Posted on 11/14/2013 5:03:32 PM PST by raptor22
Fiscal Disaster: A major credit rating agency has just given Chicago, with more general obligation debt per capita than Detroit, its second triple-notch downgrade in six months. Its bonds are perilously close to junk status.
Citing skyrocketing pension costs and a lack of meaningful solutions, Fitch Ratings lowered Chicago's debt to A- from AA- last week, making it the second serious downgrade since July.
The move by Fitch follows a triple downgrade of Chicago's bond rating by Moody's Investors in mid-July.
Moody's cited the city's "very large and growing" pension liabilities and "significant" debt service payments, among other factors.
The steady financial decline of the nation's third-largest city prompted us in early August to say Chicago was well on its way to becoming the next Detroit, a bankrupt monument to the perils of Democratic governance, a one-party Democratic town in arguably the bluest of blue states. And Chicago's mayor, former White House Chief of Staff Rahm Emanuel, learned financial discipline at the feet of the master — President Obama.
Like the president, Emanuel could claim he inherited the city's financial mess from his predecessor, but that would require blaming another Democratic mayor, Richard J. Daley.
Interestingly, Democratic governance is a common thread running through America's urban problems.
As the Chicago Tribune noted in its recent report on the problem, "Broken Bonds," Chicago's outstanding debt on general obligation bonds has quadrupled during the past 18 years, reaching $7.2 billion last year.
With interest, that amount nearly doubles. The city has more general obligation debt per capita than any of the 10 largest U.S. cities except New York.
(Excerpt) Read more at news.investors.com ...
>> you were rather nasty to boot to someone
Huh? You’re full of yourself. I didn’t “boot” anyone; I told him to back up his claims.
Which he didn’t.
And neither did you.
Sad. The Chicago of my youth was a glorious, exciting city with great museums, theaters, restaurants, shopping. Style at every level, first-rate people too.
So now you know how old I am....
IBD EDITORIAL PING
Indeed it is sad, The city of big shoulders is stooped over.
I’m not anti Semitic, but the likes of the Emanuel brothers are the reason the Nazis built ovens.
Rahm and Zeke are giving Marx and Lenin a run for their money for sure.
cool! couldn’t happen to a nicer city and mayor.
Who woulda thunk ... but Manny should be able to rescue the crisis and not let it go to waste the way Detroit did.
Isn’t the correct question; “When will Emanuel’s Chicago financially collapse.”
>> Fitch Ratings lowered Chicago’s debt to A- from AA- last week, making it the second serious downgrade since July.
That’s a FACT. Are you capable of addressing it?
>> The move by Fitch follows a triple downgrade of Chicago’s bond rating by Moody’s Investors in mid-July.
That’s a FACT. you capable of addressing it?
Moody’s cited the city’s “very large and growing” pension liabilities and “significant” debt service payments, among other factors.
That’s a FACT. you capable of addressing it?
>> Democratic governance is a common thread running through America’s urban problems.
That’s a FACT. you capable of addressing it?
>> Chicago’s outstanding debt on general obligation bonds has quadrupled during the past 18 years, reaching $7.2 billion last year.
That’s a FACT. you capable of addressing it?
>> With interest, that amount nearly doubles. The city has more general obligation debt per capita than any of the 10 largest U.S. cities except New York.
That’s a FACT. you capable of addressing it?
Tick—
If you have been following Detroit (home of the $1 house) at all and know Chicago in any way, I don’t think links are needed.
My initial comments on the flaws of the one-dimensional use of stats were directed at the author of the article, but you seem to have identified with the author, so here you go for links. (BTW my delay in response hasn’t been because there was any difficulty in finding information but because I had kids to put to bed.)
If you want links, have links.
Median household price in Detroit is under $10,000
http://www.freep.com/article/20120624/BUSINESS04/206240311/
Median household price in Chicago is near $250,000
http://www.trulia.com/real_estate/Chicago-Illinois/market-trends/
If your residential tax base is 23 or 24 times higher, you can support a great deal more debt a great deal longer. I’m not saying that Chicago isn’t destined for the great economic sewer, but a doom and gloom article needs to do more homework before presenting it as being just around the corner.
(I’d bet that the commercial tax base shows an even greater differential.)
>> Median household price in Detroit is under $10,000
http://www.freep.com/article/20120624/BUSINESS04/206240311/
Apples and oranges.
What was the median household price in Detroit BEFORE they went down the toilet?
You’ve done nothing to counteract the author’s facts pointing to the coming municipal finance catastrophe in Chicago that will certainly rival what happened in Detroit.
Debt and liabilities in Chicago are breathtaking. Unsustainably so.
As went Detroit, so shall go Chicago. Your fact-free protestations notwithstanding. It’s simply a matter of time.
>> a doom and gloom article needs to do more homework before presenting it as being just around the corner.
Can you please...
a) Define what exactly you mean by “just around the corner”? How many days/weeks/months is “just around the corner”?
b) Show where in the referenced article ANY timeline whatsoever is given, let alone one that mentions “just around the corner”, or aligns with your above definition of “just around the corner”?
Add time and you can claim anything.
Detroit debt per capita as of 2012 is $3223; Chicago isn’t far behind at $3116; http://online.wsj.com/news/interactive/CITIES2013?ref=SB10001424052702304799404579157780077670894
On the other hand, Detroit’s taxable real-estate per capita is a bit under $27,000 http://online.wsj.com/news/interactive/CITIES2013?ref=SB10001424052702304799404579157780077670894
Chicago doesn’t even make the bottom ten of that list, which indicates that whatever troubles it has, they aren’t nearly of the same magnitude as Detroit’s.
The WSJ article also makes the nice point that Detroit’s population dropped nearly a quarter over the decade: I don’t think Chicago has problems of the same magnitude.
I hope you enjoy the links—but if you look at flaglady’s home page, you’ll note that she is from the Chicago burbs, and the observations of someone with common sense on the ground may be worth taking into account, even if they don’t have links all over the place.
>> Detroit’s population dropped nearly a quarter over the decade: I don’t think Chicago has problems of the same magnitude.
Comparing post-apocalypse and pre-apocalypse cities on such statistics does not bolster the case that Chicago isn’t on the road to ruin.
>> if you look at flaglady’s home page, you’ll note that she is from the Chicago burbs, and the observations of someone with common sense on the ground may be worth taking into account
Yeah, sure. On the other hand, there may be home-team bias clouding the judgment. My own common sense, and the financial FACTS, point me in that latter direction.
How about you look at paragraph five of the article:
“The steady financial decline of the nation’s third-largest city prompted us in early August to say Chicago was well on its way to becoming the next Detroit,”
“Well on its way” and “next” are something of a timeline. I’ll leave it to you and to the author of the article which you are defending to figure it out.
“Next,” given the prevalence of Democratic governance in major cities, is a pretty high bar to meet, and if you and the author of the article think that no city is going under in the next 20 years, and Chicago is next, then there doesn’t seem to be much pressing about the situation.
If I understand the relation between the medical industry, Obamacare, and Cleveland correctly, I’d put my money there over Chicago—Chicago also has the additional advantage of having a stranglehold on state finances.
Next? I’d bet against it.
You are good at asking for links and capitalizing FACTS—why don’t you try bringing some additional facts of your own to the ball-game.
Yeah, if Chicago hits the apocalypse, things will be bad, but if you want to back up someone who says that Chicago is NEXT, why don’t you produce some statistics showing that the apocalypse has actually begun.
More facts:
“Pete Saunders, an urban planner who grew up in Detroit and now lives in Chicago, offers evidence that outcome is unlikely (excerpt):
Writing in Crain’s Chicago Business this week, he lays out three main elements that will allow Chicago to escape Detroit’s fate:
1) Chicago is way bigger:
A report from the federal Bureau of Economic Analysis released in February shows that Chicago metro area GDP in 2011 was $548 billion annually, making it the third largest in the nation after New York and Los Angeles. That makes the Chicago economy nearly three times larger than Detroit’s, which checks in at $199 billion. Chicago’s economy is also more diverse than Detroit’s, with no one industry sector making up more than 13 percent of the metro area workforce.
2) Chicago’s fiscal structure is less concentrated than Detroit’s:
the dozens of municipal corporations and special-purpose districts here, lacking in Detroit, meant the fiscal burden could be spread around. As a result, City Hall ends up having fewer direct responsibilities and a slightly rosier fiscal picture.
3) The two cities have fundamentally different characters in a way no one really talks about:
There was a certain disposableness built into Detroit — cheaply built homes and low-quality business districts dominate much of the city. Disposability long ago sent a message to Detroiters: As you move up, you move out. Chicago, meanwhile, was built with a sense of permanence. Chicago has a physical character that tells its residents that it is worth having, worth saving.
In sum: Chicago has problems, but Detroit remains a unique mess.
http://www.businessinsider.com/chicago-is-not-the-next-detroit-2013";
Analysis: Why we’re not the next Detroit
Excerpt from Chicago Sun Times, July 20, 2013 1:36AM:
“Is Chicago headed down the same road as Detroit?
It’s not the size of the debt, but the ability to pay it. Experts in government finance said Chicago is far better situated than Detroit. Compared with the Motor City, Chicago hasn’t suffered the population loss, it’s drawn more new employers from corporate headquarters to technology startups, its tax base is stable and it doesn’t have nearly the level of tax delinquency.
Donald Haider, a former Chicago budget director and a management professor at Northwestern University, recalled scouting Detroit for a bank acquisition years ago. “After the riots of the 1960s, there wasn’t a residential building permit issued in Detroit for 20 years,” Haider said.
Chicago has broken-down neighborhoods, but in Detroit, urban decline “was chronic and systematic and progressively downhill. We have nothing quite like that,” he said.
The differences between Chicago and Detroit emerge in three key areas that bond analysts look at:
Economic strength: The Chicago area’s economy is almost three times the size of the Detroit region’s, where the unemployment rate is nearly twice as high. “Our economy is diverse, which is our strength,” Emanuel said, “We’re not tied to the auto industry. No one sector is more than 13 percent of our employment.”
Elizabeth Foos, municipal credit analyst at Morningstar Inc., said Chicago is seeing a job rebound in areas such as banking, financial services, transportation and health care.
By some gauges, Detroit barely functions. Foos said 40 percent of the city’s streetlights don’t work and more than half of property owners didn’t pay taxes owed in 2011.
Debt levels: Chicago’s property and sales tax revenues are improving with the economy and the city’s debt load is manageable. Foos has published reports on both cities indicating that if their debts are compared to the taxable value of their property, Detroit’s burden is more than twice that of Chicago.
Population: Detroit has lost 60 percent of its population since its 1950s peak. For the first decade of the 21st century, Detroit was down 25 percent. For the same time periods, Chicago lost 25 percent and 7 percent of its population.”
There are more facts than this, but it should suffice to anyone other than those who wish to remain intentionally uninformed.
>> why don’t you produce some statistics showing that the apocalypse has actually begun.
Huh? Nonsense. YOU are the one who called out the author, and cast doubt on him. I am agreeing with the author presented in the OP (and his facts) and disagreeing with you. The burden is on YOU to present the countervailing statistics.
>> why don’t you produce some statistics showing that the apocalypse has actually begun.
Okay. Detroit. Or don’t you understand the meaning of “apocalypse”?
>> http://www.businessinsider.com/chicago-is-not-the-next-detroit-2013%22
I’d love to follow your link and learn more, but...
Whoops...
The page you are trying to reach cannot be found.
“Detroit” is neither a statistic nor is it about Chicago.
Bowing to the all-knowing author of the article and whatever arguments he has presented is no bolstering one’s own case. I’ve brought four links to the ball-game with countervailing stats. Show that Chicago’s tax base is actually giving concrete signs of collapse. Yes, the article points to downgrades—it did before the tax base issue was raised as well.
Google is your friend if you want to do things like find out stuff or hook up with an article which has a broken link. http://www.businessinsider.com/chicago-is-not-the-next-detroit-2013-7
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