13 Cook County Municipalities In Worse Shape than Bankrupt Stockton, Calif.

 

The 518 taxing districts in Cook County, Illinois have debts that impose a combined “financial burden” of almost $34 billion—an average of $17,147 per Cook County household—according to a study by The Heartland Institute and the Institute for Truth in Accounting.

With a population of 5.2 million persons, Cook County is the nation’s second-most populous county and includes the City of Chicago.

Thirteen of the municipalities have a worse financial burden than Stockton, California, a city of 300,000 residents that is currently in bankruptcy, the report notes.
"The Municipal Government Debt Crisis" report also reveals the financial conditions of many Cook County taxing bodies are far worse than residents know, because of misrepresentations by local officials.

“This study is the first comprehensive analysis of Cook County’s taxing districts. It reveals how officials in many districts have been misrepresenting their financial conditions by telling citizens their budgets were ‘balanced,’ when in fact they have been accumulating an overwhelming amount of debt,” said study coauthor Sheila Weinberg, founder and CEO of the Institute for Truth in Accounting.

The report examines local governments ranging from tiny mosquito abatement districts to the City of Chicago. Over-ambitious building projects and growing employee and retiree pension and health insurance costs are big factors in the financial burdens, the report states. Weinberg also says many municipalities have not followed proper accounting principles and have lacked “truth in accounting” when setting their budgets.

Current Costs, Future Taxpayers

For instance, to give the appearance of balanced budgets, some local governments have used deferred compensation schemes to shift current costs onto future taxpayers.

Also, many local governments have not provided adequate funding for retirement costs. In recent years, many have actually increased retirement benefits without a corresponding increase in funding.   

According to the report:

• the current unfunded pension liability for the Cook County taxing districts totals $31.07 billion;

• unfunded liabilities for retirees’ health care benefits total $7.18 billion;

• other debts and liabilities total $24.88 billion;

• the total amount of debts and liabilities tops $63.1 billion; and

• local taxing districts have just $29.41 billion of assets to pay bills, resulting in an unfunded financial burden of more than $33.7 billion.

Furthermore, the growing liabilities many local governments face may be even greater than most people think, because accurately determining the true financial status of many local governments is complicated by the fuzzy math they use to balance their budgets.

Off-Balance Sheet Accounting

The report found many local governments have used accounting gimmicks to hide debts and liabilities. According to the study, more than $27.1 billion worth of retirement liabilities are maintained off-budget in the county. Although the Governmental Accounting Standards Board has set rules requiring governments to report these liabilities,

Weinberg says the rules have been loosely enforced.

The five most heavily burdened municipalities in Cook County, according to the study, are the villages of McCook (with a per-household financial burden of $316,671), Bedford Park ($259,320), Rosemont ($90,468), Hodgkins ($22,990), and Melrose Park ($19,352).

The Illinois state government already has the nation’s worst credit ratings and worst unfunded pension liabilities, conservatively estimated at nearly $100 billion. When the combined local, state, and federal financial burdens borne by Cook County taxpayers are added together, they show a staggering burden.

The financial burden of the Illinois state government is $32,905 per household. The financial burden created by the federal government is $574,042 per household. Adding these burdens to the financial burdens of Cook County’s 518 taxing districts means the total financial burden on the average household is $624,094.

Report coauthor John Nothdurft, director of government relations for The Heartland Institute, warned of the long-term consequences of growing local government debt.

‘More Tax Increases or Bankruptcies’

“The current fiscal state of many of the county’s municipalities is unsustainable, and citizens will continue to see more tax increases or municipal bankruptcies unless drastic pension and spending reforms are made,” he said.

The municipalities with the heaviest financial burdens—McCook, Bedford Park, and Rosement—have spent fortunes on economic development, often through the use of tax increment financing which freezes tax receipts to schools and other local governments to pay for redevelopment of blighted areas.

“A lot of it is [a result of] bond issues,” Nothdurft said. “They all have a very big TIF district. Basically, they took out money to do renovations or economic development in their community, and they say because of these things, we’re going to be able to pay off this huge bond we took out over time. . . . The tax revenues from these districts have not come in fast as they probably would have liked.”

Nothdurft says disappointing TIF district performance is not uncommon, so he was not surprised by that. But he was surprised by the number of supposedly well-managed suburban cities and villages with sizable financial burdens.

“One hundred and two of the 126 suburban municipalities have a negative balance sheet, so they have some type of financial burden. It was overwhelmingly the biggest chunk of the taxing districts that were in bad shape. . . .

I think it shows that people need to start asking their local city council or village board or township, ‘Why are we building this convention center or things like that?’ There’s a lot of debt there that I think gets swept under the rug.”