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(Marketwatch)   Chicago has an BRILLIANT 'new' idea to cover its ever-mounting pension obligations: Sell bonds   (marketwatch.com) divider line
    More: Dumbass, Bond, pension obligation bonds, Municipal bond, unfunded pension liabilities, Bonds, pension bonds, General obligation bond, Pension  
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735 clicks; posted to Politics » on 24 Aug 2018 at 10:56 PM (51 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2018-08-24 08:50:55 PM  
Barry Bonds? I think he's a little too old to be worth anything any more.
 
2018-08-24 10:59:00 PM  
Subby will now make clear to the world outside its mind what's wrong with this?
 
2018-08-24 11:03:31 PM  
As long as they're diversified.

img.fark.netView Full Size
 
2018-08-24 11:05:39 PM  
I literally just watched Ken Burns' The War, and they had a whole segment about how many damn bonds we sold during WWII, with people championing those that sold the most. We sold them to every damn person that would get one, and people would spend their last nickels to buy 'em. They called it "fighting the war on the home front."

What the fark is subby's deal?
 
2018-08-24 11:08:51 PM  
IF the bonds are sold to cap the defined benefit pension liability, so that the municipality can transition to a defined contribution pension system,
then YES, it is brilliant.
 
2018-08-24 11:13:39 PM  

berniex: IF the bonds are sold to cap the defined benefit pension liability, so that the municipality can transition to a defined contribution pension system,
then YES, it is brilliant.


And if they are punting the proverbial can with no alterations to the current system?
 
2018-08-24 11:13:48 PM  

Tis But a Scratch: What the fark is subby's deal?


BuckTurgidson: Subby will now make clear to the world outside its mind what's wrong with this?


Perhaps a read of the TFA will help you understand. Almost every paragraph describes why pension bonds are considered toxic debt.
 
2018-08-24 11:19:01 PM  
Well, the only thing more inept than a dummy is a committee.
 
2018-08-24 11:19:59 PM  
So the pension wants to use leverage to get better investment results. Let's ask LTCM how that plan works.

(For the technical people, I understand that they are going to use the debt for pension payouts not investments, but that is essentially letting them keep a more aggressive allocation which means it is equivalent to leverage anyway).
 
2018-08-24 11:20:08 PM  
"Chicago"

DRINK!

Lame and predictable, subs.

Yer doods are still getting locked up.
 
2018-08-24 11:21:26 PM  
Since most cities that have tried this have then gone on to default, what kind of interest rate would they have to let the bonds at in order to get the $10 billion?

It seems unlikely to work well for Chicago unless they have a chump with deep pockets lined up.
 
2018-08-24 11:28:57 PM  
Maybe a better idea would be to let Chicago keep somewhere between 1-9% of every tax dollar they collect to run their city and pay what it takes to generate the massive wealth to which it's existence seems to contribute. I think there was a farkticle about this very topic just the other day.
 
2018-08-24 11:30:07 PM  
I just finished reading "Liars Poker" and so this is both relevant to my interest and frightening at the same time.

A fiscal fear boner, if you will.
 
2018-08-24 11:33:37 PM  
My thought is that bonds should only be issued for things that are proven to generate a return on investment. Otherwise people will be throwing their money down the drain buying them. You might say "hang on, the idea of a bond is that the bond seller will at some agreed point pay back the lender with interest." True, but whenever you are dealing with a government, you are dealing with an entity that spends taxpayers' money.

And if it is one of those Republican governments that slash taxes, this means that to pay for the bondholders' debts essential services will be cut or completely abolished.

///Bonds or taxes, either way we will still pay for it out of our own pockets.
 
2018-08-24 11:35:01 PM  

Farxist Marxist: Almost every paragraph describes why pension bonds are considered toxic debt.


I am not any kind of financial savant, but this phrase might explain:

the growth prospects from its young population

Chicago is gaining occupants in high-income neighborhoods and losing in low-income areas. The city has declined in population, but in my neighborhood (not super-fancy) about 10% of every block is getting renovated or replaced with new construction.
 
2018-08-24 11:50:12 PM  

Tis But a Scratch: I literally just watched Ken Burns' The War, and they had a whole segment about how many damn bonds we sold during WWII, with people championing those that sold the most. We sold them to every damn person that would get one, and people would spend their last nickels to buy 'em. They called it "fighting the war on the home front."

What the fark is subby's deal?


The difference between running up your credit card because of an emergency and paying it off as soon as possible vs. running up your credit card because, "Hey, it's only $X per month."

The cost of pensions is only going to go up.  If they can't afford to pay today, how are they going to afford to pay tomorrow on top of the interest for today?  Unless they made a bunch of pension reforms already and they are just trying to survive this way until the legacy costs get under control, this is exponentially irresponsible.
 
2018-08-24 11:56:35 PM  

jaytkay: I am not any kind of financial savant, but this phrase might explain:

the growth prospects from its young population


I would love to see what kind of assumptions they are making.  I'm going to go ahead and assume they are more wildly optimistic than Trump's budget projections.
 
2018-08-24 11:57:21 PM  

jaytkay: Farxist Marxist: Almost every paragraph describes why pension bonds are considered toxic debt.

I am not any kind of financial savant, but this phrase might explain:

the growth prospects from its young population

Chicago is gaining occupants in high-income neighborhoods and losing in low-income areas. The city has declined in population, but in my neighborhood (not super-fancy) about 10% of every block is getting renovated or replaced with new construction.


Is that true of Chicago proper or Chicagoland as a whole. Doesn't help Chicago if everyone's moving to Oak Park
 
2018-08-24 11:58:07 PM  

BMFPitt: The cost of pensions is only going to go up.


Nope. That's only true if new workers get the same deal as current retirees, and the city does not replace workers with contractors.

Feel free to research and show us the numbers.
 
2018-08-25 12:04:35 AM  

jaytkay: Chicago is gaining occupants in high-income neighborhoods and losing in low-income areas. The city has declined in population, but in my neighborhood (not super-fancy) about 10% of every block is getting renovated or replaced with new construction.


BlazeTrailer: Is that true of Chicago proper or Chicagoland as a whole. Doesn't help Chicago if everyone's moving to Oak Park


?? This has to be explained? Really?

The tax base increases while the population shrinks (a little, it's not a huge amount).
 
2018-08-25 12:07:29 AM  

jaytkay: Nope. That's only true if new workers get the same deal as current retirees, and the city does not replace workers with contractors.


Which I already stated in my post.  Though as best as I could tell with a few minutes of Googling, they are still getting the same deal.

Feel free to research and show us the numbers.

https://chicago.github.io/afa-2017/Pe​n​sions/
 
2018-08-25 12:09:41 AM  
 I think Chigago's problem is that she's named Chicago. Nothing she does will ever be right according to some people. it's a Pavlov's dog name.
 
2018-08-25 12:13:46 AM  

dickfreckle: I think Chigago's problem is that she's named Chicago. Nothing she does will ever be right according to some people. it's a Pavlov's dog name.


Yes, this article is a work of fiction by people concocting imaginary financial problems to unfairly malign Chicago.
 
2018-08-25 12:15:35 AM  

Urmuf Hamer: Maybe a better idea would be to let Chicago keep somewhere between 1-9% of every tax dollar they collect to run their city and pay what it takes to generate the massive wealth to which it's existence seems to contribute. I think there was a farkticle about this very topic just the other day.


You can't do that. Without Chicago's money, downstate Illinois would be a barren wasteland, devoid of culture and learning... wait. Damn.
 
2018-08-25 12:15:49 AM  
Variables too numerous to fully spell out in a Fark post.

Just going to say, people certainly are hunting for yield, which might make these somewhat marketable.  I don't like that these are something akin to seriously junk munis that are also taxable.

"The article further reports that the city is expecting a 5.25% interest rate for the bond; its bet is that it will earn more by investing those assets than it has to pay out in interest."

Would rather buy VNJTX (or your respective state) at 3% tax-free.  Think 5.25% on these is a bullshiat yield.

If this is taxable why am I buying this over corporate junk debt?  Like Illinois deserves a better rating than Univision at this point?  There's been pension bond defaults before.  This isn't typical muni shiat.  This is like, swallow the pill and hope it's sugar and not cyanide.  Super good times.
 
2018-08-25 12:16:50 AM  

Dictatorial_Flair: berniex: IF the bonds are sold to cap the defined benefit pension liability, so that the municipality can transition to a defined contribution pension system,
then YES, it is brilliant.

And if they are punting the proverbial can with no alterations to the current system?


If they sell out the bonds, it's a prudent way to minimize some of the risk of the upcoming down stock market.
 
2018-08-25 12:18:43 AM  

jaytkay: jaytkay: Chicago is gaining occupants in high-income neighborhoods and losing in low-income areas. The city has declined in population, but in my neighborhood (not super-fancy) about 10% of every block is getting renovated or replaced with new construction.

BlazeTrailer: Is that true of Chicago proper or Chicagoland as a whole. Doesn't help Chicago if everyone's moving to Oak Park

?? This has to be explained? Really?

The tax base increases while the population shrinks (a little, it's not a huge amount).


Only if they are moving to areas that pay Chicago taxes. Hell, I thought MY point was obvious.
 
2018-08-25 12:25:10 AM  

BMFPitt: https://chicago.github.io/afa-2017/Pe​n​sions/


Awesome, thank you! Too much to digest at the moment but that looks great.

Dealing with the city for work I am often surprised at the raw data feeds they make available. There is a bias towards transparency among the IT people.
 
2018-08-25 12:27:15 AM  

Farxist Marxist: Tis But a Scratch: What the fark is subby's deal?

BuckTurgidson: Subby will now make clear to the world outside its mind what's wrong with this?

Perhaps a read of the TFA will help you understand. Almost every paragraph describes why pension bonds are considered toxic debt.


And very little mention as to what the unions will do when the mayor decides to order the pension fund to stop paying out, or cut benefits bigly.
A judge will order the city to pay what it agreed to in its contract.
The article also fails to mention current and retired health and dental obligations which are one of the main reasons it is having financial troubles, not the pension fund.  It's almost as if single payer would be better.
The answer isn't busting the unions to allow higher health care premiums either.  Because power hates a vacuum subby, no money will be saved.
 
2018-08-25 12:28:49 AM  

BlazeTrailer: Only if they are moving to areas that pay Chicago taxes. Hell, I thought MY point was obvious.


I see. You believe every person in Chicago is collecting a city pension.

Sorry I engaged. Good luck to you.
 
2018-08-25 12:51:43 AM  
img.fark.netView Full Size


City CFO explaining how this is a good idea
 
2018-08-25 12:59:26 AM  
Saying this as a Southside Chicagoan.

PRINCE GHOST 'FUCK RAHM EMANUEL'
Youtube IWhxcbRqkW0
 
2018-08-25 01:00:14 AM  
Sounds like a great investment platform if you want to lose a shiatload of money.
 
2018-08-25 01:05:55 AM  
The public... paying its debt?
 
2018-08-25 01:07:06 AM  

jaytkay: BlazeTrailer: Only if they are moving to areas that pay Chicago taxes. Hell, I thought MY point was obvious.

I see. You believe every person in Chicago is collecting a city pension.

Sorry I engaged. Good luck to you.


No, I think I read in your comment that Chicago just MIGHT have a shrinking tax base and that kicking the can down the road just might be a mouthbreather idea
 
2018-08-25 01:11:50 AM  

Notabunny: The public... paying its debt?


vignette.wikia.nocookie.netView Full Size
 
2018-08-25 02:08:33 AM  
Muni bonds to fund infrastructure is OK. That will eventually generate money to pay back the money with interest. That's why muni bonds exist. For example, a bond for upgrading a sewerage system where people pay sewerage bills and the bond payback is factored into a monthly (or whatever) bill. That's usually a pretty safe bet to get your money back.

Muni bonds to pay out pensions for a historically mismanaged pension fund? Payout with no foreseeable return is bad. Only a fool would buy these bonds.
 
2018-08-25 02:44:59 AM  

berniex: IF the bonds are sold to cap the defined benefit pension liability, so that the municipality can transition to a defined contribution pension system,
then YES, it is brilliant.


Switching to a defined contribution plan may be unconstitutional. The State of Illinois has a clause in its constitution specifically saying that pension benefits "shall not be diminished or impaired."
 
2018-08-25 03:00:17 AM  

BMFPitt: The cost of pensions is only going to go up. If they can't afford to pay today, how are they going to afford to pay tomorrow on top of the interest for today? Unless they made a bunch of pension reforms already and they are just trying to survive this way until the legacy costs get under control, this is exponentially irresponsible.


It is no longer a pension at that point, it is a Ponzi Scheme.
 
2018-08-25 03:48:36 AM  

Tis But a Scratch: I literally just watched Ken Burns' The War, and they had a whole segment about how many damn bonds we sold during WWII, with people championing those that sold the most. We sold them to every damn person that would get one, and people would spend their last nickels to buy 'em. They called it "fighting the war on the home front."

What the fark is subby's deal?


A fine progressive you are.
There's two things wrong with your reasoning here:
1) There ain't a world war on in Chicago consuming vast resources, this is about pensions.
2) The entire state of Illinois is totally broke because of Democrats like you who think they only need to shake a money tree to fund outrageous pension committments they made to get union votes.

Fark all of them, if you live in Illinois and support this bullshiat you are in the ranks of the damned.
 
2018-08-25 04:47:06 AM  
There is more than adequate evidence to support a legal change to the administration of pension plans to prevent the employer, public or private, from ever being able to access contributions. The funds do not belong to the employer: they are an earned benefit that belongs to the employee, and that includes employer contributions. Employers recruit new employees by offering a basket of benefits, including matching pension plan contributions. Using those funds for anything else should be illegal.

During the past couple of decades I have frequently read articles about corporate bankruptcies or governments that can't pay pension obligations because they re-directed pension funds. In Canada, bankrupted private sector employers, such as Stelco and Sears, raided pension funds and the employees, both current and retired, received nothing: their pension plans are insolvent. In the US, I know of several municipal or state governments who have huge pension obligations and funding deficits. They would need the ability to print money to fix the problem, which they can't. As the TFA demonstrates, they can't even sell debt that would meet an appropriate ROI due to risk.

The only way to fix it is for employee deductions and any employer provided contributions to be separately administered by a third party. Those funds must be protected from misuse by the employer.

A union should demand an independent audit of the financial health of pension funds and force changes to the fund administration. Employees without that representation won't have an easy time of it.
 
2018-08-25 07:36:07 AM  

berniex: Dictatorial_Flair: berniex: IF the bonds are sold to cap the defined benefit pension liability, so that the municipality can transition to a defined contribution pension system,
then YES, it is brilliant.

And if they are punting the proverbial can with no alterations to the current system?

If they sell out the bonds, it's a prudent way to minimize some of the risk of the upcoming down stock market.


You're delusional. The stock market can only go up while Donald Trump is Predise-

Oh.
 
2018-08-25 08:14:43 AM  

Mr. Eugenides: Since most cities that have tried this have then gone on to default, what kind of interest rate would they have to let the bonds at in order to get the $10 billion?

It seems unlikely to work well for Chicago unless they have a chump with deep pockets lined up.


JB Pritzker?
 
2018-08-25 08:36:30 AM  
I wonder if Marketwatch still feels like the stock market is a fickle mistress when they are advocating for 401ks as opposed to advocating against pensions.
 
2018-08-25 08:53:08 AM  

twat_waffle: Switching to a defined contribution plan may be unconstitutional. The State of Illinois has a clause in its constitution specifically saying that pension benefits "shall not be diminished or impaired."


That means they can't change pensions for current employees.  They could only come up with a new system for future employees.
 
2018-08-25 09:18:47 AM  

BlazeTrailer: I think I read in your comment that Chicago just MIGHT have a shrinking tax base


jaytkay: Chicago is gaining occupants in high-income neighborhoods


People are leaving neighborhoods where the property taxes can be $500/year for a single-family home.

In the neighborhoods gaining population, $10,000 to $20,000 is common
 
2018-08-25 09:46:35 AM  
Pensions will be gone soon. No wonder there's so much murder there.
 
2018-08-25 10:24:33 AM  

jaytkay: BlazeTrailer: I think I read in your comment that Chicago just MIGHT have a shrinking tax base

jaytkay: Chicago is gaining occupants in high-income neighborhoods

People are leaving neighborhoods where the property taxes can be $500/year for a single-family home.

In the neighborhoods gaining population, $10,000 to $20,000 is common


In the low value neighborhoods, the city owns tons of vacant lots (when I worked for the city, it was part of my job to do ownership searches - some neighborhoods were mostly red, signifiying city owned land).  In the high value neighborhoods, a small condo starts at 200k-300k (I'm talking 1 bedroom/efficiency).

Studies of Chicago's population migration show the poor people moving out, either to cheaper burbs or out of state, due to the violence and poor schools.  The rich people move in to the places in the city that aren't blighted, because there isn't much crime and the schools are decent. Plus they can afford privates anyway.

More rich people moving in equals more taxes coming in, because the homes are worth more.
 
2018-08-25 10:55:12 AM  

Deep Contact: Pensions will be gone soon. No wonder there's so much murder there.


That's not a cause and effect there, Sonny, them murderers aren't angry that their pensions are at risk, they're trappin and stealing and the like.
 
2018-08-25 01:10:35 PM  

Deep Contact: Pensions will be gone soon. No wonder there's so much murder there.


I didn't realize street thugs had pension plans. The more you know.
 
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