STILL TO COME TONIGHT, HOW TO
SAVE MONEY ON YOUR TAXES.
JAMES "BIGCAT" WILLIAMS ON THE
LATEST LOP-SIDED LOSS IN THE
GRIM SEASON FOR THE BEARS.
AND MAKING GUITARS WITHOUT THE
HELP OF A COMPUTER, ONE CHICAGO
MAN SAYS IT IS A DYING ART.
BUT FIRST, COULD CITIES AND
TOWNS IN ILLINOIS GO BANKRUPT?
A NEW REPORT SAYS LOCAL LEADERS
ARE EYEING BANKRUPTCY AS A WAY
TO RESTRUCTURE DEBT AND PENSION
OBLIGATIONS, EVEN THOUGH IT IS
TECHNICALLY ILLEGAL FOR
MUNICIPALITIES IN ILLINOIS TO
FILE SOME ARE PUSHING FOR IT AS
AN OPTION.
JOINING US TO DISCUSS THIS IS
ANDREW SCHROEDTER AND PATRICK
REHKAMP OF BGA.
AND THE CO-AUTHOR A REPORT ON
MUNICIPAL BANKRUPTCY THIS MONTH
THAT RAN IN THE "SUN-TIMES".
AND LARRY MORSEY MAYOR OF
ROCKFORD, FIRST ELECTED IN 2005.
AND JAMES MCNAMEE, PRESIDENT OF
THE ILLINOIS PUBLIC PENSION FUND
ASSOCIATION.
THAT IS AN UMBRELLA ORGANIZATION
REPRESENTING POLICE AND FIRE,
AND IN THE INTEREST OF FULL
DISCLOSURE I SHOULD NOTE I HAVE
MODERATED DEBATES ON PENSION
REFORM FOR THE ASSOCIATION.
WELCOME BACK TO "CHICAGO
TONIGHT."
GLAD YOU ARE HERE.
PATRICK OR ANDREW, HOW DID YOU
COME TO FOCUS ON THIS ISSUE?
>> A LOT OF REPORTING ON THE
FINANCIAL CONDITIONS, WE FOUND A
LOT OF MUNICIPALITIES STRUGGLE
TO PAY THE BILLS AND STRUGGLING
WITH PENSION DEBT AND CUT JOB,
ET CETERA.
AND WE STARTED TO ASK OURSELVES
WHAT CAN THEY DO TO GET OUT OF
THE MESS AND A LOT SAID IF IT
WAS AVAILABLE THEY WOULD
CONSIDER FILING BANKRUPTCY.
>> CURRENTLY AS WE MENTIONED,
THE LEGAL STALL US OF MUNICIPAL
BANKRUPTCIES IS...
>> THE WAY FEDERAL BANKRUPTCY
LAW WORKS MUNICIPALITIES NEED
STATE APPROVAL BUT THERE IS NO
STATE LAW THAT SPECIFICALLY
OUTLINES HOW TO DO THIS.
I GUESS IF THEY WANTED TO DO THE
THEY WOULD NEED APPROVAL FROM
STATE IF THEY DID IT ONE BY ONE
BUT WE FOUND SOME TOWNS IN EAST
ST. LOUIS AREA THAT DID FILE FOR
BANKRUPTCY WASN'T THROUGH IT.
WE HAVE A GRAPHIC SHOWING THAT,
THE FEW TOWNS, ONE IS BROOKLYN,
750 PEOPLE, AND IT FILE FORWARD
BANKRUPTCY IN 20 HAVE 3 AND
FACED PAYOUTS FOR POLICE
MISCONDUCT ANDALLERTON, IT FILED
IN 2005, AND IT FACED A PAYOUT
TO A POLICE SHOOTING VICTIM.
VERY SMALL COMMUNITIES, AND
THOSE TWO ISSUES THEY WERE
FACING BANKRUPTED THEM.
IF IT IS NOT LEGALLY POSSIBLE TO
FILE FOR BANKRUPTCY IN ILLINOIS,
HOW DID THEY DO IT?
>> THEY FLEW UNDER THE RADAR,
VERY SMALL TOWNS, AND DID NOT
HAVE A LOT OF DEBT, NOT A MAJOR
PRESTRUCTURES AND THEIR ATTORNEY
SAID, HE GOT AWAY WITH IT.
NO ONE NOTICED, PROBABLY
WOULDN'T HAPPEN IN THE CHICAGO
AREA.
BUT WITH MORE MEDIA AND PEOPLE
WATCHING.
BUT IT DID TAKE PLACE DOWN
THERE.
MAYOR MORSEY WOULD YOU BE IN
FAIR OF BANKRUPTCY AS AN OPTION?
>> THE CITY OF ROCKFORD HAS
ABSOLUTELY NO PLANS TO FILING
FOR BANKRUPTCY EVEN IF WE HAD
THE NORTH.
WHY DO I FAVOR IT AS A TOOL
SENATE LEGISLATURE FAILING TO
TAKE ACTION ON CRITICAL ISSUES
LIKE PENSIONS AND ASH STRAIGHT
REFORM AND COLLECTIVE BARGAINING
REFORM MAY LEAVE THE COMMUNITIES
NO OPTIONS AND DO WE HAVE A
DISORGANIZED CHAOTIC QUESTION OF
HOW WE PAY OUR BILLS OR AN
ORGANIZED FORMAT THAT WORKED FOR
GM AND CHRYSLER TO RESET AND
REBUILD, FRANKLY I THINK CITIES
NEED THE SAME TOOLS.
JAMES MCNAMEE, HOW ABOUT THAT,
CHRYSLER CAN DO IT, IF
INDIVIDUALS CAN DO IT, WHY NOT
MUNICIPAL PAYMENTS?
>> MUNICIPALITYS ARE A
GOVERNMENT, AND IT IS MUCH
DIFFERENT THAN A CORPORATION.
YOU ARE SHAKING THE INVESTOR
CONVERSATION IN THE COMMUNITY
AND THEIR LEADERSHIP.
WHAT IS NEEDED RIGHT NOW IN A
LOT OF MUNICIPALITIES IS A
MARSHAL PLAN, WHERE THEY PUT
FORWARD A PLAN TO REBUILD
EUROPE, THERE NEEDS A MARSHAL
PLAN FOR THE COMMUNITIES.
WE NEED LEADERSHIP THERE AND WE
NEED A PLAN THERE TO SELL THAT.
WHEN YOU PUT THAT PLAN FORWARD,
AT THE END OF WORLD WAR 270% OF
THE PUBLIC WAS AGAINST IT AND BY
THE END YOUED WITH 8 HAVE% FOR
IT.
>>> MAYOR, WHAT IS THE STATUS OF
ROCKFORD'S PENSION OBLIGATIONS?
A PENSION OBLIGATION FOR POLICE
AND FIRE THAT ARE CREATING THIS
PRESSURE, THIS INTEREST IN
EXPLORING THE POSSIBILITY OF
MUNICIPAL BANKRUPTCY?
>> BASED ON THE LAST BIT OF
LEGISLATION CREATING A SECOND
TIER OF PENSIONERS, A BIG PART
CREATES IN 2016 A DAY OF
RECKONING, IF YOU ARE NOT
FUNDING, THE STATE WILL HAVE THE
NORTH TO START REDIRECTING
FUNDINGS IN YOO PENSION SYSTEMS.
>> THAT IS NOT THE MARSHAL PLAN?
>> I WASN'T ALIVE WHEN THAT
HAPPENED SO I DON'T KNOW.
THE REALITY I LIVE IN IS THAT WE
ARE PAYING OUR BILLS IN ROCKFORD
AND WE WON'T HAVE A BIG CRISIS
LIKE SOME CAN.
BUT FANGLY AT SOME POINT IN TIME
IF WE DON'T REDIRECT OR
ATTENTION, WE DO HAVE A HAVE A
PLAN THAT DEALS WITH THE
UNDERLYING ISSUES, ORB STRAIGS
REFORM IS ONE.
WE HAVEN'T BEEN ABLE TO GET THE
STATE'S ATTENTION, THE
NONEPALITIES HAVE BEEN FORGOTTEN
AND WHEN CHICAGO MOVES BECAUSE
THEY HAVE TO MOVE, WE WANT TO BE
PREPARED IN THE SPRING TO MAKE
SURE DOWNSTATE HAS A GOOD PLAN.
ANDREW, WHAT IS THE STATUS OF
SUBURBAN DEBT AND POTENTIAL
BANKRUPTCY?
>> PATRICK AND I LOOKED AT EVERY
SINGLE POLICE DEPARTMENT IN COOK
COUNTY, WE FOUND THAT THEY ARE
UNFUNDED LIABILITIES, AND $23
BILLION IN UNFUNDED LIABILITIES
AND MOST INTERESTINGLY, WE SAW
FOUNDS THAT WERE BORROWING TO
MAKES PAYMENTS AND THAT A FEW
HUNDRED THOUSAND LEFT.
REALLY IN DANGER OF GOING
BANKRUPT.
>> GIVE ME AN EBBS OF SOME OF
THE MUNICIPALITIES IN BAD SHAPE?
>> A LOT OF THE SOUTHLAND,
SOUTHERN COOK COUNTY AND NEAR
WESTERN SUBURBS, AND ST. CLAIRE
COUNTY BY EAST ST. LOUIS.
OBVIOUSLY, WE FOCUSED ON ALERTON
AND BROOKLYN, AND THEY ARE
BETTER, BUT STRUGGLE AT TIMES.
WASHINGTON PARK, ANOTHER TOWN
FILED FOR BANKRUPTCY.
THEY WERE DENIED IT, BUT ONE OF
THE ATTORNEYS FOR THE VILLAGE
TOLD US THAT IN WASHINGTON PARK,
SOONER OR LATER YOU WILL HAVE
BANKRUPTCY WITHOUT HAVING IT.
>> WHAT WOULD BE THE CONSEQUENCE
OF THAT?
EVEN IF THERE WEREN'T A FORMAL
BANKRUPTCY PROCEEDING, WHAT
HAPPENS IF THEY JUST RUN OUT OF
MONEY?
>> MY ARGUMENT HAS BEEN SOME OF
THE FINANCE FOLKS THAT WE ARE
MUCH BETTER OFF HAVING ORGANIZED
FORM OF RESOLVING ISSUES BECAUSE
THE END OF THE DAY IF A COUNCIL
MEMBER HAS TO MAKE A CHOICE, TO
I KEEP COPS AND FIRE MACHINE ON
THE STREETS OR PAY A BOND, I
KNOW THE ANSWER.
SHOULDN'T WE ADDRESS THE ISSUES.
THAT IS NUMBER ONE.
IF WE DON'T WOULDN'T WE LIKE TO
HAVE A SYSTEM THAT DEALS WITH
THIS, THESE OBLIGATIONS IN AN
ORDERLY FASHION AS OPPOSED TO
CHAOS.
THAT WHAT IS IT WOULD BE.
MPBLTSDS JIM, WOULD IT BE CHAOS?
>> THERE ARE SOME ISSUES OUT
THERE WITH THE FUNDING AND
MAKING SURE LEVELS OF FUNDLING.
GOING THROUGH BANKRUPTCY TO GET
OUT OF AN OBLIGATION IS
REPREHENSIBLE IN MY OPINION.
IT IS A WAY TO WIPE THE SLATE
CLEAN OF YOUR OBLIGATIONS.
IF THEY LOOK AT BLOOMINGTON THAT
SAYS WE WILL FUND OUR PLANS AND
THEY CAME UP WITH A PLAN AND THE
MAYOR SAID WE WILL DO THAT.
IN THE CITY OF BLOOMINGTON
APASSED A UTILITY TAX AND
DEDICATE TAD TAX TOWARD THE PPX
AND IN THE LONG RUN IT WILL SAVE
THEIR RESIDENTS MONEY.
MILLIONS OF DOLLARS.
THEY HAD IT PROJECTED OUT, WHAT
THE SAVINGS WOULD BE.
THAT IS WHAT I'M TALKING ABOUT.
SOME CASES WE ARE DEALING WITH
WASHINGTON PARK AND WE ARE
DEALING WITH CORRUPTION AND
ABSOLUTE STEALING OF CITY ASSETS
THIS HAPPENED IN DIXON, AND THEY
BECAME WHOLE, LATER ON.
BUT YOU HAD THEY COULDN'T EVEN
OPEN THE POOL UP BECAUSE THEY
SHUT IT DOWN BECAUSE SO MUCH
MONEY WAS DIVERTED AND STOLEN.
WE HAVE SEEN THIS IN OTHER
CITIES, TOO, SOME MALFEASANCE.
>> RESPECTFULLY THAT IS NOT IRAQ
FORWARD AND THE PICTURE IN MOST
ILLINOIS CITIES WHERE WE PAY OUR
BILLS AND WE ARE FINANCIAL
RESPONSIBLE AND WE NEED TO KNOW
THE SYSTEM THAT WE HAVE TO PAY
ON IS A SYSTEM DESIGNED APRIL
BUILT FOR BY THE STATE OF
ILLINOIS AND PENSIONERS AND WE
HAVE TO PAY THE BILL.
WE HAVE NO IMPACT ON THE DESIGN
OF THE PLAN.
>> HOW IS IT THAT THESE
MUNICIPALITIES GOT IN TROUBLE.
THE STATE TOOK THE PENSION
HOLIDAYS AND DID NOT CONTRIBUTE
ITS SHARE.
>> IT IS THE SAME, I THINK, JIM
WOULD AGO REWITH US ON.
WE HAVE FOUND THEY DID NOT MAKE
THEIR PAYMENTS.
THEIR FULL PAYMENTS TO THE
PENSION FUNDS AND THE BENEFITS,
THEY ARE NOT FUNDING THEIR
BENEFITS AND THEY SAY IT IS
BECAUSE THE MONEY IS NOT THERE,
AND I THINK JIM AND OTHERS WOULD
PROBABLY DISAGREE BUT THE FACT
OF THE MATTER IS THAT COUPLED
WITH THE RECESSION AND LOSSES IN
THE STOCK MARKET AND THE FACT
THAT, LET'S BE HONEST, LAW
ENFORCEMENT FOKTS ARE MAKING
MONEY AND THEY ARE LIVING LONG
AND THE PENSION BENEFITS ARE
SWEETER AND THAT IS A PERFECT
STORM THAT CAUSEDS FUNDS TO
SUFFER.
GIVE ME AN IDEA OF WHAT AN
AVERAGE PENSION IS FOR A RETIRED
POLICE OFFICER OR FIREFIGHTERS?
>> IT WOULD BE IN AND AROUND THE
50s.
IT DEPENDS ON WHAT AREA YOU WERE
IN.
PAYING BENEFITS, IT CHAIGS BY
WHAT COMMUNITY YOU WORKED FOR.
IN HAVE HIGHER THAN OTHERS.
I WOULD SAY IN THE 50s.
DO THEY GET SOCIAL SECURITY NO
THE CITY DOESN'T HAVE TO PAY FOR
THE SOCIAL SECURITY END OF IT,
AND THE BENEFIT THAT GIVES THEM
THEIR BACKUP IS THEIR PENSION.
>> WHAT WE NEED TO REMEMBER FEF
FOLKS THAT ARE ELIGIBLE TO
RETIRE AT AGE 50 AND 75% OF
THEIR HIGHEST WAGE AND
COMPOUNDING INTEREST AND FOR
POLICE AND FIREFIGHTERS THAT
MEANS THEIR SPOUSE GETS THEIR
BENEFIT WITH NO DECREASE.
THAT IS A NOT FINANCIALLY SOLVE
VENT SYSTEM, AND AN APPROACH, IT
CAME AT A TAME WHEN A LOT OF
CHANGES WERE MADE THE STOCK
MARKET WAS GOING CRAZY IN THE
EARLY 90s AND WE DON'T HAVE THE
ABILITY TO KEEP PAYING AT THE
SAME LEVEL.
WE HAVE A CHOICE, WE REFORM THE
SYSTEM AND WE DO IT IN A WAY
THAT IS PROTECTED OR WE HAVE TO
PREPARE FOR BIG TAX INCREASE
THAN AND UTILITY TAX, PROPERTY
TAX.
WE ARE NOT THE LARGEST HOME
RULED KMTD IN THE STATE AND WE
ARE UP AGAINST PROPERTY TAX CAPS
AND WE CAN'T RAISE OUR RATES
HIGHER.
WE HAVE TO LOOK AT A DIFFERENT
WAY TO RAISE REVENUE.
WE ARE LOOKING AT REFORMS TO
DEAL WITH THE PROBLEM.
>> SO THE PENSION IS GOING
FORWARD AS YOU MENTION, AND THEY
HAVE BEEN CHANGED AND THEY
REDUCED ALL FROM THE COLAS TO
THE RETURMT AGE.
A LOT OF THIS WE HAVE TO KEEP
PERSPECTIVE ON WHEN WE LOOK AT
PUBLIC SAFETY INDIVIDUALS WHY
THEY RETIRE AT THATLE AGE.
DO YOU WANT A 60-YEAR-OLD MAN
WRESTLING WITH AN 18-YEAR-OLD
MAN OUT THERE.
YOU WILL HAVE A DISABILITY ON
THAT 60-YEAR-OLD.
WE DESIGN THE PLANS WITH THE
INDIVIDUALS IN MIND TO GET THE
ROTATION OUT AND BRING IN
YOUNGER PEOPLE AS YOU POINTED
AUTOMATIC THERE ARE BANKRUPTCIES
IN THE U.S. THAT WE ARE TALKING
ABOUT.
FOR EXAMPLE, OYK ORANGE COUNTY,
CALIFORNIA, FILED FOR BANKRUPTCY
IN 1994.
DETROIT, MICHIGAN, WELL KNOWN
CASE, 700,000-PLUS IN 2012.
JEFFERSON COUNTY, ALABAMA
POPULATION ABOUT 700,000, FILED
IN 2011.
IN SOME OF THOSE
JURISDICTIONINGS MY
UNDERSTANDING THINKS WERE
CONSTITUTIONAL PROTECT TEXTS AND
FEDERAL COURTS WENT ALONG WITH
IT.
HOW COME?
>> THAT IS WHERE IT GETS
INTERESTING, ESPECIALLY HERE IN
ILLINOIS.
PENSIONS PROTECTED BY THE
CONSTITUTION BUT THE JIFRT OF
WHAT HAPPENED IN THE BANKRUPTCY
CASES AT THE FEDERAL JUDGES SAID
FEDERAL LAW SUPERCEDES THAT
STATE PROTECTION AND I THINK
SOME JUDGES SAID THEY CAN'T BE
ADJUSTED AND THIS IS WHERE THE
FEAR IS IF THERE WAS A PROVISION
IN ILLINOIS THAT ALLOWED THEM TO
FILE FOR BANKRUPTCY A LOT OF
PEOPLE WOULD SEEK TO TAKE
ADVANTAGE OF IT BECAUSE SOME OF
THE PENSIONS BENEFITS COULD BE
RESTRUCTURED.
>> AS WE MENTIONED JAMES
MCNAMEE, TODAY THERE WAS A
LAWSUIT FILED AGAINST THE CITY
OF CHICAGO PLANS FOR PENSION
REFORM THAT INCLUDES HIGHER
CONTRIBUTIONS AND LOWER COST OF
LIVING INCREASES.
IS THIS A CONCERN THAT THE
FEDERAL COURT MAY STEP IN AND
SAY FEDERAL LAW PREEMPTS STATE
LAWS?
WE GET CONCERNED ABOUT THAT AND
WE SHOULD LOOK AT MICHIGAN.
MICHIGAN'S CONSTITUTION IS A
LITTLE BIT DIFFERENT AND THE
LANGUAGE IS DIFFERENT ABOUT HOW
THEY PROTECT PENSIONS.
AND THERE ARE DIFFERENCES THERE.
AND IN CALIFORNIA WHERE THE
BANKRUPTCIES CAME IN PLACE THE
PENSION BENEFITS WERE NOT
REDUCED.
THE BANKRUPTCY COURTS DO D NOT
REDUCE THEM.
COULD HAVE BUT DIDN'T.
AND IN CHICAGO, I THINK ONE OF
THE QUESTIONS THAT WE HAVE TO
GET GOING, AN ISSUE THAT WE HAVE
BEEN PUSHING IS THEY SHOULDN'T
BE SELLING OFFER INFRASTRUCTURE,
TO PLUG A ONE-TERM BUDGET HOLE
LIKE WHAT HAPPENED WITH PARKING
METERS.
THEY SHOULD HAVE BEEN LOOKING AT
THE MONEY AND PARKING METER
GIVEN TO THE PENSION FUND.
>> WE ARE OUT OF TIME.
BUT REAL QUICKLY, WHAT DO YOU
WANT THE PUBLIC TO KEEP IN MIND?
>> WE'LL HAVE A BUSY SPRING
LEGISTATIVE SESSION AND
UNDERLYING ACTION THAT HAS TO
TAKE PLACE F IF WE TAKE ACTION
SOME OF THE FUNDAMENTAL COST
DRIVERS WE WON'T HAVE TO TALK
ABOUT MUNICIPAL BANKRUPTCY.
THE CITY OF ROCKFORD IS IN A
STRONG FOOTING AND WE WILL DO
OUR PART TO HELP LEAD REFORMS IN
THE STATE.
>> I APPRECIATE IT AND ANDREW
SCHROEDTER AND PATRICK REHKAMP