Given how well Rahm Emanuel’s Chicago has handled gun violence, Second Amendment-skirting, illegal immigration, failing schools and general lack of livability, I know this is probably going to shock you but they’re not all that good at financial management, either.
In fact, their city pensions are currently $28 billion in deficit. You heard me right — not debt, which is accumulated financial whoopsies (an economic term of art), but deficit, as in, they are short the money in the very near term and need to find a way out of it.
Fox Business describes the problem and the brilliant solution only a city run by Democrats since the Medicis were in power could come up with. (Okay, the Democrats were only founded in 1828 but Chicagoans would still have voted for His Right Honorable Mayorye Sir Rahmulus Emanuelius, Lord Protector of Gunviolenceshire, if the Wyndye City had existed in the 15th century. He also still would have won 110 percent of the dead vote, which would have been a much larger demo when the plague was still a thing.)
“Short $28 billion in the pension fund that goes toward the police, firefighters and other municipal employees, Chicago Mayor Rahm Emanuel is weighing a $10 billion taxable bond offering,” Fox Business reported on Friday.
“That bond would then be invested and, ideally, earn returns that surpass the interest the city has to pay on the money.”
This is about as well thought through as it sounds. The Chicago Tribune reported some aldermen were expressing doubts about the idea of spending more money to get out of debt (and not in some Keynesian kind of way).
The plan is being presented in September, but there are already some doubters.
After a PowerPoint presentation by City Chief Financial Officer Carole Brown to Chicago aldermen explaining why this was definitely not going to fail, the Tribune said many were unconvinced, and not just because any major initiative that needs a PowerPoint presentation to back it up is already doomed.
“The plan ‘will not’ add ‘additional reinvestment risk,’ the PowerPoint said. But that isn’t entirely true, as there’s risk that with another major economic downturn, the pension funds could lose a substantial amount of their invested money.
“Then the city could end up on the hook for both bigger contributions to the city’s four pension funds and the interest on the pension bond debt.”
But then you do it all over again, right?
And that’s not even the worst part. As Crain’s Chicago Business pointed out, the bond offering may use a new, dangerous securitized structure … designed to put bondholders ahead of everybody even in bankruptcy.”
And when you’re running $28 billion pension deficits and think $10 billion more in spending will help … well, let’s face it, how far off are we assuming bankruptcy is?
This, after all, would be the single biggest pension obligation bond a city has ever issued — and if it fails, there’s a very good chance this is assured bankruptcy.
It’s a farce to watch — unless you’re a policeman, firefighter or municipal employee, then this is decades of one-party mismanagement coming home to roost, and something you have every right to be angry about.
Chicago, just a thought: There is a second party out there. I know, they don’t really do well in your neck of the woods, but they sometimes emphasize fiscal responsibility. Just type “GOP” into your search bar and see what happens. Oh, and stay away from HuffPo.
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