It is well known that Chicago's pension liabilities have completely decimated the city's finances and currently stand at close to $20 billion. Faced with a significant challenge of meeting funding obligations as a result of a 2010 state law, Mayor Rahm Emanuel recently won a slight reprieve in the amount of money the city would have to contribute to fund the liabilities over the next few years, as recently Illinois lawmakers overrode Governor Bruce Rauner's veto and will now change the legislation in order to allow the city to defer payments to fund pensions.

Under the prior legislation, Chicago was required to have its public safety workers pensions 90% funded by 2040, and called for an $834 million payment to be made in 2016 alone. The revised legislation reduces that amount to $619 million, and allows for smaller increases through 2020 while pushing the timeline for 90% funding out to 2055 - at which time the timeline will be extended once again of course, as it will never be possible for the City to come up with such funds.

Perhaps riding high on that small victory, Rahm Emanuel is now quietly asking the city to change investment rules that would allow Chicago to purchase debt from sister agencies such as the Chicago Public School system - said differently, Rahm Emanuel wants to bail out the Chicago Public School system.

Although as expected, nobody wants to refer to the maneuver as a bailout, only as an "investment."

From the Chicago Tribune

Emanuel this past week quietly proposed a change to city investment rules that would allow the city to buy debt from so-called sister agencies, including CPS, no matter the creditworthiness of that debt. He said he was making the request on behalf of city Treasurer Kurt Summers as part of the Summers' annual investment policy update. Aides for both Emanuel and Summers said the proposal was not designed to give the city a way to provide temporary funding to CPS as it seeks state help to right its teetering financial ship. "That's not what's happening," city spokeswoman Molly Poppe said. "This is not some contingency plan or bailout for CPS." Instead, they said, it's meant to give the treasurer the option of investing in bonds, short-term loans or other types of debt from CPS — and other agencies like the Chicago Housing Authority, Park District, CTA and City Colleges — just as the city has the option of buying its own debt.

CPS carries roughly a $6.2 billion debt load, and recently borrowed $725 million through a bond issuance. In March CPS indicated it would have to tap an existing $370 million credit line with Barclays to help pay a June 30 pension obligation in the amount of $676 million. CPS already carries a junk rating by all three major rating agencies.

Nonetheless, the narrative that the bailout is actually an investment is fully in play.

"This change means that our sister agencies would no longer be treated any differently from an investment perspective than the city, as is commonplace throughout the country," said Alexandra Sims, senior adviser to Summers. "The city has always had the ability to invest in municipal and state bonds. This expands and allows us to invest in the city and all sister agencies as part of the treasurer's plan to invest in Chicago."

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While Emanuel and other city officials pretend that the city is making an investment, it is quite likely that the bailout will mean a significant loss for taxpayers, who already feel the burden of severely under funded pensions as noted above. The reality is that tax hikes are coming, and this "investment" will need to be covered by future revenues from the taxpayers as well.

Eventually the reality that debt can't be forever used in place of honest fiscal reforms will be introduced to Chicago (and everyplace else, Detroit for example). Until then, those who actually do have a little money are going to continue to flee cities such as Chicago, as they see the writing on the wall.

As a reminder, here is a heat map of where $100,000 pensions reside - notice anywhere in particular?