It may be better to rule in hell than serve in heaven, but if newly re-elected Chicago mayor Rahm Emanuel can't work some fiscal magic to deal with the city's massive pension and operating budget debt, hell may soon look like a garden spot compared to where he will be if there's a meltdown.

Chicago is going to finally be forced to pay up: pay up for the generous pensions promised city workers over the last few decades that the city can't afford any more; pay up for a cavalier attitude toward debt that encouraged issuing bonds to pay for short-term gaps in funding rather than invest in long-term infrastructure; and pay up for liberal social policies that have created nightmare neighborhoods riddled with violence and mistrust of the police.

Other than that, I'm sure Rahm is overjoyed to have won.

Bloomberg:

Emanuel, a former chief of staff to President Barack Obama, had 56 percent and Cook County Commissioner Jesus “Chuy” Garcia had 44 percent with 96 percent of precincts reporting Tuesday, according to the Chicago Board of Election Commissioners.

The campaign, the first runoff since Chicago switched to nonpartisan elections in 1999, was shadowed by the prospect of insolvency. With the city burdened by $20 billion of unfunded pension debts, Emanuel has scant opportunity to celebrate.

“In an era of hard choices, I can’t promise that everybody will be pleased with every decision,” Emanuel, his voice hoarse, told supporters Tuesday night at a plumbers union hall. “But the challenges we face, we face together as one community, one city, one voice where every voice counts.”

Although the specter of fiscal ruin hangs over the city, the candidates offered few specificsduring the six-week campaign about how they’d resolve the crisis. Under state law, Chicago is required to pay $600 million next year into pension funds. The source of that payment is unknown.

Emanuel, 55, and Garcia each endorsed broadening the sales tax to include some services, and the incumbent endorsed the construction of a casino with revenue dedicated to pension debts. Both those plans, though, would require legislative approval. Neither man committed to raising property taxes, the levy the city directly controls.

Garcia used his concession speech to laud Chicago as a city that nurtures immigrant children like him and said attracting new residents was the key to overcoming its challenges.

“Yes, we have a debt crisis and a pension crisis. But that’s because of the one thing: We have a growth crisis,” he said, noting Chicago’s decline in population, which fell 6.9 percent to 2.7 million from 2000 to 2010. “We can’t tax our way out of this crisis. We can’t keep borrowing our way out of this crisis.”

Some investors in the $3.5 trillion municipal market now treat Chicago’s debt as speculative grade. The burden weighing down the city totals $32.6 billion when liabilities of its park district, water agency and school board are included.

The school budget is short $1 billion.  The operating deficit is at more than $3 billion.  And no one knows where Chicago is going to get $600 million this year – and twice that amount next year – to pay into a public pension system with $20 billion in unfunded liabilities.

Raising property taxes is going to become a reality.  But the revenue generated won't even solve the immediate problems.  The decline in population has been made worse by the flight of businesses to friendlier tax climes, thus reducing the city's tax base even further.  Raising property taxes will accelerate that process, and soon, the city could be caught in a Detroit-like death spiral, where cash to pay for basic services like police, firefighters, and garbage pickup isn't available.

When some CTA bus drivers are making as much as $83,000 a year, something is terribly wrong with the system.  Few believe that Emanuel has the political skills to guide the city through these danger shoals and bring it safely to the other side.  But the reality is, there is no alternative, and the chances that a federal bailout of the city is in the offing rise by the month.