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07-22-2013, 09:00 PM #1
Chicago has a $36 BILLION retirement-fund deficit, Moody's cut debt rating to A3
Moody's Cuts Chicago Debt Rating As Crime-Fighting Costs And Pension Deficits Buffet The Windy City
By Malik Singleton
on July 18 2013 10:42 AM
Moody's cut Chicago's debt rating to A3. Reuters / Brendan McDermid
Moody's Investors Service reduced Chicago's debt rating by three steps late Wednesday to an A3 rating.
The credit ratings firm, part of Moody's Corporation (NYSE:MCO), said the third-largest city in the U.S. has a $36 billion retirement-fund deficit and "unrelenting public safety demands" on its budget, when it cut its rating of Chicago's general-obligation debt. Chicago's $7.7 billion in general-obligation bonds is now under a negative outlook, and Moody's indicated that another cut could be made.
The New York firm had rated Chicago's general-obligation bonds at Aa3, or fourth highest. The company also cut its grades on the city's securities tied to sales-tax revenue and water and sewer debt, to A3 from Aa3 and to A1 from Aa2, respectively, affecting almost $3.9 billion in related debt.
"Absent significant growth in the city's operating revenues, escalating pension funding requirements will increasingly strain the city's operating budget, as pension outlays compete with other spending priorities, including debt service and public safety," Moody's analysts wrote in the report, referring specifically to Chicago's high costs of controlling crime. The city of about 2.7 million managed to reduce its homicide rate by 29 percent in the first half of 2013, yet it had to pay overtime to 400 officers.
Chicago Mayor Rahm Emanuel said the downgrade confirmed his long-held belief that large municipalities will continue to receive negative reviews from rating agencies without comprehensive pension relief from the state. However, state lawmakers could not agree to provide relief during two special sessions called by Illinois Gov. Pat Quinn in the past five weeks.
"I urge our leaders to come together, find common ground and pass pension relief that will give taxpayers, retirees, residents and rating agencies confidence in our city's finances and our city's future," Emanuel's office said in a statement.
The 53-year-old Chicago resident and former investment banker, former congressman and former White House chief of staff to President Barack Obama previously warned that retirement contributions would cost about $1.2 billion within four years if the state legislature didn't restructure the system. His 2012 estimate was just $476 million.
The two Moody's analysts, Rachel Cortez and Thomas Aaron, said the city's four pensions reported a $19 billion collective deficit -- about half of what the analysts figured it would be. Chicago's downgrade is now just four steps above noninvestment grade, considered junk.
Moody's began reviewing the credit effects of Chicago's municipal retirement obligations in April amid political obstacles to meaningful retirement system reform that reach all the way up to the state level.
Fitch dropped Illinois to its fourth-lowest investment grade of A- after the Springfield legislature adjourned May 31 without passing a pension fix. Three days later, Moody's announced its equivalent cut to A3, while Standard & Poor's rates Illinois at the same level.
http://www.ibtimes.com/moodys-cuts-chicago-debt-rating-crime-fighting-costs-pension-deficits-buffet-windy-city-1351391NO AMNESTY
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07-22-2013, 09:26 PM #2
RELATED
Illinois is dealing with its own $97 billion pension shortfall.
http://www.alipac.us/f9/detroit-bankruptcy-raises-concerns-about-other-us-cites-under-huge-retiree-debt-284137/
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07-22-2013, 10:13 PM #3
It looks like Chicago is next. Meanwhile, the bureaucrats have made themselves rich.
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07-22-2013, 10:37 PM #4
Florida’s Retirement System, for example, has a $19.2 billion deficit in its plan, which would fund the budgets of 19 other states. Florida’s plan is only 86 percent funded, which, believe it or not, isn’t bad compared to other states. Eighty percent or higher apparently is acceptable on actuarial bright-line tests.
Miami is among the metropolitan cities in danger of defaulting on its pension debt.
Pension costs in West Palm Beach have risen from $9 million to over $16 million in the last four years, and the city now faces an $8.4 million shortfall. Tampa and Jacksonville are functionally bankrupt because of their pensions, which are now only about 50 percent funded.
http://www.bizpacreview.com/2013/05/27/pension-bomb-ticks-away-72438NO AMNESTY
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07-22-2013, 10:52 PM #5
Other cities now on the radar include Cincinnati, Minneapolis, Portland, Ore., and Santa Fe, N.M. . .
followed by such major cities as Philadelphia, at $8.6 billion. In comparison, that figure for Detroit was $12.9 billion.
Baltimore is also among the most under funded cities regarding retiree health care, when considering how much it would cost individual households. The amount is $10,208 per household.
http://www.alipac.us/f9/detroit-bankruptcy-raises-concerns-about-other-us-cites-under-huge-retiree-debt-284137/NO AMNESTY
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05-20-2016, 06:57 PM #6
Chicago’s Pension-Fund Woes Just Became $11.5 Billion Bigger
Elizabeth Campbell elizabeth_news
May 19, 2016 — 2:52 PM PDT
Updated on May 20, 2016 — 7:12 AM PDT
- New accounting rules show 162% increase in net liabilities
- Fund liability jumped because of court loss, accounting shift
Chicago’s pension-fund shortfall just got $11.5 billion bigger.
Thanks to the defeat of the city’s retirement-fund overhaul by the Illinois Supreme Court and new accounting rules, Chicago’s so-called net pension liability to its Municipal Employees’ Annuity and Benefit Fund soared to $18.6 billion by the end of 2015 from $7.1 billion a year earlier, according to its annual report. The fund serves some 70,000 workers and retirees.
The new figure, a result of actuaries’ revised estimates for the value in today’s dollars of benefits due as long as decades from now, doesn’t change how much Chicago needs to contribute each year to make sure the promised checks arrive. But it highlights the long-term pressure on the city from shortchanging its retirement funds year after year -- decisions that are now adding hundreds of millions of dollars to its annual bills and have left it with a lower credit rating than any big U.S. city but once-bankrupt Detroit.
“The longer they wait to get this fixed, the more expensive it’s going to get for the city’s taxpayers,” Richard Ciccarone, the Chicago-based president of Merritt Research Services LLC, which analyzes municipal finances.
The estimate presented Thursday to the board of the municipal fund, one of Chicago’s four pensions, will add to what had been an unfunded retirement liability for the city estimated at $20 billion.
A key driver was the court ruling striking down Mayor Rahm Emanuel’s plan that cut benefits and boosted city and employee contributions. Without it in place, the fund is now set to run out of money within 10 years.
That triggered another change. New accounting rules, adopted to keep governments from using overly optimistic investment-return forecasts to mask the scale of their liabilities, require them to use more modest assumptions once pension plans go broke. As a result, the reported liabilities jump.
The Chicago fund is notable because very few governments have been affected by the change, according to Ciccarone. “The investment returns are not going to fix the problems themselves,” he said.
City officials from Emanuel to Chief Financial Officer Carole Brown have said the city is working on a solution to shore up the retirement system. Chicago has already passed a record property-tax increase that will bolster the police and fire funds.
Under the traditional way of estimating the municipal fund’s obligations, which is how annual contributions are set, the shortfall rose to $9.9 billion as of Dec. 31, based on market value of its assets, according to the actuaries report. That’s up from $7.1 billion a year earlier.
The pension is only 32 percent funded -- meaning it has 32 cents for every dollar it owes -- compared to 42 percent last year, according to the actuaries. And it has to sell 12 percent to 15 percent of its assets every year to pay out benefits.
City officials are having “very good discussions” with the unions about the issue, according to Emanuel, who has made clear that he disagrees with the court’s ruling to throw out his plan.
“We’re working through the issue to get to what I call a responsible way to fund their pensions within the confines, the straitjacket that the court has determined,” Emanuel told reporters at City Hall on Wednesday.
A proposal is pending in the state legislature to bolster funding for the benefit fund. The plan would ensure it’s 90 percent funded by the end of fiscal year 2055.
Jim Mohler, executive director of the fund, told board members on Thursday that it’s a “fluid situation.”
http://www.bloomberg.com/news/articl...billion-bigger
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05-20-2016, 06:59 PM #7
What a shame!! Time for Chicago to vote for Trump and send those protesters scurrying for rocks to hide under.
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