My Blog

Tag: Rahm

  • Bus-Only Lanes Hurt Everybody

    CTA super-express buses that will operate on 21-mile stretches of Ashland and Western avenues will have the benefit of using full-time bus-only lanes, under a still-evolving concept the transit agency and the city will present this week at three open houses, starting Tuesday.

    via  Chicago Tribune.

    This is just an extension of the ongoing war on vehicles & one of the dumbest ideas ever.  It makes no sense to make life more difficult for cars; which just so happen to be how most people get around.  Why punish the majority for the minority?  Some people literally must drive b/c they have to take children to school before work or otherwise travel on routes not covered by public transit.

    Damen in one lane.  Halsted is one lane.  California is one lane.  It makes no sense to destroy the only two North-South arteries.  Between the bike lanes and the center islands it is getting impossible for vehicles to get around.  This includes police, fire, and EMS vehicles as well.

    Lastly, what is the problem trying to be solved here?  That buses travel more slowly in traffic is not new.  It’s been that way since the invention of buses.  People on buses however can read, play with their phones, talk on the phone, send txt messages, and do all sorts of things that people in cars cannot (safely) do.  This is the advantage of taking the bus over the car… that, and the cost.

    Chicago can be a great great city.  Truly world class.  But it will not become so by declaring war on vehicles which the majority of people use to get around.

  • Chicago’s Pension Time-Bomb

    While Emanuel can coast for two more years, the city in 2015 is required by law to set aside an additional $700 million a year for two of its four pension funds, all of which are woefully underfunded: That year’s budget will include a total of $1.2 billion for the retirement accounts of teachers, police, fire and municipal workers. Such a steep ramp-up threatens to gobble city resources for everything from parks to schools to transportation.

    via Chicago Tribune.

    The total budget for this year is $8.35 billion.  In two years the city has to find nearly another 10% more money… out of thin air.

    This is naturally in addition to the $86 billion (laughable that anyone still believes this number; it’s easily twice that) hole is the state pension funds.

    Get ready… something’s going to go BOOM pretty soon.

  • SUV as Deadly Weapon

    Two people were struck by a hit-and-run driver after a fight outside a River North neighborhood bar early Sunday morning, police said.

    via Chicago Tribune.

    Although it’s not reported here, the news from police on the scene is that this was a street fight where the fight’s loser went to his car and then used it to run over the fight’s winner.

    Another example of people who are intent on hurting other people proving they can do so without using a firearm.

  • Illinois – Worst Financial Shape Ever

    Bloomberg L.P., the big New York financial data firm, is holding its fall municipal-financing conference on Wednesday, and guess what the title is for the special panel on the Land of Lincoln?  Try Land of Entropy.  Yes, sports fans, the panel titled “Illinois Treading Water” is set for 1:45 p.m. and, according to a synopsis, not too much good will be said about our fine state.

    “California debt is beating Illinois bonds by the most in three months as investors choosing between the two lowest rated U.S. states reward efforts to bolster the finances of the nation’s biggest pension in California,” it says.  But though they passed a version of pension reform in California, nothing good has happened here.

    “Illinois lawmakers failed to advance any measures in a special session Aug. 17,” the synopsis says.  “Standard & Poor’s cut the state’s credit.”  And, at last check, “Illinois carried a backlog of about $8 billion in unpaid bills, not including pension obligations.

    “More: Illinois’ ratio of pension assets to liabilities is “the lowest among U.S. states.”  It concludes, “What is the outlook for significant defaults in the state? How can Illinois get its fiscal house in order?”

    via Crain’s Chicago Business.

    Rahm, Michael Madigan, Pat Quinn, John Cullerton, and the rest of The Machine will go down in history as fiddling while Illinois burned.

  • Jimmy John’s Leaving Illinois, Florida Bound

    Jimmy John Liautaud is moving part of the sandwich chain that bears his name to Florida next year, making good on a threat issued in 2011 after Illinois hiked its corporate tax rate.

    The founder of Jimmy John’s Gourmet Sandwiches said during a Sept. 18 panel discussion in Chicago that he will relocate the company’s licensing division to Florida, where he plans to move in early 2013. Mr. Liautaud said in January 2011 that he applied for residency in Florida out of anger when Gov. Pat Quinn raised the corporate tax rate to 5 percent from 3 percent.

    via Crain’s Chicago Business.

    Ya see!!  This is what happens when you raise taxes.  It’s called the Laffer Curve and it’s a real phenomenon.  Illinois is in the down portion of the curve where when you raise taxes you get less income.  Can someone explain that to Gov. Quinn, Michael Madigan, John Cullerton, Rahm, and the rest of The Machine?

    Raising taxes — especially on “the rich” — only shifts the actual tax burden further down into the middle class.

    What we need is a wholesale rewrite of the tax code.  But that’s a much, much longer post.

  • CPS Debt Downgraded

    A leading bond-rating agency has downgraded the Chicago Board of Education’s debt in the wake of the settlement of the Chicago Teacher’s Union’s recent strike.

    Moody’s Investor Service had already downgraded the Chicago Public Schools’ bond rating outlook to “negative” from stable in July, and cited Thursday the rating agency’s “view that the district will be hard-pressed to make the budget adjustments necessary to close an estimated $1 billion budget gap for fiscal 2014.”

    The schools’ downgrade to an A2 rating “reflects a weakened financial profile” born of depletion of reserves, a coming jump in pension payments after three years in which state law was changed to reduce the payments temporarily, slow payment of state money–and the recent strike, Moody’s said in a release.”If progress is not made toward improving the financial condition and liquidity of district operating funds, or if challenges arise in making the required pension contributions, the district’s general obligation credit quality will be impaired,” according to the release.

    Strikes by other unions, more delays in state funding or “unmanageable” increases in pension costs could result in further ratings downgrades, Moody’s warned.

    A spokesperson for Chicago Public Schools wasn’t immediately available to comment on the downgrade.

    via Chicago Tribune.

    CPS is falling apart.  The biggest losers here are the poor families generally on the South and West sides that have no other options for their children.  It’s the false choice of failing CPS school A or failing CPS school B.

    Rahm caved.  He owns this.  Epic fail.

  • Aldermen Briefed on Pension Time-Bomb

    [Chicago’s] Chief Financial Officer Lois Scott reminded council members that absent significant changes to pension plans, the city will be forced to drastically cut services, raise taxes or do both to close a funding gap that could reach $700 million in just a few years, aldermen said.  …

    …  Lawmakers are looking to fix the state’s woefully underfunded pension system, but the city also needs changes from Springfield to repair its retirement funds.

    … Absent a city pension overhaul, the fund for retired city firefighters would become insolvent in nine years, according to a city report issued two years ago.  The police pension would go broke four years later.  Funds for city laborers and municipal workers would be broke by 2030via Chicago Tribune.

    These numbers are all wrong.  These pension claim they’re going to earn 8% on their money year after year.  That simply has not happened in a decade and they are tens-of-millions of dollars behind where they claimed they would be be even two years ago.

    Kudos to my friend Anthony Curran who suggested we start a Pension Death Watch.  I think it’s a great idea.

  • Mayor Booker Gives Rahm & McCarthy an Idea

    This will be “policy” in Chicago within the next 12 months.

    Controversial Newark, N.J. Mayor Cory Booker wants to make an offer to local drug dealers that they can’t refuse.

    Cory Booker and former New York Gov. David Paterson spoke Tuesday morning about recidivism and racism at a panel hosted by Stroock law firm.

    One of Booker’s most shocking policies is dubbed a “call in,” something he borrowed from High Point, N.C. During a call in, police and other government officials meet with known drug dealers and try to convince them to choose another path.

    “What we’ve decided to do in Newark is bring them all in and sit down with them and not have a ‘you’re going to get arrested’ conversation but ‘hey, this is the pros and cons,’” Booker said.

    When the suspects come to the meeting, law enforcement has already collected evidence against them, including pictures of them dealing drugs.

    “And we basically said to them, ‘you can work with us, we have people here with housing, jobs, everything possible,” Booker said. “Or you can go out and continue doing [crimes], but if there’s one shooting in this area again […] we will come in and find every reason that’s legally allowable to arrest everybody you know.’”

    via Business Insider.

    Now mind you, I’m not saying that it’s going to be a miserable failure… I’m just saying that Rahm and McCarthy are going to bring this forward as a new and creative idea all their own after the current policy is a demonstrated failure.

  • Two Stabbed Outside Near North Bars

    Two men were stabbed, another badly beaten and a fourth arrested early Sunday morning after a fight on Division Street spilled over onto State Street, according to police.

    An officer sustained non-life-threatening injuries that didn’t require hospitalization while trying to make the arrest on a 24-year-old man, Chicago Police Department News Affairs Officer John Mirabelli said.

    via Chicago Tribune.

    Four people injured by one crazed lunatic with a knife.  When is this town going to get tough on crime and demand common sense knife laws?

    Hey Rahm!!  On No one’s talking about banning knives.  But shouldn’t we have a knife registry?  What we need is a CKOC (Chicago Knife Owners Card) to make sure that only people who’d paid their fee are able to buy and carry knives.  We clearly need more common sense knife laws in order to prevent another tragedy like this one.

    BTW — Kudos to the police for not just shooting this idiot and sending his to his eternal rest.  CPD shows incredible restraint under tough circumstances.

  • Quick Pension Analysis

    Ok, so I was getting asked about this the other day both in person and in the comments about why the pensions are really in such bad shape and what the latest GASB positions mean to the funds.  GASB first.

    GASB Changes
    I did some poking around and the recent GASB changes really mean nothing.

    After six years of research and about 400 pages of text, GASB’s statements 67 and 68 do little to provide enough meaningful information about the potential retirement costs faced by the taxpayers. The statements will force the worst of the worse, such as Illinois, to recognize a much larger liability.

    That’s like throwing the zombified Walking Dead under the bus to give the appearance of taking a serious step in providing transparency. Zombies are already dead. You can throw them under a bulldozer; it doesn’t make them more dead.  …

    The new standards still allow most pension funds to choose their discount rates when determining their pension liabilities. In other words, the sworn and civilian plans of the City of Los Angeles can wantonly throw caution to the wind and assume a 7.75% earnings assumption going forward, avoiding any consideration of risk.

    via City Watch LA.

    You can read the policy papers.  It’s pages and pages of nonsense summarized nicely with the zombie analogy above.

    But what the lastest GASB changes point out to us is the danger regarding the assumed internal rate of return.

    Interest Rate Issue
    For giggles I found the 2011 annual report of the Chicago Teachers’ Pension Fund.  It’s 116 pages detailing a underfunded, mismanagement, no financial understanding pension time-bomb with some lipstick.

    From page 13:

    As of June 30, 2011, investments at fair value plus cash totaled $10,456,912,118. This reflects a 16.8% increase from the $8,949,590,783 value of June 30, 2010. The Fund’s investment performance rate of return for the year ended June 30, 2011, was 24.8%, exceeding the projected return of 8% and reflecting a 82.3% increase from the 13.6% performance rate of return as of June 30, 2010. The ten-year rate of return posted by the Fund for the period ended June 30, 2011, was 5.7%, and fell short of the actuarial assumption of 8%.

    That’s a lot of information.  I draw your attention to the incredible swings in the rate of return of the fund over the years.  24.8% one year, 13.6% another, however the 10-year average is a mere 5.7%.   On page 25 we learn that the 5-year average is only 4.7%.  Yikes!!  But the fund assumes that over the long term it will average 8%.

    But what does that mean? So what?

    Well, the fund currently has net assets of $10.344 billion.  When invested at the given rate of returns at the end of 5 years we have:

    Year Value @ 4.7% Value @ 5.7% Value @ 8%
    0 $10,344,100,000.00 $10,344,100,000.00 $10,344,100,000.00
    1 $10,830,272,700.00 $10,933,713,700.00 $11,171,628,000.00
    2 $11,339,295,516.90 $11,556,935,380.90 $12,065,358,240.00
    3 $11,872,242,406.19 $12,215,680,697.61 $13,030,586,899.20
    4 $12,430,237,799.29 $12,911,974,497.38 $14,073,033,851.14
    5 $13,014,458,975.85 $13,647,957,043.73 $15,198,876,559.23

    If the next 5 years are like the past 5 years the fund will earn 4.7% on its assets.  So in 5 years it will have $13.014 billion.

    In the next 5 years are like the past 10 years the fund will earn 5.7% on its assets.  So in 5 years it will have $13.646 billion.

    However the plan assumes that over the next 5 years it will follow the 8% column and have $15.1 billion.  History is against them.

    If the fund earns 5.7% over the next 5 years it will be $1.55 billion short of projections.  That’s 10% less money available.

    If the fund earns 4.7% over the next 5 years it will be $2.18 billion short of projections.  That’s 14% less money available.

    If all the assumptions go on for 10 years:

    Year Value @ 4.7% Value @ 5.7% Value @ 8%
    10 $16,374,178,752.54 $18,007,050,537.73 $22,332,136,064.29

    Earning 5.7% the fund is $4.33 billion short or 19.3%.

    Earning 4.7% the fund is $5.95 billion short or 26.6%.

    So if the next 10 years are anything like the past 10 years from an investment standpoint we can expect the all the state pension funds to have about 20% less money than they’re projecting.  That could easily be another $40-50 billion that someone’s going to come looking for.

    – – –

    Now in all fairness, a historic average suggest that a return rate of 8% could be reasonable.  i.e. These funds may be able to earn an 8% return in the next 5 years.  Why?

    Interest Rates & Inflation.  In the last 5 – 10 years there has been very little inflation and interest rates have been low.  That’s generally accepted to be a good thing.  However it messes with the long-term analysis as to what something will be worth in the future.

    Given the amount of debt carried by the Feds, and the quantitative easing (a/k/a money printing) that been happening, it’s safe to say that very soon interest rates are going to start going up… fast and dramatically.

    When interest rates go up, the rate of return on these pension funds should go up as well.  If they get close to the 8%, then we’ll only have to worry about the current short fall of billions and billions and billions.

    Any questions?