Mayor Richard M. Daley‘s administration is predicting the biggest budget deficit in Chicago’s history next year, and aides said today the mayor is mulling all options except a property tax hike to close the expected shortfall of $654.7 million.
To understand the full depth of the problem, consider that the deficit represents about 20 percent of the corporate fund, the city’s budget for day-to-day operations, which is expected to be about $3.4 billion in 2011.
The situation is so bad that Daley’s budget director, Eugene Munin, felt the need to declare: “We are a going concern.”
The Daley administration continues to rely heavily on economically sensitive tax revenue streams such as the tax on real estate sales. Officials said the city is getting $300 million less per year from those sources than it did three years ago.
Munin acknowledged the possibility that the city could tap its tax-increment financing, or TIF, accounts to deal with the budget crunch. The city has aggressively used TIF dollars to subsidize private development projects across the city, diverting tax revenues that would otherwise have gone to the city, the schools and other taxing districts into special accounts.
But rather than continue to hoard those funds, Munin said officials could declare a surplus and distribute money from the accounts to schools and other taxing districts. The city’s take would amount to about 20 percent of TIF funds.
There is about $1 billion in Chicago’s dozens of TIF accounts, but Munin said about $500 million is already committed to projects.
Daley has staunchly defended using TIF dollars to help spur private investment, shrugging off criticism that the practice is nothing more than “corporate welfare.”
“It’s a serious policy discussion that we are going to have to have,” Munin said at a news conference at City Hall.
He said Daley aides already have approached the leaders of labor unions that represent city workers to discuss further contract concessions. In 2007, before the recession hit, Daley had signed a 10-year deal with the unions that promised healthy raises and generous benefits.
But the quick dive in the economy left the mayor unable to fulfill those promises to workers. Labor leaders agreed last year that workers would take as many as 24 furlough days in 2009, but the concession agreement expires in the middle of 2011.
“We need to be cooperative and collaborative,” Munin said. “It’s not just our problem. It’s everybody’s problem.”
He said it was unlikely that the requested concessions would include additional furlough days because “that’s a burden particularly on the lower wage earning employees.”
Munin did not rule out the possibility of continuing to raid the reserve funds stocked with the proceeds of Daley’s privatization deals for such assets as the Chicago Skyway and the city’s 36,000 parking meters.
At the end of this year, the city will only have about $800 million left from the more than $2 billion that it received from privatization deals. Yet, the private investors in those assets will continue to reap revenue from Skyway toll booths and parking meters for decades.
After using almost $400 million from the $1.15 billion parking windfall in 2009, Daley had planned to spend almost $600 million from that fund this year. But Munin said today that reductions in spending mean that at least $60 million of the parking reserves budgeted for 2010 can go back into the city’s coffers — for now, at least.
Munin again defended having tapped the privatization proceeds to that extent, even as he acknowledged that this practice cannot be repeated indefinitely.
“It was the prudent thing to do, we feel,” he said. “Cutting services did not seem to be the judicious thing to do.”
The Skyway deal, signed in 2004, was a 99-year lease, while the 2008 parking meter privatization is scheduled to last for 75 years. Another $2.5 billion would have been generated by a long-term privatization of Midway Airport, but that deal fell through.