Chicago's perilous financial condition (Springfield, Washington: sales, credit rating, buy)

[prelude91]

Originally Posted by marothisu

Okay, let's say it's true which it partially is of course - it still doesn't take away the fact that people actually make money here and many can easily afford to at least rent these places out. It also doesn't take away the fact that companies that pay money where people can afford a downtown apartment are hiring new people and some companies like that are also moving to Chicago.

While you can't be poor to rent out a $1500/month apartment, you don't have to be in the 1% or even close to it either. Someone who makes $75,000/year with minimal debt can afford that easily as long as they dont **** away their money on food, entertainment, etc on a regular basis.

I'm guessing your not a property owner in Chicago? This is a huge liability to owners, I own 6 properties in Chicago, and collectively my taxes are expected to increase $30k this year, I will not purchase any other properties with such long term uncertainty. What little families that have not left for the burbs will have one more thing to factor in deciding to leave the city.
Look at your property tax bill and see how much of your money is going to pensions.

[marothisu]

^ I don't own property here, currently. I do understand what you are saying though and agree. Something DOES have to be done about it

[Chi-town Native]

Originally Posted by Aleking

worth noting that Illinois will likely have a republican gov by 2015

LOFL. As if Thompson, Edgar and Ryan did a wonderful job kicking in to the state's pension liabilities.

I hate to break this to anyone who thinks our current predicament is a partisan problem, but swapping an R for a D isn't gonna do a damned thing.

[Aleking]

swapping a R for a D is definitely going to change the angle from which they approach the issue.

that is all i'm saying.

[Chi-town Native]

Originally Posted by Aleking

swapping a R for a D is definitely going to change the angle from which they approach the issue.

that is all i'm saying.

Is it? Maybe the lip service will be different, but in terms of actual accounting practices I highly doubt it. I have a friend who has been auditing the State of Illinois for decades, he said that the Democrats and Republicans are indistinguishable when it comes to fiscal incompetence and fraud.

Our problem is we've never had a housecleaning like Wisconsin did a century ago. HERE is how it's done:

Robert M. La Follette, Sr. - Wikipedia, the free encyclopedia



From 1901 until 1906, La Follette served as Governor of Wisconsin. During his first term, he proposed to set up a railroad commission, imposed an ad valorem tax on the railroad companies, and established a direct primary system. The Stalwarts blocked his agenda, and he refused to compromise with them.

During the 1904 elections, the Stalwarts organized to oppose La Follette's nomination and moved to block any reform legislation. La Follette began working to unite insurgent Democrats to form a broad coalition. He did manage to secure the passage of the primary bill and some revision to the railroad tax structure.[2]


When the legislative session concluded, La Follette traveled throughout Wisconsin reading the "roll call"; that is, he read the votes of Stalwart Republicans to the people in an effort to elect Progressives. During this campaign, La Follette gained national attention when muckraking journalist Lincoln Steffens began to cover his campaign.

With the press coverage and his successful re-election, La Follette rose to become a national figure. His message against "vast corporate combinations"[2] attracted more journalists and more progressives.

As governor, La Follette championed numerous progressive reforms, including the first workers' compensation system, railroad rate reform, direct legislation, municipal home rule, open government, the minimum wage, non-partisan elections, the open primary system, direct election of U.S. Senators, women's suffrage, and progressive taxation. He created an atmosphere of close cooperation between the state government and the University of Wisconsin in the development of progressive policy, which became known as the Wisconsin Idea. The goals of his policy included the recall, referendum, direct primary, and initiative. All of these were aimed at giving citizens a more direct role in government.

The Wisconsin Idea promoted the idea of grounding legislation on thorough research and expert involvement. To implement this program, La Follette began working with University of Wisconsin–Madison faculty. This made Wisconsin a "laboratory for democracy" and "the most important state for the development of progressive legislation".[2] As governor, La Follette signed legislation that created the Wisconsin Legislative Reference Library (now Bureau) to ensure that a research agency would be available for the development of legislation.

[Attrill]

Originally Posted by Aleking

property taxes in chicago are low for the time being

first and foremost, they will screw over pension holders long before they drastically raise property taxes

They cannot legally do that - if they try to unilaterally cut pensions all they'll do is end up paying lawyers millions of dollars and still be on the hook for the contracts they agreed to. Hell, Detroit is bankrupt and it's uncertain that they can get out of their pension obligations. It's working it's way through the courts now and will ultimately be decided by the Supreme Court. What we'll likely see is some combination of increased employee contributions, end of cost-of-living adjustments, and cuts in benefits for new hires. All of that will have to be negotiated with the unions.

Taxes will certainly go up, but I don't think it's going to be as dire as people think. For starters there is very little evidence that higher tax rates drive people or businesses away. Cities like NYC, SF, Atlanta, and Portland have much higher tax burdens than we do, and Chicago will still be the cheapest large city to live or do business in. The tax increases won't just be to property taxes either, it will be a mix of property taxes, fee increases, special new taxes (i.e. CBOT), and probably a reworking of TIFs.

No matter how much property taxes increase, the increases will be passed onto renters. But even without any tax increases we're seeing record rent increases every year (an average of 5% citywide, and close to 10% in some neighborhoods last year). The market could bear some more increases without any major problems, since vacancy rates are still at all time lows, and continue to drop.

[oakparkdude]

Originally Posted by Attrill

They cannot legally do that - if they try to unilaterally cut pensions all they'll do is end up paying lawyers millions of dollars and still be on the hook for the contracts they agreed to. Hell, Detroit is bankrupt and it's uncertain that they can get out of their pension obligations. It's working it's way through the courts now and will ultimately be decided by the Supreme Court. What we'll likely see is some combination of increased employee contributions, end of cost-of-living adjustments, and cuts in benefits for new hires. All of that will have to be negotiated with the unions.

Taxes will certainly go up, but I don't think it's going to be as dire as people think. For starters there is very little evidence that higher tax rates drive people or businesses away. Cities like NYC, SF, Atlanta, and Portland have much higher tax burdens than we do, and Chicago will still be the cheapest large city to live or do business in. The tax increases won't just be to property taxes either, it will be a mix of property taxes, fee increases, special new taxes (i.e. CBOT), and probably a reworking of TIFs.

No matter how much property taxes increase, the increases will be passed onto renters. But even without any tax increases we're seeing record rent increases every year (an average of 5% citywide, and close to 10% in some neighborhoods last year). The market could bear some more increases without any major problems, since vacancy rates are still at all time lows, and continue to drop.

This sounds exceedingly optimistic, but I hope you are right.

[chet everett]

Originally Posted by oakparkdude

This sounds exceedingly optimistic, but I hope you are right.

The problem is the scale of the pensions that the City of Chicago has "guaranteed" in relation to the TOTAL operational financials of the city -- it the multiplier was smaller (say like 3x or maybe even 5x) I would say there is a chance to sort of "reel things in" and rebalance. When we are talk 8X this is pretty past of the point of no return --- slashing things won't work, massive revenue increases will be needed just to keep the whole system from grinding to a halt.

Really things are not likely to be salvagable...

I know many of you don't like comparision with another infamous midwestern city but the fact is that where Chicago is on the "revenue vs pension" curve puts about 10 years ahead of the Motor City and that is not a good place at all -- How Detroit went broke: The answers may surprise you — and don't blame Coleman Young | Detroit Free Press | freep.com

[jonnynonos]

Originally Posted by Attrill

They cannot legally do that - if they try to unilaterally cut pensions all they'll do is end up paying lawyers millions of dollars and still be on the hook for the contracts they agreed to. Hell, Detroit is bankrupt and it's uncertain that they can get out of their pension obligations. It's working it's way through the courts now and will ultimately be decided by the Supreme Court. What we'll likely see is some combination of increased employee contributions, end of cost-of-living adjustments, and cuts in benefits for new hires. All of that will have to be negotiated with the unions.

Taxes will certainly go up, but I don't think it's going to be as dire as people think. For starters there is very little evidence that higher tax rates drive people or businesses away. Cities like NYC, SF, Atlanta, and Portland have much higher tax burdens than we do, and Chicago will still be the cheapest large city to live or do business in. The tax increases won't just be to property taxes either, it will be a mix of property taxes, fee increases, special new taxes (i.e. CBOT), and probably a reworking of TIFs.

No matter how much property taxes increase, the increases will be passed onto renters. But even without any tax increases we're seeing record rent increases every year (an average of 5% citywide, and close to 10% in some neighborhoods last year). The market could bear some more increases without any major problems, since vacancy rates are still at all time lows, and continue to drop.

I don't think even the most optimistic labor lawyer thinks Detroit pensioners have a chance of getting out of taking a major haircut.

They aren't going to get it as bad as the bondholders, likely... of course no one cares about them.

LOL.

[mjtinmemphis]

I'm curious to know if Chicagoans median or per capita income has increased and the rate of poverty has dropped? If so, that proves the point that the city is becoming wealthier. If it is remaining the same or dropping we've got a problem.

From my personal assessment (fwiw), people of all income levels are leaving. I've heard more people talk about going to less expensive states over the past 2 years. Mainly Nevada and Texas. That's just chat on the street.

With the rental market, people are spending half of their income on rent. Many don't have the desire to enter or return to ownership in the near future. That has pushed many into the urban rental market through out the country. I don't think it's an indication of income growth for the city or region.