Gapers Block published from April 22, 2003 to Jan. 1, 2016. The site will remain up in archive form. Please visit Third Coast Review, a new site by several GB alumni. ✶ Thank you for your readership and contributions. ✶
A downstate lawsuit filed shortly before Thanksgiving sums up what's wrong with Illinois government right now. Hitting local radar via a press release suggesting an action by SEIU Healthcare, the request for a temporary restraining order against the State was brought by more than a dozen public employee unions, including lead plaintiff AFSCME Council 31, nurses, and police officers, over the State of Illinois's failure to pay for health insurance for state employees.
The suit may have been overlooked here due to more sensational events, or because lawsuits against the State over its fiscal mess are no longer news; half a dozen have been filed, and court orders are part of how Illinois keeps spending money despite no budget in place. However, unusual in this case is the judge's language used in granting a TRO. In his order, Judge LeChien wrote on Nov. 25 that the inability of "the Governor and the General Assembly to perform duties makes essential services and assistance headed for a chaotic bust." The court charged both the executive and legislative branches of Illinois government with adopting a "fiddling while Rome burns posture" that forces the courts to act.
A lot of taxes are being proposed — sales taxes, property taxes, income taxes — as the state's budget stalemate grinds on and the city's financial crisis metastasizes.
But the powers that be have taken one tax off the table, and it's one that would target the very wealthy — the only ones benefiting from economic growth in recent decades: a financial transaction tax.
For some who have worked for the city their entire lives, the news that the city's credit rating has been lowered yet again hits close to home. They know that in the discourse around balancing the budget, slashing pensions inevitably takes front and center. Yet neither politicians nor the dominant media seem to call into question whether it is the retirements of hardworking people that should be one of the first budget items to get sacrificed when we fall on hard times.
Moody's Investor Service downgraded Chicago's bond credit rating last week to Baa1, giving Chicago the second lowest credit rating of any major city in the country. Detroit has the lowest. This single level downgrade was made all the harsher because it followed an unexpected triple bond level downgrade in 2013. Now, Chicago's bond rating is classified as just three levels above a junk bond.
Cook County Clerk David Orr, in a half-hour July 12 press conference releasing his office's required 2012 tax increment financing ("TIF") revenue report, highlighted the enormous amount of revenue siphoned from Chicago and Cook County taxpayers into TIF districts, and called for early declaration of surpluses within Chicago to fund needs like schools. Observing that billions of dollars have flowed into the now-over-500 districts, Orr released a video (embedded below) on the Clerk's website to help taxpayers grasp how the little-understood mechanisms work.
The video's tone suggests a school science filmstrip, kind of quiet in view of the alarming numbers, but this is government, not advocacy. At 2:41, over soothing guitar arpeggios, a pleasant female narrator says, "In most cases, taxpayers outside the TIFs pay more to generate the revenue requested by [their own] taxing districts." TIF critics such as the Reader's Ben Joravsky have hammered relentlessly on this, how TIFs hike your taxes, but it's easy to miss in the video unless you pause.
Orr's press conference was both longer and stronger than the official video. Noting that Chicago's collective TIF districts pull in half as many tax dollars as the City itself, Orr expressed concern that so "many taxpayer dollars are diverted into the Loop," charged that "not enough is being done in the neighborhoods," and that there has been little transparency as to how $5.5 billion in TIF dollars has been spent. He urged Mayor Emanuel and the City Council to declare a TIF surplus this year "as soon as possible" for the benefit of Chicago Public Schools, asking, "How do you explain to the kids in many of these schools that gym, music and art classes are cancelled while profitable businesses downtown ... received 25, 30, 40, 50 million?" Good question.
While Orr's remarks centered on Chicago, they echoed the same requests made by pressed suburban taxpayers for more transparency and accountability, better metrics, declarations of surpluses, and early retirement of no-longer-needed districts.
Overall, the video capably illustrates TIF workings and numbers, whose magnitude needs time to sink in, and Orr deserves credit for shining further light on what is now a gargantuan but opaque component of local governmental taxing and spending.
This morning a coalition of organizations opposed to Mayor Emanuel's proposed Infrastructure Trust Fund urged City Council Finance Committee members to vote on the proposal, calling it "the Great Chicago Sell-Off."
The idea of an infrastructure trust is to avoid funding needed and desirous infrastructure projects--such as public transit upkeep and expansion, building modernization, etc.--with debt. So instead of issuing general obligation bonds, attractive to borrowers because they're backed by property and other taxes the city has unlimited power to raise, the city would get private capital from wealth funds, banks, and other institutions, on the idea that the project would be administered by and in part controlled by that institutions, which would earn a return on its investment over the term of the interest.
So as a hypothetical example, the City wants to build a bus rapid transit line up and down Milwaukee Avenue. Rather than issue bonds that put the city further in debt, members of the Infrastructure Trust like, Macquarie and JP Morgan, put up $500 million to widen Milwaukee Avenue, put in the appropriate curbs, compensate the parking meter consortium for the lost spaces, buy the buses, and put in street signs and benches. In return, Trust members would be given a property interest in the BRT for a period of say 50 years, with the revenue generated either being divvied or going directly to them, either in full for the period of the agreement or up to a pre-defined ceiling that allows a nice return.
In the abstract, there's no real problem with this. We as a city don't have a lot of options. Illinois is broke beyond fixing and the federal government lost its appetite for funding major urban infrastructure projects generations ago. The general atmosphere of anti-tax hysteria makes general obligations a safe investment in theory but risky in practice. If these private institutions are willing to put up the money to develop the city's infrastructure for a similar or even slightly higher rate of return that the city would pay to bond holders, then there is no real loss to the city.
The abstract privatization isn't the problem, of course. It's the reality of it. Consider the hypothetical. In that hypothetical, the Infrastructure Trust would need to reimburse another privatizer, the consortium that bought the parking meter concession, for loss of spaces. This is a considerable cost over the life of a project. The city's agreement with that consortium tied our hands when it comes to planning our own city.
Consider in turn this story about the privatized downtown parking garages. In that agreement, the City promised not to permit competing parking garages to open up nearby. From the investor's point of view, this makes sense; they want a safe investment. From the public's point of view, it's an outrage. First of all, it's hard to see how such a promise serves the public interest, since it reduces competition for parking and thus protects a high-priced monopoly. But also, it seems like an outrageous delegation of the city's general legislative powers.
Privatization is supposed to make things more "efficient" by introducing "market-signals." In reality, however, privatization of public assets usually means binding the city's legislature--meaning us, the people--to long-term agreements that bind our ability to plan and design our city as we please, and keep us indebted to private interests, many of them with no real interest in making Chicago a better place.
A similar problem popped up with the parking meter concessionaire, too as a result of disability parking and its supposed deleterious effect on their bottom line. These agreements also tend to include arbitration agreements that are costly and keep "the City" (i.e., you and I) from going to Court over disagreements in an adversarial system that lets sunlight into operations.
Concessionaires are looking for safe, long-term investments. The more city assets they de facto control, the safer their investment, because the density of privately-controlled city infrastructure cuts into revenue generating opportunities for the city (which in turn makes it more expensive to issue bonds).
The safest investment are those that are most amenable to making a profit--more "monetizable" if you will. This inverts the rationale of infrastructure building. It's why Chicago has such a maddeningly redundant train system. The original lines were privately built, operating under charters granted by the City Council. The train operators knew the best and quickest way to make their money back was to have their train line touch the central business district, thus the creation of the Loop. But the whole point of infrastructure is not to maximize existing revenue opportunities, but to build up and out--to create new ones, even where there is risk, serving the underserved, and experimenting with new forms of infrastructure.
From a planning perspective, the concern with an Infrastructure Trust is that it privatizes our infrastructure decision-making. Rather than building and developing for the common good and to serve the underserved, we will be building and developing only where it is safe to do so, for the smallest cost for maximum return. And where such a decision may conflict with grander, more expensive, and potentially less lucrative plans, the binding, long-term agreements wins out.
As the story on the Monroe Garages indicates, these agreements are also often counter-productive. They lock the city into protecting non-competitive behavior for extremely long terms, with penalties that make forcing change or cancelling agreements costly enough to inhibit public innovation. It makes no sense for the city to agree not to permit competing parking garages, just as it made no sense for the city to guarantee the existence of parking spaces--and think how this inherently impacts the city's ability to move towards a more transit-friendly, bike-friendly planning posture. Consistent privatizing of assets creates a hodge-podge of potentially conflicting property interests owned by outside parties that keeps the city--us--from planning for a future that could, and should, look quite different from today.
From a democracy perspective, the Trust presents the twin problems accountability and transparency. Aldermen had to fight to get the Mayor to include a legislator on the body that makes decision--presumably an alderman he appoints--which does not augur well for the accountability and responsiveness of this body. It creates another appointed body immune to public pressure that further concentrates power in the person of the Mayor.
If we want a legislature that is independent of the Mayor, it'd be nice if it had some power distinct from his. With such limitless control over the Board of Education, the CTA, the CHA, and all the city's planning bodies, much of the reason the City Council can't cultivate any independence is that it has very little operational authority.
Asset privatization will create some jobs, it will modernize or improve some public assets, but it will not do so in a way that is publicly-driven, held well to account or even necessarily money-saving in a long-term sense. It isn't an inherently bad idea, particularly given the absence of lots of other options.
The problem in other words isn't privatization per se, it's privatization per quod.
The "99% Ciizen Tax Enforcers" now have a following with their third consecutive day of delivering tax bills to some of the biggest corporate tax dodgers.
Dozens of protesters chanted and marched outside of the Bank of America building pushing the local branch to close for nearly an hour. A few customers tried to enter but did not blame the protesters. A couple people even walked away saying they would close their accounts.
Once again the enforcers wore black suits, sunglasses, and carried briefcases. Security prevented them from presenting the $1.9 billion tax bill to a bank representative. A call by security to headquarters upstairs resulted in the enforcers waiting 20 minutes then told it would be another 20-30 minutes. They would also have to wait outside.
The message was clear. No one was coming. "Several years ago I worked as a foreclosure counselor, said Elizabeth Parisan a researcher with Stand Up! Chicago. "I remember Bank of America being one of the worst saying they would be right with you and then hanging up."
The "99% Citizen Tax Enforcers" visited Evanston yesterday afternoon to present Chicago Mercantile Exchange Chairman Emeritus Leo Melamed with a tax bill and message. The group hoped Melamed would take it to the current chair, Terrence Duffy.
Melamed was a featured speaker on the Northwestern campus and invited to the ribbon-cutting ceremony of a new "trading room" in the Business Institutions Program. The enforcers did not have the opportunity to see Melamed but the bill did successfully enter the building as someone inside grabbed it in order to close the door.
The exchange became the group's second target this week and the first local company. CME and Duffy came under fire after posting $2 billion in profits the prior year yet asking for tax breaks from the state. Actually, it was not really an ask but more so an extortion as Duffy said he would move the company to Indiana if the Illinois legislature did not pass the tax breaks totally about $1 billion over the next decade.
The enforcers once again wore their black suits and carried briefcases while an 8-foot tall puppet of Terrence Duffy followed behind.
Stand Up! Chicago's constant targeting of the Chicago Mercantile Exchange has been a thorn in the company's side. The organization joined Occupy Chicago and other organizations in the past months protesting outside of the exchange. Craig Donohue, CEO of CME, went to an energy trading industry conference in Houston last Friday where local activists stood in for Stand Up! Chicago.
Protesters greeted him outside of Melcher Hall on the University of Houston campus. Donohue was there to deliver a presentation but before he could really start his speech, protesters interrupted him with a mic check.
"Mr. Donohue, as you stand here today, preparing to give the 1% tips on how to get even richer, you are 1,000 miles away from the struggling families of Chicago and Illinois and they are further from your thoughts, even though CME will line its pockets with over 1 billion of their tax dollars over the next ten years."
"You were only able to get that money by making empty threats to relocate. The 99% of Chicago and Illinois can't afford to travel here so we are here to ask you a question on their behalf and on behalf of all 99% families everywhere.
"What will working families get for their billion dollar investment?"
Security escorted the four protesters out of the room before they could finish but the message was clear. Every day people are not happy with the tactics of the rich and powerful.
Just last year, Donohue and CME Chair Terrence Duffy threatened to leave Chicago over their tax rate. The incredibly profitable company, two billion in 2011, demanded tax breaks that will total more than a billion dollars over the next decade. The Illinios state legislature obliged.
Activism such as this will continue over the coming months. Whether it will have a positive impact on the 99 percent is not yet known. It does create a discussion on this issue and frames it in a manner that benefits working class Americans.
Part of the recently passed "Tax Break Bill," or SB 397, includes the Live Theater Production Tax Credit Act. This act will give any for-profit production that does a long run or a pre-Broadway run in Illinois up to $2 million in tax credits for one fiscal year.
The only other state that has a similar tax credit for theatrical productions is Louisiana, although New York City also has a tax exemptions for theatrical productions.
This week Governor Quinn signed into law special tax incentives for the insanely profitable Chicago Mercantile Exchange and the poorly run Sears. The Associated Press offers a sort-of warning: that scores of companies have tax "packages" that are to expire over the next few years. If you are a shareholder in any of those companies, would you expect anything less than threats to relocate from your CEO? And if you're a government affairs person representing a business in Springfield, what would your attitude be towards a legislator who voted for this tax package but won't put forward one for you?
I never bought for a minute that CME and Sears were actually going to leave. Nor do I suspect that Mayor Emanuel, who helped engineer the cuts for CME, or most of the legislators who voted for the cuts, actually bought the threats either. But the threat to leave is a formality that gives cover to politicians who want to hand their political supporters a nice plum but want to obscure the quid pro quo. Seeing now that the tactic works, we should fully expect a tidal wave of employers demanding incentives to stay in the state.
You know, if we cut our tax rates to 0%, we'll get all the businesses. All the businesses!
The good news, as far as it goes, is that CME at least is in a pretty unique sectors and dominates its market in the state, so there is a superficially rational argument for why they should receive breaks but nobody else should. But as the Daily Herald reports, Community Unit School District 300 is going to be feeling some hurt for a generation thanks to the cut for Sears. If legislators are willing to make trades like that, it isn't clear where or why they'll draw a line.
It's now been a week since a small group of Chicagoans descended on the Federal Reserve (by way of a brief stint at the Willis — neé Sears — Tower) to stand in solidarity with the Occupy Wall Street movement.
Rahm Emanuel's campaign released a plan today to soften regressive taxes--particularly the sales tax--and compensate for the lost revenue by closing loopholes on "luxury" taxes paid primarily by people in upper-income tax brackets:
In comments he made before meeting with Crain's editorial board, Mr. Emanuel said his intention is to make the tax system simpler and less onerous, while also pulling in a bit more cash for the city.
"I believe if you close loopholes and simplify things, you can be more progressive and pull in more revenue," he said. "That's good for everybody."
Under one part of Mr. Emanuel's plan, he would ask the Legislature to extend the current sales tax that applies only to goods to cover services mostly used by upper-income groups -- items like private club memberships, pet grooming, limo rentals, tanning parlors and interior design.
Some liberals are unhappy with the deal President Obama cut the GOP on the Bush tax cuts. Today, in a press release, Rep. Jesse Jackson Jr. (D-02) showed that he is one of those disgruntled Democrats:
"I respect President Obama and understand the difficult position he is in. However, Democrats must oppose this tax cut compromise or risk being in a permanent minority. We'll keep getting 'shellacked.' We must stick to our core principles and fight Republican efforts to enrich the rich. Apparently they were only serious about cutting the deficit when it was on the backs of the unemployed and children who need food stamps. We capitulated too much in the majority, and now we're capitulating as if we're already in the minority. We're acting like inexperienced poker players who fold with a winning hand."
Staying true to his pre-election stance, Mark Kirk this morning, in practically his first official act as Illinois Senator, joined a solid bloc of Republicans and a handful of primarily blue-dog Democrats in voting against cloture of debate on a Senate bill to extend tax cuts to American families making less than $250,000 a year. Kirk then also voted against a softened version which would have extended cuts to those making $1 million or less a year. Both votes garnered 53-vote majorities, but under the "faux filibuster" rules of the Senate, a majority vote was insufficient to move the measures forward.
It's important, as Illinoisans and Americans look at these votes, to understand the background and context. Republicans are attempting to frame the Democratic move as a "tax increase" but that is -- how to say? -- well, I'll call it a lie. In order to understand that, let's review how we got here.
The perpetual election cycle is a cause for consternation on many fronts. While news today that Cook County property tax bills will not be delivered to taxpayers till sometime near Thanksgiving isn't really all that surprising, the consequences of this stalling tactic have far greater reach and implications than our elected officials intend. Cook County Assessor candidate and current tax appeals board member Joseph Berrios can point the finger at outgoing Assessor James Houlihan all he wants, saying Houlihan's failure to assess property in a timely fashion has in turn pushed back the appeals schedule, but engaging in this futile blame game is too transparently cynical to work to anybody's advantage. Perhaps Berrios can adopt the campaign slogan: "If nobody notices, nobody gets hurt."
Except, in reality, all of us do.
Without property tax bills, homeowners obviously cannot pay their property taxes. Without the funds from these taxes arriving into municipality's coffers (coupled with the permanent vacation of due monies from Springfield) and then being applied to pay for essential services, governing bodies will have to operate from a dearth of funds to provide any services at all. To fill that hole, the cities and towns will have to look towards borrowing money just to be able to keep the lights on. And of course, borrowing will eventually cost extra money. It's not too difficult of an equation to figure out where taxing bodies will look towards to get that extra money in servicing this new debt.
It seems as if there's a systemic condition throughout Cook County that plagues it citizens to either not notice, not care, or remain too numb to machinations such as these. But it is exactly these type of small procedural missteps that make it so difficult to enact long-lasting and meaningful reform. It's these type of blatant and short-sighted maneuvers that initially make privatization of public services look attractive (as governing bodies force the hand of other bodies who effectively are unable to follow through on their essential functions), but then also make privatization something to vilify, when the same cycles repeat itself, and there's either a raid on reserve funds or nothing else to sell.
Cook County- its government, its citizenry, all of us- needs to start sweating the small stuff.
An Op-Ed Submitted by Rev. Dr. Clare Butterfield and Herman Brewer
Some experts and policymakers believe our country could do more to prevent problems before they occur. In particular, instead of postponing our response to the nation's budget problems, we should use our resources today to prevent them from becoming worse. New reports show that current patterns in U.S. spending and revenue can't be continued in the long run. Decisions must be made about the goals we want our country to meet and how we raise the money to meet them; there are steps we can take today to prevent fiscal problems from becoming bigger and more costly to fix. The solutions we come up with will be important to all Americans.
Probably the most difficult type of organizing is what's known as "coalition politics", pulling together existing organizations to move a grassroots program. The conflicting ideologies and tactics of different groups, differentials in resources, and often hard to manage personalities make coalition politics immensely frustrating. This makes the continued existence--and, in fact, progress--of the Responsible Budget Coalition particularly surprising.
It is also eye-opening. There is often a lazy false equivalence between left and right "special interest groups" when it comes to public spending; anti-tax zealots like to stoke resentment of "public employee unions" as a means to pressure legislators to slash public spending. Take a look at the RBC's roster of organizations and consider if these "special interests" are equivalent to large profit seeking firms that fund the "cut to the bone" think tanks and political funds:
Paying increased costs for employee pensions, health care for the poor and debt service will eat up virtually all new money the state can expect to bring in over the next three years, Comptroller Dan Hynes said Monday.
The state faces "a serious crisis" by 2010 unless lawmakers take a long-term view of state finances, Hynes told a business group in Chicago.
But this is a problem that has been brewing for years and years. The current economic situation may have hastened it, but this day has been coming for a long time and a large number of different issues have contributed to it.
UIC Students, Faculty and Staff Rally Against Budget Cuts.
Several hundred students, faculty and staff rallied at the University of Illinois Chicago campus on March 4th, to demand an end to budget cuts that target the poor. They rallied in the Quad, before marching around campus and marching to University Hall where the administrative offices for the school are. It was part of a national day of action to defend public education.
SEIU Local 73 chief Steward Joe Iosbaker led the crowd in chants, "They Say Furlough Day, We Say No Way! They Say Cut Back, We Say Fight Back!" and the sarcastic, "They Say Fee Hike, We Say, Yea, Right!"
At University Hall SEIU members served Soup to passer-by's "to prepare us for what we'll be eating if the budget cuts go through." They then sang a parody of Gnarls Barkley's Crazy, "Is UIC crazy? They must be crazy,to think that they can defeat, local 73."
Fees and consumption taxes like the sales tax are essentially regressive. While those with more money spend more (and thus pay a larger dollar amount in sales taxes), the tax as a transaction is the same no matter how much of a proportion of your wealth it takes away. And fees are the same for everybody. The reliance of local governments on these taxes, and the concurrent shifting of federal tax dollars from cities to states, leaves regressive taxes, disproportionately impacting the working class, as the bedrock of local government funding.
Liquor isn't the only commodity taxed at higher rates from five years ago. In that time, various local governments have imposed a variety of higher taxes, fees and fines, with many increases topping 100 percent, a Chicago Sun-Times review found.
Moreover, most of the increases far outpaced the rate of inflation over the same period: 14.4 percent.
For most, there's no way to dodge these extra expenses. Stop driving to avoid the parking tax and meter hikes? You'll still have to pay more to ride the bus or L.
The sales tax for Chicagoans on everything but groceries went up by more than 17 percent, to 10.25 percent.
It's now been 11 days since the carbon monoxide leak which sent over 80 Prussing Elementary School students and staff to the hospital. While officials from Chicago Public Schools have partially answered some questions, and CPS CEO Forrest Claypool has informed that he will be visiting the school to field more questions on Nov. 16, many parents remain irate at the CPS response to date. More...
It's not surprising that some of Mayor Emanuel's sympathizers and supporters are confusing people's substantive disputes with the mayor as the effect of poor marketing on his part. It's exactly this insular worldview that has gotten the mayor in hot... More...
By Curtis Black
For some who have worked for the city their entire lives, the news that the city's credit rating has been lowered yet again hits close to home. They know that in the discourse around balancing the budget, slashing pensions inevitably takes front and center. Yet neither politicians nor the dominant media seem to call into question whether it is the retirements of hardworking people that should be one of the first budget items to get sacrificed when we fall on hard times. 
