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Thread: Illinois in decline

  1. #91
    Forum All Star DTM's Avatar
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    I would be curious to hear the take by some of you financial types. What would be the reasoning for the state government to bail out everyone else before the taxpayers? how does this make sense?

    Illinois Democrats preparing to bail out bankers and cash-strapped local governments

    excerpts:

    "Senate Bill 10, if enacted, would create a mechanism for a backdoor bailout of bondholders and broke governments. SB 10 would allow home rule municipalities, such as Chicago, to issue new debt that gives lenders special protection in case the municipality fails to pay them back. "

    "House Bill 278 complements SB 10 because it increases state distribution dollars to local governments by $300 million per year by boosting the Local Government Distributive Fund. HB 278, sponsored by state Rep. Anthony DeLuca, D-Chicago Heights, increases the very type of state distributions to local governments against which banks could make the first claim if SB 10 passes, making the two pieces of legislation a creative way to give a backdoor bailout to local governments and their bondholders. HB 278 had 33 cosponsors, all Democrats, and passed the Illinois House with the overwhelming majority of votes in favor coming from Democrats."

    this is the kicker:

    "House Bill 2584, also sponsored by DeLuca, is yet another bill that gives banks and bondholders the first spot in line if a local government gets in trouble. HB 2584 is perhaps the worst of all the bailout proposals, because it puts a blanket mortgage on all of a local government’s future tax revenue in order to pay bondholders ahead of taxpayers and government services.

    This is a huge giveaway to bondholders – it even gives the bondholders a statutory first lien on future tax dollars for bonds that were issued in the past under different terms. If HB 2584 becomes law, it will be a handout to bondholders likely worth millions or perhaps billions of dollars, courtesy of the Illinois General Assembly. HB 2584 passed out of the House Cities and Villages Committee on a unanimous vote."

  2. #92
    Forum Regular GEman's Avatar
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    Quote Originally Posted by DTM View Post
    it even gives the bondholders a statutory first lien on future tax dollars.
    SPOILER ALERT - This is one of the latest plot lines in Billions on Showtime.

  3. #93
    Forum Regular GEman's Avatar
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    Illinois (Chicago) still attracting the young, high earners.

    NYT - The States That College Graduates Are Most Likely to Leave

    Last edited by GEman; 04-04-2017 at 11:41 AM.

  4. #94
    Forum All Star DTM's Avatar
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    thank you for not answering my question.

  5. #95
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    Quote Originally Posted by DTM View Post
    thank you for not answering my question.
    Likely a last-ditch and required measure to get our borrowing costs under control due to the downgrades.

    Otherwise, I'll wait for someone smarter to answer.

  6. #96
    Forum All Star jombl's Avatar
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    Quote Originally Posted by DTM View Post
    What would be the reasoning for the state government to bail out ...
    Professionals are beginning to position themselves for the coming meltdown. Seriously.

    to help "municipalities provide financing at the lowest possible costs with the least amount of concern over bankruptcy."
    Sold as good for borrowers, it just allows them still another bite of the apple. It really does much more, and looks written for the buyside and brokers while closing off and chaining shut the exit doors for taxpayers. There are quite a few proposed changes elsewhere in the pipeline, including a "distressed local authority" to step in and 'reorganize' on demand.

    We deserve to get reamed, just look at D41's incompetence with their bond proposal - they (including our highly paid in house CPA-MBA responsible for it) couldn't even read it. That bond, as proposed by D41, would put you in jail if you constructed it for your neighbor and ripped them for size while quoting 4.2%.

    Some tough love for one community in particular: West suburban residents who live in Hinsdale HS D86 will be asked to approve a $76 million bond referendum.

    If voters agree, D86 will borrow that $76 million, and interest costs will add one-third of the advertised price tag. So the total cost is closer to $100 million when you add up what the bond holders will charge over the life of the bonds.


    What are residents getting for all that money? School building improvements and a handful of new classrooms at the district's two schools, Hinsdale South and Hinsdale Central. Roughly one-third of the money will go toward swimming pool improvements and updated diving pits.


    Why? Because, my gosh, Hinsdale high schools are unable to host water polo championships due to pool accommodations.


    Let that sink in a minute.
    Last edited by jombl; 04-04-2017 at 01:49 PM.

  7. #97
    Forum Regular GEman's Avatar
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    Quote Originally Posted by GE Fan View Post
    Likely a last-ditch and required measure to get our borrowing costs under control due to the downgrades.
    I doubt I'm smarter, but your reasoning seems obvious for new issues. For existing bonds, its a handout to the financial sector.

    The thought at Axe Capital in terms of forcing austerity to collect on the Sandicot bonds was that it's just survival of the fittest. If a municipality cannot meet it's bond obligations its deserves to wither away and die.

  8. #98
    Forum All Star DTM's Avatar
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    Quote Originally Posted by GE Fan View Post
    Likely a last-ditch and required measure to get our borrowing costs under control due to the downgrades.

    Otherwise, I'll wait for someone smarter to answer.
    I see that. But is a law necessary? wouldn't someone issuing a bond see the different interest rates depending on creditor order and structure it this way anyway?

  9. #99
    Forum Regular GEman's Avatar
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    Hi, I'm Jombl for Jactitation Capital. Are you positioned for the coming meltdown ...

    Last edited by GEman; 04-04-2017 at 07:29 PM.

  10. #100
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    Quote Originally Posted by DTM View Post
    I see that. But is a law necessary? wouldn't someone issuing a bond see the different interest rates depending on creditor order and structure it this way anyway?
    That's how it works - but some are likely unable to be financed if you factored in the risk on an unsecured or undersecured basis. This is why mezzanine debt or home equity debt is usually higher than the prime debt.

    Why a law is necessary I am not entirely sure. There has to be some issue with existing priority/preemption that they're worried about.

  11. #101
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    If I remember correctly it is not currently possible for Illinois municipalities to file for bankruptcy. There has been some discussion of allowing that but the unions who basically tell the Democratic party in Illinois what to do have been opposed to it. So it hasn't gone very far. So the necessity of the law is strange. Should things get very bad in Illinois or should I say when things get very bad there. They may have to allow some kind of bankruptcy. But then all of that would have to be put into the bankruptcy law. Illinois of course already has the nations worst credit rating and the fact that you're digging yourself deeper into debt by 12M a day every single day. Probably makes the bankers a little nervous. So maybe they are thinking this may ease some of their concerns. But look at Detroit and Puerto Rico both saw bankers, investors take very deep haircuts. As for this being a bailout for the bankers. Well no one held a gun to your head and forced you to vote for people who drove your state off a fiscal cliff. Its your debt you pay it back.

    Oh I guess all the people leaving Cook aren't heading for DuPage

    https://www.illinoispolicy.org/dupag...rom-2015-2016/

  12. #102
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    One of my ex neighbors in Glen Ellyn just sold their house took them two years and they had to lower the price by about 100K. But I did some rough estimate and it looks like all the gain or profit they made in selling their house was eaten up by property taxes. But that actually makes sense. According to Zillow GE real estate can expect to see price appreciation of about three percent. But you pay over two percent of the value of your home every year in taxes. So most if not all your gains are eaten up by property taxes. Yeah I know you get a tax break on that . But it may mean that you are betting off renting than owning a home . Unless you can get a ten to fifteen year fixed rate mortgage.

    I hear they want to raise income taxes in Illinois to near six percent . Wow. Thats a big increase. And Illinois debt will still stay pretty high. But good luck with all of that.

  13. #103
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    S&P, Moody's Downgrade Illinois to Near Junk, Lowest Ever for a U.S. State

    "S&P warned that Illinois will likely lose its investment-grade status, an unprecedented step for a state, around July 1 if leaders haven’t agreed on a budget that chips away at the government’s chronic deficits. Moody’s followed S&P’s downgrade Thursday, citing Illinois’s underfunded pensions and the record backlog of bills that are equivalent to about 40 percent of its operating budget."

  14. #104
    Forum Regular isaac's Avatar
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    Quote Originally Posted by DTM View Post
    S&P, Moody's Downgrade Illinois to Near Junk, Lowest Ever for a U.S. State

    "S&P warned that Illinois will likely lose its investment-grade status, an unprecedented step for a state, around July 1 if leaders haven’t agreed on a budget that chips away at the government’s chronic deficits. Moody’s followed S&P’s downgrade Thursday, citing Illinois’s underfunded pensions and the record backlog of bills that are equivalent to about 40 percent of its operating budget."
    Cue Michael response in 3...2...1...

  15. #105
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    Quote Originally Posted by isaac View Post
    Cue Michael response in 3...2...1...
    LOL . Wouldn't want to disappoint everyone here. But yes that is more bad news for Illinois and those of you who remain there. I think CPS bonds are already at junk status. And Chicago isn't to far behind. I did see that Pritzker got some labor endorsement. Not saying he will win but 2018 is looking more and more like a Democratic type of year nationally. Pritzker is pretty much on board for a tax increase and maybe a progressive tax structure after that. Dems like Pritzker for the same reason Republicans like Rauner. He's rich, can fund his own campaign and give lots of money to down ballot candidates when they have to run on higher taxes, more out migration. And billions in debt. The five percent flat tax will just keep you afloat. Some of the other taxes and cost savings will never materialize or be challenged in court. Only sure thing is the income tax and you're reaching the limit on what a flat tax will do since its slightly regressive.

    Any idea on how Chicago plans to keep its schools going for next year. Heard they had nothing left.

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