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Budget Wed Sep 15 2010

Daley's Last Budget

Last week's public budget hearings took on a bit of a different hue, what with the knowledge that these would be the last of the Daley Era. At the brand new Westinghouse High School in Garfield Park on Friday evening, Mayor Daley brought out 26 members of his cabinet to sit and listen to the public-at-large voice their concerns in regards to the upcoming budget for 2011. While the budget may have been the reason for the public meetings, the forum actually rarely addressed the meat of the budget itself, and instead provided different individuals and interest blocs a chance to present their grievances directly to the powers that be. In reality, the meetings are simply a larger version of an open night at the local Alderman's office, but with a grander spotlight and a strangely off-putting feel that the whole event might burst into a populist pep rally. (No doubt contributed to by the shiny newness of Westinghouse's gymnasium where the hearings took place.)

The majority of comments were reserved for individual appeals on personal issues, of which Daley and Co. did a fine job of showing how bureaucracy in numbers can be a great mitigator to address such matters, even if results are stunted. Nearly every City Department was in full display at the hearings, and not just being represented in proxy by one of Daley's cabinet chiefs, but situated with full information booths and staffers to provide guidance. Certain speakers vented about highly specific issues- a particular vacant lot, for example- and after their allotted time to speak was up, a handler or two would whisk them away from the microphone, lead them to the back of the gymnasium and seemingly begin the work of at least giving the appearance of starting the fixing process. In all, the hearings are function of good government, in allowing people to express the daily issues they confront as Chicago citizens that obviously have an emotional effect upon them. Issues are emotional. Budgets, however, are not, and it is the job of the budget to harness the emotionality of issues into concrete plans to try and remedy things as best as possible.

That will be difficult to do in 2011. The upcoming year's budget is no surprise in its direness. The City is projecting a $654.7 million shortfall in the Corporate (i.e., Operating) Fund, and there are very few resources available to cut further or reserves to bring it full. Even with a workforce brought down from 39,327 positions in 2001 to 33,156 this year, the City notes that more than 80% of the Corporate Fund is allocated towards wages and work benefits. If City coffers were overflowing, this is still an untenable situation if Chicago intends to maintain a certain level of public services and have capacity to grow and spearhead new plans. In attempts to do exactly this, the City has engaged in two processes that, when budgetary matters were actually focused upon by citizen speakers, were highlighted over and over again: privatization and
TIF Districts.

The jury's still out on privatization, especially after the bungling of last year's parking meter lease with Morgan Stanley and Chicago Parking Meters, LLC. If an item doesn't fall under the inherent responsibilities of what the civic body is supposed to provide its public though- a city needs to provide a police force, an airport not so much- and the City negotiates a reasonable deal in good faith with ample time for public vetting, there's no reason not to pursue privatization deals. The problem with the parking meter lease was and is not the principle of the idea itself. The problems of the deal were mainly the manner in which it was (not) presented to the public and the City Council, the fact that the actual contract between the City of Chicago and Chicago Parking Meters LLC was slanted in CPM's favor, and most tellingly, the implementation of the new system was atrocious. Daley's parking meter deal should serve as a cautionary tale in making sure future privatizing efforts are done correctly and openly, but it should not serve to prevent the city from evaluating and taking advantage of future privatization deals for the City's benefit.

Recently, Daley has talked about privatizing special events, such as the Taste of Chicago. Looking at the particulars of the budget, it is easy to see why he would suggest such a move. First off, special events are not an inherent government function and hence, could easily be outsourced. As the Preliminary Budget Estimate states, "Special Events Fund 356" will begin 2011 with an unreserved fund balance of nearly negative $5.7 million. Privatization could help bring this particular fund into the black, and most likely would provide a lump-sum windfall, all the while eliminating the city's liability for future costs during the duration of contract. The PBE also states however that expected revenues from special events in 2011 could bring in approximately $16.8 million. Playing catch-up to reduce hanging debts will minimize the final tally the City actually takes in to the official estimate of $11.2mil. Before any move towards selling off the Taste of Chicago or other City-run fests occur, the negotiations must ensure that any deal pays out well more than the annual expected take. When looking at the numbers concretely, it's appealing to find a seemingly easy way to reconcile the bleeding years together, but privatization cannot be used as a way to shore up balance sheets.

If privatization draws cries, TIFs draw howls. While Tax-Increment-Financing districts tend to be derided, they can be great vehicles of investment in neighborhoods. At their best, TIFs can quarterback developments and solidify a base in an determined area, that can in turn spur other projects. For all the unequal success and drama surrounding TIFs, their use under Daley have been used to great effect in certain areas. The problem with TIFs are many-fold though, in that they are not a simple fix for all areas, and that many of the same missteps that plague Chicago's record with privatization plague TIFs as well: their implementation, the lack of transparency, and the over-reliance on them as vehicles of growth. Especially in light of the paucity of money in the Corporate Fund, money from the approximately $1.2 billion sitting in TIFs should be used to balance some portion of the budget. That is a common sense move that needs to happen. Development won't be spurred no matter what incentives are encouraged from TIFs if the City as a whole is languishing. It is wiser to keep the city on as even-footing as possible during these trying times to make sure it is still an attractive place for investment at all.

Office of Budget and Management Director Eugene Munin seems to implicitly make the case that unless the City has a supply of reserve funds to fall on in the event of a shortfall, then logically Chicago needs to privatize more assets. The bottom of page 5 of the PBE reads "The most significant decline will manifest in proceeds and transfers due to the loss of non-recurring revenue streams that were applied in prior years." Read between the lines and that sounds like a rallying cry for privatization, and yet for all the wrong reasons. Privatization can be a civic good, but if used as a method to simply clean up the balance sheet, it never will. That's an inverted approach which will only lead to downgraded bond ratings and increased costs of borrowing. Similarly, TIFs can be useful development tools, but with a budget bathed in red ink, it only makes sense to transfer at least some of the available balance into the Corporate Fund. While doing so, it would be nice to see some light shined on them and to see the Neighborhood Capital Budget Group become a household name. Daley's last signature on the 2011 budget should at the very least be reflective of these measures.

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