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No surprise: Quinn says “no can do” on city pension plan

Monday, Apr 7, 2014

* Despite some media attempts to blame the stall of Rahm Emanuel’s pension proposal on mysterious behind the scenes maneuvering, sometimes a cigar is just a cigar, especially when it involves a property tax hike

Gov. Pat Quinn on Monday made clear he’s not on board with Mayor Rahm Emanuel’s proposal to hike property taxes as a way to solve a looming pension crisis in the City of Chicago.
In a news conference today on the Near West Side, Quinn repeatedly referred to Emanuel’s plan as only a “sketch” but said he would not back a plan that relied heavily on property tax hikes.

“What I saw last week wasn’t a plan, it was a sketch,” Quinn said. “It was a sketch that would relegate property owners in Chicago, families and businesses to a future of higher and higher property taxes. I don’t think that’s a good way to go.”

“They’ve got to come up with a much better, comprehensive approach to deal with this issue,” Quinn continued. “But if they think they’re just going to gouge property tax payers, no can do. We’re not gonna go that way.”

I’m told we can expect another amendment soon, perhaps today, that will strip out the property tax language. Nothing has surfaced yet as I write this, however.

…Adding… They mayor tries to dodge responsibility for the language

“We finally have a model that brings both reform and revenue together,” Emanuel said at an unrelated news conference when asked whether state lawmakers can be spared having to vote on a version with the property tax language in it. “It was never anyone’s intention to have Springfield deal with that. That’s our responsibility. But I do believe, to actually give the 61,000 workers and retirees the certainty they deserve, you need reform and revenue. And we’ll deal with our responsibility.”

“We will work through the issues,” he said when asked again whether he’s willing to take the tax language out of the state bill.

* Meanwhile

A leading credit rating agency has called legislation to overhaul to Chicago’s pension funds a “positive development” but says it won’t solve all the city’s problems.

The analysis by Moody’s Investor Service was released Monday. It says the proposal is “modestly credit positive” because it tackles the city’s massive and growing underfunded pension liabilities.

* But

…Moody’s continues, the proposal calls for hitting a funding target of 90 percent in the city’s municipal and laborers’ retirement system in 40 years, not the normal 30 years that actuaries recommend. Because of that and other factors, unfunded liability in the two pension funds, which Moody’s sets at $13.8 billion in 2012, would resume rising after a brief dip. While the unfunded liability eventually would drop if plan assumptions are met, “if annual investment returns fall short of the assumed 7.5 percent, the risk of plan insolvency may well reappear.”

Moreover, Moody’s adds in what definitely is a gray-Monday report, “the proposal does not address” a shortfall in police and fire funds for which the city faces a $600 million increase in contributions next year under current state law.

Despite all those sour words, Moody’s, which rates city debt Baa1 with a negative outlook, just a couple of levels above junk, terms Mr. Emanuel’s proposal “modestly credit positive.” But Moody’s says that “even with reform, pensions will continue to weigh heavily on Chicago’s credit quality.”

- Posted by Rich Miller        


19 Comments
  1. - Commander Norton - Monday, Apr 7, 14 @ 1:35 pm:

    Do you mean the new amendment would strip out the property tax language?


  2. - fed up - Monday, Apr 7, 14 @ 1:37 pm:

    Hmm Quinn says no to Chicago Casino and no to Rahms property tax hike, maybe Rahm will be supporting Bruce for Gov.


  3. - wordslinger - Monday, Apr 7, 14 @ 1:38 pm:

    Can’t the City Council just do this own their own?

    Aren’t they just looking for political cover so they can pretend the GA “made” them raise property taxes?


  4. - Norseman - Monday, Apr 7, 14 @ 1:39 pm:

    Rich, your headline says it all!


  5. - Yellow Dog Democrat - Monday, Apr 7, 14 @ 1:45 pm:

    I’m not sure how an amendment changes things.

    Assuming property taxes are going up, how does it matter in a political campaign whether there is still specific language in the bill?


  6. - wordslinger - Monday, Apr 7, 14 @ 1:49 pm:

    Rahm “tries to dodge responsibility?” What a shock.


  7. - Chi - Monday, Apr 7, 14 @ 1:52 pm:

    Word-

    The City Council can put more money into the funds on their own, but they can’t alter the benefit structure on their own.


  8. - wordslinger - Monday, Apr 7, 14 @ 1:59 pm:

    Thanks Chi.

    The property tax language has confused me. I took that part of it as a way to make the GA wear the jacket for the property tax raise.

    Why anyone thought they would go for that is beyond me.


  9. - Jack - Monday, Apr 7, 14 @ 3:07 pm:

    They can strip out the property tax language and put in corporate subsidy cutbacks.


  10. - A guy... - Monday, Apr 7, 14 @ 3:09 pm:

    Funny…they were about to vote on that Sketch.


  11. - Precinct Captain - Monday, Apr 7, 14 @ 3:23 pm:

    “It was never anyone’s intention to have Springfield deal with that.” Except, that was exactly Rahm’s intention and was reported months ago.

    Second, this is the same Rahm that talks about holding the line on property taxes with one side of his mouth while praising CPS raising property taxes. That’s not holding the line on property taxes when you appoint the entire CPS board and they act at largely at your discretion.

    http://www.suntimes.com/13464373-460/mayor-defends-41-million-school-property-tax-hike.html


  12. - Rod - Monday, Apr 7, 14 @ 5:07 pm:

    Governor Quinn would have been wise just to side step the Chicago pension issue for as long as possible. While opposing property tax increases is normally good politics, opposing it in this situation and just saying “They’ve got to come up with a much better, comprehensive approach to deal with this issue. But if they think they’re just going to gouge property tax payers, no can do. We’re not gonna go that way,” really offers no solution.

    Not that Bruce Rauner has a constitutional solution either. As many of us have commented on this blog Chicago’s property tax rate is near the lowest if not the lowest in Cook County. So this is not exactly gouging Chicago tax payers, including the Governor himself. But the truth also is there are still three other pension funds to deal with and going to property taxes to solve all of those would be impossible. Until the Governor actually had something that could at least pretend to be a comprehensive approach to deal with the pension funds he would have been wise to be silent.


  13. - regular democrat - Monday, Apr 7, 14 @ 5:33 pm:

    Could the gov be trying to check mate the mayor into using his beloved TIF dollars to shore up the pension funds? That would be a good start.


  14. - Just Me - Monday, Apr 7, 14 @ 6:20 pm:

    Quinn to Mayor: “When the GOVERNOR wants to raise taxes it is the will of the people, when the MAYOR wants to raise taxes it is because you aren’t trying hard enough.”


  15. - Just The Way It Is One - Monday, Apr 7, 14 @ 7:46 pm:

    “No can do.” Well, Rahm, at least for the time being, friend, guess that about sums it up…!


  16. - Yellow Dog Democrat - Monday, Apr 7, 14 @ 11:20 pm:

    @Rod -

    You and the bond houses make the some point.

    The big deal is that this is not the big deal.

    We are talking a $250 tax hike for residents and $675 for commercial, for a $250K property.

    But the other pension funds have a problem that is 12 times larger.

    One would expect the other pension funds begin negotiating to increase the taxpayer contribution, starting at $3K for homeowners. Ouch.


  17. - Jack - Tuesday, Apr 8, 14 @ 8:16 am:

    Again, revenue needs to also come from corporate subsidy and perk cutbacks. It is only fair they become part of the equation.


  18. - Chris - Tuesday, Apr 8, 14 @ 11:37 am:

    “One would expect the other pension funds begin negotiating to increase the taxpayer contribution, starting at $3K for homeowners. Ouch.”

    But that would mean that all of the ‘residency required’ current employees would have to pony up forhte taxes, too. Police and Fire might be willing to live with $3-400 property tax increases, but they’d choke (along with everyone else!!) on $3-4,000 increases.

    If Chicago property taxes *actually* double, with services being cut, too, then we can all watch the death spiral begin. And I don’t believe in the Chicago = Detroit storyline. But I know that I would be hard pressed to stay in the city (and stay with CPS) and pay taxes at Winnetka levels.


  19. - Jimbo - Tuesday, Apr 8, 14 @ 1:55 pm:

    The way I see this is that Rahm didn’t want to wear the blame for the increase. He wanted the lege to wear it. Why on earth would they want to do that? I can’t believe anyone thought the mandated increases had a shot.


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