By Ted Dabrowski and John Klingner | Wirepoints
Imagine you work for a major company that’s looking to expand its footprint somewhere in the country. The company can go anywhere, and so you look at booming cities in Florida, Texas and a host of other states in the South. And of course, you can’t ignore the old standbys, including Chicago.
But you then see two stories that rapidly dissuade you from considering the Windy City.
That was the reality for any business person reading the news last week. Two articles separately highlighted the city’s overwhelming debt and crime problems, with two paragraphs in two important documents giving particular pause.
The first paragraph was tied to a New York Times article by Andrew Biggs, titled “What’s the matter with Chicago?”, in which he said, “the word bankruptcy has been hanging over Chicago like a storm cloud about to burst.”
Part of his evidence for bankruptcy was the city’s own pension actuaries warning of “potential insolvency” for the city’s biggest pension system. The Municipal Employees’ Annuity and Benefit Fund is just 22% funded and has one of the poorest liquidity positions in the country.
In its letter to the pension fund’s board members, the actuary wrote:
“Given the low funded ratio and the expected timing of employer contributions, the Fund is still at risk of potential insolvency if an economic recession or investment market downturn were to occur in the near term.”
It’s not just the municipal fund that’s in trouble. Chicago’s three other city-run pensions are in equally bad shape, and so is the pension fund for Chicago teachers. Adding up all their debts, Chicago has $53 billion in unfunded pensions. It’s one of the big reasons the city has the worst credit rating in the nation.
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The safety of employees and customers is another key consideration. Unfortunately for Chicago, companies looking to attract investment are being forced to acknowledge the risks of the city’s crime problem
Crain’s reported that Bally’s, the company building the city’s first casino, officially expressed, in its $250 million stock offering documents, a concern to potential investors about crime’s potential impact on its future revenues:
“Business interruptions in Chicago due to crime or civil unrest could adversely affect us. Our business and our assets are planned to be primarily located in Chicago, Illinois, a city which has recently experienced very high levels of criminality and civil unrest. Heightened criminality or the perception of danger among our customers, and events of civil unrest, at or in the vicinity of any of the facilities that we operate and intend to operate, including our temporary casino and our permanent resort and casino, could result in a decline in customer traffic and spending patterns, which would result in a decline in revenue.”
It’s understandable why Bally’s would be so concerned and why it would warn potential investors.
Chicago was the nation’s homicide capital for the 13th year in a row in 2024. Even with an 8% drop in murders last year, Chicago’s homicide rate remains nearly five times that of New York City (21.5 vs. 4.5 murders for every 100,000 residents) and 3.1 times higher than Los Angeles’ (21.5 vs. 7.0). And the fact that violent crime continued at a near-six year high last year serves as a clear warning to any business considering locating here.
Read more here.
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