Emanuel Leads Garcia in Polls as Chicago Veers Toward Insolvency
Whether it’s Rahm Emanuel or Jesus “Chuy” Garcia, the victor in Chicago’s mayoral runoff will face the unenviable task of reversing a fiscal decline that’s left the city’s credit rating on the cusp of junk.
Emanuel, who’s guided the third-most-populous U.S. city since 2011, led Garcia, a Cook County commissioner, by as much as 28 percentage points in polls going into Tuesday’s election. Chicago’s finances became a focal point during the campaign after Moody’s Investors Service lowered its rank by five steps since 2013 to Baa2, the second-lowest level of investment grade.
In the $3.5 trillion municipal-bond market, some investors Chicago depends on to finance its operations, including AllianceBernstein Holding LP, already consider the city equivalent to speculative grade. The next mayor will confront the prospect of a politically poisonous property-tax boost as one of the few possible solutions to halt the fiscal decay.
“If you take all the Chicago issuers, we calculate they basically have to double their property taxes, and take them to one of the highest property-tax levels in the country,” said Guy Davidson, head of munis in New York at AllianceBernstein, which oversees $32 billion in local debt. He said the company deems the city below investment grade.
Area Burden
The debt load reaches almost $33 billion, four times the city’s general obligations, when including issuers such as the park district, water agency and Cook County, home to Chicago and its suburbs, data compiled by Bloomberg show. The school board, the second-largest borrower behind the city itself, was cut last month by Moody’s to one step above junk.
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