Winger's Weekly Wrap-up

O'Hare Noise
O'Hare runway rotation test-period ends at end of year. Communities impacted by O'Hare Airport are halfway through a Runway Rotation Test that is aimed at reducing noise from aircraft. The Chicago Department of Aviation (CDA) wants to know if the rotation plan is working. They are encouraging residents to complete their online survey.

The survey will serve as one component in determining whether or not the Runway Rotation Test was a successful in reducing noise. Once the rotation test is completed on December 25th of this year, the Fly Quiet Program will return to its original format. The O'Hare Noise Compatibility Commission (ONCC) and the CDA will review data and survey results before making a recommendation to continue with the Fly Quiet Runway Rotation Plan permanently.

It is important they hear from you. If you are impacted by O'Hare noise, please take a minute to take the Fly Quiet Survey.

Find out more here:

Budget – Debt Refinancing
Underwriters agree to help refinance some Illinois debt. The $600 million in variable-rate bonds that will be refinanced are stapled to a set of “crocodile” clauses. Hidden under the dark water of the 2003 bonds’ contractual covenant are a series of punishment terms in which the State of Illinois promised to pay an enormous penalty ($150 million) should its credit standing fall below letter-of-credit level. A consortium of four banks has agreed to refinance the debt under terms that will replace the letters of credit requirement that was stapled, by covenant, to the old debt.

The bonds that will be refinanced under this agreement were placed during the administration of former Gov. Rod Blagojevich. The agreement, which was announced on Wednesday, October 12, is not expected to lead to an upgrade of Illinois’ sub-par triple-B credit rating. In addition, it is expected that the State of Illinois will have to pay fees to the refinancing banks in return for their replacement of the letters of credit. The refinancing is expected to be completed on November 7.

Budget – Yield Picture Worsens
In latest sale of Illinois bonds, interest rates rise again. The newest sale of Illinois general obligation (GO) bonds was completed on Thursday, October 13. It drew a picture of worsening yields and interest-rate obligations for the debt-beleaguered State of Illinois.

In the process that led up to this week’s bond sale, debt underwriters negotiated in the marketplace with potential lenders on the interest rate Illinois would have to pay as the price for selling its package of bonds. When the sale process was complete, Illinois taxpayers learned that their BBB-ranked State government would have to pay a premium of 200 interest basis points (2.00%) in interest over the rates paid by borrowers which have achieved the coveted triple-A (AAA) rating. AAA-rated borrowers include the neighboring state of Indiana.

The risk premium paid by Illinois and its taxpayers this week was a sharp upturn from the 1.62% risk premium quoted in the last Illinois debt sale. These numbers signaled a further weakening of Illinois’ financial position relative to other U.S. units of government. Illinois has now operated for more than 15 months without a full-year budget. Continued growth in the State’s backlog of unpaid bills (more than $8.9 billion as of Wednesday, October 12) is leading to growing pressure on the State’s credit rating and perceived standing as a debtor.

Health Care – Affordable Care Act
Few Illinois Obamacare marketplaces are truly competitive. The Illinois Department of Insurance (IDOI) reported this week that of the 102 counties of Illinois, three-quarters – more than 70 counties – now have only one or two insurance companies offering coverage through “Get Covered Illinois”, the IDOI Affordable Care Act marketplace.

The announcement implies that many Illinoisans mandated to purchase individual-household insurance by the federal Affordable Care Act will have only one or two entities willing to quote a price to them. While prices for health insurance differ from household to household based upon the age of the purchaser and other factors, a lack of competition is generally correlated with higher prices. The IDOI announcement coincides with reports that there are likely to be sharp price hikes for ACA-compliant health insurance in Illinois for purchasers in 2017.

The announcement of diminished or absent ACA competition in Illinois follows decisions by large providers of private-sector health insurance, headed by UnitedHealth, to withdraw from the Illinois market. This development also followed the financial collapse of a significant Illinois ACA-compliant health insurance cooperative, Land of Lincoln Health, which is now in liquidation and is not offering health insurance policies for 2017.

The Department of Insurance reports that in seven significantly-populated counties of Illinois – Grundy, Kendall, Lake, Madison, McHenry, Monroe, and St. Clair – there is now only one insurance firm willing to sell ACA-compliant policies, Blue Cross Blue Shield. The Obamacare mandate now impacts the consumer status of the 1.75 million Illinois residents of these counties.

Outmigration – Illinoisans Leaving the State
Study shows why Illinois residents are thinking about moving out of state. The study, performed by the Paul Simon Public Policy Institute, found that 47% of Illinois respondents said they were thinking about moving out of Illinois. When asked about their reasons for considering emigration from Illinois, the largest single subset of the respondent group (27% of total respondents) responded “taxes.” The weather, bad government, and the state’s job/education picture were also cited as reasons to think about leaving the Land of Lincoln. More than four-fifths (84%) of all of the respondents, including those who are not considering leaving Illinois, believe the state is “headed in the wrong direction.” The study questioned residents who were registered voters within Illinois. Results of the study were published on Monday, October 10.

Many former Illinoisans have already left the State. The State of Illinois experienced a net loss of more than 1.3 million people between 1995 and 2014. This number reflects the surplus of leavers over newcomers during this twenty-year period. Many of those who remain as of 2016, and who are now thinking about emigration, are tied to Illinois by possession of a house or job here; and they know it will not be easy for them to leave. When asked by the Simon Institute polling team, only 20% of respondents think it is likely they will in fact leave Illinois within the next 12 months. The Paul Simon Public Policy Institute is an affiliated institution within Southern Illinois University (SIU) in downstate Carbondale.

Pensions – Possible Payment Delays
Illinois warns bond buyers that key pension payment may be delayed. The mandated payment in FY17 of more than $7.8 billion from state general funds to the five Illinois state-managed pension systems is required by statutory law. State law requires that whenever the State falls short of past commitments to these pension funds, it must make actuarially determined annual payments to these funds to “ramp up” or “catch up.” As these five funds now post, collectively, approximately $111 billion in unfunded pension liabilities, these ramp-up payments will be a feature of the State’s budget picture for more than a decade to come.

State general funds income, particularly income taxes collected from individuals and corporations, is falling at the same time as mandated pension payments are rising. At the same time, many other mandated recipients of state general funds have appealed to court orders, consent decrees, and automatic appropriations to ensure that they get positions at or close to the head of the line for the State’s remaining funds. The result of the convergence of all of these trends was that the State of Illinois was legally compelled to print a warning in its most recent State bond prospectus released on Tuesday, October 11, that some of the mandated $7.8 billion FY17 pension payment may have to be delayed.

Warnings of this type, in bond prospectuses, are part of the data used by credit rating agencies to rate the debts of institutional borrowers. Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings have downgraded State of Illinois general obligation debt to only two notches above “junk bond” level. The three different firms use different terminology; in S&P phraseology, Illinois general-obligation debt is rated ‘BBB,’ or triple B. While bonds stamped with this rating can be sold as investment-grade securities, they are classified as a relatively low-ranking, risky investment. The State of Illinois, when it sells bonds in the marketplace, must offer to pay interest rates that are much high than the rates paid by other states. Illinois taxpayers must pay annual interest rates on 10-year notes that are approximately 200 basis points (2.00%) higher than the rates paid by the AAA-rated neighboring state of Indiana.

Transportation – REAL ID Act
Federal government confirms Illinois is moving toward compliance with REAL ID Act. Compliance, or movement toward compliance, is required for a state ID card (such as a driver’s license) to be seen as adequate identification for federal security purposes, such as entering an armed forces base or the boarding area of an airport. Illinois is one of 14 states that have been officially ruled as out of compliance with the 2005 federal law. Congress enacted, and former President George W. Bush signed, the REAL ID Act after the events of September 11.

Under the terms of the federal law, applicants for a drivers’ license or official ID equivalent are required to present a variety of official documentation to confirm and re-confirm their legal status within the United States. In addition, the drivers’ licenses or equivalent state documentation must be produced in physically secure facilities and must comply with a series of federal mandates intended to reduce and eliminate counterfeiting. The eventual goal is to bring the 50 states’ drivers’ licenses closer to the level of identification and security that are imposed upon applicants for a U.S. passport. After a ten-year transition period, the federal government has begun to impose penalties upon the residents of states that remain out of compliance with the REAL ID Act.

The General Assembly responded to federal compliance issues in spring 2016 by enacting new legislation (SB 637) intended to move toward compliance with the REAL ID Act. Under this legislation, the offices of the Illinois Secretary of State are no longer allowed to print out and distribute plastic drivers’ license cards. Starting in summer 2016, Secretary of State employees who have undergone criminal background checks are now allowed to collect information from an Illinois resident. The State employee will then send digital information over a secure phone line to a facility in a secure location. The new drivers’ licenses, which are mailed to their recipients, are similar to the old drivers’ licenses in some ways and different from them in others. They contain features that are difficult to counterfeit.

Under the new legislation and technology, Illinois has now been re-ruled to be 84% in compliance with the REAL ID Act. This status will be valid until October 10, 2017. During the 12-month period preceding this deadline, Illinois drivers’ licenses and ID-card equivalents will be viewed as adequate to enter federal security-secured areas, such as federal facilities and airport boarding areas. The Department of Homeland Security is warning Illinois and 13 other states that they must take further actions in spring 2017 in order to move closer toward complete compliance with the REAL ID Act. Eight other states, including Kentucky and Missouri, have been ruled noncompliant with the REAL ID Act. Their residents could face identification-related sanctions as soon as January 30, 2017.

Fall in Illinois – Decorative Contacts Warning
Illinois families warned against using decorative or colored contacts in holiday costumes. The Illinois Department of Professional Regulation (IDFPR) reminds Illinoisans that contact lenses, and any other product intended to be seen through, must be fitted to an individual customer. IDFPR reminds Illinois customers that the eye professional who is qualified to fit a set of contacts or prescription eyeglasses will instruct the patient on proper eye care, including when to take out the contacts and proper administration of the eye drop solutions familiar to people who wear contacts.

Halloween contacts, bought by some thrill seekers to produce “extreme eyes” or “crazy eyes,” could be especially dangerous. The Department reports that many of these products are made with other novelty goods in facilities that are not licensed or inspected by the U.S. Food and Drug Administration (FDA). As with other non-professionally-administered, non-FDA-approved items and chemicals, these products could cause eye damage.

Fire Prevention Week
Fire Prevention Week was established to commemorate the Great Chicago Fire. The tragic 1871 conflagration that killed more than 250 people, left 100,000 homeless, destroyed more than 17,400 structures and burned more than 2,000 acres. The fire began on October 8, but continued into and did most of its damage on October 9, 1871.

According to popular legend, the fire broke out after a cow - belonging to Mrs. Catherine O'Leary - kicked over a lamp, setting first the barn, then the whole city on fire. Chances are you've heard some version of this story yourself; people have been blaming the Great Chicago Fire on the cow and Mrs. O'Leary, for more than 130 years. But recent research by Chicago historian Robert Cromie has helped to debunk this version of events.

Like any good story, the 'case of the cow' has some truth to it. The great fire almost certainly started near the barn where Mrs. O'Leary kept her five milking cows. But there is no proof that O'Leary was in the barn when the fire broke out - or that a jumpy cow sparked the blaze. Mrs. O'Leary herself swore that she'd been in bed early that night, and that the cows were also tucked in for the evening.

But if a cow wasn't to blame for the huge fire, what was? Over the years, journalists and historians have offered plenty of theories. Some blamed the blaze on a couple of neighborhood boys who were near the barn sneaking cigarettes. Others believed that a neighbor of the O'Leary's may have started the fire. Some people have speculated that a fiery meteorite may have fallen to earth on October 8, starting several fires that day - in Michigan and Wisconsin, as well as in Chicago. Read more.

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