All Forum Posts by: Sid Franklin

Good article by Greg Hinz in Crain's today.

http://www.chicagobusiness.com/article/20150725/IS...

"I fear the real crisis will be when either CPS or Chicago heads over the fiscal cliff. The new CPS budget is $500 million short, and new CPS boss Forrest Claypool can only juggle so long. Mayor Rahm Emanuel will face all sorts of problems with the new city budget due in September if he doesn't get pension relief (he just suffered a big legal hit), a new casino and other related things. Does Chicago really have to go to the brink for Rauner and Madigan to work it out?"

In a recent FB post, Cook County Board President Toni Prec's Director of Governmental and Legislative Affairs decsribes Cook County's debt problem as a "pension tsunami" in defending the recent 1% sales tax increase.  

https://www.facebook.com/ChicagoScott?fref=ts

here's the pension tsunami website, btw.

http://www.pensiontsunami.com/

Here's the post:

People ask me why Toni Preckwinkle cut the Stroger Sales Tax and now asked for a 1% increase herself. I will give it to you straight, from my insider view of the fifth floor.

After eliminating the Stroger Sales Tax, Toni closed budget deficits of $1.4 billion and decreased taxpayer funding of the county health system by $225 million. She reduced the county's head count by 8 percent, eliminating about 2,000 positions. Rolling back the Stroger Sales Tax saved Cook County residents $1.4 BILLION (with a "b") during the last five years and she is not even close to finished cutting. She returned that money to you, the tax payers.

Cook County was hit by a "pension tsunami". We owe more than $6.5 billion and the amount grows $1,000,000 EVERY DAY we do nothing. The Stroger Sales Tax did not go to pay pension obligations or to retire debt. The money was spent to support an operation that was riddled with waste, fraud, and abuse.

The revenue from the new tax increase will NOT be put into operations. Almost all of it will be used to pay down the pension debt. She also made a promise: if Springfield approves our pension reform plan, she will reassess and reduce the sales tax increase accordingly. She has rolled it back before. I take her at her word to do it again.

The irony of this all is not lost on me. I ran her campaign on rolling back the Stroger Sales Tax. She would not settle for a quick fix or a stop gap measure - and she would not consider kicking the can. She was determined to be honest about what will put Cook County on a path to stability. I am proud to serve in her administration and I will be happy to answer any of my friends questions, either below or by personal message.

In a recent FB post, Cook County Board President Toni Preckwinkle's Director of Governmental and Legislative Affairs describes Cook County's debt problem as a "pension tsunami" in defending the recent 1% sales tax increase.  

https://www.facebook.com/ChicagoScott?fref=ts

Here's the pension tsunami website, btw.

http://www.pensiontsunami.com/

Here's the post:

People ask me why Toni Preckwinkle cut the Stroger Sales Tax and now asked for a 1% increase herself. I will give it to you straight, from my insider view of the fifth floor.

After eliminating the Stroger Sales Tax, Toni closed budget deficits of $1.4 billion and decreased taxpayer funding of the county health system by $225 million. She reduced the county's head count by 8 percent, eliminating about 2,000 positions. Rolling back the Stroger Sales Tax saved Cook County residents $1.4 BILLION (with a "b") during the last five years and she is not even close to finished cutting. She returned that money to you, the tax payers.

Cook County was hit by a "pension tsunami". We owe more than $6.5 billion and the amount grows $1,000,000 EVERY DAY we do nothing. The Stroger Sales Tax did not go to pay pension obligations or to retire debt. The money was spent to support an operation that was riddled with waste, fraud, and abuse.

The revenue from the new tax increase will NOT be put into operations. Almost all of it will be used to pay down the pension debt. She also made a promise: if Springfield approves our pension reform plan, she will reassess and reduce the sales tax increase accordingly. She has rolled it back before. I take her at her word to do it again.

The irony of this all is not lost on me. I ran her campaign on rolling back the Stroger Sales Tax. She would not settle for a quick fix or a stop gap measure - and she would not consider kicking the can. She was determined to be honest about what will put Cook County on a path to stability. I am proud to serve in her administration and I will be happy to answer any of my friends questions, either below or by personal message.

http://www.chicagotribune.com/bluesky/originals/ct...

Mayor Emanuel proposes $225 mil property tax hike to (partially) fund CPS.

http://chicago.suntimes.com/chicago-politics/7/71/...

Puerto Rico appears to be on the verge of a financial collapse.

http://www.nytimes.com/2015/06/29/business/dealboo...

 Here's an interesting story in the Detroit News today:

"When loans failed, financial firms practically gave away some homes in Detroit.

Warren landlord Alan Thorne said he bought 50 homes for $1 apiece in 2007 from subprime lending giant Ocwen Financial Corp. of Georgia.

A year later, his company paid $9,600 for 10 foreclosed homes from Novastar Financial, a Kansas City-based subprime lender, records show.

Since then, all but one of the properties have been foreclosed on by the county for nonpayment of taxes.

"I just don't see how the city can charge you $3,000 per year in taxes for a house you paid $1 for," Thorne said. "If you're getting $600 a month in rent and paying $3,000 in taxes, the math doesn't add up.""

http://www.detroitnews.com/longform/news/special-r...

CPS seeks to borrow $1 Billion to run schools in 2015-16 and make next year's pension payment.  They may also make cuts as well...

http://www.chicagotribune.com/news/local/breaking/...

Chicago Public Schools State bailout fails in the House of Representatives today.

http://www.chicagotribune.com/news/local/politics/...

I live in Chicago and there's been a lot of discussion recently on whether Chicago could follow Detroit down the path of municipal bankruptcy.  Many folks believe that because Chicago is much more diverse in its industries, economy and has better job creation strengths, that Chicago will be immune from Detroit's death spiral of (a) borrowing and pension debt, (b) failure to control the costs of government, (c) loss of state revenues, (d) bad public schools and (e) ever increasing tax burden for working, middle class families.

My interest in this question stems primarily from the dramatic price declines in Detroit real estate prices before its municipal bankruptcy.  Detroit's pensions were almost fully funded when it declared bankruptcy.   Bankruptcy was necessary because there wasn't a whole lot of value left in the city to tax.  Chicago has taken a different policy.  The City has skipped making pension payments and pushed the costs of governing off.  Real estate prices continue to rise, apparently not taking into account governmental debt.  The Chicago Public Schools, Cook County and the State of Illinois have all used the same pension payments skipping strategy as well - n Illinois its's known as a "pension holiday."   Because of several Illinois Supreme Court decisions prohibiting pension and retiree healthcare "reform" (cuts), the day of reckoning on the massive pension debt is about to hit Chicago, Cook County, Illinois and many more units of local government.

What's your take on Detroit and Chicago?  Did the demise of the auto industry cause its downfall or were there multiple factors involved that caused Detroit to go broke?  Do you see any parallels yet between Chicago and Detroit?  If so, what should Chicago do to pay off its massive pension debt AND preserve its real estate values over the next 20 years?

Here's a good post on what happened in Detroit:

http://archive.freep.com/interactive/article/20130...