Drop in Collections Brings Chicago's 1Q Shortfall to $83M

CHICAGO - Chicago's revenue collections fell another $18.5 million short of budgeted levels last month, boosting the total revenue shortfall for the first quarter to $82.8 million in the $6 billion budget.

Officials have warned the gap could exceed $200 million before the end of the year, and tax increases remain a last resort. About $31 million has been trimmed off the deficit through various spending cuts and management initiatives, with the pressure mounting on unions to agree to concessions to trim city expenses or face layoffs.

"We are actively looking for even more ways to cut spending and better manage government. The reality is that we aren't going to be able to reduce expenses without addressing personnel costs," said new chief financial officer Gene Saffold.

Real estate transaction taxes are down about $33 million from last year's levels, as are sales and income taxes. Utility taxes are faring better than expected

Saffold said Chicago continues to weigh options including further dipping into revenues raised from the $1.2 billion collected from its lease of the city's parking meter system. About $325 million was placed in a mid-term reserve, of which about $150 million is already being used in the budget. That reserve is supposed to help support city budgets through 2012.

The budget also relies on about $40 million from the pending $2.5 billion 99-year lease of Midway Airport. The deal faced a closing deadline of last week, but the private consortium that won the lease bidding has failed so far to put together the financing needed to close. The city is willing to extend the deadline six months but was unable to reach a final agreement last week so instead extended the deadline for two weeks in hopes of reaching a six month agreement.

Saffold said it was too early to gauge whether the transaction might fall through altogether, but said if it does, the $126 million in collateral posted by the consortium would be tapped to cover the portion of deal proceeds earmarked for the budget.

Chicago's $6 billion of general obligation bonds are rated AA by Fitch Ratings, Aa3 by Moody's Investors Service, and AA-minus by Standard & Poor's.

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