Posted on 03/30/2015 6:15:58 PM PDT by reaganaut1
This article explains that the City of Chicago has concealed how it has dealt with its budget gap over the past decade. The city failed to cut its recurring expenditures to match its recurring revenues after it blew through its reserve funds. Instead, two administrations have:
Used long-term debt to finance everyday expenses and maintenance; Used long-term debt to finance judgments and settlements, including police brutality cases, and retroactive wage increases and pension contributions for its unionized employees; Restructured the city’s existing debt to extend the maturities on its bonds far out into the future in order to avoid having to pay the debt as it was coming due; Borrowed more money than it needed in order to make payments on the bonds its was issuing to avoid debt service expenses, essentially using debt to pay debt; and Possibly used the city’s portfolio of interest rate derivatives as an ATM. State and local governments typically issue bonds to finance the construction of buildings and infrastructure that will benefit residents for generations. This article explains how Chicago residents have billions of dollars of debt and nothing to show for it.
Chicago made headlines at the end of February after Moody’s downgraded the city’s general obligation bond rating to Baa2. Moody’s has cut Chicago’s rating five notches in less than two years. This downgrade, however, placed the city’s credit below the termination triggers on some of its outstanding interest rate swaps. The city has been working to renegotiate the terms of those contracts with its counterparties.
If Chicago’s general obligation rating falls below investment grade, the city’s credit deterioration will become a self-fulfilling prophesy. The city risks nearly $400 million of swap termination payments and the acceleration of its $294 million of outstanding short-term debt.
(Excerpt) Read more at finance.yahoo.com ...
Financial Engineering = Cooking the books
Sure sounds like it!
It’s the “Chicago Way” of running a government.
We need a cookthebooks.com to expose govt fraud.
Great! They use the same method as Governor Jindal....Louisiana will be destitute, January, 2016; and term limited Bobby will be out of office...leaving a ruined state for the next Guv.
The guys at ENRON used Financial Engineering too and went to jail for a long time. Of course they aren’t “Gub’ment Certified” Financial Engineers, so... ya know...
Looks like they ran out of others peoples money
You know a city is desperate for cash when it sells the parking meter concession to a private company, on a decades long contract, for a quick infusion. You just don’t sell sources of steady revenue like that unless it’s a last resort.
“Looks like they ran out of others peoples money’
When they can’t even dream up a way to steal, you KNOW they are in trouble : )
Detroit II
Baa Baa…sheep getting sheared by Chicago socialists.
If a US corporation did anything like this, the stock would be about zero and the officers in prison.
“You just don’t sell sources of steady revenue like that unless it’s a last resort.”
I think that it was spending it in a few years that was the problem. It’s like drugs to these politicians.
Depending upon who the President is at that time, they'll probably get it - since Congress has abdicated all its authority over budgetary issues.
Enslaving future generations in perpetual debt to pay for our wants today.
I thought Slavery was Evil, unless you are a Muslim.
They cannot stop. Chicago is built on racial politics and payoffs. That’s why the Dems are done.
If Bush had allowed the economy to collapse naturally the end of Dem urban control would have come sooner. The economy would be in a full recovery today.
Instead he tossed them a lifeline and allowed the Fed to grow new bubbles.
Really?
California’s doing the same thing.
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