Chicago's Emanuel Nixes Some Ideas to Eliminate $636M Gap

CHICAGO — With the unveiling of his first budget two weeks away, Chicago Mayor Rahm Emanuel ruled out several ideas offered up this week in a special report from the city’s inspector general to help erase $636 million of red ink.

The proposals include imposing a city income tax or charging tolls on Lake Shore Drive.

“As I have said from the beginning, raising property taxes, income taxes or sales taxes is off the table. And asking drivers on Lake Shore Drive to pay a toll is also a nonstarter,” Emanuel said in a statement. “There are a number of reforms and efficiencies in the inspector general’s report that are promising, some of which we have already implemented and some we will give serious consideration.”

Emanuel will release a proposed 2012 budget on Oct. 12. A fiscal reckoning is at hand, as his predecessor, Richard Daley, relied heavily on non-recurring revenues such as debt restructuring and reserves to eliminate deficits over the last two years.

The city is also grappling with $15 billion in unfunded pension liabilities and faces a state-mandated $550 million increase in contributions in 2015.

Chicago inspector general Joe Ferguson Tuesday released a 54-page report titled “Budget Options for the City of Chicago.” Without any endorsement by Ferguson, the analysis offered up ideas that could generate $3 billion to help stabilize the city’s balance sheet.

On the revenue side, the city could raise $500 million by imposing a 1% income tax on residents, free up $100 million in property tax revenues by eliminating its use of tax-increment financing, generate $450 million by extending its sales tax to services that are not now taxed, and produce $87.5 million by collecting tolls on Lake Shore Drive.

Chicago could raise $380 million by bringing water and sewer rates in line with the national average, $37 million by imposing a transaction tax on trades at the Board of Trade and Mercantile Exchange, $125 million from a garbage collection fee, and $105 million by broadening the city’s amusement tax.

On spending, the city could save $190 million by reducing the ratio of supervisors to workers, $40 million by imposing a 40-hour workweek, and $57 million by reducing the number of firefighters assigned to trucks.

“To balance its budget, the city … must begin to reduce its spending through restructuring its operations, eliminating programs and subsidies, increasing revenue by increasing taxes and fees, or undertaking some combination of the two. This will require difficult choices,” Ferguson wrote in the report.

The inspector general’s office is independent. The holder is appointed by the mayor to a four-year term with the power to investigate the mayor, clerk, treasurer, and city contractors, but not the City Council.

The report was released as part of the office’s mission to promote efficiency in city operations, Ferguson said.

Economic pressures, growing costs and the use of one-shots last year drove a round of downgrades of the city’s nearly $7 billion of general obligation debt. Fitch Ratings rates the GOs AA-minus, Standard & Poor’s rates them A-plus, and Moody’s Investors Service rates them Aa3. All three agencies have stable outlooks.

In addition to holding the line on the city’s major taxes, Emanuel has also pledged not to rely on non-recurring revenues.

For reprint and licensing requests for this article, click here.
Illinois
MORE FROM BOND BUYER