Comments on: The myth of Chicago’s “shadow budget” Bridges, budgets, bonds Mon, 24 Nov 2014 00:29:08 +0000 hourly 1 By: Cate_Long Wed, 16 Apr 2014 18:03:46 +0000 Hi tmnolte:

You are 100% right. This piece was written before Detroit had their UTGO settlement for 74 cents on the $ (City had offered UTGO bondholders 15 cents on the $).

Although the UTGO & TIF revenue streams in Detroit are separate I still believe funding the new Detroit Red Wings hockey arena with tax monies is not right. Bondholders were impaired and the fiscal needs of Detroit and its school district are massive.

By: tmnolte Thu, 10 Apr 2014 18:35:26 +0000 Ms. Long, as usual great discussion.

I wanted to as about this particular sentence:

“…while general obligation bondholders are slated to receive 15 cents on the dollar in the city’s bankruptcy. Using TIF revenues in a bankrupt city for an entertainment venue is hard to rationalize.

Didn’t the settlement between Detroit and the monolines state something to the effect that GO (unl+lt) bondholders will received an estimated 76% recovery rate?

I may be comparing apples to oranges in asking if your estimate and the estimate quoted in the BondBuyer article from yesterday are reference the same thing so I thought I’d ask.

By: chrisbr Thu, 10 Apr 2014 00:15:46 +0000 No one is concerned that firefighters do not receive medicare benefits, presumably because they have the benefits through their pension. Personally, if I were a firefighter without decent healthcare to look forward to, that I was promised at hire, I would no longer be so quick to run into those fires.

By: Cate_Long Wed, 09 Apr 2014 21:14:19 +0000 Fitch Ratings-New York-09 April 2014: The Chicago pension reform plan, approved by the Illinois State Legislature Tuesday, would eliminate the threat of pension insolvency facing two of the city’s four plans. However, long-term pension fund sustainability is many years away, according to Fitch Ratings. Illinois affords particularly strong legal protection to pension benefits and Fitch expects these changes will face protracted litigation.
Chicago’s (‘A-‘/Outlook Negative) combined unfunded liability for all four plans totals $19 billion, yielding a funded ratio of 35%. Fitch considers pension funding levels below 70% to be weak. The proposal seeks to improve two pension systems by trimming future growth of the liability with changes to the cost of living adjustments (COLA), while providing increased contributions from both employer and employees. The plan redefines the city’s annual required contribution (ARC) to an amount that would be sufficient to produce 90% funding in 40 years, similar to the weak funding standard used by the state’s plans prior to its recent pension reform.

The closed amortization period is a positive, but given the four- to six-year ramp up before reaching the weaker ARC level, combined with the long amortization period, Fitch believes it will be many years before meaningful reduction in the unfunded liability is evident.

Officials expect a property tax increase will cover half of the increased costs with budget savings, such as the elimination of most retiree healthcare benefits and reallocation of pension costs to the water and aviation enterprise funds, to make up the balance.

Increasing pension costs are a recurring theme among Chicago area governments and funding these increases will likely place a considerable stacked burden on the area’s resource base. The city plans to gradually increase its property tax levy by $50 million (approximately 6%) annually for five years before reaching the target increment of $250 million in the fifth year.

These increases will occur in the context of other steeply rising costs, including a statutorily required $600 million increase in contributions for the city’s other two pension systems (police and fire) in 2016. The city has not said how the $600 million increase for police and fire will be accommodated, but media reports indicate that future legislation may allow for a ramping up of the funding obligation.

By: chrisbr Wed, 09 Apr 2014 20:04:16 +0000 Yes, it is transparent. The city did not contribute to the pension funds of which they were obligated by contract, and the mayor is openly lining the pockets of his contributors. Right out there for all to see.