Could Chicago Be Next in Line for a Municipal Bankruptcy?
Illinois Gov. Bruce Rauner has warned that a bankruptcy filing is likely inevitable for the city of Chicago.
According to a March 6 WLS-TV Chicago article, Rauner says the city is “going down the drain” financially, and that it will be crucial for voters to keep this in mind when they go to the polls on April 7 for the mayoral election.
“Chicago is sliding into bankruptcy. They can’t pay their pensions. They can’t pay their bills. The debt has been going up for years,” Rauner said at an event in Kendall County as Chicago Mayor Rahm Emanuel was campaigning in the city.
According to the Chicago Tribune, the city’s financial woes stem from city politicians’ continued partnerships with government unions. As mayor, Emanuel has made controversial decisions to close 50 Chicago public schools, and has considered removing red light cameras throughout the city — both moves that he says will save money. Another major source of contention is the city’s inability to provide some $688 million in pension payments to former city employees in the next fiscal year.
“There’s a corrupt bargain between politicians and government union bosses that is bankrupting the governments of Illinois,” said the governor, who added that Chicago “is basically sliding to bankruptcy.”
Is there any way Chicago could avoid a bankruptcy at this point?
“Chicago would have the benefit of the precedent set by Detroit. The benefits that Detroit was able to secure when it filed would be the starting point for Chicago,” says Charles Huber of the Law Office of Charles Huber. “In other words, Chicago would not have to reinvent the wheel when it tries to convince creditors and the court of the relief it wants. It could point to what Detroit was able to accomplish, and go on from there. I would not be surprised if municipal bankruptcies became a trend for dealing with otherwise insurmountable financial issues.”
In his statement, Rauner said he endorses neither Emanuel nor Garcia — that the election’s outcome should ultimately be up to the voters to decide. But if one thing is clear, it’s that whoever wins the mayoral seat will have to deal with a massive municipal bankruptcy — perhaps even one that’s on par with Detroit’s bankruptcy that made headlines last year.