This winter, Chicago will need to dig out of a number of major challenges, including policing reform, city pensions and a storm of shootings in our poorest neighborhoods. But the blizzard that threatens to overtake them all is last week’s failed Chicago Public Schools $875 million bond issue.

The concepts behind it are dry, but CPS’ giant problem with bond markets has the potential to permanently damage the school system, halt a burgeoning white, upper-middle class student body, decimate property values in some of Chicago’s hottest neighborhoods and possibly harm the city’s residential property tax base.

I’m not exaggerating.

CPS’ financial problems have been building for some time. It hasn’t had a balanced budget in four years. Last year, it used 13 months of revenue to pay for 12 months of operations. This year, it passed a budget with a $480 million gap, expecting the state legislature to fill it. But as we all know, Republican Gov. Bruce Rauner has refused to support a CPS bailout, and the Democratic-controlled state legislature lacks the votes to override Rauner’s veto.

So the schools have been borrowing. There’s two kinds of debt: Short-term, which comes from banks and has high interest rates, likely in the double digits. And long-term, which comes in the form of bonds, debt taken on by investors in an open market.

Last December, CPS Vice President of Finance Ron DeNard reported the schools had already incurred $1.065 billion in short-term debt on an overall annual budget of $5.692 billion. This sort of short-term borrowing for CPS–especially without a serious revenue solution on the horizon publicly–is unprecedented.

So then we get to last Wednesday’s $875 million bond offering. The offering, which was part of a regular borrowing by the school system–they’re carrying over $6 billion in bonds–failed, just a week after investors heard talk from Gov. Bruce Rauner and Springfield Republicans that they want a state takeover of CPS and to allow the district to declare bankruptcy.

Nobody wants to lend money to an organization that might go bankrupt.

Chicago CFO Carole Brown and CPS CEO Forrest Claypool ran to the microphones Thursday to say that pulling a bond issue from the market at the last minute is “common”. And that Gov. Rauner’s declarations had nothing to do with the bond offering. But we reported analysts saying otherwise. So did Bloomberg. And so did the trade newsletter Bond Buyer.

Last week Claypool said that the school system will, “definitely go to market before next week, early next week at the latest,” but since the bonds are already on the market day-to-day (that means they’re actively looking for investors and trying to figure out how much buyers will pay, and how much they’ll buy), that’s a fairly squishy statement. The key question is, when does CPS expect to close the sale, but saying so would tip their hand to the market too much.

After such a public failure, and little support from the Governor, bond investors are spooked, and CPS’ ability to borrow is on the line. Since its property taxes are capped and Springfield won’t bail it out, without the ability to borrow, CPS could be quickly sent into a death spiral.

Here’s why: While the vast majority of Chicago’s public school students are lower income and minority, some of the city’s trendiest, largely white neighborhoods are deeply linked to CPS. Ravenswood, North Center, Lincoln Square, Roscoe Village, West Lakeview, West Town and Wicker Park have some of the city’s best neighborhood elementary schools, and their high schools are improving, too. Many of those schools have improved because of the personal investment area parents have made, including through many “friends of” fundraising organizations. Gradually, the schools in these areas have become high performing, excellent education options for families.

As a parent for one of those schools, I can attest to the changes. But for four years I also reported for a neighborhood publication covering many of those neighborhoods, and I heard endless stories about school crowding because of their popularity. Realtors were selling homes purely because of the neighborhood school and a burgeoning pride in public education. Ald. Ameya Pawar (47) has made neighborhood school improvement his centerpiece, and recently his neighboring colleagues, Ald. Pat O’Connor (40) and Ald. Tom Tunney (44), have joined him to push for more resources to the area neighborhood high schools, Lakeview and Amundsen.

The local interest in public schools is not altruistic. It’s because housing costs east of Western Ave. and south of Foster Ave. are incredibly expensive. Single family homes are rarely found for less than $600,000, and $1 million-plus is becoming the norm. After paying the mortgage, few families–even ones able to afford a million dollar house–are able to afford the $15,000 per year more per child many private schools cost.

As a result, many of these North Side white parents are living in Chicago, rather than the suburbs, because of their schools.

If the quality of CPS schools begins to decline noticeably, and already many of even the “best” schools have 25-28 kids in a classroom with little special education support, then there’s a danger well-to-do parents will pick up and move to the suburbs. Because they can.

What then happens to these “hot” neighborhoods? Some will stay and find a private school, but many will move out. We should expect to see moving vans filling the streets, but an inexorable decline seems likely. Despite the housing downturn, Chicago’s North Side neighborhoods south of Foster and east of Western have bounced back the fastest and highest in terms of property values.

If CPS can’t get back into the bond markets and fix its finances, much of that is in jeopardy.