rahm Emanuel did away with by going after the TIF funds, clearing those out and making sure that money goes toward public need," said 35th Ward Alderman Carlos Ramirez-Rosa.

Friday she pushed back on those demanding TIF reforms and certain other corporate taxes.

"We're in the process of doing TIF reform, from top to bottom, and we'll be rolling out a package of reforms later this fall," she said. "I don't favor a head tax, I don't favor a LaSalle Street tax."

She also said her congestion plan does not involve a commuter tax.

"Obviously rideshare's got to be part of the conversation, but we're going to be putting forward a package of ideas that are going to be designed to deal with congestion, traffic pollution, the wear and tear on our infrastructure, and provide a revenue stream for us," she said.

Lightfoot had been meeting with editorial boards Friday morning. She told the Crain's Chicago Business editorial board that she'll be making a big push for statewide pension consolidation and that any talk of downstate consolidations must have Chicago in the mix.


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https://fixedincome.fidelity.com/ftg..._110.1#new_tab

Quote:
Chicago mayor sends signals to the muni market, without details

Spoiler:
The municipal bond market has a message for first-year Chicago Mayor Lori Lightfoot: go light on one-time maneuvers, avoid fiscal gimmicks, and move the city toward structural balance.

Lightfoot must solve an $838 million budget gap next year and potential billion-dollar deficits in the following two years.

“We are looking for a reliance on structurally balanced measures to close the gap," said Carol Spain, lead analyst for Chicago at S&P Global Ratings, which rates the city's general obligation debt BBB-plus.

If the city is using one time sources, S&P would look for “the structural gap to be closed within the near term in the next couple years,” she said. “What we are looking for is a credible plan” that doesn’t solely rely on measures requiring state approval that might not come to pass or that are cyclical or volatile in nature.

Lightfoot laid out the numbers in a state of the city address last Thursday and in a budget forecast. She also offered some ideas that will likely wind up part of a plan when her 2020 budget is unveiled in mid-October. The city is currently operating on a $10.67 billion budget.

Corporate fund revenues of $3.83 billion will fall about $838 million short of $4.67 billion in expected expenses primarily due to rising personnel, debt, and pension costs. The number doesn’t anticipate any natural revenue growth and the overall numbers count both annually recurring costs and one-time expenses like retroactive pay raises.

Lightfoot won praise for laying out the city’s strains and some potential options in a speech broadcast on local television stations Thursday.


But many market participants had anticipated a more detailed road map, earlier in the summer, to stabilize the city’s fiscal health. In the week before the speech, Lightfoot portrayed it as laying the foundation for a budget plan and longer-term solutions.

“I was impressed with her goal of transparency and her statement about being willing to do the right things” at the risk of her political career, Spain said. “But I also think what we were looking for … was to get more transparency as to what her plan really is … the market is looking for more certainty.”

Focusing on just the numbers for now, however, may lay the groundwork for building not just state but also city council support.

Deficits of $1.19 billion and $1.16 billion are projected in 2021 and 2022, respectively, on a baseline forecast that doesn’t account for revenue or expense changes in 2020.

Chicago has a $30 billion net pension liability, and pension contributions rise to $1.68 billion next year, when an actuarial contribution requirement hits for the police and fire funds, from $1.3 billion this year, rising to $1.8 billion in 2021 and $2.25 billion in 2022 when the municipal and laborers’ contribution is required to hit actuarial requirements.

“If $838 million sounds big, it’s because it is. It’s the largest in our recent history,” Lightfoot said.

Early indications in her speech and subsequent interviews suggest Lightfoot is well aware of what the municipal market is watching for.

Sticking with the pension funding ramp is a priority because the plans put in place by predecessor Rahm Emanuel with legislative approval saved two of the four funds from insolvency, but they will remain in negative cash flow for years with improvements in funded ratios below 30% taking years to achieve.

“The budget gap is a really big number considering we have a $10 billion all funds budget,” but when you are coming into office it’s expected that “you kitchen sink it so you can blame the last person,” said Brian Battle, director of trading at Chicago-based Performance Trust Capital Partners.

The number will require “new revenue and there’s only a couple places” you can go, Battle said. He expects that a property tax hike is on the horizon. Lightfoot repeatedly puts one down as a last resort.

Battle said the market would frown on any backpedaling toward the gimmicks Emanuel eventually wound down, such as borrowing for settlements and scoop-and-toss debt restructuring, but Lightfoot could “get some latitude to do those things, but only if part of a comprehensive five-year plan” to achieve structural balance.

Battle said he was encouraged that the mayor understands the careful balance she must strike to avoid driving homeowners and businesses. “She does seem to have a longer-term time horizon and understands this is structural thing that has a lot of moving parts,” Battle said.

“I think what she’s done is put together a comprehensive assessment of the financial condition of the city of Chicago,” said Laurence Msall, president of the Chicago Civic Federation, which tracks the city and state’s finances.


Lightfoot has now begun the conversation and outlined the crisis and urgency needed to deal with it, Msall added. He too said the city “can’t afford to back track” and turn again to “fiscally reckless” practices like scoop-and-toss.

Kroll Bond Rating Agency’s lead Chicago analysts, Karen Daly and Harvey Zachem, said the rating agency did not expect more than Lightfoot offered at this point. “We are going to want to know which specific revenue streams will close the gap, what the city has planned with respect to that and over what time period,” Daly said. Kroll rates Chicago GOs A.

Kroll said it had “informally” met with Lightfoot and Kroll and S&P both say chief financial officer Jennie Huang Bennett is in frequent contact.

“It will be interesting to see what she is going to do on taxes," said Howard Cure, director of municipal bond credit research for Evercore Wealth Management. "I’m not sure on what approach she will take, so that’s a concern.”

Depending on state help is worrisome, especially as Gov. J.B. Pritzker wants to focus on voter passage of a constitutional amendment to move to a progressive income tax system from the current flat tax mandate, and city’s requests could also be complicated if the economy softens.

Richard Ciccarone, president and CEO of Merritt Research Services, called the deficit a “herculean” number given the new revenues that may be needed. The city’s revenue hikes in a single year hit a high of $562 million in 2014. “She's now drawn the line and the market will expect to see concrete progress,” but the market also likely will give her the “benefit of doubt” in granting more time, Ciccarone said.

Setting the table
“I cannot in good faith promise you that I will take any option off the table to tackle this crisis, whether it's through budget reductions or by raising revenue,” Lightfoot said Thursday.

During editorial board meetings, Lightfoot and her finance team provided some more specifics on what is on and off the table. The city is not eyeing mass layoffs, Lightfoot said during a meeting with Crain’s Chicago Business.

Lightfoot said any discussion of consolidating downstate public safety pension funds should include the city and called the 3% cost-of-living adjustment that retirees hired after 2011 in two Chicago funds enjoy “unsustainable,” but she stopped short of saying she would lead any effort to alter the formula, which would require a constitutional amendment. Pritzker has thrown cold water on the idea. Lightfoot also then went on to speak of honoring pension commitments.

Lightfoot appeared to take a re-amortization off the table during the Crain’s meeting. “That is something that we talked about early on, but the response from the rating agencies was decidedly negative” and going down that path the city was “looking at a pretty substantial downgrade,” Lightfoot said. “I just don’t see how we could do that.”

She threw cold water on a longstanding push by the teachers’ union to adopt a tax on financial transactions at Chicago-based exchanges. She also is against reinstating a head tax on businesses, fearful that businesses would flee the city.

Lightfoot agreed with an assessment offered during the Chicago Tribune meeting that she would like to see a “revenue source” to deal with local and state government pension woes.

Lightfoot left some form of a pension obligation bond issue on the table, saying it was Emanuel’s $10 billion proposal pitched last year that she opposed.

“I remain opposed to a $10 billion pension obligation bond because of the size” and “because the details of how that bond would be serviced were never fully flushed out,” which led to concerns over how POBs used elsewhere, like in Detroit, backfired, Lightfoot told the Tribune board. On the chances for a smaller issue, Lightfoot said she was “not going to get ahead” of herself.

Chicago’s ratings and spreads remain in the cross-hairs. Lightfoot inherited one junk-bond rating, from Moody’s Investors Service, which rates the city Ba1 with a stable outlook. Fitch Ratings rates Chicago BBB-minus and stable.

Chicago’s yield penalties sharply narrowed to a 170 basis point spread in a March sale from a high in an early 2017 GO sale of a comparable 331 bp spread over Municipal Market Data’s AAA benchmark. Secondary spreads have further narrowed and are about a 140 bp spread, said MMD-Refinitiv senior market strategist Daniel Berger.

IHS Markit (INFO) strategist Edward Lee observed a trade last week at a 135 bps spread down from a prior spread of 148 bps. The administration will host investors at an annual investors’ conference Sept. 20.


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Old 09-15-2019, 03:05 PM
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https://pjmedia.com/trending/will-ch...re-bankruptcy/

Quote:
Will Chicago Be the Largest U.S. City to Declare Bankruptcy?

Spoiler:
The city of Chicago is in dire fiscal and financial straits with an almost billion dollar budget deficit, bonds rated at junk status or below, numerous extremely costly legal judgments, a shrinking tax base, and unfunded public pension liabilities to the tune of an astonishing $42 billion.

Other than that, it's a great place to live.

The state of Illinois has its own financial troubles, so the city can expect little or no help there. And good luck getting a federal bailout through the GOP Senate and signed by a president who's been called a "racist" by the mayor.

The shrinking tax base is clear proof that citizens are already over taxed. And since it's Democrats in charge, there won't be much cutting of city services.

The only option for Mayor Lori Lightfoot and the city council is restructuring the city's massive debts. In other words: bankruptcy.

11 Shot Dead, 63 Wounded in Chicago Over the Weekend. America Yawns
RealClear Politics:

The city needs to lower taxes to start growing again, but lower taxes would mean Chicago can no longer service its debts. Federal law offers a procedure for reducing those debts by commencing a case in bankruptcy court. A bankruptcy judge has the power under federal law to reduce the city’s liabilities, change its pensions, reorganize its functions into a more efficient ongoing structure and eliminate some of its debts — but the judge does not have the authority to raise your taxes.
Bankruptcy is a painful process because it forces creditors who facilitated the city’s failure to take a loss: bond holders, such as hedge funds, Wall Street bankers that sold the bonds and the people who are waiting to be paid for goods and services sold to Chicago, including past and current municipal employees. (The city can and will still be able to offer generous pension benefits to its workers, but perhaps with a cap limiting pensions of well more than $100,000 and without the automatic 3% COLA; the exact terms of any new deal would be hammered out in negotiations under the auspices of the court.)

There are several problems with this plan. Good luck getting unions to agree to any change in the way pensions are figured. Former Illinois Governor Bruce Rauner tried for 3 years to find a way to get the public unions in the state to make some tiny reforms and he was blown out of office.


Besides, it doesn't matter what the bankruptcy judge will say or do. There is going to be pain. Just ask the citizens of Detroit who endured the process in 2013. It wasn't pretty.

Indeed, there simply isn't an alternative:

This is Lightfoot’s moment: She didn’t make this crisis, but if she seeks higher taxes and less services instead of reform, Chicago’s population and property values will continue to bleed out. A bankruptcy restructuring is in Chicago’s future; it’s immoral to wait until empty buildings fill the downtown instead of cranes, and property values for “remainers” fall further toward zero.
Unfortunately, Lightfoot can’t make this happen on her own. Under federal law, the state must first authorize bankruptcy filings by municipalities before the city can avail itself of this procedure to restructure its debts.

Instead of lobbying Springfield to ask residents of other towns to pay Chicago’s debts, she needs Gov. Pritzker and the legislature to grant permission for the city to pursue a prudent financial reorganization and debt reduction through a federal bankruptcy procedure.

One thing is certain: a filing of bankruptcy will totally eliminate the leverage of machine politicians to bilk the public. The machine has been in decline for at least 3 decades, but remnants of the old Daley coalition survived. But there's no hiding anymore. The machine has to go if the city is to recover and thrive again.

From my 40-year observations of the Chicago political scene, I have my doubts whether Mayor Lightfoot could do what needs to be done. The powers that be are just too entrenched. It's not only politicians, it's bloodsucking businessmen, organized crime, and now street gangs who also get a cut of the action. This is the way the "City that works" has worked for more than 90 years.


Since the days of Big Bill Thompson, Chicago has been a cesspool of graft and corruption. Can waving the magic wand of bankruptcy cure the city of almost 100 years of amoral governance?

Don't bet the farm on it.


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Old 09-15-2019, 07:37 PM
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https://www.realclearpolitics.com/ar...o__141257.html
Quote:
Bankruptcy: Pain With Gain for Chicago

Spoiler:
“Bankruptcy” is a dirty word that connotes failure, an ending — the antithesis of opportunity. For many, it’s unthinkable “to go there,” as if it were a dark place, replete with shame.

And indeed bankruptcy was once all of that. Those unable to pay their debts were thrown into dark jails to rot until relatives came up with money to pay off their debts.


Chicagoans should know that this barbaric treatment of debtors hasn’t been our law for hundreds of years. In a great innovation that unleashed capitalism, the law turned the tables on creditors and set debtors free.

Bankruptcy erases burdensome debt, requiring those who finance and facilitate failure to bear the losses associated with that failure. Bankruptcy means freedom, a new beginning and fresh opportunities. Bankruptcy is a painful process, but it’s pain with gain: a future free of excessive debt.

Mayor Lori Lightfoot revealed that the City of Chicago faces a deficit of nearly $1 billion, driven by debt, including bonds, unfunded pension and retiree health obligations and tort judgments. So far, she’s only talking about increasing taxes on, or cutting services to, Chicagoans, but there’s no upside to that strategy: It offers Chicagoans nothing but more pain. Instead, she should be talking about strategies for restructuring and reducing the city’s debts now, including bankruptcy, before things get even worse.

While “Chicago” is a (beautiful!) geographic place, the “City of Chicago” is actually an entity, akin to a business corporation. The city’s debts are solely the obligation of that entity, but the city passes its costs on to Chicagoans by imposing taxes and fees. These residents bear the municipality’s costs only while they remain Chicagoans; when people leave, they owe nothing to the city. Our individual freedom to choose and move thus limits the city’s power to pass on excessive costs through taxes. When government charges too much for too little service, residents search for and begin to choose alternative places to live.

Chicago’s population is already shrinking, which is powerful evidence that the city is already taxing too much for too little service: for too many residents and potential residents, the cost imposed to live here now exceeds Chicago’s many benefits, and so Chicago shrinks while dozens of other cities grow. As population shrinks, property values fall, increasing the burden of future expected taxes, driving the population and property values down even further. Increasing taxes further only exacerbates this cycle of failure.

The city needs to lower taxes to start growing again, but lower taxes would mean Chicago can no longer service its debts. Federal law offers a procedure for reducing those debts by commencing a case in bankruptcy court. A bankruptcy judge has the power under federal law to reduce the city’s liabilities, change its pensions, reorganize its functions into a more efficient ongoing structure and eliminate some of its debts — but the judge does not have the authority to raise your taxes.

Bankruptcy is a painful process because it forces creditors who facilitated the city’s failure to take a loss: bond holders, such as hedge funds, Wall Street bankers that sold the bonds and the people who are waiting to be paid for goods and services sold to Chicago, including past and current municipal employees. (The city can and will still be able to offer generous pension benefits to its workers, but perhaps with a cap limiting pensions of well more than $100,000 and without the automatic 3% COLA; the exact terms of any new deal would be hammered out in negotiations under the auspices of the court.)

But, bankruptcy offers an upside: a future free from fear of ever-increasing city taxes and improved services. If government confronts its problems now while Chicago’s core retains its current vibrancy, the city will still offer benefits that make it a wonderful place to live -- the lakefront, our skyline, our restaurants, museums, people and jobs -- all at a lower expected future cost in taxes charged by the reorganized government. Bankruptcy offers Chicagoans relief from bearing the accumulated burden of a generation of imprudent administration.

Chicago’s bankruptcy will likely be especially hard on the politicians who run the town. They bilked their base — the good folks who work for the City of Chicago — by saving only cents for every dollar of their promiscuous promises.

Understandably, municipal workers will not be happy with politicians for whom they campaigned and to whom they contributed millions upon millions of dollars over decades, even if the pension adjustments are modest in an absolute sense.

So, while reorganizing the city to lower its debts and trim liabilities would benefit Chicago’s residents, it will embarrass our ruling party and undermine its coalition with the people who work for the government they ostensibly run. That makes bankruptcy an unspeakably dark place for machine politicians: Unless pushed, they will delay the inevitable (until they can retire and move to Arizona themselves).

Mayor Lightfoot isn’t a product of the machine and so has latitude for action that machine politicians don’t have. She won with a broad coalition seeking change. While she isn’t “going there” yet, civic leaders should urge her to seek out a fresh start for Chicago by lowering taxes, restructuring debts and revamping the city’s organization in court.

This is Lightfoot’s moment: She didn’t make this crisis, but if she seeks higher taxes and less services instead of reform, Chicago’s population and property values will continue to bleed out. A bankruptcy restructuring is in Chicago’s future; it’s immoral to wait until empty buildings fill the downtown instead of cranes, and property values for “remainers” fall further toward zero.

Unfortunately, Lightfoot can’t make this happen on her own. Under federal law, the state must first authorize bankruptcy filings by municipalities before the city can avail itself of this procedure to restructure its debts.

Instead of lobbying Springfield to ask residents of other towns to pay Chicago’s debts, she needs Gov. Pritzker and the legislature to grant permission for the city to pursue a prudent financial reorganization and debt reduction through a federal bankruptcy procedure.

Convincing longtime politicians in her own party to permit this restructuring, many of whom will (justly) experience political pain for facilitating the city’s financial failure, may seem a daunting mission, but it’s the right thing to do for the people she sought to serve as mayor.

Richard Porter is a lawyer in Chicago and Illinois’ national committeeman to the RNC.


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Old 09-19-2019, 04:31 PM
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https://fixedincome.fidelity.com/ftg..._110.1#new_tab
Quote:
Chicago's new administration will take fiscal message directly to investors
Spoiler:
Chicago is billing Friday’s investor conference as a chance to hear directly from rookie Mayor Lori Lightfoot about her commitment to putting the city on a path to structural solvency.

“The biggest goal of this conference … is for investors to get an opportunity to hear from the mayor, hear what her vision is for Chicago” and show “why we think that her vision really puts the city on a path toward long-term financial sustainability,” Lightfoot’s hand-picked chief financial officer, Jennie Huang Bennett, said in an interview Monday.

“Importantly the mayor is really committed to long-term sustainability and reform,” Bennett added. “We clearly have a very big financial challenge that we are facing, but by the same token it's also a great opportunity.” After morning tours of city development projects, Bennett will open the program and then Lightfoot will address investors.

The big financial challenge comes in the form of an $838 million gap looming in the 2020 budget that is scheduled to be unveiled on Oct. 23. The deficit, announced by Lightfoot in her August State of the City address, covers both one-time operating costs coming up next year and ongoing costs. The city this year is operating on a $10.7 billion budget, with a $3.8 billion corporate fund.

About $280 million is due to rising pension costs as required contributions for the police and fire funds hit an actuarial level. The remaining shortfall is due to rising personnel, debt, and other expenses. While that’s costly, Bennett said it’s a plus that the public safety pension funds will soon be an actuarially required contribution payment plan. Another $300 million will be due in two years when the municipal and laborers funds hit an ARC requirement. The city has $30 billion of net pension liabilities and the system is less than 30% funded.

Investors and other market participants who attend the conference may hear some additional details beyond what was said during the State of City address, but no big news is expected as the city considers further cuts and efficiencies, tax hikes, and the use of debt measures to balance the books at least on an operating basis.

Last year, then Mayor Rahm Emanuel rolled out at the August conference his proposal to sell $10 billion of pension obligation bonds. The plan stalled after his September announcement that he would not seek a third term.

Bennett acknowledges that investors and rating agencies are clamoring for details.

“What they want to hear is the plan,” Bennett says. Lightfoot “will go into a little more detail on some of the options” for tackling the deficit, but Bennett cautions “we are still very early on in this process."

The Lightfoot administration remains tight-lipped. Although she provided some clues during her speech and in editorial board meetings, no formal plan has been laid out.

The State of the City speech was billed at the first step toward a transparent dialogue on the extent of the city’s woes and potential fixes with stakeholders from citizens and the business community to investors and rating agencies. While the market remains hungry for answers, Lightfoot did win praise for that strategy.

The budget forecast released last month also includes more detailed line item information and a broader look at the deficit than the city has offered in the past, by combining structural and operating pressures. A two-page citizen’s guide was released and five town halls are being held as the city attempts to build support for painful fixes.

"At this point we are putting together a plan not just for a 2020 budget, but for out-year structural balance and that's what we hope that investors will hear,” Bennett said.

The city’s finance team has not yet settled on how information will be released in October with respect to future budgets. “We will release more information than what’s been seen in the past,” Bennett says. “We are working through a time frame” on achieving structural balance.

The city continues to explore revenue ideas and cuts after trimming the deficit to $838 million from $1 billion the finance team estimated after examining the books when Lightfoot took office in May. The Emanuel administration had in May put the operating deficit at about $700 million.

The city faces a tricky balancing act in the use of one-shots versus structural fixes and Bennett said she “absolutely” hears the concerns of investors and rating agencies. The city needs to proceed cautiously in order to avoid triggering a downgrade, but it also has to guard against putting too much of onus on residents and business through higher taxes and fees.

“The size of the remaining structural imbalance and credibility of the city's plan to close the gap in a timely manner will be critical to the rating and outlook,” S&P Global Ratings lead Chicago analyst Carol Spain wrote in a recently published special commentary, “How Chicago Closes Its Fiscal 2020 Budget Gap Will Be Pivotal to the Rating.”


“There's not really a way we are going to bridge an $838 million gap in one year with all structural solutions and nor would the rating agencies expect that … but importantly what we have to do is demonstrate that there is a plan for long-term financial sustainability,” Bennett said. “One-shots are really a way for us to get to that long-term goal and give us the time it takes to put a full structural solution in place.”

Options
Lightfoot announced during the State of the City address debt refunding plans to achieve $100 million of savings in 2020. Market participants have said they believe that involves further use of the city’s securitization structure that was tapped over the last two years to refund nearly $3 billion of general obligation bonds by leveraging city sales taxes in a bankruptcy-remote structure.

Bennett said the city hasn’t decided on a security structure and that it could include a combination, but it would capture much of the savings upfront and so would be considered by rating agencies as a one-shot. Bennett’s aim is to complete the deal in 2019.

Lightfoot shot down Emanuel’s $10 billion pension bond proposal as too big and too risky a gamble given the arbitrage play and weight on the city’s books, but she did not rule out a smaller deal during editorial board meetings. Bennett would say only “all options are on the table.”

Emanuel inherited scoop-and-toss debt restructuring to mask rising debt service costs, but eliminated it in his final years. Bennett declined to take the option off the table.

Bennett did describe a re-amortization of the city’s current pension schedule, which is designed to move all four funds to a 90% funded ratio by 2058, as “very low on the list” of options. Healthy funded ratios will take decades to achieve under the plan and any move to delay that even more could trigger a downgrade.

Tapping the city’s $550 million reserve set up with a portion of proceeds from the 2005 Skyway toll bridge lease is also “low on the list,” Bennett said.

While talk has circulated that the city might try to leverage revenues from an as-yet-unbuilt casino, Bennett said that couldn’t be accomplished until the city wins state approval for tax structure changes needed to make the casino viable and the timing of that is uncertain.

Lightfoot is stressing the need for help from Springfield whether in the form of help on pensions or from several new taxes under consideration, including a change in the city’s transfer tax on property sales and a tax on legal and accounting transactions.

"Given the size of the gap, we need help from Springfield whether it's this year or next year. It's about the long-term plan," Bennett said.

The city, Bennett said, hasn't decided if the 2020 proposed budget, scheduled to be released one week before the legislature's veto session and several months before the start of the 2020 session, will include any measures that need state legislative approval. Taxes could prove a hard sell as the state doesn’t want to alienate voters ahead of a November 2020 referendum to allow the state to move to graduate income tax from the current flat one.

Bankruptcy is “not an option. We are not talking about it,” Bennett said.

Illinois law doesn't allow for Chapter 9 filings, though it has been suggested it as a future path for Chicago, if its pension funding pressures can’t be eased given state constitutional protections against benefit cuts.

Bennett keeps in contact with the rating agencies and the mayor has met informally with Kroll Bond Rating Agency and Fitch Ratings. Formal meetings are expected after the budget’s release. The Emanuel administration stopped asking Moody’s Investors Service to rate new deals after the agency dropped Chicago to junk. It assigns a Ba1 rating to Chicago. Fitch has Chicago at BBB-minus, Kroll has it at A, and S&P has it at BBB-plus. All four agencies assign a stable outlook.

Members of Moody’s sales team have talked to the city, but the future relationship remains unclear. “We will have to see,” Bennett said. “We are not intending on having them rate debt immediately.”

No new money deals are planned for some time. A refunding of O’Hare International Airport debt and water and wastewater refunding bonds are expected next year. The city sold new money general obligation bonds earlier this year and the timing of the next deal would depend “on the state of the capital plan and any capital needs,” Bennett said.

Balancing act
The city doesn’t want to alienate business or stymie economic growth and that’s part of why Lightfoot opposes reinstating a corporate head tax or taxing financial exchange transactions.

“That I think is probably the toughest part of it. The city has a lot of tools in its toolbox especially as a home rule unit, especially given it has a fairly large presence in the state to address its financial issues, but we have to strike the right balance as it relates to ongoing solutions, one-time solutions, how is it we are decreasing the expenditure profile, driving efficiencies,” Bennett said.

The city also is working to avoid a teachers’ strike that would place a black mark on Lightfoot’s first year.

“I think it's a balance we have to strike. We want to make sure the contract is affordable. It’s got to fit in with what CPS can afford otherwise we can't make it sustainable long-term” while also providing teachers a fair deal, said Bennett, who previously served as CFO at the school district, a job she left public finance banking to take.
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