Tupungato/Shutterstock The Windy City is famous for a lot of things, including the biting winter breeze off Lake Michigan and blowhard politicians.

Whether Chicago got its pet name from one or the other doesn’t really matter, since both fit.

But soon, the place also called the Second City will be known as something else: The municipal black hole.

It’s only a matter of when, not if, Chicago will consume itself financially, and will start sucking in the wealth of anyone and anything connected to it, just as black holes in space eat the energy of nearby stars.

It’s easy to lay the blame on runaway pension liabilities, not uncommon in cities and states across this country. But Chicago’s trouble is deeper than most, and recent decisions by the state of Illinois will only make things worse.

The Fiscal Times rates over 100 municipalities based on their fiscal strength. Chicago is dead last.

The city has little in reserve to cover unexpected expenses or a drop in revenue. Its general fund balance covers only 6.27% of annual expenditures. Meanwhile, Chicago carries a lot of debt. Its long-term obligations are almost 300% of revenue.

The city spends one-fifth of its budget covering required pension contributions, but it’s still not enough. As of 2015, one of the city’s larger pensions held just 33% of what it needs to meet its obligations. The Municipal Employee’s Annuity and Benefit Fund had $4.7 billion in assets and owed $14.7 billion in benefits.

Mayor Rahm Emmanuel raised taxes to address some of the shortfall, but it won’t right the ship. This pension, along with several others, will drag Chicago under.

The mayor tried to curb pension benefits, but the courts beat him back. Illinois views public pensions as constitutionally-guaranteed, so there will be no compromise. Beneficiaries can demand payments until the city’s bank accounts run dry.

Several states take this same stance, while others take a different view, which will lead to varying outcomes as pensions blow up around the country (I cover this topic in the August edition of Boom & Bust).

After that, who knows? There’s no provision in the bankruptcy code for states, so all we can do is look to previous examples to see how things might go.

History May Not Be in Chicago’s Favor

When we look at Puerto Rico, currently the largest near-state plodding through a near-bankruptcy, it’s ugly.

Bondholders, who are constitutionally-guaranteed their payments ahead of any other payment, including salaries, vendors, rent, etc., have been stiffed.

No one knows how things will end up, but it won’t be with investors receiving 100% of what they’re due, even those who bought dedicated streams of income. That should serve as a warning to investors contemplating bonds issued by Chicago in the months ahead.