Report Maps $2.2 Billion for Cash-Strapped City

Tue, 09-27-2011
By: Dan Mihalopolous

For the first time, City Hall’s inspector general has issued a raft of revenue-generating suggestions that together would raise more than $2.2 billion for a city government with an annual budget shortfall that effectively tops $1 billion.

In his “budget options” report released late Monday, Inspector General Joseph Ferguson presents estimates of how much the city could reap through such moves as instituting a city income tax ($500 million a year), installing toll booths on Lake Shore Drive ($87.5 million), eliminating all tax-increment financing districts ($100 million) and taxing the wages of commuters who work in the city but live elsewhere ($300 million). (Scroll down to read the complete report.)

Ferguson also outlines spending cuts that could save a total of $660 million a year. The biggest cost-cutting possibility that the report mentions would slash the ranks of City Hall managers to save an estimated $190 million a year in salary and benefits.

But in a statement, Ferguson made clear that “the inclusion of any option in this report is not, and should not, be construed as an endorsement” by his office. And many of the options that he presented seem highly unlikely to become reality.

Some would require action by state lawmakers. Others would only be possible if employee unions agreed to them. And many seem too politically unpalatable to win approval from Mayor Rahm Emanuel and aldermen, even in a time of deep fiscal crisis.

“The new administration has candidly acknowledged the fiscal mess it inherited and has publicly committed itself to fixing it,” Ferguson said. “This report is meant to support efforts to balance the budget by arming the public and city officials with context, basic data and analysis needed to inform the tough choices ahead.”

Besides a 1 percent income tax and a “commuter tax” on the 620,000 non-residents who work in Chicago, the report also contemplates a $5 fee on every vehicle that enters downtown Chicago during peak traffic hours ($235 million) and an expansion of the sales tax to cover purchases that are not currently taxed ($450 million).

During the campaign for the February mayoral election, Emanuel had floated the concept of a tax on what he described as luxury services, but the notion came under heavy criticism from rival candidate Gery Chico, and the new mayor has not pushed that plan since taking office.

As for tax-increment financing, a heavily used economic development tool under former Mayor Richard M. Daley, Emanuel’s “TIF Reform Panel” recently issued a report that did not come anywhere near suggesting the program’s end. The inspector general’s report noted that closing TIF districts would mean more than $250 million a year for the Chicago Public Schools and tens of millions of dollars for other taxing districts.

Emanuel already has embraced another option in the report: eliminating free water and sewer for non-profits. That would make about $15 million a year for the city, the inspector general predicted. Ferguson’s report also raised the specter of major increases in water and sewer rates ($380 million).

According to the report, charges for those services in Chicago are far below national averages and could be increased dramatically – 70 percent for water and 80 percent for sewer service.

In addressing city spending for management-level workers, the inspector general touched on a topic that has sparked heated debate between Emanuel and employee unions. In July, after Emanuel threatened to lay off hundreds of rank-and-file, unionized workers, the Chicago Federation of Labor issued a report alleging that the city payroll is top-heavy with highly paid political appointees.

The new inspector general’s report counted more than 4,000 city employees who appear to be in supervisory positions. They are paid an average of about $103,000 a year, so cutting about 1,400 of those positions would save almost $200 million, according to the report.

Ferguson also repeated his call for cuts in staffing in the Chicago Fire Department. The report cited an analysis by the Chicago News Cooperative, which found that the department’s staffing levels have remained unchanged despite a dramatic drop in the number of fires in recent decades.

The recession has forced many other cities to make cuts in public safety spending, but fire department and union officials here have opposed the suggestions from Ferguson.