Daley to put a bandage on 2011 budget

Deeper cuts, pension shortage to fall to his successor, sources say

Friday, September 24, 2010

Mayor Daley has said he intends to be a different kind of lame-duck mayor, who tackles the tough issues to take them off his successor's full plate.

That apparently does not apply to the city's record, $654.7 million shortfall.

Sources said the mayor will use a mix of tax-increment-financing (TIF) funds, parking meter and Chicago Skyway reserves, budget cuts and debt refinancing to declare his final budget balanced without raising taxes, fines or fees.

He'll also tap $32 million worth of unclaimed property tax relief bankrolled by parking meter proceeds.

The short-term fix means the worst budget crisis in Chicago history -- and the problem of bailing out four city employee pension funds that will run out of money by 2030 -- will be punted to Daley's successor.

"We cannot afford the level of government the current budget provides. If the means of balancing the budget is to draw down reserves and rely on other one-time revenue sources, the problem will grow worse and create enormous challenges for the next mayor," said Civic Federation President Laurence Msall.

Daley wants to consolidate six departments and privatize curbside recycling, animal care, fleet management and lakefront festivals, including Taste of Chicago.

But, Msall said that's not enough. Chicago needs a "significant restructuring" that downsizes the Departments of Police and Streets and Sanitation.

"That does not mean you have to reduce the number of police officers on the street. But, you have to significantly reduce the number of non-responding administrators and support staff and their related benefits," Msall said.

"That means not only reducing the number of garbage men on each truck, but also consolidating the number of ward yards."

Before leaving for China and Korea, Daley said he was determined to keep his hands out of taxpayers pockets.

"You cannot increase fees or taxes. ... People do not have money. They have some money left in one pocket. They have no money in the other pocket. The other pocket used to be money for their pensions, money from their real estate valuation, and that has disappeared, unfortunately," he said.

While the mayor will claim he's freezing taxes, fines and fees, that's not entirely true.

The parking meter deal allows a private company to raise rates by an average of 20 percent next year, 17 percent in 2012 and 14 percent in 2013. After that, annual increases will be tied to the rate of inflation.

As of Dec. 31, the city had just $180 million left from the 75-year, $1.15 billion deal that privatized Chicago parking meters. That figure has since climbed to $240 million, thanks to $57 million in budget cuts and a $3 million increase in city revenues.

There was $550 million left from the $1.83 billion deal that privatized the Chicago Skyway for 99 years.

Daley is expected to wipe out much, if not all of the parking meter proceeds, but leave much of the Skyway fund intact to avoid a second drop in the bond rating that determines city borrowing costs.

Chicago's 159 tax-increment financing districts have a collective balance of $1.2 billion, with $700 million of that money uncommitted.

If the mayor took all of it, the city would get just 23 percent or $161 million, with the rest distributed to schools and other local taxing districts. But, a City Council emboldened by Daley's lame-duck status will have the final say.

"Some of these aldermen are very jealous about their TIF money," Finance Committee Chairman Edward M. Burke (14th) warned Thursday.

Asked if aldermen would be willing to give up their piggybanks used for everything from developer subsidies to construction of roads, schools, libraries, police and fire stations, Burke said, "Not easily."

Daley's $6.1 billion 2010 budget was precariously balanced by draining the parking meter reserves and ordering city employees to take the equivalent of 24 annual unpaid furlough days, a nine percent pay cut.

That package of concessions expires June 30, 2011, six weeks after the new mayor is sworn in.

Reduced employee benefits, higher worker contributions and "new revenue" from taxpayers will be needed to bail out four pension funds with assets to cover just 42 percent of future liabilities.

That's another hot potato expected to land in the new mayor's lap.

Daley is scheduled to unveil his final budget next month. It must pass the City Council by Dec. 31.