"Five reasons Chicago is in worse shape than Detroit" via Bloomberg

[SpartanDawg]

"Chicago’s unfunded liability from four pension funds is $20 billion and growing, hitting every city resident with an obligation of about $7,400. Detroit’s, whose population of about 689,000 is roughly a quarter of Chicago’s, had a retirement funding gap of $3.5 billion, meaning each resident was liable for $5,100."

http://www.bloomberg.com/news/articl...ser-to-detroit

interesting article... i don't think chicago will EVER be in as bad of shape as Detroit was only a few short years ago, but they definitely need to take care of this quickly.

maybe some businesses will be scared and flee to the open arms of Detroit

[BankruptcyGuy]

That also doesn't take into account the $110B that the State of Illinois has unfunded. That works out to another $8,500 per person. Then there's the Cook County pension funds [[there are six of them). They have about another $20B in unfunded liabilities, divided across the county's 5M people. That's another $4,000 per person. The total is pretty close to $20,000 for every man, woman and child in the City of Chicago.

I've been saying for a long time: Detroit, as a whole, is better off for having filed for bankruptcy.

Chicago also has a) an Illinois Supreme Court ruling indicating that healthcare benefits are protected by their constitution; and b) an Illinois Supreme Court ruling indicating that pension benefits [[3% annual increases, for example) can't be curtailed.

[Wesley Mouch]

That also doesn't take into account the $110B that the State of Illinois has unfunded. That works out to another $8,500 per person. Then there's the Cook County pension funds [[there are six of them). They have about another $20B in unfunded liabilities, divided across the county's 5M people. That's another $4,000 per person. The total is pretty close to $20,000 for every man, woman and child in the City of Chicago.

I've been saying for a long time: Detroit, as a whole, is better off for having filed for bankruptcy.

Chicago also has a) an Illinois Supreme Court ruling indicating that healthcare benefits are protected by their constitution; and b) an Illinois Supreme Court ruling indicating that pension benefits [[3% annual increases, for example) can't be curtailed.

So the Illinois Supreme Court has ruled in favor of disproportionate benefit for public service employees. I guess the Supreme Court of Fiscal Reality will have to rule next. Let's just hope it does so before all the money is transferred to wealthy pensioners. Does anyone know how many Chicago millionaires gets $100k plus pensions?

[BankruptcyGuy]

So the Illinois Supreme Court has ruled in favor of disproportionate benefit for public service employees. I guess the Supreme Court of Fiscal Reality will have to rule next. Let's just hope it does so before all the money is transferred to wealthy pensioners. Does anyone know how many Chicago millionaires gets $100k plus pensions?

It's a really interesting question. Their constitutional provision and Michigan's are virtually identical. And, under current law, states can't declare bankruptcy.

If you recall, Judge Rhodes asked counsel for the retirees a very pointed question about agreements for retirement benefits in the future, and the lack of limits in taxation. He asked, "Since the State can't print money, how can they make that promise [to provide for benefits indefinitely." The State of Illinois is about to find out, I think.

One of the provisions in the pension reform law in Illinois was a limitation on certain salary amounts applying to pensions; it was also found unconstitutional. I've read a number as high as 9,900 people receive pensions over $100,000, but not from any sources I'd find that reliable.

[mwilbert]

The State of Illinois has a problem that is going to be hard for them to solve. There has been discussion of either allowing states to declare bankruptcy, or of putting some special-purpose pension legislation into effect. If the problem continues to get worse, something like that will probably happen.

I don't think Illinois law allows Chicago to declare bankruptcy, and if it did, you would have the same argument that we had in Detroit about whether that can be done given the constitutional prohibition on cutting pensions. So resolving Chicago's fiscal problem will be messy. I think we will look back and think that the Detroit experience was remarkably straightforward in comparison.

[ABetterDetroit]

Not looking to throw any city shade but if a few businesses are looking for a more certain tax future and stay in the midwest...

[TTime]

Reasons 6,7 and 8...because they have millions of tax paying residents, 32 miles of beautiful public lakefront and a large, diverse economy?

[313WX]

Reasons 6,7 and 8...because they have millions of tax paying residents, 32 miles of beautiful public lakefront and a large, diverse economy?

Finally, a voice of reason in this thread...

It's one thing to be a Detroit cheerleader, but bashing Chicago does nothing to solve the catastrophic problems facing Detroit.

[CrashDummy]

Reasons 6,7 and 8...because they have millions of tax paying residents, 32 miles of beautiful public lakefront and a large, diverse economy?

This actually goes back to reason number 5. DENIAL.

[TTime]

This actually goes back to reason number 5. DENIAL.

I'm just curious, who is in denial?

[CrashDummy]

I'm just curious, who is in denial?

Chicagoland. I'm sure there are many powers that be that cite reasons 6, 7, and 8 as why Detroit can't possibly happen to them. They would prefer to use the method that was referred to several times during Detroit's bankruptcy of pouring more water into the bathtub without plugging the hole at the bottom. And they're banking on an unlimited water supply.

[TTime]

Chicagoland. I'm sure there are many powers that be that cite reasons 6, 7, and 8 as why Detroit can't possibly happen to them. They would prefer to use the method that was referred to several times during Detroit's bankruptcy of pouring more water into the bathtub without plugging the hole at the bottom. And they're banking on an unlimited water supply.

i appreciate the honest response but maybe I was too subtle with this question. I realize the article clearly suggests that Chicago is in denial and there is probably some merit to that suggestion. My question was intended for Detroiters who are championing a movement that says Detroit is on the verge of competing with a clearly functional, thriving Chicago while at the same time attacking Chicago by saying it is just as bad off as Detroit. To me it seems like a warped version of the old misery loves company saying and those that don't see this may also be suffering from just a touch of denial themselves.

[SpartanDawg]

i appreciate the honest response but maybe I was too subtle with this question. I realize the article clearly suggests that Chicago is in denial and there is probably some merit to that suggestion. My question was intended for Detroiters who are championing a movement that says Detroit is on the verge of competing with a clearly functional, thriving Chicago while at the same time attacking Chicago by saying it is just as bad off as Detroit. To me it seems like a warped version of the old misery loves company saying and those that don't see this may also be suffering from just a touch of denial themselves.

oh no i agree i am not by any means trying to bash chicago saying they're the next detroit... i also believe that they are honestly far too thriving of a city to crash and burn anyyyyywhere near the level that detroit has.... but this is no doubt a problem that they need to face sooner than later.

as much as i hate to admit it... chicago is one of the most beautiful cities in the world, no doubt about that

i just posted the article since bloomberg is talking about the two cities in the same sentence.. for discussion only

[Bham1982]

The article conflates two things. Will Chicago ever look totally bombed out like most of Detroit, with a dead center? Obviously, no. Chicago remains extremely vibrant despite its horrible financial problems and population decline.

Does Chicago have similar economic and demographic challenges as Detroit, and is Chicago experiencing a long-term relative decline, similar to Detroit? Definitely.

The message from Chicago, IMO, is that the goals articulated in DYes and the goals for a growing and thriving region aren't necessarily aligned. A healthy downtown and the postcollegiate crowd and functional public transit aren't going to save your region, if the overall fundamentals suck. They're lifestyle preferences, and nice to have, but not necessary for a healthy region.

Houston has a horrible downtown, not even up to Detroit standards, much less Chicago standards, yet Houston has a booming economy and will probably surpass Chicago in population within a decade.

[Bham1982]

as much as i hate to admit it... chicago is one of the most beautiful cities in the world, no doubt about that

I realize it's a subjective opinion, but of the many adjectives used to describe Chicago [[or any big city in the Midwest, for that matter) "beautiful" would not come to mind. Vibrant, yes. Hard-working, yes. Interesting, definitely.

But a completely flat landscape, industrial and railroads, giant freeways everywhere, functional Great Lakes-style housing and commercial strips, do not exactly trump the glories of the Barri Gotic or Saint Germain.

I mean, have you been to Florence? To Venice? To Brugge? Hell, to San Francisco? You honestly think that Illinois tops Tuscany? Much of the industrial midwest is frankly pretty ugly. It's a pretty grim drive going from MI into Chicago.

[Wesley Mouch]

The State of Illinois has a problem that is going to be hard for them to solve. There has been discussion of either allowing states to declare bankruptcy, or of putting some special-purpose pension legislation into effect. If the problem continues to get worse, something like that will probably happen.

I don't think Illinois law allows Chicago to declare bankruptcy, and if it did, you would have the same argument that we had in Detroit about whether that can be done given the constitutional prohibition on cutting pensions. So resolving Chicago's fiscal problem will be messy. I think we will look back and think that the Detroit experience was remarkably straightforward in comparison.

At some point, the law may have to be changed. Otherwise somebody will have to pay the taxes to fund the pensions, or the pensions will be reduced somehow.

The only other alternative is that they kick then can down the road, and somehow the stock/bond market solves their problem.

[SpartanDawg]

I realize it's a subjective opinion, but of the many adjectives used to describe Chicago [[or any big city in the Midwest, for that matter) "beautiful" would not come to mind. Vibrant, yes. Hard-working, yes. Interesting, definitely.

But a completely flat landscape, industrial and railroads, giant freeways everywhere, functional Great Lakes-style housing and commercial strips, do not exactly trump the glories of the Barri Gotic or Saint Germain.

I mean, have you been to Florence? To Venice? To Brugge? Hell, to San Francisco? You honestly think that Illinois tops Tuscany? Much of the industrial midwest is frankly pretty ugly. It's a pretty grim drive going from MI into Chicago.

can't help but be envious when i see this.. different opinions for everyone... of course there are beautiful cities all across the world.. i'm a sucker for big cities though. you can have venice et. al

[TTime]

I realize it's a subjective opinion, but of the many adjectives used to describe Chicago [[or any big city in the Midwest, for that matter) "beautiful" would not come to mind. Vibrant, yes. Hard-working, yes. Interesting, definitely.

But a completely flat landscape, industrial and railroads, giant freeways everywhere, functional Great Lakes-style housing and commercial strips, do not exactly trump the glories of the Barri Gotic or Saint Germain.

I mean, have you been to Florence? To Venice? To Brugge? Hell, to San Francisco? You honestly think that Illinois tops Tuscany? Much of the industrial midwest is frankly pretty ugly. It's a pretty grim drive going from MI into Chicago.

Bham you should go the Old Town Art Fair in Chicago this summer and then maybe stroll through the park down to the beach to take in the skyline and if you still think it isn't beautiful I'll apologize for wasting your time and money but my guess is that apology won't be necessary.

[BankruptcyGuy]

a clearly functional, thriving Chicago

Not financially. Not by a long shot. The only ones who may be worse is the State of Illinois. There's a reason why they have the worst credit rating in the country.

[Wesley Mouch]

Not financially. Not by a long shot. The only ones who may be worse is the State of Illinois. There's a reason why they have the worst credit rating in the country.

Why does financial health matter? The city is vibrant. What more do we need. Employees are being paid. Pensions accrued. Businesses open and selling expensive purses and cars. Happiness.

That 'financially' of which you speak? All solved as soon as you address 'income inequality'. The money from the rich is more than enough to keep Chicago vibrant.
The hidden rot, you say? Deny. Deny. Deny. And eventually it'll get fixed -- by the sacrifice of the rich.

[mwilbert]

That 'financially' of which you speak? All solved as soon as you address 'income inequality'. The money from the rich is more than enough to keep Chicago vibrant.
The hidden rot, you say? Deny. Deny. Deny. And eventually it'll get fixed -- by the sacrifice of the rich.

I do not think that there is even one person who has ever said that addressing income inequality would solve Chicago's pension problems.

And probably the pensioners are better people to worry about than the rich. The rich are doing fine, and in all likelihood will continue to do so.

[313WX]

can't help but be envious when i see this.. different opinions for everyone... of course there are beautiful cities all across the world.. i'm a sucker for big cities though. you can have venice et. al

Agreed. Much nicer than this:



or this:

[iheartthed]

Not financially. Not by a long shot. The only ones who may be worse is the State of Illinois. There's a reason why they have the worst credit rating in the country.

But Chicago has options to raise revenues, which is a huge difference from their situation and Detroit's situation. Detroit property taxes were by far the highest in the state and from what I have read this isn't the case in Chicago. Chicago is also has taxing authority on goods and services within its borders, which is a privilege that Detroit is not allowed.

[rb336]

can't help but be envious when i see this.. different opinions for everyone... of course there are beautiful cities all across the world.. i'm a sucker for big cities though. you can have venice et. al

get below the loop and chicago is one city, above it, it is another

[maverick1]

I don't buy this but if it's true it doesn't matter. Chicago is economically relevant. People care about Chicago. If it is in worse shape than Detroit there are more than enough people to care about it to keep it from going bankrupt. When it comes to finance Chicago is second to New York nationally.