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Moody’s to Chicago: You’re junk!

Wednesday, May 13, 2015

* From Moody’s

Rating Action: Moody’s downgrades Chicago, IL to Ba1, affecting $8.9B of GO, sales, and motor fuel tax debt; outlook negative

Global Credit Research - 12 May 2015

Also downgrades senior and second lien water bonds to Baa1 and Baa2 and downgrades senior and second lien sewer bonds to Baa2 and Baa3, affecting $3.8B; outlook negative

New York, May 12, 2015 — Moody’s Investors Service has downgraded to Ba1 from Baa2 the rating on the City of Chicago, IL’s $8.1 billion of outstanding general obligation (GO) debt; $542 million of outstanding sales tax revenue debt; and $268 million of outstanding and authorized motor fuel tax revenue debt.

We have also downgraded the following ratings on debt secured by net revenues of Chicago’s water and sewer enterprises: to Baa1 from A2 on $38 million of outstanding senior lien water revenue bonds; to Baa2 from A3 on $2.3 billion of outstanding second lien water revenue bonds; to Baa2 from A3 on $35 million of outstanding senior lien sewer revenue bonds; and to Baa3 from Baa1 on $1.5 billion of outstanding second lien sewer revenue bonds.

We have also downgraded to Ba2 from Baa3 the rating on $6 million of outstanding MetraMarket Certificates of Participation (COPs), Series 2010A, and to Ba3 from Ba1 the rating on $3 million of outstanding Fullerton/Milwaukee COPs, Series 2011A.

Finally, we have affirmed the Speculative Grade (SG) short term rating on $112 million of Chicago’s outstanding Sales Tax Revenue Refunding Bonds, Series 2002.

The outlook on all long term ratings remains negative.

SUMMARY RATING RATIONALE

The Ba1 rating on Chicago’s GO debt incorporates expected growth in the city’s highly elevated unfunded pension liabilities. Based on the Illinois Supreme Court’s May 8 overturning of the statute that governs the State of Illinois’ (A3 negative) pensions, we believe that the city’s options for curbing growth in its own unfunded pension liabilities have narrowed considerably. Whether or not the current statutes that govern Chicago’s pension plans stand, we expect the costs of servicing Chicago’s unfunded liabilities will grow, placing significant strain on the city’s financial operations absent commensurate growth in revenue and/or reductions in other expenditures. The magnitude of the budget adjustments that will be required of the city are significant. Furthermore, Chicago’s tax base is highly leveraged by the debt and unfunded pension obligations of the city, as well as those of overlapping governments. Balanced against the city’s many credit challenges are several attributes, the greatest of which is the city’s broad legal authority to tap into its large and diverse tax base for increased revenue.

The Ba1 rating on Chicago’s sales tax and motor fuel tax debt reflects the absence of legal segregation of pledged revenue from the general operations of the city. This lack of separation caps the ratings at the city’s GO rating, despite sound maximum annual debt service (MADS) coverage provided by pledged revenue.

The Baa1 rating on Chicago’s senior lien water revenue bonds reflects the water enterprise’s large and diverse service area that extends well beyond city boundaries; the Chicago City Council’s unlimited rate setting authority; and sound debt service coverage. These credit attributes are balanced against challenges including an elevated debt ratio and the water system’s status as an enterprise of the city, a connection which we believe links the system’s credit profile to that of the city’s GO. The Baa2 rating on the city’s second lien water revenue bonds is based on the credit characteristics of the senior lien water revenue bonds and the subordinate lien pledge of net water system revenue. The Baa2 rating on Chicago’s senior lien sewer revenue bonds reflects similar credit characteristics as the senior lien water revenue bonds and also incorporates the sewer system’s relatively smaller service area, the boundaries of which are conterminous with those of the city. The Baa3 rating on the city’s second lien sewer revenue bonds is based on the credit characteristics of the senior lien sewer revenue bonds and the subordinate pledge of net sewer system revenue.

The Ba2 rating on the MetraMarket COPs, Series 2010A, reflects the tax increment financing (TIF) district’s moderate equalized assessed valuations (EAV) and sound debt service coverage provided by pledged revenue. The Ba3 rating on the Fullerton/Milwaukee COPs, Series 2011A, reflects the TIF district’s small size, negative trend in incremental EAV growth, and the COPs’ subordinate lien on pledged TIF revenue, which is first used to pay debt service on certain series of the city’s GO debt. The ratings on both series of COPs incorporate the relationship of the TIFs with the city’s GO credit profile.

The SG short term rating on the Sales Tax Revenue Refunding Bonds, Series 2002, is based on the credit fundamentals inherent in the city’s Ba1 long term sales tax rating and the conditional liquidity support associated with the bonds.

OUTLOOK

Our negative outlook reflects our expectation that Chicago’s credit challenges will continue, both in the near term and in the long term. Immediate credit challenges include potential draws on liquidity associated with rating triggers embedded in the city’s letters of credit (LOCs), standby bond purchase agreement (SBPA), lines of credit, direct bank loans, and swaps. The current rating actions give the counterparties of these transactions the option to immediately demand up to $2.2 billion in accelerated principal and accrued interest and associated termination fees. Of this amount, the GO and sales tax revenue rating actions trigger $1.7 billion of potential payments; the second lien water revenue rating action triggers $99 million of potential payments; and the second lien sewer revenue rating action triggers $355 million of potential payments.

The negative outlook also reflects our expectation that Chicago’s credit quality will weaken as unfunded liabilities of the Municipal, Laborer, Police, and Fire pension plans grow and exert increased pressure on the city’s operating budget. In the near term, Chicago’s administration must comply with a 179% contribution increase to its Police and Fire pension plans in 2016.

Developments involving the Municipal and Laborer plans present longer term risks to the city’s credit profile. In our opinion, the Illinois Supreme Court’s May 8 ruling raises the risk that the statute governing Chicago’s Municipal and Laborer pension plans will eventually be overturned. If so, the city’s obligation to fund the Municipal and Laborer plans would likely revert to that which existed before the statute took effect in January 2015. Under the prior funding requirements, the city’s pension contributions were well below the plans’ actuarial requirements. Therefore, if the Municipal and Laborer statute is overturned, and no other adjustments are made to plan revenues and/or expenditures, we believe the plans will continue to extinguish assets to pay annuitants. As the plans move toward insolvency, the city’s credit standing will continue to deteriorate, given our view that the state may eventually implement legislation forcing Chicago to pay annuitants directly. Annuitant payments would materially exceed current employer contribution levels. In our view, Chicago’s ability and willingness to fund annuitant payments, should they be required of the city, is uncertain.

WHAT COULD MAKE THE RATINGS GO UP (or revise the outlook to stable)

    - City or state actions that halt the growth of the city’s unfunded pension liabilities

    - Revenue growth and/or reductions in other operating expenditures that enable the city to accommodate increased pension costs into annual operating budgets

    - Demonstrated legal separation of pledged revenue from the city’s general operations (sales tax and motor fuel tax ratings)

WHAT COULD MAKE THE RATINGS GO DOWN

    - Determination by a court of law that the current statute governing the city’s Municipal and Laborer plans is unconstitutional

    - Continued growth in the debt and/or unfunded pension liabilities of the city and/or overlapping governments

    - Narrowing of the city’s fund balances and liquidity

OBLIGOR PROFILE

The City of Chicago, with a 2010 US Census population of 2.7 million, is the largest city in the State of Illinois and the third most populous city in the US. Chicago’s water enterprise serves an estimated population of 5.3 million in northeast Illinois consisting of residents of the city as well as 125 suburban communities. Chicago’s sewer enterprise serves 2.7 million city residents.

LEGAL SECURITY

Chicago’s GO bonds are secured by a pledge to levy a tax unlimited as to rate and amount to pay debt service. The city’s outstanding CP bank bonds are secured by the city’s GO full faith and credit pledge but do not benefit from a dedicated levy.

Chicago’s sales tax revenue bonds are secured by a senior lien pledge on both receipts of the city’s local home rule sales tax revenue and the city’s share of state sales tax collections.

Chicago’s motor fuel tax revenue bonds are secured by a senior lien pledge on 75% of the city’s annual allocation of state motor fuel taxes as well as additional revenues pledged by the city that primarily consist of dock licensing fees collected from tour boats operating on the Chicago River.

Chicago’s senior lien water revenue bonds are secured by a senior lien on the net revenue of the city’s water enterprise. Chicago’s second lien water revenue bonds are secured by a second lien on the net revenue of the city’s water enterprise. Chicago’s senior lien sewer revenue bonds are secured by a senior lien on the net revenue of the city’s sewer enterprise. Chicago’s second lien sewer revenue bonds are secured by a second lien on the net revenue of the city’s sewer enterprise.

The MetraMarket COPs, Series 2010A, and the Fullerton/Milwaukee COPs, Series 2011A, are secured by a pledge of payments made by the city on developers’ notes to finance redevelopment in the respective TIF districts. Neither series of COPs is an obligation of the City of Chicago. The city’s payments on the respective development notes have been assigned to the trustees by the developers as security on the COPs.

One thing the city needs to do right away is separate those special funds from the general operating fund. But that’s only a small step.

* React from Mayor Rahm Emanuel

“While Chicago’s financial crisis is very real and at our doorsteps, today’s irresponsible decision by Moody’s to downgrade the City’s credit by two steps goes far beyond that reality. Their decision was driven solely by the overturning of a state pension bill that did not include Chicago’s pension reform, yet they did not downgrade the State of Illinois. Moody’s is out of step with other rating agencies – by as many as six steps – as they refuse to acknowledge Chicago’s growing economy, progress we have made on our legacy financial liabilities, balancing four budgets without raising property taxes while adding to our reserves, securing pension reforms for two of the City’s four funds to preserve and protect retirements for 61,000 employees that were previously in danger, and the progress we are now making with our partners in labor at the other two city funds. This action by Moody’s is not only premature, but it is irresponsible to play politics with Chicago’s financial future by pushing the City to increase taxes on residents without reform. I am committed to focus on both reform and revenue to address Chicago’s fiscal crisis, and we will continue our work in Springfield and with our partners in labor to ensure we will always meet our obligations, protect the retirements of our workforce, continue to deliver vital city services, while protecting our taxpayers.”

“(I)t is irresponsible to play politics with Chicago’s financial future by pushing the City to increase taxes on residents without reform.” Heh. Sounds a bit like the governor.

* Tribune

One analyst was sympathetic to the mayor’s argument that Moody’s acted too quickly, but noted the message being sent about Emanuel’s leadership as he enters a second term.

“A cut below investment grade is a major statement, implying that there is material risk to the city not paying its bondholders on time or in full,” said Matt Fabian, a managing partner at Municipal Market Analytics. “To have gone there without waiting to see the city’s approach to the current budget gap, or whether or not they will raise revenues is clear demonstration of a lack of confidence in city management. In other words, they see little reason to wait because they expect little in the way of a management response.” […]

Some financial analysts said they were caught off guard by the downgrade, which came less than three months after another significant Moody’s downgrade of Chicago’s debt. Those analysts said they weren’t sure if the Moody’s action would increase city borrowing costs, given that other agencies have given the city higher ratings and the city’s already paying relatively high interest rates.

“The downgrade is a surprise to me, because I see no reason to give up on management yet,” Fabian said. “There is still time for them to formulate a plan and, over time, fix their budget issues.”

* Reuters

Clint Krislov, the attorney representing retired city workers in one of two lawsuits against the Chicago pension reform law, said he will ask a judge on Wednesday for a summary judgment invalidating the law. […]

The latest Moody’s downgrade gives banks that provide credit support and interest-rate swaps the right to demand a total of $2.2 billion in accelerated principal, interest and termination payments from Chicago, according to Moody’s.

Chicago debt has been trading at huge spreads over the municipal market’s triple-A benchmark yield scale. Chicago’s descent into junk status could obligate managers of some high-quality muni funds to dump the city’s bonds, warned Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management.

“We would continue to urge investors to have an extreme level of caution here,” Heckman said.

If Krislov is successful, we could see a stampede.

* Sun-Times

Budget Director Alex Holt said Tuesday the city plans to forge ahead with that plan, even though “swaps that overlay variable rate debt” could be called in immediately as a result of the double-downgrade.

“If they do, there will be termination payments we’ll need to make. But we were going to take out $200 million in variable rate debt anyway over the course of this year,” Holt said.

As for the city’s ability to borrow to fund capital projects, Holt said, “We think the capital markets will continue to be available to us. We think investors still have confidence in the city.”

Yeah, but some institutional investors won’t be able to buy those bonds now.

- Posted by Rich Miller        

50 Comments
  1. - Steve - Wednesday, May 13, 15 @ 8:44 am:

    Chicago is clearly boxed in. Can they raise sales taxes much higher ? Michigan Ave. has some of the highest sales taxes in the country. How much higher can property taxes in Chicago go? Rahm has talked , in the past, of increases of anywhere from 50% to 100% on property. The issue is simply this: who’s going to have a diminished standard of living? Government workers or people who pay the salaries and pensions of government workers? The Illinois Supreme Court says the taxpayers have to pay, deep and hard. Can Illinois thrive as taxpayers have less disposable income do to coming tax increases?


  2. - MrJM - Wednesday, May 13, 15 @ 8:45 am:

    And I thought Mayor Ruthless Gravitas was supposed to inspire the bond markets in a manner that would forestall such misfortunes.

    Guess I misunderstood…

    – MrJM


  3. - Precinct Captain - Wednesday, May 13, 15 @ 8:46 am:

    Huh, I recall hearing in March and April that electing Chuy would lead to this result, not re-electing The Great Financial Wizard. Oops.

    More to the point, it is clear–and has been for those paying attention–that Emanuel’s supposed sway with Wall Street is more about a personal fundraising brand than it is a two way street with regards to his credibility as a financial manager.


  4. - Demoralized - Wednesday, May 13, 15 @ 8:48 am:

    ==The issue is simply this: who’s going to have a diminished standard of living? Government workers or people who pay the salaries and pensions of government workers?==

    What is it with this ridiculous argument? Do you think government workers are exempted from all of the actions the government would take with regard to increasing revenues? Can we please stop with this inaccurate argument?


  5. - Demoralized - Wednesday, May 13, 15 @ 8:49 am:

    ==The Illinois Supreme Court says the taxpayers have to pay, deep and hard==

    To add on to what I said above, EVERYONE pays those taxes, INCLUDING government workers. Stop with that argument.


  6. - Wensicia - Wednesday, May 13, 15 @ 8:49 am:

    He no longer has a choice; Emanuel will have to raise property taxes.


  7. - Precinct Captain - Wednesday, May 13, 15 @ 8:50 am:

    Hello Steve, thanks for the fact free rant so early. Chicago does not have high property taxes compared to its neighbors. I believe Rich posted Phil Kadner’s recent article pointing out this fact. In other words, property taxes should go up.


  8. - Anonymous - Wednesday, May 13, 15 @ 8:55 am:

    “Whether or not the current statutes that govern Chicago’s pension plans stand, we expect the costs of servicing Chicago’s unfunded liabilities will grow, placing significant strain on the city’s financial operations absent commensurate growth in revenue and/or reductions in other expenditures. ”

    Seems that Moody’s is saying that Chicago is in a bind regardless of litigation or legislation and that taxes/cuts need to be in the mix under any scenario.


  9. - Cassiopeia - Wednesday, May 13, 15 @ 8:58 am:

    Tax increases are inevitable on both the state and local level and no matter how much the politicians squirm there is no other way around this clear and simple fact.


  10. - Steve - Wednesday, May 13, 15 @ 8:59 am:

    - Precinct Captain -

    High property taxes. Compared to the Chicago suburbs you do have a valid point. However, nationally?

    http://www.chicagomag.com/real-estate/January-2014/Illinois-Now-Has-the-Second-Highest-Property-Taxes-in-the-Nation/


  11. - Juvenal - Wednesday, May 13, 15 @ 9:02 am:

    === yet they did not downgrade the State of Illinois. ===

    First, don’t worry: Illinois is next if they don’t get their act together. But Illinois also has many more revenue options at its disposal.

    Unfortunately for you, the most likely one is the one your pal the governor has already floated: reducing the local distribution of taxes.

    Never waste a crisis, Mayor, but don’t waste your blame on Moody’s. Aim the barrel at the governor where it will do you some good. When you raise property taxes, blaming Moody’s will do you no good, but blaming Rauner for cuts to your budget will.


  12. - Michael Westen - Wednesday, May 13, 15 @ 9:03 am:

    Isn’t that why the Chicago media all went into the tank for Emanuel? The meme (false) was that only with the great leadership of Rahm could Chicago avert this type of thing.

    Good thing Chuy didn’t get in there!


  13. - Juice - Wednesday, May 13, 15 @ 9:03 am:

    On the institutional investor front, Moody’s is the only agency that has the City outside of A territory (for the time being), let alone in junk status. I guess it probably depends on the institution, but maybe there is the possibility, with a bit of massaging, that the City could still attract institutional investors if whoever replaces Lois can convince them that Moody’s should be ignored and they should rely on Fitch, S&P and Kroll.


  14. - Cassandra - Wednesday, May 13, 15 @ 9:06 am:

    Property tax increases do, however, appear to have a special significance to Chicagoans, witness Mayor Rahm’s rather extraordinary efforts to avoid them pre-election. And Chicagoans may well be looking at a state income tax increase as well. I know, it’s really just a resumption of the one they were already paying, but the longer the “suspension,” the more it feels like a new increase. And that’s not counting the possibility of a retroactive component.

    On the other hand, Chicago is a heavily Democratic city whose elites claim to be 21st century progressives. So, we’ll see.


  15. - Anon. - Wednesday, May 13, 15 @ 9:07 am:

    ==Huh, I recall hearing in March and April that electing Chuy would lead to this result, not re-electing The Great Financial Wizard. Oops.==

    Brings to mind the old joke: “They said that if I voted for Goldwater, within a year there would be half a million of our boys fighting in Viet Nam. Like a fool, I voted for him, and they were right.”


  16. - Juvenal - Wednesday, May 13, 15 @ 9:12 am:

    Cassandra:

    Part of the problem for Rahm — and he does deserve some sympathy — he cannot structure a property tax hike, reform the budget, or restructure debt until he knows what state funding for both the city and CPS looks like.


  17. - Norseman - Wednesday, May 13, 15 @ 9:20 am:

    The lifting just got geometrically heavier for the Governor and General Assembly this session. Since they’ve wasted years on unconstitutional approaches, they now have weeks to come up with new legal ideas that will reassure the ratings agencies.


  18. - Greg - Wednesday, May 13, 15 @ 9:22 am:

    Steve,

    That article states that Illinois (a state) has the second highest property taxes in the country. Rich posted an analysis from stating that Chicago (not a state) could raise its property taxes by 50% and still be less than New Jersey.


  19. - Wordslinger - Wednesday, May 13, 15 @ 9:23 am:

    Anybody want to give the former World’s Greatest Mayor Ever a call and see what he thinks? Or is he tuning up for the 2016 Olympics he tried to sell all the city’s assets for?

    The Big Money “business community,” led by the Civvies and Tribbies, sure thought he was El Gravitas Grande.


  20. - John A Logan - Wednesday, May 13, 15 @ 9:25 am:

    At least we have a governor with a well balanced approach to revenue vs. spending cuts. His even handed approach should spur business growth and place enough confidence in the rating agencies to make this a bump in the road.

    #ifkirkdillardhadbeenelected


  21. - Anonymous - Wednesday, May 13, 15 @ 9:26 am:

    ===How much higher can property taxes in Chicago go?===

    According to the most recent report on property tax rates in Cook County by David Orr, the Cook County Clerk, Chicago has the lowest composite property tax rate in Cook County.

    http://cookcountyclerk.com/tsd/DocumentLibrary/2013%20Tax%20Rate%20Report.pdf (see page 4 of the report)

    The most recent composite property tax rate for Chicago was 6.832. The highest composite property tax rate in the county was 34.947 in the Village of Ford Heights.

    It appears that there is considerable room for property tax increases in the City of Chicago.


  22. - Muscular - Wednesday, May 13, 15 @ 9:29 am:

    Rahm’s defiance sounds like he is still willing to borrow money so aldermen can hand out free doggie dudu bags. Serious reform can only happen when Chicago stops long term borrowing to pay for short term needs.


  23. - Gooner - Wednesday, May 13, 15 @ 9:29 am:

    Steve’s just wrong.

    Personally, low property taxes were one factor keeping me in Chicago. We looked at other areas (especially Evanston) and ruled them out for that reason.

    Now it is time. We benefited for a long time from low taxes. We bought some cool stuff (notably the huge improvements to Millenium Park which will help draw tourists). It is time to pay for it. If my alderman wants to back a property tax increase, I’ve got his back.


  24. - MrJM - Wednesday, May 13, 15 @ 9:29 am:

    We aren’t the government.
    https://www.youtube.com/watch?v=kqoBZLSm1WA

    Steve,

    An Appeal to Authority is a fallacy with the following form: Person A is (claimed to be) an authority on subject S. Person A makes claim C about subject S. Therefore, C is true.

    And about that “authority” — http://en.wikipedia.org/wiki/Murray_Rothbard

    But other than that…

    – MrJM


  25. - east central - Wednesday, May 13, 15 @ 9:30 am:

    Moody’s may have done the City a favor in bolstering its ability to convince legislators to avoid cutting allocations to municipalities.

    Perhaps their timing was not so bad.


  26. - Robert the 1st - Wednesday, May 13, 15 @ 9:36 am:

    “EVERYONE pays those taxes, INCLUDING government workers. Stop with that argument.”
    True. But the only group of taxpayers chanting “raise the taxes” in downtown Springfield were public union members as I recall it.


  27. - walker - Wednesday, May 13, 15 @ 9:36 am:

    Pretty aggressive to knock the ratings down two or more levels, based solely on the ISC decision on state pensions, because that makes them fear an ISC rejection of a City pension law.

    Is there a realistic forecast that the city law will be legally challenged and fail?

    They’ve taken the better-overly-safe-than-embarrassed position.


  28. - Careful what you wish for - Wednesday, May 13, 15 @ 9:38 am:

    Honest question. Could the city mortgage it’s assets to refinance it’s debt? It looks like there are about 8B in outstanding general obligation bonds and the city’s rate is likely exceeding 6% after this latest downgrade. With a reasonable LTV and some of it’s prime real estate assets to back the loans, (thinking O’Hare, City Hall, Museums, etc) they should be able to get a 30 year rate closer to 3%. I realize that putting city assets at risk seems crazy and would like to see something to prevent them from using this to add new debt, but desperate times…


  29. - Hit or Miss - Wednesday, May 13, 15 @ 9:39 am:

    I wonder when Fitch and S&P will downgrade (again) the bond rating of Chicago?


  30. - ejhickey - Wednesday, May 13, 15 @ 9:50 am:

    Why not consider a city income tax on the income of anyone who lives or works in Chicago? There could be two rates : one for people who live and work in the city and one for commuters. It would probably raise more money than merely raising property taxes alone since more people would be subject to it. NYC has an income tax and it hasn’t seem to have had a negative impact


  31. - Arsenal - Wednesday, May 13, 15 @ 9:54 am:

    “The issue is simply this: who’s going to have a diminished standard of living? Government workers or people who pay the salaries and pensions of government workers? ”

    You have created a distinction that does not exist in reality. Government workers pay taxes, and non-government workers use the services the government workers provide. “Do it to Julia!” doesn’t work here, Winston; everyone’s in this together.


  32. - D.P.Gumby - Wednesday, May 13, 15 @ 9:56 am:

    The bond rating agencies are the biggest scams since Bernie Madoff. They have far too much influence and contribute little in the government bond rating field, where they really don’t belong. It’s really like a grade school popularity contest.


  33. - Arsenal - Wednesday, May 13, 15 @ 9:58 am:

    ==The Illinois Supreme Court says the taxpayers have to pay, deep and hard==

    Also, not sure how “deep and hard” it’s going to be; as everyone here has pointed out, at the state level, the pension debt was manageable when the income tax was at 5%, and while I appreciate the extra $40 a month I get since it expired, I certainly managed just fine without it for four years.

    It is best not to exaggerate here.


  34. - From the 'Dale to HP - Wednesday, May 13, 15 @ 10:00 am:

    =====Matt Fabian, a managing partner at Municipal Market Analytics. “To have gone there without waiting to see the city’s approach to the current budget gap, or whether or not they will raise revenues is clear demonstration of a lack of confidence in city management. In other words, they see little reason to wait because they expect little in the way of a management response.”=====

    Wow. Moody’s telling Rahm they see little evidence he can run the city, wonder if anyone catches/latches on to this.


  35. - Anon2U - Wednesday, May 13, 15 @ 10:03 am:

    Rhambo calling Moody’s decision “irresponsible” is priceless. No Mayor, the way Chicago has been run, and our state for that matter, is what irresponsible really looks like.


  36. - grumpy - Wednesday, May 13, 15 @ 10:09 am:

    Is this downgrade the work of Ty Fahner and Civic Committee, again? Are they claiming it as a result of their own lobbying effort as they did for Illinois bond ratings?

    (Oops! Is it rude to bring up that unpleasant history up again?)


  37. - RNUG - Wednesday, May 13, 15 @ 10:10 am:

    === yet they did not downgrade the State of Illinois. ===

    A lot of the rating companies already factored that in the last time. Unlike the politicians, they knew SB-1 was unconstitutional.


  38. - Steve - Wednesday, May 13, 15 @ 10:26 am:

    Since many people commenting seem to believe that Chicago’s property taxes aren’t that high, consider this.Let’s say Joseph Sixpack on the northside of Chicago who’s paying $13,000 in property taxes is asked to pay $20,000 for living in Chicago. What if Joseph Sixpack sells his house because his children aren’t going to the fine Chicago public high schools now and there are “few ” takers for his house with a new whopping $20,000 tax bill? This could happen. Much higher property taxes might “clip” the property values in Chicago. At least , in many of the suburbs, higher taxes go to better public schools. Can Chicago say that?


  39. - Anon - Wednesday, May 13, 15 @ 10:31 am:

    @ grumpy: Lois Scott said it was intentional to “reform” pensions. http://chicagopolicyreview.org/2014/01/10/focus-on-finance-funding-pensions-in-the-windy-city/

    And to the income tax question from ejhickey. It’s probably the best idea, but it requires authorization from the legislature.


  40. - Juvenal - Wednesday, May 13, 15 @ 10:36 am:

    Steve:

    No one is arguing that Chicago should not improve the quality of their public schools.

    In fact, I think most people would agree with you that a property tax out to be coupled with public school improvements, and not just window-dressing like free laptops or more charter schools.

    But actual, honest-to-goodness reforms that mean that the quality of your child’s education does not depend upon 1) your zip code, 2) a lottery, 3) your ability to pay private school tuition.


  41. - Gooner - Wednesday, May 13, 15 @ 10:47 am:

    Steve, where would “Joe” move? As noted, taxes in most of the suburbs are higher.


  42. - Bertram - Wednesday, May 13, 15 @ 10:52 am:

    The most recent composite property tax rate for Chicago was 6.832. The highest composite property tax rate in the county was 34.947 in the Village of Ford Heights.

    Great, let’s turn Chicago into another Ford Heights. Ever been to Ford Heights?


  43. - Wordslinger - Wednesday, May 13, 15 @ 11:25 am:

    – Great, let’s turn Chicago into another Ford Heights. Ever been to Ford Heights?–

    Ever been to Chicago?

    You real that’s a reasonable contribution that just had to be made?


  44. - Arsenal - Wednesday, May 13, 15 @ 12:03 pm:

    “True. But the only group of taxpayers chanting “raise the taxes” in downtown Springfield were public union members as I recall it.”

    Yeah, that’s kind of exactly the point.

    Although it’s worth pointing out that plenty of non-government workers have VOTED for tax hikes, or politicians promising them.

    Point is, this false dichotomy between government workers and non-government workers is just one more example of “Let’s you and him fight.”


  45. - ejhickey - Wednesday, May 13, 15 @ 12:14 pm:

    Anon: thanks. You are correct. A city income tax would require GA approval. I don’t know how likely that is but right now everyone in office seems afraid to even utter the words “city income tax” especially if it would apply to city residents. If it can’t even be discussed , it is going nowhere.


  46. - anon - Wednesday, May 13, 15 @ 12:47 pm:

    ===How much higher can property tax rates in Chicago go. ===

    If the rate rises 50% then it would equal the rate in Schaumburg. Chicago home owners pay about the lowest property taxes in the state.


  47. - anon - Wednesday, May 13, 15 @ 12:57 pm:

    === What about a City income tax? ===

    Indiana allows counties to tax incomes,yet conserv- atives constantly hold up the Hoosier state as a model. If a county income tax is just dandy, the why not a City income tax? McSweeney would be apolectic.


  48. - Juvenal - Wednesday, May 13, 15 @ 1:42 pm:

    ejhickey:

    The reason a city income tax cannot be discussed is not because of fear of taxing city residents.

    The real fear is that income tax would be paid - as it should be - based on where it is earned.

    Governor Rauner mockingly pointed out that Chicago is “only” about 1/4 of the state’s population.

    But hundreds of thousands of people travel from the suburbs to work every day, and the real fear of the 1% is that the Chicago City Council will have the authority to tax income earned in the city by people who live on the horse farms in Barrington.


  49. - steve schnorf - Wednesday, May 13, 15 @ 5:04 pm:

    the crows that just roosted have been circling for a long time


  50. - Bertram - Thursday, May 14, 15 @ 4:50 pm:

    I guess I’ll take that as a “no”.


Sorry, comments for this post are now closed.


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