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  #351  
Old 06-27-2018, 09:12 AM
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DEMOGRAPHICS

http://www.chicagotribune.com/news/c...619-story.html

Quote:
Millennials are largest age group in Cook County, census shows, but will they stay?

Spoiler:
You can mock them for their love of avocado toast but there are more millennials than any other age group in Chicago and the Cook County suburbs, newly released population figures show.

U.S. Census Bureau data released this week indicates those aged 25 to 34 years old represent the largest chunk of Cook County’s population. That age range covers most, but not all of the generation commonly known as millennials, defined by Pew Research Center as those born from 1981 to 1996, who would now be 22 to 37 years old.

Twenty- and 30-somethings have flocked to urban areas for years, lured by jobs and a variety of amenities, experts say. And millennials are no different, favoring life in the city and nearby suburbs close to public transportation, bars and other nightlife.

“The influx of growth of young people, that’s likely to continue,” said Janet Smith, a professor at the University of Illinois at Chicago. “We anticipate that for a couple of reasons (including) the growing globalization and technology.”

If Amazon taps Chicago for its second headquarters, that would draw even more millennials as well as other skilled workers, she said.

People who are 25 to 34 years old account for just shy of 850,000 of the county’s 5 million residents, the just-released 2017 census figures show.

But like the overall population of Chicago and Cook County, the number of milllennials in Cook County is falling, data shows. The county lost 20,093 residents in 2017, including an estimated 3,182 aged 25 to 29, census data show.

A closer look at the demographic breakdown shows African-Americans and whites continue to leave the county. Illinois lost the most African-Americans out of all states, and the state ranked third in its loss of whites, said William Frey, a senior fellow at the Brookings Institution.

But the census figures also showed the county is growing in some ways. There was an increase among those aged 35 to 39 years old, which includes older millennials and the younger members of “Generation X.” And while the county’s Asian and Hispanic populations were on the rise too, the increase isn’t as large as it had been for the area in past years, Frey said.

Millennials also make up the largest slice of the Asian population in Cook County, with largest age group of Asian women being 25 to 29 years old and the largest age group of Asian men being 30 to 34 years old, according to the census data. For Hispanics in Cook County, the largest age group is children ages 10 to 14.


Marzena Maka, 25, and Nick Gitchell, 24, friends who work downtown and live in Chicago, have seen pals move to other parts of the country such as Colorado and Texas, seeking a lower cost of living and better weather and job opportunities.

Both have differing opinions on their futures in Chicago. Maka, a Chicago native who lives in the Southwest Side’s Garfield Ridge, wants to stay in Chicago and would even like to move closer to the Loop one day.

“I consider this home. There’s always something to do in Chicago. My friends are out here,” Maka said. “I would love to live in the city, but the price is kind of what keeps me from here. But I don’t see myself moving anytime soon.”

But Gitchell, who lives in Lakeview and grew up in the suburbs, said he would like to eventually get out.

“I’d like to move because of the cost of living,” Gitchell said. “Still going to be a few years out, though.”

Experts say it’s too soon to tell if millennials like Maka and Gitchell will stay in cities for the long haul, though there’s evidence that they could follow Generation X and remain city dwellers for longer, said Barbara Risman, a sociology professor, at the University of Illinois at Chicago. For the past decade, those in their 20s and 30s have decided to stay put as they age in cities like Chicago, she said.

“This is a serious moment of social change for cities,” Risman said.


Smith, the UIC professor, said as millennials think about buying a home or starting a family, it’s unlikely all will be able to call Chicago home.

She and others at Voorhees Center for Neighborhood and Community Improvement found that over the decades the middle class in Chicago has been pushed out as the city increasingly comprises residents on opposite ends of the income scale.

“As they’re aging, what is going to assure that they stay in the city?” Smith said. “I think that’s the question people are asking. Can they afford to stay in the city?”

The Chicago metropolitan area — which includes suburban counties — has seen job growth in industries that include construction, finance and transportation, which could be luring millennials to the area, said Gus Faucher, the chief economist for PNC. Faucher said he thinks millennials will eventually migrate to the suburbs when they are older, but losing that segment of the population too soon could have serious consequences.

“If the population is not growing, that could lead to economic stagnation,” Faucher said.

Job growth in the Chicago area has lagged behind other parts of the country, and that along with a high cost of living and crime could all entice millennials to move elsewhere, Faucher said.


Shawn and Victoria Groll work out at their business, Strive 4 Fitness, in Riverside, on June 20, 2018. They recently moved from DuPage County to Berwyn. (Nuccio DiNuzzo / Chicago Tribune)
In some cases, the beneficiaries could be other Cook County communities that have access to urban amenities — at a lower price.

In recent years, Berwyn, a suburb west of Chicago in Cook County, has campaigned to lure millennials tired of hectic city life who want to settle down. At a Loop CTA station, an advertisement declares Berwyn, known for its blocks and blocks of bungalows, is “nothing like a suburb” and is a “handcrafted community.”

“We are really looking to get first-time homebuyers to check us out,” said Elaina Hampson, part of the Berwyn Development Corp. “We are close to the city, we have the city feel but the suburb environment.”

Shawn Groll, 30, moved earlier this year from DuPage County to his native Berwyn with his wife, who is expecting their first child. The couple opened a location of their gym, Strive 4 Fitness, near Berwyn. Groll said his family has no regrets about their move, prompted by what he calls Berwyn’s sense of community.

“I just believe it’s meant to be,” Groll said. “Like, that’s where our destiny was to be back over there.”


Interesting graphs at the link.
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  #352  
Old 06-28-2018, 01:11 AM
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Originally Posted by campbell View Post
such "protections" don't help when the money is gone.
so how is Chicago different from Harvey? Is Harvey in debt with a gazillion in bonds issued? is a court order like the one issued forcing Harvey to divert funds to the pension possible for Chicago? Or is Chicago so big it will force action on law changes?

It is possible I am misremembering the Harvey stuff. if so, please tell me some of the ways I am wrong.
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  #353  
Old 07-02-2018, 08:22 AM
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COOK COUNTY

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

Quote:
Cook County deal will free up credit line for capital spending

Spoiler:
CHICAGO – Cook County, Illinois, plans a $175 million new money offering of its top-rated sales tax-backed paper later this summer.

The county, home of Chicago and its neighboring suburbs, will use proceeds to pay off about $125 million currently outstanding in a revolving line of credit. The other $50 million will finance upcoming projects.


“We fill that up and then refund it and that allows us to borrow short-term debt at a low rate” during construction, the county Chief Financial Officer Ammar Rizki said of the credit line use.

The borrowing authorization introduced to the county board at its Wednesday meeting names Loop Capital Markets LLC as senior manager and Barclays Capital and PNC Capital Markets LLC as co-senior managers. Another three firms serve as co-managers.

PFM Financial Advisors LLC and Acacia Financial Group Inc. are advisors on the deal, bond counsel is Ice Miller LLP and co-bond counsel is Pugh, Jones & Johnson PC. Another four law firms serve in roles including disclosure counsel and underwriters’ counsel.

S&P Global Ratings affirmed the county’s AAA sales tax rating and stable outlook last year ahead of a $165 million issue that primarily refunded 2014 general obligation bonds. About $45 million went to help finance a new health system building.

“The county's pledge of home rule sales tax revenues on the bonds greatly limits the possibility of negative sovereign intervention in the payment of the debt or in the operations of the county,” S&P said at the time. “Cook County has considerable financial flexibility, as demonstrated by its home rule status, strong general fund balance as a percentage of expenditures, and very strong liquidity.”

The report last year said the county had no plans at that time for additional issuance.

The credit benefits from a strong, historical additional bonds test that requires 2.5 times coverage of debt service remain in place for any new borrowing. The county last year had $262 million of debt secured by sales tax revenues while fiscal 2016 collections totaled $643.8 million providing 18.3 times coverage.

The county's home rule taxing powers provide it with the flexibility to adjust its sales tax rate. It was raised to 1.75% from 0.75% in 2016 as the county sought to stabilize its weak pension funding ratios through supplemental payments.

The AAA sales tax rating is higher than S&P's AA-minus rating of Cook County's general obligation debt, with its pension burden a primary driver of the rating agency’s decision earlier this year to shift the outlook on Cook's GOs to negative from stable.

"The negative outlook reflects our view that despite the strides the county has made to improve the funding of its pension liabilities, including passing a sales tax to support payments above the state's statutory requirement, the pressures the low pension funding levels put on the county's operations could negatively affect the rating," said analyst Lisa Schroeer.

Supplemental payments are on schedule. “Despite fiscal 2018 being an extremely difficult revenue year, the county is on track to make the full” supplemental payment, board President Toni Preckwinkle said during a luncheon address at The Bond Buyer’s Midwest Municipal Market Conference.

Preckwinkle’s reference to the county’s difficulties this year stems from the county board’s repeal late last year of a sweetened beverage tax against Preckwinkle’s wishes, which forced leaders to cut $200 million in costs. County officials are still working to close an $82 million gap ahead of releasing a fiscal 2019 budget in the fall.

The county made supplemental pension contributions of $270.5 million in fiscal 2016, $353.8 million in fiscal 2017, and is slated for $353.4 million more this year, which should bring total payments to about 80% of the actuarially determined contribution level. Regular payments are based on a statutory level tied to payroll and it falls short of actuarial levels.

Future supplemental payments are not reflected in the pension system’s reporting because the county still needs state legislative approval to codify the new funding scheme into law. It’s not clear yet whether the county will again pursue a change in the law during the fall veto session or wait for the next session early in 2019.

Gov. Bruce Rauner has been critical of higher taxes to fund pensions without reforms and the county could find a more friendly ally if the Democratic candidate J.B. Pritzker wins the November election. The county’s net pension liabilities totaled $14.124 billion in 2016.

Preckwinkle noted other county debt management measures during her tenure that include the elimination of borrowing to fund settlements and beginning in 2016 capping debt cost increases to 2% annually. The county front-loaded the savings and deferred principal in a refunding earlier this year to achieve that goal but the final maturity was not pushed out.

The county must close an $82 million gap in its next roughly $5 billion for the next fiscal year that begins Dec. 1. “We expect to pursue structural solutions” so as to maintain reserves, Preckwinkle said. New or higher taxes are not currently on the table.

Fitch Ratings Thursday affirmed its A-plus issuer default rating for Cook County and the same A-plus rating for $3.5 billion of unlimited tax GOs. The outlook is stable. Moody’s Investors Service rates the GO A2 with a stable outlook.

The new Fitch contained a warning that “a reduction in the county's commitment toward actuarial funding of pension liabilities would create negative rating pressure.” The 2018 supplemental payments brings the annual contribution to about 80% of an actuarially determined level and the projected 2019 payment would move that level up to 90%, Fitch said.
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  #354  
Old 07-02-2018, 08:22 AM
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COOK COUNTY

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

Quote:
Cook County deal will free up credit line for capital spending

Spoiler:
CHICAGO – Cook County, Illinois, plans a $175 million new money offering of its top-rated sales tax-backed paper later this summer.

The county, home of Chicago and its neighboring suburbs, will use proceeds to pay off about $125 million currently outstanding in a revolving line of credit. The other $50 million will finance upcoming projects.


“We fill that up and then refund it and that allows us to borrow short-term debt at a low rate” during construction, the county Chief Financial Officer Ammar Rizki said of the credit line use.

The borrowing authorization introduced to the county board at its Wednesday meeting names Loop Capital Markets LLC as senior manager and Barclays Capital and PNC Capital Markets LLC as co-senior managers. Another three firms serve as co-managers.

PFM Financial Advisors LLC and Acacia Financial Group Inc. are advisors on the deal, bond counsel is Ice Miller LLP and co-bond counsel is Pugh, Jones & Johnson PC. Another four law firms serve in roles including disclosure counsel and underwriters’ counsel.

S&P Global Ratings affirmed the county’s AAA sales tax rating and stable outlook last year ahead of a $165 million issue that primarily refunded 2014 general obligation bonds. About $45 million went to help finance a new health system building.

“The county's pledge of home rule sales tax revenues on the bonds greatly limits the possibility of negative sovereign intervention in the payment of the debt or in the operations of the county,” S&P said at the time. “Cook County has considerable financial flexibility, as demonstrated by its home rule status, strong general fund balance as a percentage of expenditures, and very strong liquidity.”

The report last year said the county had no plans at that time for additional issuance.

The credit benefits from a strong, historical additional bonds test that requires 2.5 times coverage of debt service remain in place for any new borrowing. The county last year had $262 million of debt secured by sales tax revenues while fiscal 2016 collections totaled $643.8 million providing 18.3 times coverage.

The county's home rule taxing powers provide it with the flexibility to adjust its sales tax rate. It was raised to 1.75% from 0.75% in 2016 as the county sought to stabilize its weak pension funding ratios through supplemental payments.

The AAA sales tax rating is higher than S&P's AA-minus rating of Cook County's general obligation debt, with its pension burden a primary driver of the rating agency’s decision earlier this year to shift the outlook on Cook's GOs to negative from stable.

"The negative outlook reflects our view that despite the strides the county has made to improve the funding of its pension liabilities, including passing a sales tax to support payments above the state's statutory requirement, the pressures the low pension funding levels put on the county's operations could negatively affect the rating," said analyst Lisa Schroeer.

Supplemental payments are on schedule. “Despite fiscal 2018 being an extremely difficult revenue year, the county is on track to make the full” supplemental payment, board President Toni Preckwinkle said during a luncheon address at The Bond Buyer’s Midwest Municipal Market Conference.

Preckwinkle’s reference to the county’s difficulties this year stems from the county board’s repeal late last year of a sweetened beverage tax against Preckwinkle’s wishes, which forced leaders to cut $200 million in costs. County officials are still working to close an $82 million gap ahead of releasing a fiscal 2019 budget in the fall.

The county made supplemental pension contributions of $270.5 million in fiscal 2016, $353.8 million in fiscal 2017, and is slated for $353.4 million more this year, which should bring total payments to about 80% of the actuarially determined contribution level. Regular payments are based on a statutory level tied to payroll and it falls short of actuarial levels.

Future supplemental payments are not reflected in the pension system’s reporting because the county still needs state legislative approval to codify the new funding scheme into law. It’s not clear yet whether the county will again pursue a change in the law during the fall veto session or wait for the next session early in 2019.

Gov. Bruce Rauner has been critical of higher taxes to fund pensions without reforms and the county could find a more friendly ally if the Democratic candidate J.B. Pritzker wins the November election. The county’s net pension liabilities totaled $14.124 billion in 2016.

Preckwinkle noted other county debt management measures during her tenure that include the elimination of borrowing to fund settlements and beginning in 2016 capping debt cost increases to 2% annually. The county front-loaded the savings and deferred principal in a refunding earlier this year to achieve that goal but the final maturity was not pushed out.

The county must close an $82 million gap in its next roughly $5 billion for the next fiscal year that begins Dec. 1. “We expect to pursue structural solutions” so as to maintain reserves, Preckwinkle said. New or higher taxes are not currently on the table.

Fitch Ratings Thursday affirmed its A-plus issuer default rating for Cook County and the same A-plus rating for $3.5 billion of unlimited tax GOs. The outlook is stable. Moody’s Investors Service rates the GO A2 with a stable outlook.

The new Fitch contained a warning that “a reduction in the county's commitment toward actuarial funding of pension liabilities would create negative rating pressure.” The 2018 supplemental payments brings the annual contribution to about 80% of an actuarially determined level and the projected 2019 payment would move that level up to 90%, Fitch said.
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  #355  
Old 07-06-2018, 09:53 AM
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https://chicagocitywire.com/stories/...report#new_tab

Quote:
City of Chicago keeps missing state-mandated deadline for publishing Comprehensive Annual Financial Report

Spoiler:
The City of Chicago has for years missed a state-mandated deadline to publish its annual Comprehensive Annual Financial Report (CAFR) because no one calls them on it, a researcher for a fiscal advocacy group said during a recent interview.

"One reason they keep blowing it is that they get away with it," Bill Bergman, director of research at the Institute for Truth in Accounting and a regular blogger on financial issues, told Chicago City Wire. "Our mainstream media doesn't do squat about it. Neither do our leading corporate citizens, or citizens generally, so maybe we deserve what we get."

Bill Bergman, director of research at the Institute for Truth in Accounting
Bill Bergman, director of research at the Institute for Truth in Accounting
The City of Chicago is required by state law to publish its CAFR within six months of the end of the fiscal year, the most recent of which passed in December, which means the CAFR for 2017 should have been posted to the city's website by June 30. To date, the most recent CAFR posted on the city's website is for 2016.

The missed deadline for posting the CAFR for 2017 isn't the first time the city has missed the state-mandated deadline. The city has regularly missed the deadline in recent years, only to later issue the report with a letter of transmittal dated "June 30," no matter when they publish the report.

The reasons behind all those missed deadlines can be difficult to pin down.

"Chicago is a very large and complex city," Bergman said. "New York City is too, however, and the Big Apple gets its report out in four months. Chicago’s deadline is six months, so how big it is can’t explain it."

The hold up for the 2017 CAFR may possibly be attributable to the underlying city police pension fund report that also, apparently, is not yet available. A source familiar with the police fund told Chicago City Wire before the July 4th holiday that the police pension fund report is still in the works.

"We are working on getting the financial statements and the CAFR issued," the source said. "It looks like those are not going to be available until probably early next week, and then probably will not be posted on our website until the following week given some people that are going to be out of the office. So I would say July 9th or 10th will probably be when everything will be posted on the website."

Whatever the reason for the missed deadline, breaking a state mandate doesn't speak well for Chicago.

"One thing it says about the city is reflected in what the city itself says about the city," Bergman said.

"Last year, the report was introduced with a cover letter by Mayor Rahm Emanuel addressed to 'Dear Chicagoan' that was dated June 30, the legal due date. It also had a 'letter of transmittal' addressed to 'The Honorable Rahm Emanuel, Members of the Chicago City Council, and Citizens of the City of Chicago' that was also dated June 30th. But the report wasn’t available until July 12."

The deadlines are missed but the reports have, so far, ultimately been released, so the city can say it isn't hiding anything, Bergman said.

"We have transparency," he said. "But the latest audited results we have are for a year that ended 549 days ago. It's like looking through a clean window to see the weather, but you only see what happened long ago, not what is happening now."

And that's an accountability issue, Bergman said.

"Accounting reports serve as critical tools, in theory, to secure the accountability of government officials to the people they represent," he said. "In practice, however, the integrity of our republic can be undermined by the same tools advertised to safeguard that integrity."
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  #356  
Old 07-09-2018, 01:10 PM
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https://chicago.cbslocal.com/2018/07...posal/#new_tab

Quote:
Big Questions Loom After Emanuel Reveals $1 Billion CPS Budget Plan
Spoiler:
CHICAGO (CBS)—A $1 billion capital investment boost announced Friday will give Chicago Public Schools the means to modernize schools and implement universal preschools, according to Chicago Mayor Rahm Emanuel.

Standing with CEO of CPS Janice Jackson at a press conference Friday, Emanuel announced what would be a historic investment in CPS, but provided few details about how the plan will be financed.

The budget proposal released today shows a new open-enrollment high school somewhere on the city’s Near West Side. The new school was announced as part of $247 million in proposed building renovations and new construction. CPS is also planning a new building for Hancock High School, a selective-enrollment school on the Southwest Side.

The budget proposal also mentions renovations and expansions for a host of other schools, including Hyde Park Academy High School, Senn High School and Prosser Career Academy.

CBS 2’s Mai Martinez pressed the Mayor—who is seeking reelection this year–on where the money would be coming from.

budget proprosal Big Questions Loom After Emanuel Reveals $1 Billion CPS Budget Plan

But Emanuel skimmed over the question at his press conference Friday—instead changing the subject to Governor Bruce Rauner before spending more than a minute discussing CPS’s upgraded credit rating.

“The new funding formula—equalize that funding,” Emanuel said.

The city, he said, is benefitting from the state having a budget in place. He says the state budget allows CPS to outline their own budget in a more expedited manner.

Big questions still loomed when Emanuel ended the press conference, however. Namely, will the city need to borrow to finance the improvements?

rahm budget Big Questions Loom After Emanuel Reveals $1 Billion CPS Budget Plan

“Well, how about this, Illinois is finally returning to Chicago taxpayers the money they already pay and doing it fairly because for 50 years, we’ve been funding education, and it’s been going to the suburbs,” Emanuel said before walking away from reporters. “We’re finally getting our fair share back.”

CBS turned to Lawrence Msall of the Civic Federation for answers about whether the city could afford the $1 billion without borrowing money, and he had this to say.

“They’re not going to spend a billion dollars of cash flow,” Msall said. “They don’t have a billion dollars worth of cash flow—they have very little reserve.”

The short answer is that CPS will likely need to borrow most of or all of the money to finance the proposal, despite the city’s improved credit rating.

The CPS Teacher’s Union said in a statement that the plan would not be taken seriously unless it addresses complaints logged by the community during the past seven years.

“This is just another election year stunt,” the statement said.

Hearings on the capital budget will be held from 6 to 8 p.m. July 19, at Truman College, Malcolm X College and Kennedy King College. The school board is set to vote on the budget July 25.


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  #357  
Old 07-14-2018, 08:26 PM
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https://chicago.suntimes.com/busines...tatus/#new_tab

Quote:
Bond ratings for Chicago and Chicago Public Schools a tad less junky

Spoiler:
The Wall Street rating agency that stands alone in rating Chicago bonds as junk — and that threw cold water on Mayor Rahm Emanuel’s $8.7 billion O’Hare Airport expansion project — on Thursday delivered a double-dose of good news for a change.

Moody’s Investors raised the bond rating for the Chicago Public Schools one notch higher — from B3 to B2 — but still deep into junk status.

The rating agency also affirmed Chicago’s Ba1 rating, also junk, but revised the outlook from negative to stable.

The CPS upgrade is tied to a revised state funding formula, state pension help that produced a $450 million cash infusion and the General Assembly’s decision to grant the system “enhanced authority to levy property taxes.”

But, Moody’s warned that the rating would “continue to be constrained” by the district’s “still weak liquidity and high debt and pension burdens.”

The city’s outlook was raised to stable because the CPS burden has been lifted for the time being and because Emanuel’s five-year plan to boost contributions to Chicago’s “very high unfunded pension liabilities has so far proceeded on schedule.”

“A primary reason for Chicago’s negative outlook for the last two years was the heightened risk the city would need to provide financial assistance to the school district. With the increased state aid, that contingent risk has been reduced,” Moody’s wrote.

Still, Moody’s noted that the city “retains a very high and growing pension burden and has a very highly-leveraged tax base.”

The double dose of good news is unlikely to cool Emanuel’s running feud with Moody’s.

The mayor was so incensed by the junk bond rating, he asked Moody’s to stop rating Chicago’s bonds.

The tension only got worse when Moody’s branded the O’Hare project that Emanuel calls a game-changer credit negative because it will increase leverage and airline costs above those of airline peers, weakening O’Hare’s competitive position and profitability.


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Old 07-14-2018, 08:45 PM
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http://www.chicagotribune.com/news/c...711-story.html

Quote:
Mayor Emanuel cuts Chicago pension debt, but future hits to taxpayers are still expected

Spoiler:
The city’s annual comprehensive financial report offered a classic good news/bad news scenario on pensions: Mayor Rahm Emanuel has dramatically cut the long-term pension shortfall, but at a steep cost to Chicago taxpayers.

As of the end of 2017, City Hall was about $28 billion short of what’s needed to cover future pension payments to retired city workers. That debt was about $7.7 billion less than at the end of 2016.

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But there’s a bit of accounting wizardry at work: Finance officials who prepared the yearly report assume the city will be making higher contributions to its four pension funds in coming years, as required under various state laws Emanuel engineered to prevent them from going broke.

That means the city will have to come up with a way to raise hundreds of millions of additional dollars a year to contribute to the city’s four pension funds for municipal workers, laborers, police officers and firefighters. That, in turn, is almost certainly going to mean even higher taxes.

Such decisions, however, don’t have to be made until the end of next year, when Emanuel would be starting his third term in office or Chicago would have a new mayor.

READ MORE: Average Chicago homeowner to pay $110 more in property taxes this year »

Over three years starting in 2020, required yearly taxpayer contributions to the four pension funds are expected to grow by $864 million, according to city estimates released last year. That comes after Emanuel already hit up taxpayers for more than $800 million a year for pension contributions through higher property taxes, a bigger 911 emergency communications fee on phone bills and a new water and sewer service tax.

Nevertheless, Carole Brown, Emanuel’s chief financial officer, touted the lower pension debt as a sign the mayor was finding ways to meet city financial obligations that were ignored before he first took office in 2011.

Wall Street bond rating agencies have been a bit less enthusiastic. Although they have acknowledged the city’s finances are in better shape, city debt backed by property taxes still hovers in junk-to-low investment grade territory.

Brown also pointed to other signs of stronger city finances, including a $1.1 billion increase in capital assets because of upgraded streets, lights, transit systems, airport facilities and sewer mains; a new way of financing bonds through sales taxes that resulted in a strong bond rating on that portion of the city’s debt; and a slightly higher balance in the city’s day-to-day operating fund.

Nevertheless, the annual financial report also showed that Chicago is still struggling to make ends meet. Debt backed by property taxes, often looked at to gauge a city’s financial health, grew by more than $500 million, to nearly $10 billion. The city, however, expects to refinance some of that debt at lower interest rates through the new sales tax-backed bonds.


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Old 07-15-2018, 04:36 PM
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CHICAGO SCHOOLS

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

Quote:
Chicago schools' $1 billion capital plan is short on particulars

Spoiler:
CHICAGO — With a hike in debt service already looming, Chicago's public school district needs to spell out how it can afford a $1 billion fiscal 2019 capital program without risking fiscal gains that have cut recent borrowing costs, say market participants.

Mayor Rahm Emanuel and Chicago Public Schools Chief Executive Officer Janice Jackson unveiled a nearly $6 billion operating budget for the fiscal year that began July 1, and a revised capital plan. The $1 billion capital plan is a drastic increase from the $189 million draft plan released this spring.

The operating plan illustrates both the district’s gains – from new state cash approved last year along with higher property tax levies for pensions approved over the last two years -- and its deeper struggles to dig itself out of the red ink that saddled it with junk bond ratings. CPS is rebuilding its operating fund balance that had been in the red, but it also anticipates relying on as much as $1 billion of costly short-term borrowing.

Emanuel and Jackson on Friday billed the capital program as the “district’s largest single-year capital investment in more than two decades.”


The district – with three of its four general obligation ratings at junk – is planning to borrow $313 million of GOs and up to $125 million under its capital improvement tax levy credit. Separately, the district is planning on a $500 million refunding this year.

“CPS will bring these bonds to market when market conditions are most favorable,” said a CPS representative. “The remainder will get financed at a later date as the capital project expenditures are needed.”

The full fiscal 2019 package primarily relies on $189 million from the district’s new money issuance of last year, $43 million of federal funds, and $750 million from future borrowing and “other capital funds” such as state aid and “outside resources as they become identified.”

While the appropriations for projects will be approved when the Chicago Board of Education takes up the budget at its July 25 meeting, the timing of expenditures is less clear based on data included in the capital plan.

CPS expects to spend a total of $522 million in fiscal year 2019 but just $200 million would cover the fiscal 2019 appropriations. Another $242 million would pay down projects included in the $938 million fiscal 2017 capital plan, $70 million from the $136 million fiscal 2018 package, $10 million from the $160 million fiscal 2016 plan, and $2 million from the $510 million fiscal 2015 package. That leaves nearly $1.5 billion of remaining appropriations.

The Chicago Civic Federation budget watchdog group said it’s waiting for a more detailed briefing from CPS officials, but the lack of financing details raises concerns.

“The Civic Federation is urging CPS to be transparent and provide details on how they will pay for their $1 billion proposal,” the federation's president, Laurence Msall, said in an interview, adding that while the district “clearly has capital needs” it needs to disclose revenue sources to cover borrowing costs because it has so little in reserves and should also disclose backup plans should state funding lag in the future.

“We are concerned about their ability to borrow at a reasonable cost. It’s not unreasonable to invest in infrastructure and maintenance and other needs but it is unreasonable to borrow at excessive rates,” Msall added.

With rising interest costs in the coming years, Msall said the district doesn’t appear to have much near-term capacity to structure its debt repayment in a more “traditional” fashion instead of pushing off repayment.

CPS spreads have come down, but remain costly. The district’s GOs maturing in 2039 with a 2024 call and a 5.25% coupon traded Monday at about 200 basis points over the Municipal Market Data’s AAA benchmark, said MMD strategist Daniel Berger. The district’s GO paper “is thinly traded,” Berger added.

Uninsured spreads in the district’s recent GO refunding ranged from 193 bp to 224 bp while insured tranches ranged from 120 bp to 135 bp. Before passage of the state funding and city’s commitment to also provide funding for safety expenses the district saw spreads of more than 450 bp. The district’s Capital Improvement Tax-backed bonds sold late last year at a spread of about 150 bp last fall compared to 309 bp in 2016.

The buyside will look beyond the $1 billion headline that gives Emanuel an investment to boast about as he heads into the 2019 mayoral campaign, said Brian Battle, director of trading at Chicago-based Performance Trust Capital Partners.

“Short-term they averted a crisis with the state funding” and are now “off the ledge, but long term their problems persist,” he said. “CPS will have to show specifically where the money to repay the debt is coming from” and how it is spending the proceeds.

The school district will benefit from its improved market perception and a dearth of supply, especially paper that offers extra yield. “The district will have market access” and won’t likely face any new spread penalties, Battle said.

DEBT

The capital budget would finance maintenance, energy efficiency measures, information technology and security infrastructure upgrades, new and expanded schools to relieve overcrowding and allow the district to accommodate its newly announced goal to provide free, full-day pre-kindergarten for all by 2021.


New borrowing will add to a total debt load of $8.2 billion of general obligation, capital improvement tax-backed, and city public building commission issued bonds as of June 30 with $607 million earmarked for debt service in fiscal 2019. The district will use $328 million of its state aid to cover debt service.

Counting principal of $7 billion and interest of $6.8 billion, the district will pay a total of $13.8 billion through 2046 to retire its GO debt.

The city’s capital improvement tax levy first imposed in fiscal 2016 and used to back a roughly $730 million borrowing in fiscal 2017 and roughly $65 million in fiscal 2017, will rise from its original $45 million to $56 million. Principal repayment on CIT bonds doesn’t start until 2033. Counting principal and interest, the district will pay a total of $1.82 billion on the existing debt through 2046.

Fitch Ratings assigns an A rating to the bonds and Kroll Bond Rating Agency a BBB rating.

The district’s GOs carry a BB-minus rating and stable outlook from Fitch, a mix of BBB-minus and BBB ratings with a positive outlook from Kroll, a B rating and positive outlook from S&P Global Ratings, and a B3 rating and stable outlook from Moody’s Investors Service. The district’s ratings or outlook have all benefited from the new state aid package.

New money borrowing will add to the district’s debt service burden, already set to grow by $100 million to more than $700 million in fiscal 2020 and remain there until fiscal 2031 when it drops to about $625 million.

It then falls to about $450 million in fiscal 2032 where it holds steady until 2043 when it drops to about $350 million and then lands at $300 million in 2045.

CASH FLOW

On the operating side, the district expects an increase of $65 million in evidence-based state funding and $18.5 million in early childhood funding. The district will receive $239 million in state pension help.

The state in 2017 shifted to the evidence-based model and approved new funding for pensions in line with what other districts have long received.

The district anticipates a $75 million increase in property tax revenues and $12 million more from a personal property replacement tax levy. Total local tax revenue accounts for $3.5 billion of the operating budget with the state accounting for $2.2 billion and federal sources making up much of the remainder.

The operating budget of $5.9 billion is about $280 million more than fiscal 2018. The budget relies on just $22 million from a city-declared tax-increment financing surplus, down $66 million from fiscal 2018.

The district will contribute $809 million to its teachers’ fund in the next fiscal year with $239 million coming from the state. Much of the remainder will come from its property tax levies for pensions. The fiscal 2018 contribution included $551 million of CPS funds and $233 in state help.

Growth in its local dedicated levy and state funding are expected by fiscal 2037 to “cover the entire annual teacher pension cost,” budget documents say.

The district projects a $231 million operating fund balance in fiscal 2019 that marks a turnaround from a negative $275 million balance it began fiscal 2018 with, according to documents.

While the district’s improved liquidity allowed it to trim total borrowing to $1.1 billion from $1.55 billion in fiscal 2018 due to the “historic statewide education funding reform, budgetary savings, improved cash flow forecasting, and active cash management,” the district “plans to issue TANs of a similar size to support liquidity” in fiscal 2019, according to the budget documents.

The fiscal 2018 reduction trimmed about $68 million off short-term interest expenses. The budget allocates $21 million for interest in the new fiscal year. About $600 million of the district’s $1.1 billion of fiscal 2018 short-term tax anticipation note borrowing debt remains outstanding and is slated to be repaid by mid-December.

The district is paying 70% of the three-month London Interbank Offered Rate plus a spread of 330 basis points on recent TAN tranches.

While liquidity remains strained, the district managed to spend three months in fiscal 2018 in a positive net cash position.


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Old 08-01-2018, 03:59 PM
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Quote:
Chicago budget gap shrinks again, but big pension debt looms
Spoiler:
s Mayor Rahm Emanuel prepares to seek his third term at the city’s helm, his budget team on Tuesday ruled out any major tax increases to close a relatively small projected budget shortfall in the coming year.

The 2018 Annual Financial Analysis, a starting point for shaping next year’s spending plan, pegged the 2019 operating budget shortfall at $97.9 million — the lowest predicted gap since Emanuel took office in 2011, when the mayor had to close a 2012 budget chasm of $636 million.

Budget Director Samantha Fields said a property tax increase would not be needed to balance next year’s books.

“We don’t expect to have a tax increase that you’ve seen in the past, but we’ll have a better idea of how we’ll solve for the gap in the next few months,” she said, before flatly ruling out a property tax increase. “We may have small recommendations from the departments on revenues here or there, but I don’t anticipate any large ones that will move heaven and earth.”

The relatively good news on the budget front is reminiscent of 2014, when Emanuel proposed a budget for the following year that included a few relatively minor increases in targeted taxes to raise $61 million. Months after winning re-election in early 2015, he pushed through a phased-in $543 million increase in property taxes to boost contributions to pension funds for city police officers and firefighters.

Chicago's budget gap
Chicago's projected pension contributions
If he emerges victorious from what is shaping up to be a large field of mayoral contestants in next year’s election, he may again have to deliver bad news to city taxpayers. The financial analysis shows that the city in 2023 will need more than $2.1 billion to make its required contributions to the city’s four worker pension funds, up from about $1.2 billion next year.

The city projects that spending for day-to-day operating costs will increase next year to more than $3.8 billion, an increase of nearly $50 million over budgeted spending for this year. That’s attributable to rising personnel costs and some expansions of city services, Fields said.

The city also could find itself facing higher costs that were not included in the projected budget forecast. Those potentially include tens of millions of dollars for raises and back pay for police, firefighters and some other city workers whose unions are negotiating new contracts — as well as any costs added to the expense of running the Police Department as a result of a proposed federal consent decree aimed at restoring community trust in the long-troubled department.

Emanuel in his first term tried to reduce the city’s pension fund obligations, but the Illinois Supreme Court overruled the changes, saying they violated a state constitutional clause that state pension benefits, once granted, “shall not be diminished or impaired.” That left him little choice but to turn to tax increases.

In addition to inheriting a huge pension funding hole when he took office in 2011, he faced whopping budget shortfalls that were the result of the Great Recession, combined with former Mayor Richard M. Daley’s reliance on one-time infusions of revenue — such as the much-criticized long-term lease of city parking meters — to balance budgets near the end of his 22-year tenure.

MORE COVERAGE: Emanuel cuts Chicago pension debt, but future hits to taxpayers are still expected »

To solve the budget and pension problems, as well as upgrading the city’s aging water and sewer pipes, Emanuel pushed through the City Council property tax increases, a doubling of water and sewer fees, a new tax on water and sewer service, a garbage-hauling fee, higher 911 emergency fees on telephone bills, and other increases in less broad-based taxes, fees and fines. Property taxes also have increased significantly at Chicago Public Schools, which the mayor controls, largely to restore health to the teachers’ pension fund.

As a result, the overall taxes and fees being collected in 2018 by the city and CPS are nearly $2.2 billion more than when he took office, according to a Tribune tally. All told, the average family will pay $1,813 more this year in taxes and fees to the city and schools than it would have in 2011.

The mayor also has ended certain risky borrowing practices that ended up driving up city costs; found new, less-expensive ways to borrow money; and cut health care expenses.

Even if there are no major tax increases in next year’s budget, taxpayers will still end up paying more because of increases set in motion during previous years. A $63 million increase in the property tax, the last of four to boost police and fire pension funding, is in store for next year. And the water and sewer taxes, which are being used to increase contributions to the municipal workers’ pension fund, also will increase again.

hdardick@chicagotribune.com

Twitter @ReporterHal

MORE COVERAGE:

Average Chicago homeowner to pay $110 more in property taxes this year »

Nearly a third of city property tax collections diverted into special taxing districts »


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Easiest prediction: Chicago will not be making the following payments in full:


Specifically, the 2023 payment will not be met.

Btw, I think that excludes Chicago Public Schools. They have a pension issue, too.
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