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  #111  
Old 08-05-2016, 09:48 AM
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http://www.chicagobusiness.com/artic...itics-20160805

Quote:
Chicago bonds gain as city plans tax hike to fix biggest pension

(Bloomberg)—Chicago debt rallied after Mayor Rahm Emanuel released his plan to increase water and sewer levies to shore up the retirement plan for municipal workers, a move to avert insolvency for the city's largest pension fund.

Without the fix, the fund that serves more than 70,000 workers and retirees is on track to run out of money within a decade. Less than a day after Emanuel laid out the plan at Chicago's investor conference, the municipal market applauded the proposal. The city's most-actively traded debt traded at 87.98 cents on the dollar Thursday, the highest average price since April 2015, according to data compiled by Bloomberg. The taxable debt that matures in 2042 yields 6.4 percent.

“This is exactly the type of plan we were looking for,” said Ty Schoback, a senior analyst at Columbia Threadneedle Investments, which holds Chicago debt among its $26 billion of municipal securities. “If the tax is successfully ratified by City Council, it will be the last heavy political lift to get all the city's pensions on track to full funding over the long run.”

Chicago hasn't paid enough to pensions for years. Over the last decade alone, the city shorted the municipal fund by more than $4 billion, according to an annual actuarial report. The fund has to liquidate assets to pay out benefits. Combined, the police, fire, municipal and laborers' pensions face $34 billion of unfunded liabilities. The strain is weighing on Chicago's ability to offer services to residents. More than 35 cents of every dollar of the budget goes to pay debt and pensions, according to Moody's Investors Service, which slashed Chicago's rating to junk last year because of the pension crisis.
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  #112  
Old 08-05-2016, 09:49 AM
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http://chicago.suntimes.com/news/ema...and-sewer-tax/

Quote:
Emanuel rules out compromise on water and sewer tax

With an assist from labor, Mayor Rahm Emanuel on Thursday began the formidable task of selling his new utility tax to save the city’s largest pension fund by ruling out compromise and blaming that intransigence on Wall Street rating agencies.

Emanuel said the rating agencies are demanding a single, reliable source of revenue to raise the $250 million needed to put the Municipal Employees pension fund on solid footing and it has to be a tax the City Council can enact without having to rely on the Illinois General Assembly.

One by one, the mayor discussed and dismissed the limited options at his disposal.

He ruled out yet another property tax increase because he has already raised property taxes by $588 million for police and fire pensions and school construction and promised another $250 million hike for teacher pensions.

Ditto for the sales tax because County Board President Toni Preckwinkle beat the city to the punch.

“We have the highest sales tax in the United States of America. I don’t think raising the sales tax higher than it is [at 10.25 percent] is the right way” to go, Emanuel said.

For the first time, the mayor did not dismiss outright the idea of imposing a financial transaction tax on LaSalle Street exchanges. That’s a tax championed by vanquished mayoral challenger Jesus “Chuy” Garcia and the Chicago Teachers Union that bankrolled Garcia’s campaign.

But Emanuel argued that such a tax would need approval in Springfield and the rating agencies won’t wait around for that to happen. Same story with a so-called “commuter tax” on suburbanites who work in the city.

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  #113  
Old 08-08-2016, 10:48 AM
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CHICAGO, ILLINOIS

http://www.chicagotribune.com/news/o...805-story.html

Quote:
Editorial: Chicago aldermen created this mess. Now they dislike Emanuel's proposed fixes.

Nice work if you can get it. Nice and cowardly and irresponsible:

You're a Chicago alderman. Year after year you voted to approve Mayor Richard M. Daley's budgets — as if City Hall was spending no more than it would collect in revenue. Or, if you joined the City Council after Daley's departure, you didn't ask rude questions such as, "How did we get so broke?" You kept quiet. You went along.

You and yours didn't confess to voters that the council and the mayor knowingly had underfunded workers' pensions by many billions of dollars — a debt sure to come due. You held your breath. In the short term, almost nobody noticed. And in the long term, you blithely assumed, city revenue would just keep rising. And there would never be another serious recession. And some future mayor's brainiacs would conjure a magic trick to erase all this debt. And remember what your predecessors told you: Somehow, we've always made it work. Heh.

But now the roof of City Hall is collapsing on you. The national recession that ended in June 2009 still won't quit in your ward. City debt — taxpayer debt, really — is measured in tens of billions and rising. Chicago has the bond market spooked. And Mayor Rahm Emanuel has no magic to keep the pension funds from going bust. So he's asking you for yet another vote to raise a tax, this time on water and sewer bills. Let's be honest, it's a property tax hike by another name.

And you? Because you're an alderman in denial of the mess you've made — your budget votes or your pension-pretend or both — you want a pain-free solution. You always do. Because your constituents are wide awake and their tax burden has them in a fury. They're catching on to what you've done to them. So this time:

You want a progressive income tax to squeeze the millionaires (which, in fact, would require a state constitutional amendment). Or maybe a financial transactions tax (which state government would have to approve). Or a tax on commuters (again, Springfield). Or a sales tax hike (to go atop the biggest sales tax of any big U.S. city, and thank you too, Cook County Board President Toni Preckwinkle, for pushing it to 10.25 percent).

Sure, if you wanted to, you could slash spending and outsource all sorts of operations to more economical private-sector companies. Except slashing spending is as foreign to you as whatever language the locals speak in Uzbekistan. It's just not done here. Besides, if you propose consolidating and streamlining and, yes, outsourcing, the unions that bring you money and muscle and votes will make your life a horror.

......
But wait, you have one escape route. You can suggest a real alternative to this tax increase — some way to raise not chump change, but billions of dollars to feed the pension monster that is eating Chicago.

You have a better idea than Emanuel's proposed tax hike? Let's hear it now.

Otherwise, apologize to your constituents for the pension crisis. Then suck it up and vote.

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  #114  
Old 08-08-2016, 01:33 PM
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CHICAGO PUBLIC SCHOOLS

http://www.chicagotribune.com/news/c...807-story.html

Quote:
CPS will continue to rely on borrowing as it prepares to release 2017 budgets

Months after Chicago Public Schools officials said a dire budget outlook had all but barred the district from the capital markets, the school system is re-engaging lenders to finance construction projects and bolster cash flow.

The district plans to unveil its 2017 operating and capital budgets this week. CPS has said it will balance its operating budget with help from state measures that include the authority to generate $250 million in new property tax revenue.

The district, which has a debt load of nearly $7 billion, also will continue to rely heavily on borrowing. In addition to $150 million in bonds the district sold on the private market last week to fund construction projects and other expenses, CPS also plans to leverage $45 million from a recently enacted property tax levy to borrow hundreds of millions of dollars for additional school construction projects.

Chicago Board of Education President Frank Clark briefed investors on CPS finances Wednesday behind closed doors at the Symphony Center as the district attempts to stabilize its standing with credit rating agencies.

After the state passed a school funding measure in June, CPS said it still had to cover a $300 million budget shortfall. There also is continuing uncertainty over a teachers' contract that is still being negotiated.

In addition to the money from the property tax approved by the state, CPS expects to get about $131 million more in state funding. Another $215 million in state assistance is dependent on consensus on pension reforms by the legislature and Gov. Bruce Rauner.

.....
The district has not provided an official statement on the latest bond sale, a document that clarifies vital details about such deals and updates the district's financial picture. CPS, citing an agreement with J.P. Morgan, said more public information would arrive by September.

The district declined to comment on its agreement with the bank. A copy of that agreement was obtained by the Tribune.

The bonds mature in 2045 and bear interest at an annual rate of 6.5 percent, according to disclosure filings.

Should Standard & Poor's or the Fitch ratings service drop the district's credit rating deeper into junk territory by Sept. 2, CPS' annual interest rate could increase by a half-percentage point up to a "maximum rate" the district would not identify.

CPS sold the bonds last week at initial yields of 7.25 percent, an improvement from the $725 million debt sold in February at initial yields of 8.5 percent, but still far more expensive than typical government borrowing deals.

......
S&P, which downgraded the Board of Education's debt by two notches in January, said much of the state funding amounts to "one-time revenue." The agency said it will maintain a negative outlook on the district's credit at least until it sees the new budget.

Ciccarone was doubtful a severe downgrade of the district's credit is likely. Even if a substantial downgrade triggered a higher base interest rate on the bonds, he said, the additional pressure wouldn't be too severe on a $150 million loan.

"We still have cash flow issues, we still have parts of that stopgap budget that are based on conditions," Ciccarone said.
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  #115  
Old 08-09-2016, 03:13 PM
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http://chicago.suntimes.com/politics...ative-outlook/

Quote:
S&P affirms Chicago’s BBB bond rating and negative outlook

Standard & Poor’s on Tuesday affirmed Chicago’s BBB bond rating and negative outlook — even after Mayor Rahm Emanuel proposed a 30 percent utility tax to save the largest of Chicago’s four city employee pension funds.

“While we believe the city is moving in the right direction toward stabilizing its budget and its pension plans and that the announcement of the new tax is a positive development, in our view there is uncertainty around the new tax until fully approved,” the report states.

“The outlook could be changed to stable if the city’s new water/sewer tax revenue is approved by the City Council without any other obstacles.”

But, the report warned, “In addition to the pressure of funding pensions, there are other aspects of the structural imbalance that bear correcting such as the city’s approach to debt as a source of budgetary relief and the high fixed charges stemming from its high liabilities. We could lower the rating if the city’s budgetary performance worsens in such a way that we believe its budgetary flexibility and liquidity is compromised.”

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  #116  
Old 08-09-2016, 03:17 PM
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CHICAGO PUBLIC SCHOOLS

http://www.chicagobusiness.com/artic...ing10-20160809

Quote:
$5.4 billion CPS budget banks on pension overhaul to close gap

(Bloomberg)—Chicago school officials presented a budget that relies on the state of Illinois passing an overhaul of its underfunded pension system and assumes that the teachers' union will agree to pay more into their retirement funds.

The $5.4 billion operating budget for the fiscal year that began July 1 is more than $230 million smaller than last year's spending plan, district officials said. The plan relies on the state providing the district with an additional $215 million for its pension bills, which lawmakers and Governor Bruce Rauner have agreed to shell out only if the state comes up with a plan to restructure its own retirement system.

“The fiscal '17 Chicago public schools' budget is balanced without gimmicks or without operational borrowing,” Forrest Claypool, chief executive officer of the school system, told reporters on Monday. "Today marks the return to financial stability for the coming school year.”

The district won some relief from Illinois's stopgap budget. The six-month spending plan approved at the end of June allows Chicago to establish a property tax levy up to $250 million specifically to help cover the teachers' pension fund. The retirement system was only 52 percent funded as of June 30, 2015. The school system also secured $131 million of additional state funding from a so-called equity grant to bolster districts with high concentrations of students in poverty.

.....
The 2017 proposal also assumes that the Chicago Teachers Union agrees to a contract that is similar in framework to the agreement that district officials reached with union leadership in January, according to Claypool. Rank-and-file employees ultimately rejected the accord, leaving the district without a contract.

"Without absolute certainty on our labor costs, we have to make, and do make, rational assumptions,” Claypool said in response to questions about the union contract.

The January plan included a two-year phase out of the so-called pension pickup. Since 1981, the district has paid 7 percent of the 9 percent pension contribution that employees are supposed to contribute to their retirement fund. The pension pickup cost the district $130 million last year.

"Make no mistake, if CPS enforces a 7% pay cut, we will STRIKE!!!" Karen Lewis, president of the union, said in a post on Twitter.

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  #117  
Old 08-10-2016, 04:30 PM
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CHICAGO PUBLIC SCHOOLS

http://chicago.suntimes.com/politics...artments-grow/

Quote:
As CPS cuts overall spending, some central departments grow

CEO Forrest Claypool heralded new efficiencies to keep “cuts away from the classroom” earlier this week when he unveiled Chicago Public Schools’ $5.4 billion in budget recommendations for the upcoming school year that will spend about $232 million less than last year.

But at a time when the reduction of classroom teachers outpaces enrollment drops and per-pupil funding is down from a year ago in the cash-strapped district, several central office departments will see increases in their budgets, including an auditing department that Claypool has bulked up since taking the reins of the district about a year ago.
......
CPS’ proposed budget is balanced on paper but depends on a few big ifs — including one from Springfield that requires legislators to pass amorphous “pension reform” by January for $200 million. Another, $31 million, is contingent upon the Chicago Teachers Union going along with a contract proposal they’ve already rejected — prompting CTU president Karen Lewis to begin using the word “strike” again earlier this week.

https://www.dnainfo.com/chicago/2016...-district-says

Quote:
Chicago Teachers Strike Threats Resurface After CPS Announces New Budget

THE LOOP — Chicago Public Schools said Monday it plans to cut $232 million in spending in its budget for the 2017 fiscal year.

Saying it was "balanced without gimmicks ... or operational borrowing," CPS Chief Executive Officer Forrest Claypool said it "puts the district on a path toward fiscal stability while protecting classrooms so Chicago’s students can continue their remarkable gains."

Yet the cuts could come at a potential cost in relations with the Chicago Teachers Union, as it's based on a contract offer rejected by its bargaining team in January.


.....
Claypool insisted that deal, which swaps "a healthy net raise" in exchange for teachers making an additional 7 percent pension contribution, now had assurances for funding teachers said it lacked earlier in the year. He pointed to additional state education funding, saying he expected that to be extended beyond this year's stopgap state budget, and an extra $250 million in Chicago property taxes passed along as part of that deal in the General Assembly.


He urged teachers to accept such a deal in a spirit of shared sacrifice, pointing to "Chicago taxpayers sacrificing for teacher pensions."

"We need teachers to be part of the solution," he said.

Yet Lewis said any deal that ends the district's pension pickup and requires teachers to pay it could lead to a strike.

......
The union and grassroots education groups have backed a package of proposals for added education funding put forth in the City Council. That included a bid to declare a surplus in Tax Increment Finance district funds, to be redistributed to CPS, as well as hiking the tax on business equipment rentals and reinstating the corporate head tax on employees eliminated by Mayor Rahm Emanuel.

They've suggested the proposals could raise an additional $400 million, or about $1,000 per pupil in the district's student-based budgeting formula.

Yet Claypool all but rejected those proposals. He said the budget includes some additional TIF funds, but otherwise "we are going with the revenue streams we have available to us."
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  #118  
Old 08-12-2016, 03:37 PM
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TAXES

http://www.chicagobusiness.com/artic...cipal-pensions

Quote:
Why Emanuel is right to impose this new tax

As mayor, Richard M. Daley sure threw one hell of a bash. Turns out, though, that what we thought was an open bar was actually a cash bar. Now his successor is handing Chicago residents the latest—and what he promises will be the last—tab for the party.

No one wants to pay higher taxes. But Mayor Rahm Emanuel is doing the right thing by raising revenue to fill the shortfalls Chicago has run up in its public employee pension plans. He also deserves credit for negotiating deals with the city's labor unions that should reduce the burden on taxpayers of funding pension benefits going forward.

We wish we could pat Daley on the back, too. But when it comes to how he managed city finances, a kick in the rump is more deserved. To buy labor peace and avoid a taxpayer revolt, he lavished Chicago's unionized workers with generous retirement packages without the means to sustain these payments. Perhaps he thought that when the bills finally came due, another mayor would be able to make ends meet by chopping benefits. The Illinois Supreme Court took that option away earlier this year when it ruled that once promised, public-sector pension benefits can't be taken away under the Illinois constitution.

After hiking property and telephone taxes to pump more money into pension funds for police, firefighters, public school teachers and laborers, Emanuel is proposing a tax on city water and sewer fees to adequately fund pensions for municipal workers. The tax rate would start at 7 percent and rise to 28 percent over four years. Current employees and retirees will keep their benefits, but new employees would have to contribute 11.5 percent of their pay toward their pensions, up from 8.5 percent today.


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  #119  
Old 08-15-2016, 05:53 PM
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http://chicago.suntimes.com/news/chi...dget-hearings/

Quote:
CPS to hold budget hearings this week

Chicago Public Schools has been talking about money nonstop for months as it has wrangled with a $1.1 billion budget deficit and insufficient funding.

This week, it’s the public’s turn to talk back.

The state’s largest school district is holding a series of meetings this week for members of the public to share two minutes’ worth of their minds.

CPS officials will gather feedback on the proposed capital budget of at least $338 million on Wednesday evening, and on Thursday, on a new plan to raise up to $250 million with a property tax levy dedicated to teacher pensions that still need approval from the Board of Education.

But unlike past years, when hearings on the schools’ operating budget were held in evenings out in neighborhoods so working parents could easily attend, these are scheduled for downtown during the workday for the convenience of Board of Education members, CPS said.

That’s despite a recent turnabout by Mayor Rahm Emanuel, whose original decision to hold morning meetings on police misconduct at City Hall was deemed a farce by the commissioner he selected to oversee reforms, the head of the Urban League and activists. Their protestations applied enough public pressure to have several more nighttime neighborhood hearings added to the process.

.....
By law, the schools’ budget must be approved by the Board of Education before Sept. 1. They will take it up at their Aug. 24 meeting, where it is expected to sail through. They’re also tasked with enacting the $250 million tax levy for pensions.

.....
CEO Forrest Claypool unveiled his budget recommendations earlier this month, claiming they would keep cuts away from classrooms despite spending $232 million less than last year.

But balancing his proposed $5.4 billion operating budget depends on more than $200 million from Springfield, which is contingent on lawmakers passing pension reform, and on $31 million in concessions from the Chicago Teachers Union. For its part, the union has already responded with threats they could strike at an undetermined time in the upcoming school year.

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  #120  
Old 08-17-2016, 05:48 PM
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CHICAGO PUBLIC SCHOOLS

http://chicago.suntimes.com/news/cps...o-945-million/

Quote:
CPS wants permission to borrow up to $945 million in new bonds

A cash-strapped Chicago Public Schools seeks to issue almost $1 billion in new bonds, the district announced in a public notice Tuesday.

That’s as the Chicago Teachers Union, angry that CPS’ projections for a balanced budget count on union concessions, offers strike training this weekend.

The latest borrowing for the broke school system will be up to $945 million “for the purpose of financing the rehabilitation, renovation, construction and acquisition of school and administrative buildings and equipment, site improvements and other real and personal property, funding of contract obligations, the purchase of school grounds for the construction of or additions to school buildings and costs of issuance and other costs and reserves related to the foregoing.”

The district will hold a public hearing at 8:30 a.m. on Aug. 24 at its headquarters, 42 W. Madison, just before its 10:30 a.m. meeting, when the Board of Education will vote on authorizing the borrowing.

CEO Forrest Claypool told reporters Tuesday that the authorization would support capital improvements over multiple years and that a $45 million capital levy recently passed by the City Council would primarily pay the bonds back.

“We are confident that investors will find that acceptable,” he said, noting that the board would have to approve actual bond sales when they’re presented in the future.

A spokeswoman wouldn’t specify whether the district intended to go to the open market or into a “private placement” arrangement.

Just last month, CPS borrowed $150 million in a “private placement” with JP Morgan — rather than on the open market — to pay for “critically needed” construction and maintenance work. Several investment websites indicate that investors often expect higher rates of return on such arrangements. In return, they benefit from the typically shorter time it takes for them to be completed.

At 7.25 percent, their interest rates were high — but better than a round of borrowing last winter, when CPS sold $725 million in bonds on the open market at yields of 8.5 percent for investors. Those bonds won’t be paid off until 2044.

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