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The [Wednesday] Papers

"Chicago took yet another hit Tuesday when a major credit rating agency downgraded much of the city's debt to junk status, making it more difficult for Mayor Rahm Emanuel to fix the financial mess without a major tax increase," the Tribune reports.

I made all my jokes about this on Twitter, so I'll keep it serious here.

"A cut below investment grade is a major statement, implying that there is material risk to the city not paying its bondholders on time or in full," said Matt Fabian, a managing partner at Municipal Market Analytics. "To have gone there without waiting to see the city's approach to the current budget gap, or whether or not they will raise revenues is clear demonstration of a lack of confidence in city management. In other words, they see little reason to wait because they expect little in the way of a management response."

In other words, Moody's - the ratings agency doing the downgrading - just gave Rahm Emanuel a vote of no confidence.


"Emanuel attacked Moody's decision to downgrade the city's credit, but his remarks illustrate the grave financial situation the city faces.

"This action by Moody's is not only premature, but it is irresponsible to play politics with Chicago's financial future by pushing the city to increase taxes on residents without reform," said Emanuel in a statement.

The key phrase here is to increase taxes on residents without reform.


Because Emanuel is trying to use this somewhat-manufactured crisis as an opportunity to achieve political goals that otherwise would not be achievable in a non-emergency environment, as I and a few others have been saying. (Gov. Bruce Rauner is doing the same.)

To wit:

* Did The City Wait Too Long?

In which former chief financial officer Lois Scott is found to have said:

[T]he issue that the rating agencies and investors have with Chicago is that we can resolve our issues, we just have chosen not to.

What we know, however, is that the minute we pull the lever of increasing revenue, our ability to drive reform in the system will be gone. The city needs to implement reforms that will promote long-term health, even if it means short-term stress and discomfort for people in the financial community about the fact that we haven't increased revenues at this point. We are balancing revenues with reforms. That's what you saw with the recent Chicago Park District reform proposal. When we enact reforms, we increase revenues.

Right. This is the same argument I've used with my credit card companies - no more money for you until you reform yourselves! And my credit rating, too, has been downgraded to junk status.


"The practical impact is that investors typically demand higher interest payments because of the risk they are taking. That could make it more expensive for the city to borrow money. And Emanuel was planning to do just that as part of a financial restructuring plan he unveiled late last month as he tried to get out in front of the state Supreme Court ruling on pensions and the potential downgrade that could follow.

"As part of that, Emanuel planned to go to market in the coming weeks to convert $900 million the city had borrowed at fluctuating interest rates into fixed-rate debt and to borrow $200 million on the city's credit card to pay off related transactions known as interest-rate swaps. Now the city could be forced to pay higher interest costs."

So taxes have essentially been raised already - without reforms in a way that only makes the problem worse


"Emanuel and the City Council last year put off making a decision on whether to enact a significant property tax increase to help cover the city's ballooning pension costs. That deferral came as Emanuel and aldermen prepared to run for re-election this spring on a theme of having made courageous tough choices."

I added the tough choices part.


"The mayor has long maintained that it's unwise to commit additional funding to pension fund without 'reform,' which he defines as a commitment by unions to lower the city burden through reduced benefits or additional employee payments.

"But the state Supreme Court ruling Friday was clear that the Illinois Constitution holds that pension benefits can't be 'diminished or impaired' once they're granted. Emanuel has maintained that pension changes he engineered for the workers and laborers funds can withstand lawsuits, but legal analysts are far less optimistic, as was Moody's, which quickly downgraded the city's credit."

In other words, Rahm's reform has been illegal all along. But at least he had a plan!


Meanwhile . . .

"Lawmakers returned to the Capitol on Tuesday facing renewed pressure to overhaul the state's employee pension system after the Illinois Supreme Court struck down a law aimed at sharply curbing benefits, with Senate President John Cullerton proposing an updated version of a plan he floated two years ago.

"We wasted two years with an unconstitutional bill that saved us zero," Cullerton said.

"[His new plan is] a revamped version of a Cullerton proposal that passed the Senate in 2013 with union support that would have allowed employees and retirees to choose between compounded cost-of-living increases or health care benefits. That measure was never called for a vote in the House, as critics argued it would save about a third of the more sweeping proposal that ultimately became law but was struck down last week."

Let's get rid of the passive voice: "House Speaker Michael Madigan never called the plan for a vote."

Also, a math lesson: When is a third of zero actually far larger than zero? When your plan's unconstitutional!


Unlock Congress!
Beachwood readers are invited to this event in Logan Square on Thursday night. Hope to see you there.


Exclusive! The New Wrigley Bleachers
Another Beachwood Special Report.

See also: Wrigley Bleachers Reopen: Game Already Delayed By Asswiping Incident.


Proving once again that money ruins everything.


* Brazil's World Cup Stadiums Were A Colossal Waste Of Money.

* U.S. Tech Giants Stockpile More Than $500 Billion Overseas.


A sampling.



The Beachwood Tip Line: All the right junk in all the right places.


Posted on May 13, 2015

MUSIC - Chief Keef Changed The Industry.
TV - Vizio's Best Product Is You.
POLITICS - UIC: Soda Taxes Work.
SPORTS - More McCaskey Malpractice.

BOOKS - All About Poop.


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