The City of Chicago has $7 billion of revenue each year, from which is it supposed to pay all city operating costs, service debt obligations, retire debt, and fund several employee pension plans. But it can't do that, or more accurately won't do it because politicians lack the political courage necessary to make changes. And because the amount owed is so staggering relative to Chicago's tax revenues.
The WaPo article lists $19.5 billion of unfunded pension liabilities and $13.9 billion of outstanding general obligation bond liability, a total of $33 billion. All of these obligations are to be paid from revenues collected via the property tax and local sales taxes.
Decades of city government spending means that in 2039, Chicago will still be paying off bonds from 1993. Some of those repayments, the Tribune said, will be for debts on public housing developments that were torn down more than a decade ago. Generous pension contracts signed without allocating future money means the police union’s pension fund has just 31 percent of what it will need to pay out future liabilities; the firefighting union has just 25 percent of the money it needs.The WaPo article is accurate as far as it goes, but it doesn't go far enough. It doesn't look at ALL pension obligations that the Chicago must meet. Taken from a publication of the Civic Federation:
Chicago has unfunded pension liabilities of $14.8 billion plus $27.4 billion, a total of $42.2 billion. Add the general obligation bond liability of $13.9 billion and the total becomes a whopping $56.1 billion that Chicago owes.
And that doesn't count Chicago's portion of the $75 billion of unfunded state-wide pension liabilities.
The mayor of Chicago has five difficult choices from which he can choose:
1. Protect Chicago from pension liabilities by filing for bankruptcy.
2. Seek payment of its outstanding obligations in part or fully by the federal government. Obama can solve this with a stroke of his auto-pen. And every other major city will expect the same gift.
3. Restructure Chicago's labor union contracts to require that union employees pay a larger part of their own retirement funding. Rahm doesn't have enough Kevlar to do this. And his aldermen would not stand with him.
4. Impose and astronomical increase in property taxes and watch businesses and residents flee to other municipalities while tax delinquencies skyrocket.
5. Do nothing and let the problem fester for the next mayor to resolve, or more likely, kick further down the road. Seek higher political office and let some other schlub solve the problem next term.Welcome to the decline of a once-great American city.
