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City of Chicago’s cash cushion plummets, debt triples, arrests drop, water use rises

 

...Moody’s Investors ordered an unprecedented triple-drop in the city’s bond rating, citing Chicago’s “very large and growing” pension liabilities, "significant" debt service payments, “unrelenting public safety demands” and historic reluctance to raise local taxes that has continued under Emanuel.

The 2012 city audits explain why. They show that an unallocated balance that was $167 million a year ago because of Emanuel’s aggressive cost-cutting efforts has dropped to $33.4 million.

. . .

The new round of borrowing brings Chicago’s total long-term debt to nearly $29 billion. That’s $10,780 for every one of the city’s nearly 2.69 million residents. More than a decade ago, the debt load was $9.6 billion or $3,338 per resident.

 

A decrease in their bond rating will make it more costly for them to borrow money.

 

Like most municipalities, their bonds are junk which means that the likelihood of bondholders being paid back is essentially none, or they'll be paid back with depreciated currency. Either way, bondholders will take a loss.

Posted

$1 Billion Financial Shortfall Forecast by 2015

 

...the city’s payroll is more than $2.4 billion, with over 2400 city employees (not including school employees) making over $100,000 a year. The payroll is by far the highest expense for the city, yet in the Financial Forecast report, it is expected to increase by $100 million in 2014. No one from city hall is talking about making any cuts to employees’ salaries.
  • 1 year later...
Posted

Following City, Chicago Public Schools Credit Rating Junked
 

One day after the city of Chicago took a big hit to its credit rating, a leading bond-rating agency further downgraded the Chicago Public Schools debt to “junk” status.

 

The Moody’s Investor Service applied the Ba3 rating to the Chicago Board of Education’s $6.2 billion in debt.

 

Like the city, CPS is facing a huge problem with increasing required contributions to teachers’ pensions.

 

“The Ba3 rating reflects CPS’s steadily escalating pension contributions and use of reserves to fund those contributions,” Moody’s said. “We believe pension costs will place increasing strain on the district’s precarious financial position absent material revenue growth or expenditure reduction, both of which appear increasingly difficult for the district to achieve.”

 

The rating means the school system’s ability to pay off its debt is at risk. It also means it will cost more for CPS to borrow in the future.

 

On Tuesday, the city of Chicago’s bond rating was also downgraded to “junk” status.

 

According to Moody’s, the district’s net annual pension contribution will increase by 6 percent this year. In fiscal 2015, the district’s mandatory net annual pension contribution totals $635 million.

 

Further increases are scheduled in future years.

 

Moody’s also downgraded the credit rating for the Chicago Park District.

 

“The downgrade is an example of how the rating agencies work in concert with bond holders in pushing our city and schools to the brink by recklessly increasing termination fees and costs of borrowing. Today’s action by Moody’s induces further political panic to force the City to implement even more misguided fiscal decisions that will hurt our students and public schools,” said teachers’ union spokeswoman Stephanie Gadlin.

Posted

Thanks for all your news links Alan Chapman. I don't typically seek out news so these help me keep up with what's worth knowing about some of what's going on out there.

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