The Windy City’s fiscal crisis is so dire it might make some EU debtor countries blush. Chicago Mayor Rahm Emmanuel is proposing to restructure $20 billion in unfunded pension liabilities for city employees, partly with a $250 million annual tax increase, partly with a $750 million cumulative five-year property tax increase. And that doesn’t even touch the $696 million contribution the Chicago Board of Education needs to make in the next fiscal year to teacher pensions, which have a completely separate $10 billion unfunded liability.The worst part is, no one knows how much it will take to return Chicago’s total unfunded liabilities to anything resembling normal. Chicago Business reports:
Uncertainty about the total cost to stabilize Chicago’s woefully underfunded pension plans has troubled some members of the Illinois General Assembly, which on April 3 delayed a vote on the pension deal. It also is starting to worry downtown office building owners and their tenants, who would feel the brunt of the tax increases.“If you had one situation to deal with, you take the pain and it goes away,” says Robert Six, chief operating officer of Chicago-based Zeller Realty Group, which owns the Wrigley Building and other landmark office high-rises in Chicago. “But the light you see behind this one is another freight train coming at you, not the end of the tunnel.”
Mayor Emmanuel deserves credit for taking seriously the egregious fiscal situation he inherited. If state-level politicians would only tackle the problem with the same alacrity, Illinois might have a fighting chance to avoid sinking further into financial ruin and humiliation and being crowned the Puerto Rico of the mainland. But it’s not even clear that hundreds of millions of dollars in property taxes (which, in apartment and office buildings, will likely be passed on to tenants) and further increases in employee contributions can fix this pension mess. These are dark days for the Midwest’s blue mecca.