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S&P: Growing pension costs to force cities to raise taxes, cut services

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S&P Global Ratings is warning that growing public retirement debt is likely going to continue to eat up public funds that would otherwise go to providing services to taxpayers.

In an annual report on America’s 15 largest cities and their public debt, S&P said major cities like Chicago are going to have to cut services as they shift more money to pay down legacy retirement costs. Analysts also expect cities to continue to raise taxes, with all of that new tax revenue going to pay for pensions.

“As we expect these costs to continue to rise in the near term, we likewise expect to see growing pressure on other priority services such as public safety and public works, absent revenue growth from tax hikes or the identification of new revenue streams,” the report said.

Growing pension costs could even make it more difficult for cities to come up with money for infrastructure projects, such as road improvements.

“Any of the major cities that currently face a backlog of deferred capital will only find it more difficult to keep pace with demand for new infrastructure investment, as mounting legacy costs command an ever greater share of budgets,” the report said.

The report describes Chicago as an “outlier” in terms of its 26 percent pension funding levels. The city has raised property taxes multiple times in recent years, most of that money going to pensions. The city is considering borrowing $10 billion to essentially refinance its pension debt using portions of future income as leverage to get better rates.

S&P Analyst Scott Nees expects it to become more pronounced as required contributions increase.

“Those cities that are on the low end of the distribution in terms of pension funding levels will continue to see these costs increase in the future,” he said.

Similar budgetary pressure is apparent in cities across Illinois. The city of Peoria announced more than two dozen layoffs last month. Its annual budget report noted that pension payments are crowding out services. Many more municipalities are raising taxes to pay into the funds.

“I think it ends up being a little bit of a mixture raising new revenue streams and then maybe curbing cost growth that otherwise wouldn’t have emerged if it weren’t for the fact that they didn’t have to cover rising pension costs,” Nees said, adding that Chicago still benefits from its solidly diverse economy.

Article by Cole Lauterbach with Illinois News Network. For more INN News visit ILnews.org

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Illinois News Network, publisher of ILNews.org, is a nonpartisan, nonprofit media company dedicated to the principles of transparency, accountability, and fiscal responsibility in the state of Illinois. INN is Illinois’ pioneering non-profit news brand, offering content from the statehouse and beyond to Illinoisans through their local media of choice and from their digital hub at ILNews.org. Springfield Daily was granted republishing permission by INN.

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LIVE | Springfield City Council Meeting September 17th

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This is the live feed for the Springfield City Council meeting for September 17th, 2019. The zoning for a new homeless shelter in Ward 2 is up for discussion. Regulations for recreational cannabis are also up for passage after discussion last week.

The proposed location homeless shelter has drawn significant public discussion, and the council chamber is standing-room only. The discussion of the shelter begins at ~22 minute mark of the video.

Update: The city council voted 8-2 to approve the zoning for the Helping Hands facility. Aldermen Gregory (Ward 2) and Turner (Ward 3) opposed.

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Graves, Davis talk flooding at transportation summit

Thomas Clatterbuck

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When thinking about transportation infrastructure, it is easy to get focused on the roads we use every day. But for Congressmen Rodney Davis (R-IL) and Sam Graves (R-MO), waterways are another serious concern. This spring, both their districts suffered significant flooding. In Illinois, Calhoun County was completely cut off from the rest of the state. Their ferries had to close and the road into the county was washed out.

In Missouri, the flooding was often just as bad. Davis shared his story of telling Graves he had levies topped in Illinois, to which Graves responded he had 57 levy breaks. These breaks did more than just wash away buildings, whole roadbeds were reduced to craters. With the highway trust fund already scheduled to run dry by 2021, it is unclear where the funds to fix the damage will come from.

When asked why the flooding was so bad, Graves highlighted two issues. This spring saw record snow melts and rainfall. But Graves said management by the Army Corps of Engineers made the flooding worse along the Missouri and Mississippi Rivers. The Missouri River has a series of seven reservoirs for flood mitigation. However, the Corps’ priorities for the river are fishing and recreation, rather than flood control; making the river run high. Once the rainfalls hit the already high Missouri, a flood along the Mississippi was all but inevitable.

Davis and Graves expressed further frustration with this situation because of Congress’ limited ability to direct the Corps of Engineers. Graves suggested there was widespread dissatisfaction with how the Crops manages rivers across the country, but said that with how the budget is set up, Congress has little direct control over how the money is spent. Davis said congressional leaders are looking to craft a bill to change these rules.

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Jacksonville hears proposals for municipal solar arrays and park grants

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Several new projects may be coming to Jacksonville. The Parks and Lakes committee discussed two state grants to improve local recreation. A 50-50 matching grant could provide up to $400,000 to help restore the Nichols Park pool. 

A second grant would provide funds to be used on the lakes. The committee decided that fixing the boat ramp area for Lake Mauvaisterre was the best use of the grant. Although lots of work has been into the lake, many boaters are reluctant to put their boats out due to the poor conditions of the launch ramps. Other projects were considered, but fixing the main point of entry for the lake was considered a prerequisite for any other recreation project. 

Both projects depend on a successful grant application, which will be submitted in the coming weeks.

Solar Plans

Next, Joe Christian from Simpleray came to discuss potentially adding solar arrays to the city’s water plants. These plants require large amounts of power and solar is one possible way of cutting down on these costs. They also have considerable amounts of open space, making them plausible candidates for solar arrays. 

The proposal calls for a 25 year deal with Simpleray, where they would install and operate the arrays, and sell power to the city. They want a locked-in rate that is currently below the market price. Based on Simpleray’s cost projections for electricity, the city could save over $2 million over the duration of the deal. At the end of the deal, the city would buy the arrays, which are projected to last for at least another ten or fifteen years.

There are some concerns with the deal. Technical questions remain about facility planning. New structures are planned at the treatment plants, and any new solar arrays would need to be built around both current and future structures. There were also finical concerns. 25 years is a long commitment for a utility price. Even though it is below projections, no one knows what the price of power will be in the future. 

The arrays themselves also had unknown costs. Since the city would take ownership of the arrays after 25 years, the city would be responsible for disposing of the panels once they reached the end of their usefulness. The Simpleray consultant was unsure how expensive it would be to dispose of the panels even under current regulations. Like many forms of electronic trash, it is not known what new rules may apply to solar panels in 25 or 30 years. 

Simpelray was interested in moving forward quickly, because there are Federal incentives that will expire at the end of the year. Despite some interest from the council, Alderman Wankel pointed out that the city’s engineers will need to examine the plan, and it may need to go out for a bid. Special Studies is planning a dedicated meeting to discuss solar options in the near future.

Ward 2 retirement

Monday’s meeting was also the last for longtime Alderman Tony Williams. Williams was recently reelected in April, but is moving out of the ward. Mayor Ezard will appoint his replacement, but there is no word on who will be selected to fill the term. 

You can watch the full workshop session in the player above.

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