CHICAGO — The Chicago City Council Wednesday unanimously approved Mayor Rahm Emanuel’s rookie budget, a $6.3 billion spending plan for 2012 that eliminates a $635 million gap with layoffs, cuts, debt restructuring, and a series of tax, fine and fee increases.
The council’s 50 members also all voted in favor of the revenue ordinance that imposes the fines, fees and taxes projected to raise $220 million for the budget.
Emanuel praised aldermen for their votes and their suggestions, some of which he heeded, and he called the budget “part of a process and part of a strategy” aimed at stabilizing city finances, and improving schools and public safety.
Though it was expected that the budget would easily pass, especially after Emanuel scaled back on some service cuts, it was uncertain whether all members would embrace a spending plan many labeled “painful.”
The vote came after many aldermen stood to lament the impact of layoffs, service cuts, and shuttering of several police district stations while also praising Emanuel’s administration for a more open process than veteran members remember under Emanuel’s predecessor, Richard Daley. Many members praised the mayor’s moves to open up some city services to private competition, put $20 million into reserves, and consolidate departments.
Alderman Brendan Reilly said he voted against three of the last four budgets because they “failed to address the structural deficit we carried” by relying on one-time fixes like reserves from asset leases. “This is a painful austerity budget,” he said. “This is the type of budget this city has needed for the past several years. … Today is a day of reckoning.”
Council members and Emanuel acknowledged that they still face the arduous task of reining in growth in Chicago’s pension obligations, which likely will require both union concessions and state legislation to put pensions on an improved track.
The city’s unfunded liabilities rose by $12.1 billion over the past decade to $15 billion. Payments are set by statutory formula.
Chicago will pay $476 million towards its four pension funds next year and faces a $550 million increase in its contribution levels in 2015 under an Illinois mandate.
The budget whittles away a $635 million deficit by cutting 550 positions, scaling back on some services, and enacting a long list of new or higher taxes, fees and fines, though the city’s property and sales taxes were not raised. The budget puts $20 million into existing reserve accounts that hold $624 million. One-time maneuvers are limited to about $88 million from restructuring debt and swap-related savings.
Daley relied heavily on one-shots, including reserves and employee furloughs, to balance the last several budgets without deeper spending cuts or tax hikes.
Emanuel’s revenue proposals include a hike in the city’s hotel tax, imposing a loading zone fee and a parking congestion charge, and increased towing fines, impoundment fees and fines for tampering with parking meter boxes.
The budget also includes a steep four-year increase in water and sewer fees, though it is not tied to the deficit. Instead, those revenues will help accelerate planned projects.
Ahead of a recent general obligation bond sale, Fitch Ratings affirmed the AA-minus rating assigned to $6.7 billion of Chicago GOs, Moody’s Investors Service affirmed its Aa3, and Standard & Poor’s affirmed its A-plus, all with stable outlooks. The city’s GOs suffered a round of downgrades last year due to mounting fiscal woes and the use of one-shots to close budget gaps.
The budget marks a 2.1% increase over 2011 spending and includes a $3.1 billion corporate fund that is down 5.4% over 2011. It totals $8.2 billion when all funds are counted. The capital budget totals $558 million for 2012 and would be funded from a mix of GO borrowing and other local, state, and federal funds.
Chicago has not released revenue-backed, water and sewer bonding plans for 2012. Some of the measures depend on projections and savings estimates that will have to be reached over the year to keep the city on track. The 2012 budget anticipates carrying over a $143.5 million balance.
