Chicago’s Pension And Debt Load Worse Than Puerto Rico’s, And A New Moody’s Report Zaps Chicago – Wirepoints Original

By: Mark Glennon*

Chicago worse than Puerto Rico. That was among the Twitter reactions in the municipal bond community today to a new Moody’s report.

Could that be right? Well, it’s certainly correct to say Chicago’s debt burden is worse than Puerto Rico’s

First, that new Moody’s report. The full report is for their subscribers only but they published parts. It compares 50 major local governments by total debt load, including what Moody’s calls Adjusted Net Pension Liability or ANPL. That’s their take on unfunded pension liabilities to correct the phony assumptions used in official pension reporting.

It ranks Chicago worst by far of the 50 municipalities, with total debt burden of $131,000 per household.

As a percentage of operating revenues, Moody’s says Chicago remained at the top. Unfunded pension liabilities represent over 700% of annual revenue.

How does that compare to Puerto Rico? The new Moody’s report doesn’t cover Puerto Rico but its total debt and pension hole is about $118 billion, which is $93,00 per household, lower than Chicago’s $131,000 per household.

Use the more optimistic official numbers for Chicago and Illinois instead of the adjusted Moody’s numbers and Chicago still looks worse than Puerto Rico. Each Chicago household is officially on the hook for 67,000 of city and other local debt (which we showed in a recent article), plus another $46,000 for their share of state debt (about $220 million of state bonds and unfunded pension/healthcare liabilities). That totals $115,000 per household, still higher than Puerto Rico’s $93,000 per household.

Puerto Rico, by the way, is in worse shape than was Detroit on a per capital basis. So, if our numbers are worse than Puerto Rico’s but Puerto Rico is better than Detroit was, well….

That’s not to say, however, that Chicago is Puerto Rico or Detroit. It’s not — not even close by other measures, particularly in terms of the income and wealth in Chicago. But Chicago sure better work to keep that income and wealth here if it hopes to honor anything even close to the debts it has incurred.

*Mark Glennon is founder and Executive Editor of Wirepoints. Opinions expressed are his own.

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Fred
6 years ago

Mark- It seems to me that this pension crisis in part is similar to a run on the banks. The tier 1 retirees who up to 2006 could “Spike” their pensions with years of unused vacation sick days personal days and so on without much limitations. After the 2005-06 law they were limited to 6% spike after which a nominal penalty is applied (paid by taxpayers). Rockford school district 205 had the highest penalties of over $1.885 mil over a few years according to a Chicago Tribune article named Taxpayers walloped twice” Pensions and Penalties” .Tier 2 had the 6%… Read more »

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