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Providence, the capital of Rhode Island, is in such bad financial straits that Former Hasbro CEO Alan Hassenfeld has this scary message for state officials Providence Should Consider Bankruptcy.
In a candid interview with the Providence Business News, Hassenfeld said he fears Providence is in deeper trouble “than anyone comprehends” and that officials should consider bankruptcy in order to right the ship.Illinois Needs Bankruptcy Solution
“I’m not sure, and this will shock you, I’m not sure if we shouldn’t pull a Detroit or Central Falls and level the playing field and start all over,” Hassenfeld told PBN.
Hassenfeld is among the most prominent Rhode Islanders to publicly suggest Providence should consider bankruptcy.
In 2011, tiny Central Falls filed for Chapter 9 bankruptcy, slashing pensions and ordering 4% annual tax increases for five straight years in order to improve the city’s finances. Under new Mayor James Diossa, the city has earned high praise for helping the city recover, but Central Falls had the state’s fourth-highest residential property tax rate ($27.63 per $1,000 of assessed value) and second-highest commercial tax rate ($39.67 per $1,000) in 2015, according to the state Division of Municipal Finance.
A least Rhode Island offers cities and municipalities a choice.
Illinois has no provision for municipal bankruptcies. As a direct consequence, Illinois cities and school districts sink deeper and deeper in debt, even though taxes go higher and higher.
Illinois "Too Big a Risk"
Chicago was supposedly on the "short list" of cities GE was considering for its new headquarters. But GE instead selected Boston.
GE said "Illinois Too Big a Risk".
GE accurately cited Chicago schools, pensions, corporate tax rates, financial meltdowns, budget holes, and a rock-bottom state debt rating.
Too many risks? You bet. So what is mayor Emmanuel and the Illinois legislature going to do about it?
Tax Hikes and More Tax Hikes
Mayor Rahm Emanuel's solution to this mess was to make the biggest tax hike in history.
On October 28, 2015 I commented Chicago's Sheep Dogs Approve Mayor's Tax on Sheep; Quote of the Day "It's Not a Piece of Art".
The "sheep" in question are Chicago taxpayers who will need to pony up a historic property tax hike of $589 million to fund the city's police and fire department pensions.
Deal or No Deal
25 cents out of every Illinois taxpayer dollar goes to Illinois pensions. Yet, Illinois has the worst funded state pensions in the entire nation.
On January 20, I reported "B" Word Hits Chicago: Illinois Governor Proposes Bankruptcy for Chicago Public School System.
To appease the unions and save his own job in the process, mayor Emanuel's spokeswoman, Kelley Quinn, responded “The mayor is 100 percent opposed to Gov. Rauner’s ‘plan’ to drive CPS bankrupt,” Emanuel’s.
I commented "When a politician's job depends on not understanding a problem, there's no way in hell the problem will be understood."
Yesterday I read Illinois governor Bruce Rauner and the Democrats agreed on a pension deal. Just hours later the deal fell through.
A headline that yesterday said "deal reached" today says "Rauner backs Cullerton pension plan - but Cullerton says it’s not his plan".
The fundamental difference is over collective bargaining. Cullerton said he believes collective bargaining should continue to exist, but Rauner disagrees.
Governor Rauner says "reforms first". Emanuel and the Democratic legislature say "money first".
Rauner would be a fool to accept that offer. So we sit.
Illinois still does not have a budget for 2015. A quick check of my calendar says it's already 2016.
I applaud Rauner's holdout.
Chicago should not get one dime until Illinois gets needed changes in bankruptcy law, and until cities can escape the enormous expense of prevailing wages laws and collective bargaining.
Mike "Mish" Shedlock