Daley's last budget dips into reserves, cuts 234 employees

Wednesday, October 13, 2010

Mayor Richard Daley this morning is proposing a $6.1 billion
budget for next year, up nearly $49 million from this year. According to a series of placards set up in a conference room behind City Council chambers, the mayor's final budget proposal lowers the number of city employees by 234, to a total of 32,922.

Daley, who is not running for re-election, will dip into the city's reserves to balance the budget without raising taxes or fees, according to aldermen who have been briefed on the plan.

Daley said he will have non-union employees take dozens of unpaid days off again this year. That equals a pay cut of 9.2 percent, he said.

In all, Daley plans to take use $273 million from the proceeds of long-term leases of the Chicago Skyway and parking meter system to balance the budget.

At the end of next year, there will only be $500 million left in Skyway proceeds and, significantly, only $77 million left from the 75-year lease of the parking meters. The parking meters were leased two years ago for an upfront payment for $1.15 billion, and the Skyway was leased in 2004 for $1.82 billion.

By declaring $180 million in TIF funds as surplus, Chicago Public Schools will get $90 million. The city will get $38 million, and the rest will go to other local governments.

He also proposed asking Springfield to change the pension system for new police officers and firefighters, as was done earlier this year for municipal fund employees.

Aldermen applauded Daley four times during his speech when he thanked President Barack Obama for federal economic stimulus funding, announced that $90 million in TIF funds would go to shore up the schools budget, said the head tax would be charged on less employees and talked about efforts over the years to end racial divisions. They also applauded at the end of the speech.

Daley said his budget will hold the line on spending, except for programs that make neighborhoods safer and help improve the city's economy, where he argued it is appropriate to spend "a limited amount more."

By declaring a surplus in 25 special taxing districts, or TIFs, Daley said he will use $38 million the city receives to help balance the budget. But Daley also gave a forceful defense of the districts, which some aldermen would like to see tapped more deeply to balance the budget. "TIFs have created neighborhood jobs, strengthened Chicago," he said.

Daley said $120 million will be taken from the parking meter lease fund to balance the budget, in a move he acknowledged "will be controversial." But he said he is not asking aldermen to approve using any money from the long-term Skyway lease reserve account.

Daley said he has "real concerns about charging an admission fee for the Taste of Chicago," but said the city will go forward with seeking companies to take over managing the festival and other lakefront events. He reiterated that no deals will be completed unless the festivals can be run less expensively by a bidder for the contract.

The city will also seek to privatize recycling.

"No private sector company will own any of these services," he said.

Despite the need for revenue, Daley said his budget plan will change the wage standards for the city's per-employee head tax.

Rather than charging it to companies for each employee making more than $900 per quarter, Daley said he wants to charge it to employers for each worker making more than $4,300 per quarter. "While it may result in a small revenue loss for the city in the short term, in the long-term it will benefit our economy as more people find employment," he said.

At the end of the speech, Daley again reflected on his broader legacy. He said he is proud the city has moved past "racial politics and rhetoric" during his time in office. "When I became mayor, remember Chicago had been called 'Beirut on the Lake,'" he said.

"Since then, we've lowered our voices and raised our sights."

The nearly 40-minute speech ended with aldermen giving him a
standing ovation, as Daley stood at the dais smiling and pantomimed wiping his brow.

The mayor began his budget address by calling federal claims that the recession is over "laughable."

"Far too many families are still drawing on their savings to pay their bill," Daley said to a City Council chambers packed with aldermen and spectators.

Then Daley quickly moved to defend his legacy for transforming Chicago, saying that when he took office in 1989 it was "a rust belt city that many people had written off."

Chicago has become a global city under his stewardship with a diverse economy and a modern government that is "smaller in size, but greater in performance," Daley said. He touted the fact that there will be a total of 39 city departments under his 2011 proposed budget, down from 49 departments when he took office.

The mayor then went on to stand up for his programs of privatizing city services, making the case that he has done so "only when the private sector could perform a service more efficiently and with greater quality."

The charts indicate that three city taxes are expected to generate more than $1 billion less than they did in 2007.

The tax on real estate sales is expected to be down 68 percent, a drop of more than $500 million in the past four years. The income tax is projected to drop 30 percent, or $340 million, over that same period. And sales taxes will be down 9 percent, or $200 million.

Outside the City Council chambers at about 9 a.m. , people were lining up to get a seat to hear Daley deliver his final budget address.

But what they are likely to hear likely won’t rock the house. The mayor is expected to talk about a budget that mostly holds the line. It will keep taxes and fees level by tapping onetime funding sources:

city reserves, debt refinancing and surplus funds from the city’s controversial tax increment finance districts.

In his proposal to spend more than $6 billion, Daley will make some changes. He has already said he will look to consolidate city departments to eliminate 280 jobs, propose privatizing city festivals and call for hiring up to 200 new police officers — a number that might not even keep up with retirements in a department well short of full staffing.

Aldermen, meanwhile, have noted that the information Daley has released does not specify how much of the city’s remaining $756 million in reserves, established in recent years by long-term leases on the Chicago Skyway and parking meter system that generated upfront payments of nearly $2 billion.

Also expected to be listening for the details are a host of potential candidates for mayor. The winner of that contest next year will have to grapple with what budget watchdogs say is the need to completely reorganize city government to keep the city from going broke.