Fault line of financial trouble in the Midwest
July 18, 2013 (CHICAGO) (WLS) -- From Chicago to Detroit, there is terrible news for the two cities' government's and the people who live there.
These are two separate and distinct financial stories, but on a day when two Midwestern cities are rattled by bad news -- Chicago's credit rating taking an unprecedented dive and Detroit declaring bankruptcy -- there are questions.
Is Chicago's credit drop an early symptom of the financial disease that on Thursday struck down Detroit?
"It's a sad situation; it's been a sad situation in Detroit for some time," said Laurence Msall, president of the Civic Federation. "The city of Detroit has been losing population, had been losing jobs for a long time."
Msall Thursday night distances Chicago from Detroit, and in many statistical regards, the city of Detroit is much farther than 250 miles away from Chicago.
"This is a situation that's been 60 years in the making in terms of the decline of Detroit," said Michigan Governor Rick Snyder.
Michigan's Governor Rick Snyder, in a web video posted after the bankruptcy filing, noted Detroit has lost more than a quarter of its population since 2000; unemployment has tripled, and there are 78,000 abandoned buildings. Chicago is much more vibrant.
"The city of Chicago has incredible assets: a strong economic base, Moody's talks about it in their analysis, it has great resources, still has a very large and dynamic population -- people want to live here. Detroit for over a decade has been losing population and losing the ability to attract jobs, and opportunities to make people want to go there," said Msall.
However, Detroit is $18 billion in debt, about the same amount as Chicago's unfunded pension debt, and Chicago exists in a state that is largely broke, with a pension system that is $100 billion in the red and no solution in sight. Those facts on Thursday caused the Moody's rating service to triple-downgrade Chicago's credit rating.
"Three different notches -- that's a reflection, and Moody's has said -- and they have been warning the City of Chicago and warning the State of Illinois that the failure to address the pension reform in Springfield puts in jeopardy the city's ability meet its own obligations," said Msall.
Chicago Mayor Rahm Emanuel Thursday night says: "Without comprehensive pension relief from Springfield, municipalities such as Chicago will continue to receive negative reviews from rating agencies."
"To our citizens... as tough as this is -- I really didn't want to go in this direction, but now that we are here, we have to make the best of it," said Detroit Mayor Dave Bing.
They are words that neither Chicago's mayor nor the leader of any other government wants to say, and Thursday night, Emanuel again urged leaders to come together, find common ground, and pass pension relief.
iteam, chuck goudie
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