Awareness of Chicago’s massive financial hole seems to dawned on the public fairly recently. Crain’s did a story on the debt 2010. The Tribune did a big series on Chicago’s recently. There’s been a ton of national analysis of it. But a hole this big didn’t get dug overnight. Were there any events or signs along the way that could have tipped off Chicagoans that something was fundamentally awry?
I believe there was.
Years back I remember reading an article talking about a Taubman mall that was going to open without a Gap in it. Google pulled up this one from 2001, so this may be it. At the time, Gap was a juggernaut. They could basically dictate terms to mall owners, so important was a Gap to any mall’s success. Here’s what the linked article has to say:
The two largest mall developers–Simon Property Group Inc. and General Growth Properties Inc.–have already capitulated to some of the retailer’s [Gap’s] demands…Taubman could have more to lose by not having Gap stores in its malls than Gap would lose by not being there, said Steven Greenberg, head of Greenberg Group, a real estate consultant to retailers. “It is extremely difficult to have a successful retail center today without a Gap,” he said.
The article is illuminating and I recommend reading the whole thing. Because as it turns out, this event was really signalling that the end was nigh for Gap. The retailer ended up going into a tailspin from which it never recovered its position. Had a shrewd investor seeing how this lease dispute played out shorted Gap, he would have made a mint.
I believe a similar signalling event occurred in Chicago on the night of March 30, 2003. That was the night that Mayor Daley sent in the bulldozers to dig big X’s into the runway at Meig’s Field airport, to make happen its closure via fait accompli when he could not get it through the political process.
While some were outraged at the time, few appreciated the significance of the event. It was a big signal that something had gone seriously wrong with Daley and Chicago. While some dubious tactics such as using long term bonds to pay for litigation settlements began a bit earlier, 2003 is where the wheels started to come off the city. It just took another 5-7 years before people realized it.
Kristi Culpepper recently posted an eye-opening look at Chicago’s disturbing finances. (Don’t let the fact that this is on Tumblr deceive you – she’s legit). She notes that: “There has been a structural gap in Chicago’s Corporate Fund budget since at least 2003.”
For pensions, Chicago had underfunding by 2003 but wasn’t in a terrible position in terms of making its annual required contribution. But the contribution gap soared after that year 2003, creating a crisis. Here’s a chart out of a Nuveen report showing this.
It can be hard to tell which events are signal and which are noise, but when disaster strikes, it can be useful to go back and take a look at what might have been missed. In retrospect, Meig’s Field was a sign that Daley had lost his mojo and there were troubled waters ahead for the city.