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  #451  
Old 09-20-2019, 09:29 AM
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Mary Pat Campbell
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https://taxfoundation.org/chicago-bu...eid=4737d05e09
Quote:
No Good Options as Chicago Seeks Revenue
Spoiler:
Although the word is often applied to any difficult decision, a dilemma, properly speaking, arises when one is forced to choose exclusively from bad options. The two bad options are termed the “horns” of the dilemma. As Chicago contemplates how to close a revenue shortfall and potentially generate additional revenue for new spending priorities, however, two horns aren’t enough. Chicago’s dilemma summons the sort of multihorned creatures found in apocalyptic literature—which could almost be its own metaphor for the situation in which Chicago officials find themselves.

Facing an $838 million budget shortfall, a looming pension crisis, and an aggressive spending wish list, some Chicago policymakers and activists are expressing interest in a laundry list of new and higher taxes that could, collectively, raise as much as an additional $4.5 billion a year. Proposals include:

A 3.5 percent city income tax on income above $100,000
A financial transaction tax (the “LaSalle Street Tax,” after the street running through Chicago’s financial district)
The return (at a higher rate) of the reviled business head tax
A graduated-rate real estate transaction tax
Sales tax base broadening
Commercial lease taxes, a vacancy tax (on vacant commercial properties), and an increase in the hotel tax
Separately, a former state revenue director proposed the adoption of a modified gross receipts tax. The list shows that Chicago has no shortage of options, per se—but an extremely limited set of good ones.

New mayor Lori Lightfoot (D) has expressed opposition to several of these proposals, including the LaSalle Street Tax, which has drawn support from some city council members. Meanwhile, hoping to avoid a general property tax increase, the mayor has turned to state lawmakers in seeking expanded tax authority, most notably the authority to apply the sales tax to professional services not included in the state’s sales tax base.

Local property and, to a lesser extent, sales taxes are the workhorses of local tax collections nationwide, responsible for about 85 percent of all local tax revenue. This is borne of both practical necessity (these are the taxes most readily available to local governments) and sound policy (these taxes are relatively economically efficient). As a general rule, local jurisdictions looking for additional revenue would be advised to remain focused on these sources of revenue rather than casting about for more creative—but also often far less competitive—ones.

Chicago, however, has little leeway with either tax. Chicago’s property taxes are already among the highest in the country, and at 10.25 percent, the combined sales tax rate is tied (with two California cities) for the highest rate of any major city. Neither tax can be ratcheted up much higher. Unfortunately, the proposed alternatives are even worse.

Take the financial transaction tax, for instance. Occasionally proposed at the federal level, there’s broad recognition that such taxes distort asset prices, reduce liquidity, and can increase market volatility. Internationally, a financial transaction tax has long been mooted for the European Union, but the proposal has yet to overcome the opposition of countries justly concerned about the adverse economic ramifications. But at the local level, there’s an even more basic concern: if there’s a tax on transactions run through Chicago exchanges, those transactions simply won’t be run through Chicago exchanges. A federal tax could capture all transactions conducted within the U.S. or by U.S. persons. A Chicago tax would only cover Chicago’s trading floors, putting them at a competitive disadvantage against those located anywhere else.

A business head tax, meanwhile, is a rehash of an old bad idea, one that the city council voted in 2011 to phase out—which it succeeded in doing by 2014. Then-mayor Rahm Emanuel (D) rightly termed the tax a “job killer,” and this was when it was assessed at $48 per job per year—one-fourth of what advocates now propose. Very few cities impose head taxes, which are literally taxes on job creation; when Seattle did so last year, the city council quickly reversed itself, wiping out the tax before it went into effect.

Gross receipts taxes were once common, but most states repealed them nearly a century ago, recognizing them as nonneutral and antithetical to growth. A gross receipts tax is imposed at a low rate on the entire gross revenue of a company, not its net income. This leads to tax pyramiding, where a good or service is taxed multiple times across the production chain, and disproportionately harms low-margin firms or those struggling to turn a profit. The former revenue director raising this idea proposes structuring the tax as a so-called “margin tax,” in line with Texas and Oregon, and thus providing some limited deduction against actual costs. But in both states, the tax falls on an excessively broad definition of income.

Mayor Lightfoot’s proposed sales tax base broadening is a more attractive option, at least at first glance. Illinois, like its peers, has a narrow and eroding sales tax base that exempts a significant share of personal consumption, particularly of services. Sales tax base broadening is good policy, and a relatively efficient way to raise revenue. Moreover, since services tend to be consumed in greater proportion by higher-income individuals, sales tax base broadening makes the tax code more progressive.

However, the mayor’s proposal faces two significant obstacles. First, she proposes decoupling Chicago’s sales tax base from the state’s, with Chicago taxing services that are untaxed at the state level. Lacking a unified base is not just poor policy or the source of significant compliance costs for businesses, though it is both of those things. It could also jeopardize the city’s legal authority to collect taxes on remote sales, as the disharmonized base and multiple points of collections could impose unconstitutional undue burdens on out-of-state sellers. Second, in her public statements, the mayor has not distinguished between personal consumption of professional services (which should, ideally, be taxed) and business-to-business transactions, which should be exempt to avoid pyramiding. The sale of a good or service should be subject to the sales tax precisely once, when sold to the final consumer; anything else leads to double taxation.

And then there’s the high earners’ income tax proposal, at a possible rate of 3.5 percent. Currently, Illinois’ state income tax is competitive at a flat rate of 4.95 percent, though somewhat higher—6.45 percent—for pass-through business income. Voters will soon weigh in on granting constitutional authority for a graduated-rate income tax, however. If a constitutional amendment were ratified, the choice of rates would fall to the legislature, but Governor J.B. Pritzker (D) has proposed a top rate of 7.95 (and 9.45 percent on pass-through income). Tack on 3.5 percentage points and small business owners could face marginal rates of 12.95 percent—an incredibly steep burden.

With policymakers already concerned about the city’s business competitiveness, moreover, substantially higher commercial lease taxes could drive more companies outside city limits, and progressive real estate transfer taxes will decrease the attractiveness (and taxable value) of land in the city.

All taxes involve trade-offs. In Chicago, however, policymakers face a particularly unattractive set of options because decades of profligacy already have the city very nearly maxing out the traditional sources of local tax collections. Mayor Lightfoot inherits a precarious situation, particularly since prior generations of local officials saved money upfront by offering city employees generous pension plans that wouldn’t have to be paid for until much later.

Pensions can only be underfunded for so long. The business of running the city must continue. Consequently, difficult choices about taxes, spending, and even bankruptcy loom. But particularly as some are looking not just to cover costs but to dramatically increase the city’s budget outlays, it pays to be aware of just how unattractive the city’s remaining revenue options are.
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  #452  
Old 09-27-2019, 06:39 AM
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I could put this in the pensions thread, but, I feel it goes here

https://www.chicagotribune.com/opini...gea-story.html

Quote:
Commentary: Bankruptcy looms for Chicago if there’s no pension fix
Spoiler:
People make judgments based on what they see, and in downtown Chicago people see beauty: buildings conceived by the world’s great architects glimmering against the sky and Lake Michigan; sandy beaches, clattering trains, crowds, cars and brown bridges over green channels; and other people working, shopping, dining, living.
Chicago’s beauty makes it hard to believe that our city government is broken. In fact, it is so broken that, unless the Illinois Constitution is amended next year to permit modest pension adjustments, a restructuring in bankruptcy court is Chicago’s only practical path to prosperity.


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The city of Chicago is an entity akin to a corporation that is distinct from Chicago the geographic place and the people who live there. The city’s debts are solely obligations of that entity, and are not direct personal debts of the people. So, while the city attempts to pass the burden of its debts to residents through taxes, residents can choose to stay and pay or leave — and thereby leave their share of the burden behind for others to bear.
The city’s rapidly mounting debts — arising from bonds issued to Wall Street, tort judgments and woefully unfunded pension promises and other benefits offered to city workers — are now of such a scale that the numbers are numbing and lose meaning to many. One number, though, is a “tell” that Chicago and other parts of Illinois have passed a tipping point: Chicago’s population is shrinking.
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The Chicago Tribune’s recent examination of the “exodus” from Illinois and Chicago found that, although people leave or don’t come to Chicago and Illinois for many reasons, people rationally choose where to locate based in part on which government works best for them.
[Most read] Doctors took a newborn baby from her parents after they refused a vitamin K shot for her. Now the couple is suing the hospital and DCFS. »
Our city government obsesses over raising revenue, rather than focusing on competing and improving the value proposition to its citizens. It drives away more value-minded taxpayers, which lessens demand for property and causes values to fall, thus increasing the expected tax burden and wealth loss for those who stay — which in turn drives yet more people away.
Chicago is in a hole that tax hikes only deepen; the only way out of Chicago’s death spiral is debt reduction.
Under federal bankruptcy law, Illinois may authorize municipalities to reduce debt through a court proceeding, but Illinois has yet to seize this opportunity. Bankruptcy is a painful process in which the creditors that financed failure are forced to bear a loss, and the court proceedings can implement negotiated adjustments to pensions that could not be accomplished outside of federal court under Illinois’ current constitution.
In fact, Chicago pays very high interest rates because Illinois has this right to empower Chicago to make Wall Street take a loss in bankruptcy — and the managers of the hedge funds holding Chicago’s bonds know the numbers and understand those debts will indeed be restructured, sooner or later.
Chicago is not alone. Hundreds of other Illinois municipalities are finding it impossible to pay for the twin obligations of providing current services and keeping the exorbitant pension promises made in connection with past services.

News came recently that the state is being asked to divert funding intended to provide services to the people of East St. Louis to the city’s pension plans instead. The state has taken similar actions in Harvey and North Chicago, two other low-income communities.
As a result, each community has (or likely will, in the case of East St. Louis) cut staff providing current services to the residents of that community. Illinois’ perverse public policy is creditors first, no matter how great the debt, and services to the people only to the extent funds remain. Authorizing bankruptcy puts people first and will not impair access to credit for well-run municipalities. Instead, empowering municipal bankruptcies harnesses Wall Street to the mission of requiring prudent municipal management to the benefit of all people.
Other municipalities of every size and for many different reasons have availed themselves of this federal process for forcing losses on creditors and to assure that government serves its people first. Detroit is smaller than Chicago, larger than East St. Louis, and its financial distress had other causes, but Detroit’s current turnaround started with a court-ordered restructuring that modestly trimmed pensions and imposed a greater percentage loss on bondholders.
No one wishes to see friends and neighbors who are city workers get less than they bargained for, but restructuring these pensions now — before more of our tax base moves to Austin or to Indianapolis — will make for better new pensions.
We need financial first aid in Illinois now. Waiting and wishing as prosperity bleeds away is cruel and immoral. Chicago needs to restructure and reduce debt now. Give Chicago the benefit of a bankruptcy we have already paid for.
[Most read] Column: They witnessed the scene where an Illinois State Trooper died. Now these high school hockey players want to help his family recover. »
Richard Porter is a lawyer in Chicago and Illinois’ national committeeman on the Republican National Committee.
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  #453  
Old 09-30-2019, 03:11 PM
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https://www.chicagotribune.com/polit...y.html#new_tab

Quote:
Mayor Lori Lightfoot needs Springfield’s help to solve Chicago’s $838 million budget problem, but many Illinois lawmakers say they don’t know what that might mean
Spoiler:
Once again, Mayor Lori Lightfoot is looking for help from Springfield to solve the city’s 2020 budget crisis.

Once again, state lawmakers say they’re still waiting to hear what she wants from them.

As Lightfoot prepares to deliver her city budget presentation less than a month from now, on Oct. 23, her options for closing the city’s projected $838 million budget hole without help from the legislature are limited. State lawmakers are set to convene for a six-day fall veto session less than a week after Lightfoot is scheduled to lay out her budget plan.

The mayor will need to build support among legislators to have any hope of getting something passed to help the city this fall. But like during the spring legislative session, lawmakers said they don’t have specific asks yet from City Hall on what she wants to raise money for 2020.

State Rep. Mike Zalewski, a Riverside Democrat who chairs the House Revenue Committee, said Lightfoot has “been pretty forthright and honest about the challenges she faces.” Nevertheless, lawmakers don’t want to wait until her budget speech to find out what she wants from Springfield, Zalewski said.

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“I don’t think they’re going to want to have heard anything for the first time in that speech,” he said.

Lori Lightfoot walks with Gov. J.B. Pritzker in his office in the Illinois State Capitol in Springfield, on April 10, 2019, when she was Chicago's mayor-elect.
Lori Lightfoot walks with Gov. J.B. Pritzker in his office in the Illinois State Capitol in Springfield, on April 10, 2019, when she was Chicago's mayor-elect. (Terrence Antonio James / Chicago Tribune)
During closed-door meetings with aldermen last week, Lightfoot’s financial team solicited ideas to raise revenue to close the budget hole.

According to aldermen, they also pointed to a few things they plan to pursue in Springfield to try to avoid a massive, politically dangerous property tax increase. Among them is a graduated real estate transfer tax the mayor has often discussed that would charge more money for transactions on costlier properties.

After lawmakers approved several major pieces of legislation this spring that included increasing taxes on gas, cigarettes and parking, there’s a feeling of fatigue in the Capitol for taking tough votes. That may make it harder for the new mayor to rally support for any proposals.

“Something that everyone will have to take into consideration is just what the appetite is for more major actions,” said House Democratic leader Greg Harris of Chicago. Harris said he hasn’t met with the mayor’s office or seen any specific requests.

The more time lawmakers have to consider ideas before being asked to vote on them, the better, he said, but “how she rolls them out and when she decides to do that, that’s up to her.”

Before she took office in May, Lightfoot said she would be leaning on Springfield to help fix the daunting financial problems she inherited. Yet when the session ended, the legislature had provided little short-term assistance to the city, and legislators said the new mayor hadn’t been clear on what she wanted from them. Still, the city and its sister agencies could receive an additional $200 million in state funding for the upcoming year as a result of the budget Gov. J.B. Pritzker signed into law in June, according to the governor’s office

While the legislature did grant Chicago a casino license, a top Lightfoot priority this fall will be trying to get lawmakers to make significant changes to the tax payouts in that deal after a consultant said last month that the taxes are so high the project could fail to attract a developer.

The mayor’s office has been meeting with at least one key legislator to try to address her concerns about the tax rates set in state law for the casino.

[Most read] Roquan Smith’s status with the Bears up in the air after he sits out the Week 4 win for ‘personal reasons’ »
Democratic Sen. Terry Link of Vernon Hills, an architect of the gambling expansion legislation that authorized the Chicago casino, said he’s had discussions with the Lightfoot administration in recent weeks about ways to make sure the proposed casino attracts a developer while also generating sufficient revenue for the state and the city.

Proposed Chicago casino site: Pershing and State
Across the Dan Ryan Expressway from Guaranteed Rate Field, the mostly vacant former site of Stateway Gardens and Robert Taylor Homes is a potential site for a Chicago casino. The site is accessible from the Dan Ryan, the CTA’s Red and Green lines and Metra Rock Island trains. (Armando L. Sanchez/Chicago Tribune)

1 / 5
Link, who last month suggested the city could reduce its 33.3% share of post-payout revenue if necessary to attract a developer, declined to comment on the specifics of what’s being discussed.

“We’re all working in a positive manner, and we’re all looking to try to resolve this,” he said. “It’s hopefully a win-win situation for everybody concerned.”

But even if the Chicago casino legislation gets fixed, it won’t bring in much money next year.

A spokesman for Illinois Senate President John Cullerton acknowledged “ongoing conversations,” when asked if he or his staff have been briefed on any of Lightfoot’s requests or initiatives that would involve action by the Illinois General Assembly.

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“The Senate President looks forward to working with the Mayor to be a strong ally in solving problems,” Cullerton spokesman John Patterson wrote in an emailed statement Thursday.

Earlier in the week, Cullerton told reporters in Chicago he will be meeting with city officials to discuss the tax structure for a Chicago casino.

“The goal there is to make money for the state and the city, and if it’s true that the way we’ve structured it doesn’t even result in having the project be completed, obviously we have to change it,” Cullerton said. “So I’m very open to that.”

Lightfoot made an appearance with Cullerton at his Thursday night fundraiser at Harry Caray’s Italian Steakhouse in Chicago. She didn’t get much city work done that evening, she told reporters the next day. “It was more to be a meet-and-greet," the mayor said. "He’s an animated guy, and I think there was a lot of fun in the room, so that was my purpose.”

Senate Republican leader Bill Brady hasn’t heard from Lightfoot’s office about proposals that would help address Chicago’s budget deficit, spokesman Jason Gerwig said Wednesday.

Following the mayor’s budget address last month, Brady’s office said his door “remains open,” and that’s where things still stand, Gerwig said.

Brady and Lightfoot met in the spring when she visited Springfield, after she was elected but before she took office.

“I’m not aware of any policy discussions that have taken place since then,” Gerwig said.

Lightfoot spokeswoman Lauren Huffman released a statement saying the administration “has been engaging with local and state leaders and the Governor’s Office on a number of issues related to the future of our City and state.”

“With Mayor Lightfoot only just recently taking office, the new administration is working to develop strong partnerships with all stakeholders that will help to move our City forward and generate new opportunities beyond just this budget cycle,” Huffman’s statement reads in part.

Chicago Mayor Lori Lightfoot delivers her State of the City address at the Harold Washington Library Center on Aug. 29, 2019.

Pritzker spokeswoman Emily Bittner said the governor looks forward to addressing the city's proposals during the upcoming veto session.

“The governor wants every city in Illinois to succeed, and he is committed to helping them thrive,” Bittner said in a statement. “The administration continues to have productive conversations with the mayor’s office, and we are hopeful that her requests will receive a warm welcome in the General Assembly."

Since publicly announcing the city’s projected budget deficit last month, Lightfoot has held a series of town hall meetings across the city to hear from residents their thoughts on the situation. The mayor also has announced a city hiring freeze and announced some modest spending reductions.

Last month, in a meeting with the Chicago Tribune Editorial Board, the mayor floated the idea of some kind of congestion tax for vehicles around downtown and said she was considering “a package of things” to raise money while cutting the increasingly intractable traffic there.

At City Hall, meanwhile, the mayor’s finance team sat down last week with small groups of aldermen in “budget round table” meetings. Chief Financial Officer Jennie Huang Bennett and Budget Director Susie Park filled in aldermen about what Lightfoot heard from residents who testified at her budget hearings held around the city.

They also took suggestions from aldermen about ways to offset the deficit, according to South Side Ald. Michelle Harris, 8th.

There has been grumbling among some council members who say Lightfoot hasn’t reached out to them enough about her budget plans after setting herself up as a crusader for reform during her campaign and as she passed a series of ethics reform packages aimed at curtailing ward-level aldermanic privilege during her first months in office.

But Harris, who Lightfoot kept on as chair of the City Council Rules Committee, said the meetings with Bennett and Park show the mayor is taking steps to collaborate. “This was all about (bringing aldermen into) the process, and being in the process,” Harris said. “People who don’t have ideas and concepts can’t — this is your opportunity. If you really want to be part of the process, go to your briefing, give your idea, give your concepts and see where they go."

The meetings with aldermen remained light on specifics from the mayor’s team, according to attendees. But aldermen who attended small-group briefings with Lightfoot administration officials on the 2020 city budget said they were told the new mayor might look to lay off city workers to help close the massive shortfall.

“As the mayor has said, she’s going to look at ways to improve efficiency and deal with absenteeism and other problems, and what that might entail,” North Side Ald. Andre Vasquez, 40th, said.

Southwest Side Ald. Raymond Lopez, 15th, a Lightfoot critic, also said Park told aldermen that “they’re looking for smart reductions, and layoffs are a possibility.”

“They said there could be painful reductions,” Lopez said.

Asked about layoffs, Huffman said, “There will be no easy choices in this year’s budget as the city faces an historic deficit in 2020 and with costs only continuing to increase next year.”

“With the budget address less than a month away, the Budget Office continues to work closely with the departments to identify any areas for savings without minimizing services to the people of Chicago,” Huffman said in a statement. “Make no mistake, presenting a balanced budget will require shared sacrifice by us all — with all options, including layoffs, still on the table.”

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  #454  
Old 10-01-2019, 05:37 PM
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https://chicagocitywire.com/stories/...ny-author-says

Quote:
Chicago bankruptcy most likely the city's 'destiny,' author says

Spoiler:
Author and journalist Nathan Bomey easily sees bankruptcy in the city of Chicago’s future.

“Like I've said before, bankruptcy is probably Chicago's destiny unless the city negotiates major pension cuts, raises taxes to crushing rates, slashes spending massively” or “some combination of A, B, C,” he recently posted on Twitter.

Bomey’s said the city’s options are even more limited given he argues Illinois’ cash-eating pension system isn’t likely to undergo any fundamental changes anytime soon. Bomey’s words carry weight given he covered the city of Detroit’s meltdown and later chronicled much of it as the author of “Detroit Resurrected: To Bankruptcy and Back.” Bomey is a business reporter for USA Today.

In her first State of the City address, Chicago Mayor Lori Lightfoot said that the city now has a projected $838 million budget deficit for the fiscal year beginning Jan. 1, with most of the shortfall caused by still-rising pension debt.


https://chicagocitywire.com/stories/...e-debt#new_tab
Quote:
Chicago GOP leader says bankruptcy may be city's best solution for massive debt

Spoiler:
Just five months into her term, Chicago Mayor Lori Lightfoot is already facing the prospect of finding a solution for a massive budget deficit.

Facing a deficit of more than $800 million, Lightfoot has floated several ideas including raising property taxes, while some on the other side of the aisle say the city should follow Detroit's example and declare bankruptcy.

Chris Cleveland, chairman of the Chicago Republican Party
Chris Cleveland, chairman of the Chicago Republican Party
As the chairman of the Chicago Republican Party, Chris Cleveland said the idea of raising property taxes is a non-starter for city residents who he said are already paying higher taxes than many can afford. He also said any increase in property taxes could pose a challenge to the city’s finances as it could continue a growing trend of people leaving the city and the state for more affordable locations.

Lightfoot’s idea of raising property taxes was one of several suggestions she made during a recent appearance at a conference for municipal bond investors. Crain's Chicago Business reported that at the meeting Lightfoot suggested raising the city’s real estate transfer tax on higher-end properties and raising the levy placed on ride-sharing services like Uber and Lyft, while still leaving open the possibility of raising property taxes.

While Lightfoot may not have caused the massive hole in the city’s budget, Cleveland placed the blame squarely at the feet of her Democratic predecessors.

"The Democrats are clearly to blame for this," Cleveland told Chicago City Wire. "They’ve been in charge of Chicago for 80-plus years now. They dug this hole. It’s because they think you can tax and spend without limit and now they’ve found that they hit the limit.”

Cleveland said the answer to the problems the city faces is not more taxation, but rather to cut spending. He said the biggest problem is the city’s pension program.

“[The problem is the] excessively generous compensation to public employees,” Cleveland said. “If they don’t tackle that problem, the city is going to collapse financially.”

Rather than trying to steer the city away from bankruptcy, Cleveland said it could be a good thing. By declaring bankruptcy, he said, the city would be able to go through the court system to renegotiate contracts that are rapidly depleting the city’s coffers.

“The mayor is still enjoying a honeymoon," Cleveland said. "More power to her, but she’s got to get serious about spending.”

One area where Cleveland said people on both sides of the aisle agree is looking at the city’s Tax Increment Financing (TIF) program.

"It's a slush fund for the government to distribute money to favored developers and projects," Cleveland said. "It's corrupt at its very core.”

Cleveland said that by redistributing those funds, the city could find some much-needed revenue to help solve its considerable problems. More information about the city’s TIF program can be found on its website.


https://chicagocitywire.com/stories/...enuous#new_tab
Quote:
Former political reporter Thomas finds Lightfoot's approach to Chicago's fiscal crisis 'disingenuous'

Spoiler:
There is no doubt that Chicago Mayor Lori Lightfoot is facing difficult challenges when it comes to the $800 million budget deficit the city is facing, but one longtime observer of city politics said that is just part of the job she was elected to do when she took office five months ago.

At a recent city conference for municipal bond investors, Lightfoot made several suggestions for how she wants to tackle the city’s $838 million deficit, including raising the city’s real estate transfer tax for high-end properties and raising the levy on ride-sharing services like Uber and Lyft. She also did not dismiss the idea of raising property taxes for the city, according to a story in Crain’s Chicago Business.

Former Chicago political reporter Charles Thomas
Former Chicago political reporter Charles Thomas | YouTube
Charles Thomas, who spent a quarter century as the political reporter for the city’s ABC affiliate, said that while Lightfoot and the Crain’s story differentiate between the real estate transfer tax and property taxes for the average Chicagoland resident, the difference is minimal at best.

“When she talks about trying to avoid raising the property tax and in the same breath talks about a real estate transfer tax, the real estate transfer tax in my way of thinking is a property tax,” Thomas told Chicago City Wire. “It’s a tax that only property owners would pay, and it is a very regressive tax in as much as it is charged on the value of the property being transferred, not on the amount of money that a particular homeowner might have in that property.”

While property taxes are paid on an annual basis, Thomas said the real estate transfer tax is just a deferred property tax paid at the time of the sale.

“The city shows up at the closing to get their share of either the seller’s equity or the buyer’s down payment,” Thomas said. “I find that somewhat disingenuous that she’s suggesting that she’s trying to avoid raising property taxes.”

Thomas said that people in Chicago, especially those who have lived in their homes for many years, are already struggling to make ends meet in many cases. Any increase in the city’s property tax would just make the burden that much greater.

“They’re already struggling to pay the property taxes that Rahm Emanuel increased, so to do it again, I just can’t imagine where she’s going,” Thomas said.

Having covered Emanuel’s tenure in City Hall, Thomas said his biggest concern is that after five months in office he does not see Lightfoot as having a more concrete plan to tackle the city’s dire financial issues. Lightfoot is expected to have a budget to put forward early next month, which Thomas said does not leave a lot of time for the city to discuss and advance the budget and agree on the spending plan.

“I can’t believe that her administration does not have its arms around this situation already,” he said, noting that while Emanuel claimed to have fixed the city’s structural deficit, he left his successor with a larger financial deficit than his predecessors left him.


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Old 10-02-2019, 03:22 PM
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https://fixedincome.fidelity.com/ftg..._110.1#new_tab

Quote:
Chicago investors' conference set the table for October budget release

Spoiler:
Investors welcomed the opportunity to meet and hear directly from Chicago Mayor Lori Lightfoot, but they remain hungry to see the details of how she will tackle an $838 million deficit.

Lightfoot, who took office May 20, spoke Friday's at the city's annual investors' conference. She laid out her strategies for building up Chicago’s neighborhoods and sharing information on city finances in a transparent fashion, and stated her willingness to sacrifice her own political fortunes to put the city on a path to structural balance.

“If politically costly to me and I need to sacrifice myself politically to do it so be it,” Lightfoot said.


But she didn't say how she would do those things. Investors will have to wait until the October release of Lightfoot's 2020 budget proposal.

“She's reiterating the same points that everything is on the table, that she's going to be tough, and there's going to be shared sacrifice,” said Brian Battle, director of trading at Performance Trust Capital Partners. “I’ve already heard that speech” but am “cautiously optimistic. The mayor is so far who she said she would be” on ethics reforms and other subjects but “we will find out” Oct. 23 if that remains the case.

Nuveen Investments’ head of municipals John Miller says overall the city’s economic numbers still look sound and the number being portrayed is a matter of accounting as the new administration has shifted what’s accounted for in the preliminary budget forecast. It now includes all operating and structural red ink while in the past left out some expenses.

“I think it was important to extend the tradition of conveying information and bringing together the investors and rating agencies,” even if no new information was garnered at the conference, Miller said. “When Mayor Emanuel decided not to run there was a great deal of uncertainty around the finance office." He said the mayor's pick of Jennie Huang Bennett as CFO is a good sign given her background both in banking and more recently as CFO at Chicago Public Schools.

“We knew we would be asking Chicago to make shared sacrifices to solve our fiscal challenges. We then had to lay our cards on the table early… and start an open and honest discussion about the path forward,” Lightfoot said Friday in her speech to investors. She disclosed in her August State of the City address last month the $838 million 2020 gap due to rising personnel, debt, and pension costs. Predecessor Rahm Emanuel's administration estimated the number at $700 million

“Transparency means we are taking a whole new approach to budgeting. The numbers you see are the numbers you get…honesty and integrity create financial certainty” and should “lay the foundation for long term fiscal growth and health,” she told a crowd of about 300 municipal market participants, including 100 investors at the downtown conference.

The city is looking at changing the tax on property sales from a flat tax to a progressive schedule, taxing ride sharing, and examining options for some form of a congestion tax. A property tax remains on the table although Lightfoot said it’s one tax that residents are asking her to avoid.

“It’s a tough sell” and the city is looking elsewhere first, Lightfoot said.

Lightfoot renewed her push for state help on pensions — at least by being included in an expected downstate and suburban public safety fund consolidation bill — but the city is not expected to be part of the mix initially, according to lawmakers. The city is carrying a $30 billion net pension liability with its four funds at a collective funded ratio under 30%.

The prospects for passage by state lawmakers of various tax hikes Lightfoot has offered up as options in the legislature's October veto session scheduled the week after the Oct. 23 budget announcement remains uncertain. Bennett has said the budget will offer a mix of structural solutions and one-time measures with information expected on a long-term plan toward achieving structural balance.

The city may get its wish to overhaul state legislation allowing for a Chicago casino. An independent report concluded the tax structure is too onerous to draw private financing and Gov. J.B. Pritzker’s deputy governor Dan Hynes said in a brief interview at the conference that “time is of the essence” on the issue. City profits would go to pay down its public safety pensions. The state finance team had met the day before with investors in town for the conference.

The mayor’s speech along with Bennett's did not offer any new insights into the fixes that will be unveiled Oct. 23.


Miller said he’s heartened that the city has outlined some potential non-property tax revenue ideas.

"My wish would be that she did this after the budget," said Howard Cure, director of municipal research at Evercore Wealth Management. "She's got a tough road" and “I’m still a little anxious just because she is new and doesn't have a finance background."

Cure credits Lightfoot for talking about key issues such as reducing crime levels that draw national headlines and developing strategies to turn around population loss and share economic prosperity with lower-income neighborhoods and communities, Cure said.

“She still has make sure the city has a balanced budget,” he said. Cure is also watching for how tough a stance she takes on current contract negotiations with the teachers’ union and on public safety contracts.

Cure said he was struck by the differences in Lightfoot's and Emanuel's agendas. Emanuel had typically highlighted the city’s top numbers for foreign and business investment and relocations. Lightfoot highlighted the need for good social policies that she believes lead to economic growth.


“Iit was worthwhile just to hear what the new administration has to say, their commitment to limiting aldermanic power and the hiring of a chief risk office” to rein in costs, said Dennis Derby, senior tax-exempt analyst and portfolio manager at Wells Capital Management. Once the budget is out that will show whether “it’s consistent with what we heard today.

“She’s very straightforward and very frank,” Derby said of the mayor.

“It’s a slow process of revealing their revenue strategy but the big picture hasn't come together yet and investors are anxiously awaiting the detailed picture,” said Richard Ciccarone, president of Merritt Research Services.

She might have showed people who had not heard her speak before that she is a “credible leader of the city's government and she's trying to be proactive but the engine is moving relatively slow and deliberate and we will have to see if that strategy works,” Ciccarone added.

Investors said they had hoped Lightfoot would take direct questions from the crowd when Bennett and Lightfoot sat down for a question and answer chat after her address. It was Bennett who asked the questions, but she said some of them originally came from investors.

A panel discussion on securitization and rating criteria signaled to investors that it is in fact the city’s securtization structure that will be used to refund outstanding general obligation debt to achieve $100 million in 2020 savings announced during the State of the City speech.

Bennett said after the conference the city was pleased with the turnout and the timing ahead of the budget’s release was designed to make sure the city was “meeting expectations of investors” with respect to hearing from the mayor “relating to city finances and her approach toward long-term sustainability.”

She said the city is eyeing using the current sales tax securitization structure, a junior lien, or tapping other revenues to achieve the refunding savings but all debt options remain on the table for the deal that she is aiming to complete this year.

Preserving Chicago's existing ratings remains part of the budget strategy. “It weighs a lot on us…the city’s ratings are very important…to access the capital markets at a competitive rate,” Bennett said.

Moody’s assigns a junk rating of Ba1 with a stable outlook to Chicago. Fitch has it at BBB-minus, Kroll Bond Rating Agency has it at A, and S&P has it at BBB-plus. All assign a stable outlook. Members of Moody’s sales team have talked to the city but the future relationship remains unclear as the city is not currently in discussion to resume rating new deals.


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https://www.chicagobusiness.com/greg...-teacher-offer

Quote:
Higher taxes? Groups warn of impact from a sweetened teacher offer.
You might not concur with the conclusions of the two fiscally conservative organizations, but it’s hard to dispute their figures.
Spoiler:
As Chicago heads toward a potentially nasty—and expensive—teachers’ strike, a pair of conservative economic groups is out with a look at some of the fiscal implications of a resolution, and though you may not agree with their conclusions, it’s hard to dispute their math.

The first report comes from the Illinois Policy Institute, a libertarian group whose leaders were very involved in former Gov. Bruce Rauner’s administration.

According to the IPI, Chicago property taxes for school-related matters have risen twice as fast in the past decade as median household income in the city—not counting the cost of a new contract.

Specifically, median household income in the city rose 21 percent between 2009 and 2017, to $55,300, but Chicago Public Schools' property tax collections jumped 43 percent, that from U.S. Census and local government financial reports, according to the institute.

At the same time, CPS’ combined debt rose 132 percent as the school district borrowed to survive a financial crisis and eventually began to ramp up its contributions to its underfunded pension fund, the report says. But the ratio of liabilities to assets in the retirement fund still dropped from 74 percent to 50 percent.

I haven’t double-checked all of those figures, but based on related research by the Civic Federation and others, I believe them to be basically true. For instance, the federation reported last year that CPS still wasn’t contributing enough to keep the funded ratio even—the “tread water” line—much less reduce outstanding debt.

Given that, the IPI asks, how is the board going to pay for anything more than its current contract proposal, which, among other things, would raise the salary of the average teacher from $79,000 to almost $100,000? Anything beyond the current city offer to teachers could be a big number, because CPS says the union is asking for hundreds and hundreds of millions of dollars in spending above and beyond what CPS is offering.

The union has suggested a variety of new levies, such as a corporate head tax or a commuter tax. But most of those ideas face staunch political opposition or require approval by the Legislature. That means that other taxes—like the property tax—could again be brought into the mix.

The second report comes from Truth in Accounting, a Chicago-based conservative think tank.

It’s a little different but has the same bottom line as IPI: Even after hundreds of millions in new state aid and local property tax hikes, CPS’ financial condition remains weak and deserves a D, with the district’s overall balance sheet (including unfunded pension debt) $17.1 billion in the hole, the group says.

No response yet to either report from CTU, which earnestly argues that the looming strike is all about improving education for needy kids.

You may agree or disagree. But when it’s all over, as the reports suggest, someone is going to have to pay the bill.
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https://www.chicagotribune.com/polit...s4y-story.html
Quote:
Chicago Mayor Lori Lightfoot holds final budget town hall on city’s $838 million shortfall: ‘We heard a lot of great ideas’

Spoiler:
Chicago Mayor Lori Lightfoot ended her series of budget town halls with a South Side forum that often focused on local concerns over citywide issues.

Lightfoot hosted her fifth and final public hearing at the South Shore Cultural Center on Wednesday night to field suggestions from residents about Chicago city government’s looming $838 million budget shortfall.

At previous forums held at the Copernicus Center in Jefferson Park, Roberto Clemente High School in Ukrainian Village, George Washington High School in the East Side neighborhood and Lindblom Math and Science Academy in West Englewood, residents provided the mayor with a wide variety of suggestions on how to address the city’s financial problems.

Residents have suggested Chicago tax visiting suburbanites, stop offering public employee pensions and lead a citywide penny drive to help fix the city’s financial troubles.

Several speakers in South Shore weighed in on a proposed golf course in Jackson Park pushed by golf icon Tiger Woods, though the mayor did not comment.

Others exhorted Lightfoot to support an airport in the south suburbs to create jobs, but Lightfoot did not respond. In the past, she has been cold to the idea, saying the city must focus on O’Hare International Airport and Midway Airport.

One woman expressed criticism of the plan to host the Obama Presidential Center in Jackson Park, saying it would cost parklands and be too expensive, among other concerns.

Lightfoot has lauded the Obama center as a “tremendous opportunity” to transform Chicago’s South Side.

Sign up for The Spin to get the top stories in politics delivered to your inbox weekday afternoons.

Ride-share advocates also expressed concern about their industry, which Lightfoot has signaled she might tap in the form of some sort of a congestion tax. One speaker supported capping the number of drivers and other reforms, but wanted to know what the mayor is considering.

[Most read] Brad Biggs’ 10 thoughts on Bears’ 24-21 loss to the Raiders in London in Week 5 »
“We are looking at a range of options and we’re getting feedback from a number of different people,” Lightfoot said.

Nicole Johnson, who unsuccessfully ran for 20th Ward alderman earlier this year, asked Lightfoot about lead in Chicago’s pipes.

Lightfoot said citywide lead pipe replacement is a “complicated issue,” potentially costing $8.5 billion that the city does not have.

“But I want to be clear, our water is safe,” Lightfoot said.

At times, the meeting took a lighter turn. One exasperated man complained about Spanish-language newspapers and phone books being dropped in his neighborhood.

[Most read] Chicago named ‘Best Big City’ third year in a row by Condé Nast readers »
“Do you guys use yellow pages?” he asked his fellow audience members.

“No!” they shouted back.

Mayor Lori Lightfoot listens to attendees during a budget town hall meeting at the South Shore Cultural Center in Chicago on Wednesday, Oct. 2, 2019.
Mayor Lori Lightfoot listens to attendees during a budget town hall meeting at the South Shore Cultural Center in Chicago on Wednesday, Oct. 2, 2019. (Armando L. Sanchez / Chicago Tribune)
Another speed-talked his way through a number of proposals to fit the 1 1/2-minute time frame allotted to speakers. When he finished, Lightfoot responded, “Nice work,” drawing laughs.

Responding to another man who expressed concern about trash on streets and roads, Lightfoot said she’s been “all over” the Illinois Department of Transportation to complain about dirty expressways.

During previous forums, various speakers rose to support and oppose the Chicago Teachers Union as the powerful labor group considers whether to strike.

[Most read] Chicago-area environmental activists plan demonstration Monday downtown during rush hour »
But on Wednesday night, hours after the union set an Oct. 17 strike date, the subject did not come up during Lightfoot’s last town hall.

Though residents across the city lined up to give Lightfoot their opinions on the city’s finances, it’s not yet clear what options the mayor will lay out during a planned budget address on Oct. 23 for shoring up city finances.

But at the end of the forum, Lightfoot thanked those who attended for being part of the process. She said the budget town halls will help shape her plan.

“We heard a lot of great ideas, we heard a lot of passion and what I take away from this is people in this city love their town, they love their neighborhood,” Lightfoot said.
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Old 10-17-2019, 05:47 PM
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TEACHERS

https://wirepoints.org/the-chicago-t...s-that-matter/
Quote:
The Chicago Teachers Union strike is on: 13 things that matter
Spoiler:
Chicago teachers are striking for the third time in seven years. The Chicago Teachers Union has rejected what Mayor Lori Lightfoot says is “the most lucrative CTU package in its history.” The union shunned 5-year, 24 percent teacher raises and continues to demand more, including thousands in new hires and additional benefits like affordable housing.

Over 25,000 teachers and 7,000 support staff will be on strike while 300,000 students will be left in the lurch.

It’s become standard operating procedure for the CTU to strike when it doesn’t like the school district’s contract proposals. In 2012, the union struck for one week over a contract dispute with then-Mayor Rahm Emanuel. It did the same again in 2016, when the union held a one-day walkout.

In both cases, the union’s demands drove Chicago deeper into its financial hole. Now this strike poses a new danger to the fiscal viability of the city and the school district. The simple fact is that Chicagoans can’t afford either the CTU’s demands or Lightfoot’s offer.

Regardless of how the strike ends, the massive costs inflicted on CPS will force Chicagoans’ tax bills to keep rising, the city’s population to keep shrinking and property values will continue to suffer. Neither side’s deal will help teachers or residents if the city and the school district move faster toward insolvency.

Here are 13 reasons why the strike spells trouble for Chicago:

Chicagoans can’t afford either the CTU’s demands or Lightfoot’s offer.

1. Chicago teachers are already among the highest paid in Illinois. Chicago already offers new teachers a starting salary of $56,665, the 6th-highest out of Illinois 870 school districts. That salary rises rapidly as teachers work more and achieve higher degrees. A career Chicago teacher with a masters degree is paid a maximum of $100,000 a year by CPS, still one of the highest in the state.

That level of compensation is far out of reach for most Chicagoans, but even younger teachers get paid far more than what the average Windy City resident can afford.

The average teacher salary in CPS equaled $78,211 in 2019. That’s 55 percent more than what the average full-time private sector worker makes ($50,356).

If the union agrees to Lightfoot’s contract proposal, that average salary will rise to nearly $100,000 by 2024.



2. High salaries translate into big pension benefits for career teachers. The average CPS teacher who retired in 2018 with 30-34 years of service had a final average salary of nearly $98,000 and a starting pension of over $70,000.



3. The district’s offer is unaffordable. Under the district’s proposal, the average teacher will get a salary hike of 16 percent over the five-year contract (24 percent if step and lane raises are included). The average teacher salary will be nearly $100,000 within just five years. Nurses’ average salaries will jump to $73,000 from $49,000 during those same five years, an increase of nearly 50 percent.



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4. The CTU’s demands are even more impossible. The CTU’s demands include a 15 percent raise over a three-year contract and numerous additional benefits, including affordable housing benefits and thousands more in support staff, all of which Lightfoot says will “cost $2.5 billion that the city can’t afford.”

The union is demanding all those benefits at a time when both the school district and the city are mired in a deep financial crisis. Here’s how bad things are:

5. Chicago and CPS have some of the nation’s worst credit ratings. Both the city and the school district are already junk-rated by Moodys, Ba1 and B2 respectively. Only the city of Detroit has a lower rating than Chicago.



6. Both the city and school district are drowning in red ink. Chicago’s debts continue to grow steadily worse every year. The city alone is now stuck with a net position of negative $30 billion. And CPS has a negative $14 billion net position of its own.



7. The school district has been shrinking for years. District enrollment has dropped by 75,000 students, or 15 percent, since 2000.



8. Residents are already hurting from the $860 million in new annual taxes imposed by Mayor Rahm Emanuel. The list of new taxes and fees over the past few years include:

A $543 million property-tax hike in 2015, the single largest in the city’s history.
A separate $250 million property-tax hike by CPS to pay for pensions in 2016.
Numerous fee hikes on garbage collection, utilities, permits and more.
New taxes on ride sharing, online entertainment, e-cigarettes and more
9. Chicago is losing people. The city’s population has shrunk four years in a row, the only major metropolitan area in the country to do so.



10. Chicago homes have lost value. Real city home prices have fallen since 2000, making Chicago an outlier nationally. Home prices in the Chicago have grown just 44 percent since 2000. By comparison, inflation was up 46 percent over the same time period.



11. Chicagoans are drowning in retirement debt. Chicagoans are on the hook for a collective $150 billion in overlapping government retirement debts, based on Moody’s pension calculations. That’s nearly than $145,000 per Chicago household.



12. Chicago is an extreme outlier fiscally. Cities across the nation are dealing with deep pension problems, but Chicago is in a class of its own. The Windy City has the nation’s worst pension crisis under almost every measure.

J.P. Morgan compiled funding ratios for the country’s major cities and found Chicago pensions, at just 23 percent, were the nation’s worst-funded. They’re effectively insolvent. The Chicago Public Schools’ pension fund is just 50 percent funded.



The state’s pro-union collective bargaining laws are a big reason by Chicago has such a belligerent teachers union. Here’s what makes Illinois, and by extension the CTU, different:

13. Illinois is the only state among its neighbors that enshrines teacher strikes. In contrast, strikes are illegal in Wisconsin, Indiana, Missouri, Kentucky and Iowa. In fact, Illinois is one of just 12 states nationally where teacher strikes are legal.




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CHICAGO PUBLIC SCHOOLS

https://wirepoints.org/a-comprehensi...ily-available/

Quote:
A Comprehensive Solution To All CPS Problems And The Teacher Strike Is Readily Available
Spoiler:
How could Chicago Public Schools get a fresh restart, fix its pension crisis, cut its debt, void bad contracts and end the teacher’s strike?

The same way Michigan did for Detroit schools. It’s called “reconstitution” and it’s a regular process in the private sector, often called “oldco/newco.” It would have all the benefits of a bankruptcy reorganization, though a formal bankruptcy might not even be needed.

It would go something like this:

– Create a new entity, or perhaps several of them, to run the schools.
– Redirect to the new entity taxes and other funding now going to CPS. Transfer needed assets to the new system. Put the old CPS in a Chapter 9 bankruptcy, if necessary.
– Freeze the Chicago Teachers’ Pension Fund and, instead, begin funding a new, affordable retirement plan.
– Terminate all CPS employees and rehire the good ones on terms affordable for the city.
We wrote about the option for CPS in 2015. The Wall Street Journal wrote later about its application in Detroit’s schools and its potential for Chicago: “The district would avoid declaring bankruptcy by using an ‘oldco/newco’ model similar to GM’s. School operations would be transferred to a new debt-free district.”

The Detroit Free Press reported the opening of that city’s new school district in July 2016. We also wrote here about why the option is actually better suited for Chicago than it was for Detroit.

GM did the same thing in its bankruptcy. The GM you know today is actually a new company formed in 2009 to take over assets of the old, insolvent GM.

Reconstituting CPS would require state legislation as well as the city’s cooperation. That legislation could also include changes to the collective bargaining process to ensure there’s no repeat of the Chicago Teachers Union’s impossible demands. Currently, those laws are stacked in favor of CTU and are out of line with other states, especially our neighboring states, as we described here.

To nobody’s surprise, Illinois politicians have never considered the option for Chicago. And with lawmakers still in denial about the scope of our crisis, it’s right to be cynical about the chance of them reconstituting CPS now.

But maybe, just maybe, they will start to consider how history will record their failure to act. Mayor Lightfoot has no good options for dealing with the city’s financial plight, and may not have any bad options either. CTU seems resolute, impassioned with their role as the vanguard of a radical agenda that goes far beyond schools. “Bargaining for the common good” is what they call it – they deem themselves deputized to bargain for the working class across the country.

Faced with that, why shouldn’t Lightfoot ask Springfield for legislation to reconstitute CPS? Chances are she would be ignored, but at least she would be remembered as the first Chicago politician to suggest a serious step to head off or at least mitigate the meltdown that’s ahead.

*Mark Glennon is founder of Wirepoints.
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They should have credit ratings go from A to F like normal report cards with pluses and minuses.
None of this "every credit rating starts with an A or B" crap. Baa1 is something a sheep says, not a credit rating.
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