Life in the people's republic of Chicago

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From the Chicago Sun-Times:

CPS facing $200 million-plus penalties as bond ratings plunge
Chicago’s deep financial problems worsened Friday as a Wall Street bond-rating agency dramatically downgraded the credit of the city’s school system — triggering penalties that could come to more than $200 million.

Fitch Ratings dropped the Chicago Board of Education’s credit score by three notches. The plunge came two weeks after another agency, Moody’s Investors Service, also reduced its rating on the school district’s debt.

Chicago Public Schools is required to maintain a certain credit rating under the terms of complex debt “swap” deals with financial institutions. Failure to do so could activate termination clauses in the deals and CPS could have to make payments to the financial institutions.

And how bad is it?

For CPS, the Fitch and Moody’s downgrades leave its bond rating — which affects the interest rates the city must pay to borrow money — just one level above junk status.

“This was not unforeseeable, but it certainly is unwelcome news,” said Laurence Msall, president of the Civic Federation.

CPS officials “have been operating without a transparent, long-term plan” to deal with the district’s fiscal problems and should have cut costs more aggressively, Msall said.

Even after closing a record number of schools, cutting administrative costs and raising property taxes, CPS has projected a budget deficit of more than $1 billion for the coming school year.

And anyone hazard a guess as to why?

The analysts cited the district’s high pension liability and “poor labor history,” referring to the 2012 teachers’ strike.

The rocky relations between the mayor — who appoints the school board — and the Chicago Teachers Union haven’t improved since the strike. And the teachers’ current contract can end June 15. CTU is heavily backing challenger Jesus “Chuy” Garcia in an effort to unseat Emanuel in the April 7 runoff election.

Garcia said the Fitch downgrade “is the latest example of the consequences of Mayor Emanuel’s fiscal mismanagement.”

And Garcia is politically to the left of Emanuel - at least Rahm had some executive experience before becoming mayor.

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This page contains a single entry by DaveH published on March 21, 2015 7:16 PM.

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