Chicago mayor vows fiscal fix before muni audience

Reuters News
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Posted: May 04, 2016 1:29 PM

CHICAGO (Reuters) - Chicago Mayor Rahm Emanuel tried to reassure municipal credit analysts on Wednesday that the city and its public school district are not falling into a financial abyss.

"I will not rest until we fix the fiscal position of both the city and (Chicago Public Schools)," the mayor told the National Federation of Municipal Analysts annual conference.

But some attendees said his speech did little to alleviate their worries about the city's sinking credit.

"I'm very concerned. I don't see them making any headway," said Susan Dushock, a senior vice president at SunTrust Private Wealth Management, referring to an ongoing political impasse that is hindering Chicago's efforts.

The battle between Illinois' Republican governor, Bruce Rauner, and Democrats who control the legislature has left the state without a fiscal 2016 budget and has stymied Chicago's efforts to seek pension relief.

Chicago continues to struggle with a structural budget deficit and a $20 billion unfunded pension liability. Rulings by the Illinois Supreme Court both this year and last year have made it much more difficult to enact pension changes to lower that liability.

Emanuel likened those rulings to putting "a straightjacket around us," but vowed to continue negotiating with unions to reach a deal that ensures pensions are paid in a manner that is responsible to taxpayers.

He also touted the diverse economy of the nation's third-largest city, its ability to snag relocating corporations, and educational improvements at schools.

"(Emanuel) didn't focus on how to solve the current fiscal crisis," said Richard Ciccarone, who heads Merritt Research Services.

CPS is also betting on state solutions for escalating pension payments that have left it with a $1 billion budget gap. The district is calling for a bigger share of state funding to cover pensions and the costs of educating poor children.

The city and CPS have been hit with downgrades that pushed their credit ratings closer to or into the "junk" level and both are paying a huge penalty in the U.S. municipal bond market.

Chicago general obligation bonds due in 22 years were trading at 287 basis points over Municipal Market Data's benchmark triple-A yield scale, while the so-called credit spread for CPS bonds due in 15 years was 463 basis points, according to MMD.

(Reporting by Karen Pierog; Editing by Matthew Lewis)