Chicago's bond rating is under threat, despite a resolution to its current budget stalemate, due to a combination of factors including its reliance on one-time revenues and failure to increase property taxes.
The city's credit outlook has been downgraded by Wall Street rating agencies in the past year, with Standard & Poor's dropping its rating two notches above junk status. This was largely due to Mayor Brandon Johnson's decision to hold the line on property tax increases in his first budget, relying instead on one-time revenues such as a record $1 billion tax increment financing surplus.
Experts warn that this approach could have serious consequences for future generations of taxpayers, who will be left with higher borrowing costs and reduced ability to invest in vital infrastructure projects. "The danger is that it will be incredibly expensive to issue a lot of debt," said Dana Levenson, former Chicago's chief financial officer. "It'll be at a higher price and the property tax will be impacted."
Chicago has significant pension liabilities, with three of its four city employee pension funds having assets to cover less than 25% of future liabilities. This raises concerns about the city's long-term financial sustainability.
"It's not a recurring solution," said Lisa Washburn, managing director and chief credit officer at Municipal Market Analytics. "Every time they do this, they're going to have to find a recurring solution for that amount." The city's reliance on one-time fixes is a worrying trend, with experts warning that taxpayers will eventually have to foot the bill.
In an effort to avoid further downgrades, Alderman Scott Waguespack is leading a push for an alternative budget without corporate head taxes. However, this would require significant concessions from unions and reductions in government spending.
The city's finances are becoming increasingly unsustainable, with many experts warning that it could follow the path of New York City, which was on the brink of bankruptcy in 1975 before making concessions to business and labor groups. Mayor Johnson acknowledged the issue, stating that he wants to fully fund the pension advance "so that we can move toward solvency quicker". However, the motivation behind this move remains unclear, with some speculating that it may be driven by a desire to avoid further criticism from Wall Street rating agencies.
As the city's financial situation continues to deteriorate, taxpayers will have to wait and see whether Mayor Johnson is able to turn things around before it's too late.
The city's credit outlook has been downgraded by Wall Street rating agencies in the past year, with Standard & Poor's dropping its rating two notches above junk status. This was largely due to Mayor Brandon Johnson's decision to hold the line on property tax increases in his first budget, relying instead on one-time revenues such as a record $1 billion tax increment financing surplus.
Experts warn that this approach could have serious consequences for future generations of taxpayers, who will be left with higher borrowing costs and reduced ability to invest in vital infrastructure projects. "The danger is that it will be incredibly expensive to issue a lot of debt," said Dana Levenson, former Chicago's chief financial officer. "It'll be at a higher price and the property tax will be impacted."
Chicago has significant pension liabilities, with three of its four city employee pension funds having assets to cover less than 25% of future liabilities. This raises concerns about the city's long-term financial sustainability.
"It's not a recurring solution," said Lisa Washburn, managing director and chief credit officer at Municipal Market Analytics. "Every time they do this, they're going to have to find a recurring solution for that amount." The city's reliance on one-time fixes is a worrying trend, with experts warning that taxpayers will eventually have to foot the bill.
In an effort to avoid further downgrades, Alderman Scott Waguespack is leading a push for an alternative budget without corporate head taxes. However, this would require significant concessions from unions and reductions in government spending.
The city's finances are becoming increasingly unsustainable, with many experts warning that it could follow the path of New York City, which was on the brink of bankruptcy in 1975 before making concessions to business and labor groups. Mayor Johnson acknowledged the issue, stating that he wants to fully fund the pension advance "so that we can move toward solvency quicker". However, the motivation behind this move remains unclear, with some speculating that it may be driven by a desire to avoid further criticism from Wall Street rating agencies.
As the city's financial situation continues to deteriorate, taxpayers will have to wait and see whether Mayor Johnson is able to turn things around before it's too late.
their pension liabilities are insane! I mean, can you imagine if our school had to deal with that kind of debt? It's crazy that they're relying on one-time revenues instead of increasing property taxes, it's like they're putting off a problem for later and hoping someone else will pay for it 
. And what really gets me is that the city is still trying to find a recurring solution, it's like they're not taking this seriously enough. We need to make sure our schools are stable so future generations can have access to quality education and resources, not worry about whether their parents can afford to pay for it 
.
. like yeah one-time revenues are a thing but can we talk about how unsustainable that is? and dont even get me started on the pension liabilities... 25% of assets to cover future liabilities? that's just not good 
. and then theres this push for corporate head taxes which sounds like a bandaid solution at best. im not sure what mayor johnson's endgame is but if we're following ny citys path, i dont think it bodes well for taxpayers 
. its all just delaying the inevitable.
. And the fact that property taxes have to take the hit is just not fair to regular people trying to make ends meet 
. It's like the city is putting off its problems until later and then expecting others to deal with the consequences 
.
! They're basically living off one-time revenues, which is like playing a never-ending game of financial Jenga 
- you're just waiting for the whole thing to come crashing down 
. I'm not surprised Wall Street is threatening to downgrade them again 
.
. And don't even get me started on the unions - it's like they're not even listening to the experts' warnings 
.
. It can't just be about avoiding criticism from Wall Street (although that's a major part of it 
). We need some real changes to make Chicago's finances sustainable in the long term 
. Fingers crossed they figure it out before it's too late 
. The fact that they're relying on one-time revenues instead of increasing property taxes is a recipe for disaster 
. It's like playing Russian roulette with the city's future 
They're basically leaving the bill for future generations and hoping no one notices or gets upset about it. The pension liabilities are already a major concern, and now they're adding debt to the mix? It's gonna be a nightmare for taxpayers in the long run... 
... all that reliance on one-time revenues is gonna catch up with 'em soon enough 
. mayor johnson's got some 'splainin' to do, especially if he's tryin' to avoid wall street's wrath 
. but i gotta wonder, what's the real motivation behind this budget push? is it really about solvency or just tryin' to stay ahead of the curve 
?
And don't even get me started on those massive pension liabilities 
. if they don't start making some real changes, it's gonna be a real long haul... or should i say, a real high cost 
it's like they're waitin' for someone else to fix the problem instead of takin' charge themselves