CHICAGO — Chicago Mayor Rahm Emanuel will unveil his proposed 2016 budget Sept. 22, giving market participants a few days to digest his plan for stabilizing city finances before hosting investors on Sept. 25.
Emanuel's office on Monday announced the city would hold three town hall meetings next week to solicit ideas on reform, revenues, and savings from the public as his administration finalizes a budget plan to be unveiled Sept. 22.
Emanuel moved up the traditional October release of next year's budget as the city works to solve a pension crisis that has dragged its rating from Moody's Investors Service down to the speculative grade level of Ba1.
"As we continue to do the hard work necessary to balance the budget and right the fiscal ship, it is important that we engage with Chicagoans to ensure the city is put on a path of financial sustainability," Emanuel said in a statement announcing the budget schedule on Monday.
The city will host its annual investors' conference a few days later on Friday, according to a notice sent out to market participants. No additional details on the agenda were available. Led by former chief financial officer Lois Scott, the Emanuel administration launched the annual conference a few years ago. It originally included presentations by the city and most of its sister agencies. Last year it focused on Chicago and Chicago Public Schools.
The city has paid steep interest rate penalties to borrow because of negative headlines over unfavorable court rulings on pension reforms, its credit dive, and looming $550 million spike in its public safety contributions. The city has $754 million of red ink to erase due to its structural operating deficit and a rising pension and debt repayment burden.
Investors are banking on the budget offering a property tax increase to boost revenue. Emanuel's administration, including new CFO Carole Brown and budget director Alexandra Holt, has been meeting with council members as they lay the ground work for solutions many believe will be tough to digest due to the size of tax hikes needed.
Emanuel and his finance team will attend the town hall meetings slated for Aug. 31 at Malcolm X College, Sept. 2 at the South Shore Cultural Center, and Sept. 3 at Wright College.
Standard & Poor's issued a recent special comment warning Chicago about the need to address its fiscal ills in release of the budget.
"We expect that during the next five months, as the mayor progresses with his proposed budget and then what is ultimately adopted by the city council, the city will demonstrate how serious it is about implementing both immediate and far-reaching plans to address the structural cracks in its budget," Standard & Poor's said in the comment, which came in response to Chicago's release of its annual financial forecast at the end of July.
Standard & Poor's assigns a negative outlook to its BBB-plus rating of Chicago. Chicago carries GO ratings of BBB-plus from Fitch Ratings with a negative outlook, and A-minus with a stable outlook by Kroll Bond Rating Agency.
Chicago is grappling with a $20 billion unfunded pension liability tab. Reforms to two of its four funds were voided as unconstitutional by a circuit court judge in July. The Illinois Supreme Court will hear the city's appeal with oral arguments expected in November. The city won state legislation to ease its public safety pension spike due in 2016 but it's unclear whether Gov. Bruce Rauner will sign it or lawmakers could muster votes for an override.
Municipal Market Analytics suggested in a recent outlook piece that an alternative budget solution is needed and warned that the city could lose additional investment grade ratings, although it doesn't expect that would occur this year and it doesn't seek a material risk of payment default looming.
"Nor would downgrades be cause to sell Chicago paper (except where holdings are limited to investment grade) as current yield penalties and the generally bullish environment on municipal risk likely pose only limited prospects for further underperformance in Chicago spreads," MMA said.