Will Chicago Be The Largest US City To Declare Bankruptcy?

Authored by Rick Moran via PJMedia.com,

The city of Chicago is in dire fiscal and financial straits with an almost billion dollar budget deficit, bonds rated at junk status or below, numerous extremely costly legal judgments, a shrinking tax base, and unfunded public pension liabilities to the tune of an astonishing $42 billion.

Other than that, it’s a great place to live.

The state of Illinois has its own financial troubles, so the city can expect little or no help there. And good luck getting a federal bailout through the GOP Senate and signed by a president who’s been called a “racist” by the mayor.

The shrinking tax base is clear proof that citizens are already over taxed. And since it’s Democrats in charge, there won’t be much cutting of city services.

The only option for Mayor Lori Lightfoot and the city council is restructuring the city’s massive debts. In other words: bankruptcy.

RealClear Politics:

The city needs to lower taxes to start growing again, but lower taxes would mean Chicago can no longer service its debts.  Federal law offers a procedure for reducing those debts by commencing a case in bankruptcy court.  A bankruptcy judge has the power under federal law to reduce the city’s liabilities, change its pensions, reorganize its functions into a more efficient ongoing structure and eliminate some of its debts — but the judge does not have the authority to raise your taxes.

Bankruptcy is a painful process because it forces creditors who facilitated the city’s failure to take a loss: bond holders, such as hedge funds, Wall Street bankers that sold the bonds and the people who are waiting to be paid for goods and services sold to Chicago, including past and current municipal employees.  (The city can and will still be able to offer generous pension benefits to its workers, but perhaps with a cap limiting pensions of well more than $100,000 and without the automatic 3% COLA; the exact terms of any new deal would be hammered out in negotiations under the auspices of the court.)

There are several problems with this plan. Good luck getting unions to agree to any change in the way pensions are figured. Former Illinois Governor Bruce Rauner tried for 3 years to find a way to get the public unions in the state to make some tiny reforms and he was blown out of office.

Besides, it doesn’t matter what the bankruptcy judge will say or do. There is going to be pain. Just ask the citizens of Detroit who endured the process in 2013. It wasn’t pretty.

Indeed, there simply isn’t an alternative:

This is Lightfoot’s moment: She didn’t make this crisis, but if she seeks higher taxes and less services instead of reform, Chicago’s population and property values will continue to bleed out.  A bankruptcy restructuring is in Chicago’s future; it’s immoral to wait until empty buildings fill the downtown instead of cranes, and property values for “remainers” fall further toward zero.

Unfortunately, Lightfoot can’t make this happen on her own.  Under federal law, the state must first authorize bankruptcy filings by municipalities before the city can avail itself of this procedure to restructure its debts.

Instead of lobbying Springfield to ask residents of other towns to pay Chicago’s debts, she needs Gov. Pritzker and the legislature to grant permission for the city to pursue a prudent financial reorganization and debt reduction through a federal bankruptcy procedure.

One thing is certain: a filing of bankruptcy will totally eliminate the leverage of machine politicians to bilk the public. The machine has been in decline for at least 3 decades, but remnants of the old Daley coalition survived. But there’s no hiding anymore. The machine has to go if the city is to recover and thrive again.

From my 40-year observations of the Chicago political scene, I have my doubts whether Mayor Lightfoot could do what needs to be done. The powers that be are just too entrenched. It’s not only politicians, it’s bloodsucking businessmen, organized crime, and now street gangs who also get a cut of the action. This is the way the “City that works” has worked for more than 90 years.

Since the days of Big Bill Thompson, Chicago has been a cesspool of graft and corruption. Can waving the magic wand of bankruptcy cure the city of almost 100 years of amoral governance?

Don’t bet the farm on it.

via zerohedge

7 comments

  1. Again the focus was on protecting illegal aliens from being deported instead of protecting and working for the citizens. Bankruptcy is no surprise in legal action should be taken for aiding and abetting !!

  2. Man – They tried this sh** before and federal judges put a stop to it…..They promised massive benefits to it’s employee’s in return for their votes and they’ve FINALLY RAN OUT OF OTHER PEOPLE”S MONEY…..
    Sorry Folks – but civil war is on the horizon…..DC’s deep state along with CA and NY are pushing to take everything from you and divide it up to illegals and non-working POS…..

  3. Liberalism is a mental retardation disorders:Leading the libtards are Pelosi,Cummins,Hillary,Waters,the squad are just some of the poster girls in the godless deranged Satanist NAZI Commie Demoncrat party!Stop these traitors/weirdos from turning the US into godless shit holes like the lib run cities..

  4. Everywhere Demonrats have control, living conditions turn to shit, due totheir idiotic agendas combined with their greedy misappropriation of funds. Chicago has more murders due to their anti-gun laws and high crime due to the Demonrats stealing money that was intended to bring in jobs. LA has a homeless problem, due to importing illegal immigrants to take jobs at lower wages that citizens would otherwise have.

  5. Demos ruin cities due to corruption and poor management. These liberals mayors do not work properly. Their mission is to get the power. They do not care about citizen. Invest money on illegals and forget the residents. They should be investigated and bring to justice. It is time for people to realize these liberals are for themselves. Time to vote them out. MAGA.

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