GRADUALLY AND THEN SUDDENLY: How Debt Ate Chicago.
According to the group Truth in Accounting, Chicago continues to live up to its moniker âSecond Cityâ in at least one respect: it has the second-worst debt load of any big city in Americaâabout $43,000 per taxpayer, or almost $40 billion in total. The first is New York City, but Chicago residents also have to deal with Illinoisâ debts, which total $42,000 per taxpayer, third worst in the nation. Thus, a family moving to Chicago suddenly becomes the inheritor of almost $85,000 in liabilities. By this metric, Chicago is no longer second but has by far the worst debt burden of any major city.
Chicagoâs accumulating debt might be bearable if the city had low taxes and therefore room to raise them and pay down some of the liabilities. But taxes in the Windy City already rank among the nationâs harshest. According to a national study, Chicagoâs combined city and state taxes would eat up over 12 percent of a U.S. median family income. The only large cities with higher proportionate taxes are Rust Belt towns with much smaller populations, such as Detroit and Newark. Chicago imposes the highest sales tax of any major city (10.25 percent) and punishing property taxes, too.
Chicagoâs taxation is also brutal on businesses. A recent study of 53 cities found that Chicagoâs tax on industrial properties was nearly double the average of other cities. Chicagoâs commercial property-tax rate, at more than 4 percent per year, was by far the worst of any major city and more than twice the average.
High debt and taxes might be manageable if the cityâs economic fundamentals were strong. Theyâre not. Chicago relied for years on commercial properties, especially downtown offices in the Loop, to power its economy and fund the cityâs excesses. But those jobs are fleeing. Downtown Chicagoâs office vacancy rate recently approached 24 percent, a record high. Boeing has moved its headquarters from the Loop to Northern Virginia. These white-collar firms will not pay the cityâs higher taxes in the future; they wonât even pay their existing leases.
Making matters worse, Chicagoâs population is shrinking.
That last item requires no explanation.