FILE - Chicago, Daley Plaza, City Hall
The Picasso in Daley Plaza, in front of Chicago City Hall and the Richard J. Daley Center. (Phil Roeder | Flickr via Creative Commons)
An analysis of the top 75 most populous U.S. cities and their financial health ranked Chicago next to last and gave the city a grade of “F”.
Truth in Accounting’s Financial State of the Cities 2018 report applied to the city’s 2016 financial report filings.
The report said Chicago’s debt burden was $40.5 billion, which would equate to about $45,000 for every Chicago taxpayer. The report also said Chicago would need more than $20,000 from each of its taxpayers to pay all of its outstanding bills, which also contributed to the “F” grade.
Bill Bergman, director of research at Truth in Accounting, said the city has essentially pushed payment for government services onto taxpayers in the city.
“Chicago has accumulated massive debt obligations beyond the assets it has available,” Bergman said. “It has effectively pushed the cost of past government services onto future taxpayers.”
A breakdown within the study said the city’s assets are valued at $34.3 billion. When subtracting capital and restricted assets, that leaves about $7.1 billion to pay bills. The bills in the city are valued at about $47.6 billion, the study said.
In terms of bills the city has accumulated, the highest total came from the city’s $35.7 billion in unfunded pension benefits, while $24.5 billion came from bonds, $7.4 billion from other liabilities, and $715.5 million from unfunded retiree healthcare, the study said.
The study’s methodology said it excludes capital assets such as land, buildings, and infrastructure “because these should not be sold to pay bills.”
The analysis also said there are two key categories that are driving Chicago’s financial problems: pensions and retiree health benefits. The city has $35.8 billion in unfunded pension promises and $715.5 million in unfunded retiree health care benefits, the study said.
Jeffrey Brown, Josef and Margot Lakonishok Professor of Business and Dean of the University of Illinois Gies College of Business, called the city’s situation difficult and said recent court decisions in the state on pensions have added to its issues.
“Recent Illinois Supreme Court decisions have made the outlook even more bleak because the Court interpreted the state’s constitutional non-impairment clause in the most expensive way possible," Brown said. “First, they ruled that the retiree health benefits are covered by the clause. Second, they ruled that Illinois and its municipalities cannot change benefits for current workers even for the benefits not yet earned.”
According to 2016 Census estimates, the population of Chicago was about 2.7 million, with about 1.2 million households within the city limits. The city’s largest population in a Census year was 1950 (3.6 million). That total has decreased at a steady rate and dipped below 3 million in the 1990 Census. The only Census since 1950 in which the city registered population growth was 2000, a 4 percent increase from 1990 (about 2.78 million to about 2.89 million).
Chicago’s median household income was listed at $50,434 in 2016 dollars, while the per-capita income in 2016 dollars was $30,847.
Brown said he does feel optimistic for Chicago because it is a vibrant city and companies such as McDonald’s and ADM are moving into the city.
“Chicago also has a rapidly growing entrepreneurial community that is feeding off the enormous talent provided by some of the world’s best universities, including University of Illinois, University of Chicago, Northwestern, and others,” Brown said. “And Chicago has a strong arts community. These are all assets that Detroit, to take an example, did not have, and thus why I feel much more optimistic than a narrow look at their balance sheet would suggest.
“So although Chicago faces a really difficult financial problem, I am much less concerned about the fate of Chicago than I am about other cities that do not have the same breadth and depth of meaningful economic activity.”
Emails and a call for comment from the city of Chicago mayor’s office were not immediately returned.