Chicago Debt Watch

[campbell]

Yeah, once I saw this story, I decided Chicago needed to be split off from the Illinois debt watch thread.

http://chicago.cbslocal.com/2013/11/...llennium-park/

A budget watchdog group said it’s surprised – and troubled – to learn former Mayor Richard M. Daley borrowed millions of dollars to pay for day-to-day operations at Millennium Park.

WBBM Newsradio Political Editor Craig Dellimore reports the Daley administration took out nearly $30 million in loans to run the park, from the year after it opened, until Daley left office.

Laurence Msall, president of the Civic Federation, said the deal went unnoticed until recent city budget hearings.

“Because of the way that the money for the bonds is put into the city budget, it was difficult to find it … to find the exact use and purpose of that borrowing,” he said.
.....

Msall said, if the City Council had the independent budgeting office it is scheduled to get next year, the borrowing might have been caught.

Yeah, borrowing to cover operating costs is not a good thing.

[campbell]

more on the situation:
http://articles.chicagotribune.com/2...-debt-payments

Former Mayor Richard M. Daley borrowed nearly $30 million to cover the costs of running Millennium Park, loans that started the year after one of his signature achievements opened late and over budget and ended after he left office.

As a result, taxpayers so far have been saddled with $3.5 million in interest costs to keep open the 24-acre showpiece that features gardens, an outdoor pavilion and the Cloud Gate sculpture commonly called the Bean.



It was an unusual way to pay for day-to-day expenses, akin to a struggling family using a line of credit to pay for groceries. And it's a small amount compared with the billions of dollars in bond money Daley spent in a similar fashion as detailed in a Tribune investigation published Sunday. But the Millennium Park loans stand as another sign of how the city has lived beyond its means.

.....
The Millennium Park debt costs are just one of the so-called "legacy liabilities" from the Daley years. Those costs include payments that will become necessary to restore the financial health of underfunded public pension systems and to pay for borrowing that multiplied during Daley's years in office.

......
"At that time, they were also drawing down the reserves from the lease of the (Chicago) Skyway and the parking garage under Grant Park and the parking meters to prop up the operating budget," Msall added. "It is both expensive and not recommended because it not only requires you pay to the interest, but it leaves a hole in the next year's budget because you don't bring your revenues in line with your expenditures."

......
The previously unknown borrowing is the latest financial issue to surface with Millennium Park. The much-praised Daley accomplishment was completed late, cost far more than estimated and continues to be the source of some controversy.



When Daley first proposed building Millennium Park in the late 1990s, he estimated the cost at $150 million. It eventually topped $500 million.

A few years after its completion in 2004, it became clear that revenues from a parking garage beneath park were not going to pay off its public construction debt, even after private donors stepped up to cover much of the cost.

So in 2006, the city leased that garage and three others owned by the Chicago Park District to Morgan Stanley for 99 years. In return, the city got a one-time payment of $563 million. Most of that was to be used to retire debt on the four garages, including nearly $208 million in Millennium Park debt.

Ah, Chicago.

[Smartbill]

http://www.chicagotribune.com/news/l...0,959918.story

[campbell]

Originally Posted by Smartbill

http://www.chicagotribune.com/news/l...0,959918.story

City hit with 1 more debt downgrade of bonds

By Hal Dardick and Ray Long, Chicago Tribune reporters
November 12, 2013
A second bond rating agency has downgraded the city of Chicago's debt worthiness by three notches, citing recently failed efforts to shore up financially ailing government worker pension systems.

The downgrade by Fitch Ratings came after the General Assembly adjourned its fall session without addressing problems in the city's four pension funds, which are about $19.5 billion short of what's needed.

.

[silverfox]

Originally Posted by campbell

Yeah, once I saw this story, I decided Chicago needed to be split off from the Illinois debt watch thread.

http://chicago.cbslocal.com/2013/11/...llennium-park/




Yeah, borrowing to cover operating costs is not a good thing.

To say that the borrowed money was to run millennium park seems ridiculous. It's really just a matter of allocation. If they operated millennium park out of general funds and then decided to borrow money to pay police and fire salaries, doesn't it sound better?

[silverfox]

Unless they put up Millennium Park up as collateral. Then it seems just to earmark the bond.

[campbell]

Originally Posted by silverfox

To say that the borrowed money was to run millennium park seems ridiculous. It's really just a matter of allocation. If they operated millennium park out of general funds and then decided to borrow money to pay police and fire salaries, doesn't it sound better?

No.

Borrowing to cover operational costs is what caught my attention, not what it was operational costs for - that's why I spun this thread off.

Yes, what would be getting local play is that it's for the park, given most people don't understand the concept of matching debt lifetime to lifetime under which good/service is used. Most people don't understand why borrowing for operational costs is a bad sign of a debt spiral

[campbell]

I will have to dig up the parking meter deal, which should have been a first sign.

It was a hideous contract for Chicago

[silverfox]

Parking meter with laz was fiasco for sure. My opinion is they should have made meter maids commission based and raised the rates. The meters have all been upgraded to take plastic which is very nice and I doubt would have happened this quickly under public operation.

[Jeremy Gold]

My take on borrowing to meet operating costs:

http://www.pbs.org/newshour/rundown/...ners-safe.html

Every public pension plan less than 100% funded is a form of borrowing to meet operating costs.

Chicago, $30 million, pfft.