Tag Archives: Chicago Business Barometer

Illinois Property Taxes Are Crushing Homeowners

Chicago area sees greatest population loss of any major U.S. city, region in 2015

Ten years ago, Bonita Hatchett built her dream home in Flossmoor. A lawyer by trade, she moved to the south Chicago suburb to join a diverse community that included black professionals like herself.

But Hatchett is now planning to leave it all behind. The culprit? Property taxes.

“You’re told all your life: Be educated, be successful, work hard and buy a house. But, we’re being abused for doing so,” Hatchett said. “Living in a town like Flossmoor, it’s just not worth it.”

She’s not alone.

Illinoisans pay among the highest property taxes in the nation, according to the nonpartisan Tax Foundation. Some Illinoisans’ property-tax bills are more than their mortgage payments. And the squeeze is getting worse.

Since 1990, the average property-tax bill in Illinois has grown more than three times faster than the state’s median household income, according to Illinois Policy Institute research.

While Hatchett estimates the value of her home has been slashed in half over the past decade, her property tax bill has only gone up. She paid more than $18,000 in property taxes last year — well over 5 percent of what she thinks her house is worth.

Hatchett plans to move to Indiana, where taxes on residential property are capped at 1 percent of the value.

Seventy miles from Hatchett’s home, in the northwest Chicago suburb of Crystal Lake, Cassandra Bajak thinks this coming Christmas will be her two children’s last in their home. Since she and her husband, an Army veteran, built the house in 2002, their property-tax bills have doubled — eclipsing their mortgage payments.

Her family now is choosing between a move to a southern state or downsizing in their community.

“We’re being taxed out of our home,” Mrs. Bajak said. “The only reason we would ever leave our home or this state is property taxes, and that’s what’s going to happen.”

In McHenry County, where the Bajaks reside, property taxes eat up nearly 8 percent of the median household income. What’s worse, Illinoisans aren’t getting much bang for their tax bucks.

Property taxes at the municipal level have not been going to fund spotless roads or other public works. Instead, they’re mostly funding out-of-control pension costs.

Just take a look at Springfield, where 98 percent of the city’s 2014 property tax levy went to pensions. And where, from 2000 to 2014, members of the typical household have seen their property-tax bill grow more than twice as fast as their income.

Despite that, city-worker retirements are still in jeopardy.

While taxpayers have more than doubled their contributions to the local police and firefighter pension systems over the past decade, Springfield’s police pension fund has a mere 53 cents in the bank for every dollar it needs to pay out future benefits; for firefighter pensions, only 45 cents.

Forcing homeowners to keep shoveling more property tax dollars into broken pension systems has become a morally bankrupt solution to the problem.

In Springfield, for example, residents already contribute four times more money into police, fire and municipal employee pensions than do the employees.

The problem is that, in Illinois, state politicians mandate pension benefits for local government workers, with little regard to fairness for local taxpayers.

Many communities would prefer not to pay the high cost of workers enjoying early retirement ages, health insurance benefits normal residents could never afford, and annual 3 percent cost-of-living adjustments that private-sector workers could only dream of.

So how can the state protect homeowners?

Forcing local governments to begin to live within their means through a property-tax freeze, as has been proposed by Gov. Bruce Rauner, is necessary. But solving the root cause of the property-tax problem will require further reform, such as moving all new government workers from defined-benefit to self-managed retirement plans, transferring the power to negotiate pension benefits down to local leaders, and encouraging aggressive consolidation and resource-sharing across units of local government. For some communities, the only option to undo decades of mismanagement will be bankruptcy.

Until sincere efforts are made at reform, Illinoisans will continue to live in fear: taxpayers of being squeezed out of their homes, and government workers of pension payments that may never come.

by Austin Berg | Chicago Tribune

Chicago area sees greatest population loss of any major U.S. city, region in 2015

After years of financial woes, Lindsey Yates and her husband had to at last address the nagging question: Should they stay or should they go?

The young couple’s continued residency in Chicago was threatened by new obstacles every few months. First came the rising property taxes, then the stress of finding a decent school for their 2-year-old son in a neighborhood they could afford.

Three weeks ago, Yates and her family hit the road, leaving the South Loop and successful careers in the rearview mirror as they headed toward their new house in a Denver suburb.

“The thing that boggles my mind: How is it that a dentist and a business professional and their one young son” can’t make it work financially? Yates asked from the road, at a pit stop in Nebraska, where her in-laws are living. “If we can’t make it work, who can?” she asked.


By almost every metric, Illinois’ population is sharply declining, largely because residents are fleeing the state. The Tribune surveyed dozens of former residents who’ve left within the last five years, and each offered their own list of reasons for doing so. Common reasons include high taxes, the state budget stalemate, crime, the unemployment rate and the weather. Census data released Thursday suggest the root of the problem is in the Chicago metropolitan area, which in 2015 saw its first population decline since at least 1990.

Chicago’s metropolitan statistical area, defined by the U.S. Census Bureau, includes the city and suburbs and extends into Wisconsin and Indiana.

The Chicago area lost an estimated 6,263 residents in 2015 — the greatest loss of any metropolitan area in the country. That puts the region’s population at 9.5 million.

While the numbers fell overall, there were some bright spots in the Chicago area: Will, Kane, McHenry and Kendall counties saw growth spurts, according to census data.

A crumbling, dangerous South Side creates exodus of black Chicagoans

The Chicago region’s decline extended to the state. In fact, Illinois was one of just seven states to see a population dip in 2015, and had the second-greatest decline rate last year after West Virginia, census data show. While the state’s population dropped by 7,391 people in 2014, the number more than tripled in 2015, to 22,194.

The plunge is mainly a result of the large number of residents leaving the state last year — about 105,200 in all — which couldn’t be offset by new residents and births, according to census data. The last year Illinois saw its population plunge was 1988.

The potential fallout is both political and financial. Federal and state government dollars are often distributed to local government agencies based on population; so the population loss creates long-term budget concerns. Communities pouring millions into new roads and schools, for example, based on rosy projections of future growth are left with fewer taxpayers to cover the cost.


Sights set on sun

Illinois has a long-standing pattern of losing residents to other states, but the loss has generally been offset by births and migration from other countries. Residents are mostly flocking to Sun Belt states — those with the country’s warmest climates, such as Nevada, Arizona and Florida.

During the years after the economic recession of the mid-2000s, migration to those states slowed, but it’s heated up again as states in the South and West have sunnier job opportunities and affordable housing.

“The old Snow Belt-to-Sun Belt movement is picking back up again, and movement south and west is fueling up,” said William Frey, a demographer with the Brookings Institution who analyzes census data.

Richard Morton, an Illinois resident of 62 years, is building a house in Panama City Beach, Fla., and plans to move into it in March 2017.

“We’ll say ‘hasta la vista, Illinois.’ I say that rather humorously, but I’m really rather sad about it,” he said. “My mother was born in Illinois. My grandparents lived their entire lives in Downers Grove.”

The clear draw for Morton is Florida’s weather but also what he calls an “attractive economy.”

“I used to enjoy Illinois and the area,” he said. “But everyday there’s a reason to not want to stay here. Between (Gov. Bruce) Rauner and (House Speaker Michael) Madigan, how will the state ever fix its pension problem? To me it seems unfixable, and I don’t want to have to pay for it.”

Texas attracts the greatest number of Illinois residents, followed by Florida, Indiana, California and Arizona, according to 2013 IRS migration data. Weather isn’t the only reason people are leaving the state.

More Illinois residents move to other Midwestern states than the number of Midwesterners moving to Illinois, said Michael Lucci, vice president of policy at the right-leaning Illinois Policy Institute. Job and business creation are simply stronger in neighboring states, he said.

“We talk opportunity all the time. If you’re moving to California, you might be a tech worker, or you might be someone who likes sunshine,” he said. “But when you see Illinois losing people to every Midwestern state, you know it’s not weather. People are moving for economic reasons.”

Through the 1990s and 2000s, Illinois saw what demographers consider normal rates of exodus for the state, about 50,000 to 70,000 more residents moving away from the state than moving in. But in 2015, the number spiked to about 95,000, and in 2015 it reached more than 100,000 people, according to census data.

Several moving companies that examine industry trends found high numbers of Illinoisans moving out of state. Allied Van Lines this year ranked Illinois No. 2 on its list of states with greatest outbound moves with 1,240, said spokeswoman Violette Sieczka. The numbers are limited to the movement of entire households.

The loss of residents over the last 20 years translates to about $50 billion in lost taxable income, and about $8 billion each year in lost state and local tax revenues, Lucci said.

“Frankly, we have this state budget problem, and it would be a lot less of a problem if we had all these people,” he said. “Growth makes problems better, out-migration makes problems worse.”

Losing faith in city

The main factors in Chicago’s population dip are diminished immigration, the aging of the Mexican immigrant population that bolstered the city throughout the 1990s as well as an exodus of African-Americans, experts say.

More than any other city, Chicago has depended on Mexican immigrants to balance the sluggish growth of its native-born population, said Rob Paral, a Chicago-based demographer who advises nonprofits and community groups. During the 1990s, immigration accounted for most of Chicago’s population growth. The number of Mexican immigrants rose by 117,000 in Chicago that decade, according to data gathered by Paral’s firm, Rob Paral and Associates.

After 2007, falling Mexican-born populations became a trend across the country’s major metropolitan areas. But most of those cities were able to make up for the loss with the growth of their native populations, Paral said. Chicago couldn’t.

Some experts also attribute the decline to the city’s African-American population, in part because of historically black communities hit hard by the foreclosure crisis, making houses cheap and easy to buy for Hispanics and whites who were willing to move for a bargain.

The 2010 census reported a 17 percent drop in the city’s black population over the previous decade. That number declined another an additional 4 percent through 2014, to 852,756.

“White people have left the state for years,” Paral said. “But African-Americans? That’s the one-two punch.”

Chicago residents leaving the state have cited the Chicago Public Schools’ financial crisis and the city’s red light camera controversy as motivating factors. The greatest concern, however, seems to be safety. Despite being the nation’s third most populous city, Chicago outpaces New York City and Los Angeles in the number of homicides and shootings, though it fares better than some smaller cities on a per capita comparison.

Melissa Koski, who moved to Arizona in 2008, said she left after being the victim of two crimes. One involved a break-in at her University Village neighborhood apartment while she slept, and the second involved being robbed at gunpoint near Grand and Milwaukee avenues with her mother.

“He got a whopping $40, but I still remember his smell and can feel his sweaty body wrapped around mine, with what felt like a gun pressed to my back,” she said.

Pat and Anna van Slee, longtime residents of the Uptown neighborhood, spent Thursday morning packing their house, preparing for their move to Thousand Oaks, Calif.

Their last apartment was in a six-flat that saw a series of crimes in and around the building in recent years. In one instance, a neighbor was mugged outside the complex; in another, a homeless man seeking shelter in the complex’s basement crawled through the window of the van Slees’ downstairs neighbor, Anna van Slee said.

“We’ve always lived in developing neighborhoods, but when you have a baby it makes you look at things differently,” Anna van Slee said, referring to her son, 4-month-old Orion. While the couple is moving primarily because of job opportunities, they’re glad to not have to enroll Orion in a CPS school, either, they said.

“Oddly, this was a safer neighborhood when it was rougher. It didn’t have some of the tension there is now, when million-dollar condos are going up next to subsidized housing,” she said.

Stemming the tide

There are things that can be done in coming years to mitigate the further exodus of residents from the state, said Lucci, of the Illinois Policy Institute. He recommends refocusing on manufacturing jobs in the state and curbing property taxes.

“We’re never gonna have Colorado’s mountains or California’s beaches,” he said. “But we have historically had an attractive business and job market. The problem is that we don’t have that anymore.”

Indeed, the employment rate is an issue: Illinois this year is tied with West Virginia for the 46th worst employment rate of all states, at 6.3 percent, according to Bureau of Labor Statistics.

“People are leaving Illinois because we rank near the bottom in job growth in the Midwest and have among the highest property taxes in America,” Catherine Kelly, a spokeswoman for Rauner, wrote in an emailed statement. “We have to make structural changes in Illinois to ensure talented people — many of whom run businesses — stay in Illinois to help grow the economy and improve our state’s future.”

In response to the decline in the region’s census numbers, Mayor Rahm Emanuel’s office issued a statement, saying the mayor was “working hard to build the Chicago economy of tomorrow by investing in a diverse economy and highly educated workforce that will continue to bring jobs and people to Chicago.”

It’s important that communities engage in careful discussion about cutbacks, and begin planning for smaller populations and smaller economic growth, said Eric Zeemering, a professor at Northern Illinois University’s School of Public and Global Affairs. But those discussions tend to be difficult and unpopular, he said.

“When politicians are focused on their next elections, it’s hard to have conversations about cutbacks and the realistic budgetary future,” Zeemering said.

In the meantime, he expects local leaders will make efforts to promote and advertise their towns as great places to live. The goal is that these communities will keep their residents despite the state’s problems.

“At the end of the day, some people are happy to live in snowy weather,” Zeemering said. “We don’t want to be a state people view in a negative light.”

by Marwa Eltagouri | Chicago Tribune

Chicago PMI Crashes to 5 1/2 Year Low: Production, New Orders, Backlogs Suffer Double Digit Declines

by Mike “Mish” Shedlock

Fourth quarter GDP was revised lower today to 2.2 percent from 2.6 percent previously estimated.

Looking ahead, I think we are going to see some shocking downward estimates in the months to come. Meanwhile, a shocking PMI report came out today.

Chicago PMI Crashes to 5 1/2 Year Low

ISM Chicago reports Chicago Business Barometer At 5½-Year Low

The Chicago Business Barometer plunged 13.6 points to 45.8 in February, the lowest level since July 2009 and the first time in contraction since April 2013. The sharp fall in business activity in February came as Production, New Orders, Order Backlogs and Employment all suffered double digit losses, leaving them below the 50 level which separates contraction from expansion.

New Orders suffered the largest monthly decline on record, leaving them at the lowest since June 2009. Lower order intake and output levels led to a double digit decline in Employment which last month increased markedly to a 14-month high.

Disinflationary pressures were still in evidence in February, although the slight bounce back in energy costs pushed Prices Paid to the highest since December – although still below the breakeven 50 level. Some purchasers cited weakness in some metals prices including copper and brass, but others said suppliers were slow to pass along lower prices to customers.

Commenting on the Chicago Report, Philip Uglow, Chief Economist of MNI Indicators said, “It’s difficult to reconcile the very sharp drop in the Barometer with the recent firm tone of the survey. There’s some evidence to point to special factors such as the port strike and the weather, although we’ll need to see the March data to get a better picture of underlying growth.“

Blame it on the Ports

Everyone was quick to blame this on the ports and bad weather.

But the LA port issue has been festering for months. Weren’t economists aware of the ports? Of bad weather?

The reason I ask is the Bloomberg Consensus Estimate was 58.7. The range was 55.5 to 59.6. Who predicted 59.6?