Before Detroit, there was Stockton, California. Cities with so much debt they went belly-up. Now a recent report is raising red flags about many local communities and their debt.
We show the staggering amount each household could owe, even as their mayors argue the report doesn’t show the complete picture of their town’s financial health.
It’s a simple formula even for those of us who are mathematically challenged: Spend more than you take in and the debt racks up and up. At some point, the creditors call and if you can’t pay you’re in trouble. According to Sheila Weinberg with Truth in Accounting, citizens should be paying attention to the amount of debt their cities and villages are accruing because ultimately they will be on the hook for it.
Weinberg and the Heartland Institute analyzed the financial condition of villages and cities in Cook County and recorded the amount of debt of each. Weinberg maintains, “Our study found that 103 out of 126 of the villages and cities studied are underwater. So it’s not just happening in Illinois or Detroit, it is happening in these suburbs.”
Who’s in debt the most? According to the report, it is the tiny Village of McCook. Only about 100 people live in the community which is comprised of largely commercial businesses. The report states that the village owes $43.5 million dollars, mostly in unfunded pension and health care benefits. If the economy collapses, homeowners could be on the hook for a whopping $316,671 dollars each. That amount is much more than a homeowner in Detroit will pay.
In case you think it can’t happen, Richard Ciccarone, a managing director with McDonnell Investment Management points out, “Sooner or later if you have liabilities, which would be debt or pensions, that outstrip your economic resources in your community or your tax base that’s not a pretty picture for the long term. And there is going to be a day of reckoning for them.”
Before Detroit declared bankruptcy, it was Stockton, California. That city gambled that certain business ventures would make it more desirable. However, the market turned bad and folks moved away leaving the city unable to pay its bills.
Number two on the Institutes list is the Village of Bedford Park. The debt for each household is $259,320 dollars which is far more when compared to homeowners in Stockton, California.
Bedford Park Village President Dave Brady says it’s a skewed factor. He vehemently disagrees with the ranking saying the village can afford to give property tax rebates to its more than 200 homeowners every year. Brady said his only concern revolves around the issue of health insurance saying, “With the uncertainty of health insurance costs at this time, it’s something I’m a little concerned with.”
It is a legitimate worry according the report because the health care promised equals 241 percent of Bedford Park’s entire payroll.
Rosemont is next on the top ten list with the homeowner’s debt tab $90,468. Number four is Hodgkins at $22,990. Number five is Melrose Park at $19,352 per household.
Six on the list is the city of Chicago with debt per household at $18,202. One of its biggest problems continues to be underfunded pensions. According to Weinberg in reference to the Emanuel administration, “He only puts in a 1/3 of what he should be putting into his pension plan. So it’s sort of like a person who says,’Oh I’m balancing my budget,’ but they’re only paying a third of the minimum payment on their credit cards.”
Add in Stone Park, Forestview, North Riverside and Schiller Park and that rounds off the top ten debt ridden villages and cities in Cook County. Even though they’re not Detroit, the report says there may be caution signs in these towns. Weinberg suggests that citizens be cautious when village leaders say, “We have reserves.”
“That is again just looking at your checkbook and saying ‘I have money in the checkbook, ignore my credit card debt. I’m just going to focus on how much money I have in my checkbook,’” she said.
In other words, these towns have in one hand a checkbook with plenty of cash for today. But in the other hand is a credit card they’re not paying off with growing debt that far outpaces their checkbook reserves.
Now, here are the responses we got:
McCook and Hodgkins share Bedford Park’s opinion: We’ve got more business tax income compared to homes, so there’s no concern.
North Riverside thinks it’ll drop from the top ten debtors because a new agreement on its retiree insurance cuts costs dramatically.
Rosemont’s mayor said he’s a little worried about their debt, but business is strong.
Every other town or city didn’t respond including Chicago.