Progress Illinois

This past spring, a new $16 million system implemented by the Chicago Department of Public Health (CDPH) turned out to be so flawed that patient mental health bills weren’t submitted to the state for six months in 2008. This so-called "glitch" led to a loss of more than $1million in state funding and almost resulted in the closure down four clinics on the city's South Side.  Back in July we took Daley administration officials at their word when they said that the problems were fixed.

Big mistake.

During the ongoing city budget hearings yesterday, it was revealed that the system is still not working properly. Outgoing CDPH chief Terry Mason told aldermen that fixing the $16 million Cerner system -- which was supposed to represent an upgrade -- remains "an active process."

To his credit, Ald. Rick Munoz (22nd Ward) pressed him on the matter: "You're saying that after 18 months you're unable to work out technical glitches that prevent us from billing the state?" "That is correct," Mason responded.

Budget Committee Chair Ald. Carrie Austin (34th Ward) assured Munoz that the Cerner system would be fixed within "months."

"Months?" Munoz asked.  Austin replied that she couldn't offer a "specific date."

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With his public opinion at an all-time low and questions circling about his "creative" city financing, Chicago Mayor Richard Daley is making the media rounds -- sitting down with both WLS' Bill Cameron and WBEZ's Eight Forty-Eight in recent days. Not surprisingly, Daley is trying to blunt criticism that his shadowy tax increment financing (TIF) system has become a major drag on the city's finances, contributing to this year's historic $520 million shortfall. Instead of coming clean on the public funds that he's skimmed off the tax rolls, Daley is making more bogus claims to divert attention from his "glorified slush fund." Here's some excerpts from his conversation with WBEZ's Allison Cuddy, along with our responses:

DALEY: Most TIF funds don't generate any money. Most TIF funds are used for schools, parks, libraries, ex-offender programs, job training, economic development to keep jobs here. And I'll go over each TIF to show you that.

CUDDY: But you generate about a half-a billion in TIF funds per year.

DALEY: Not quite. No, I don't think so.

CUDDY: And you have about a billion in cash.

DALEY: No I don't think so. I don't think it's that high. Most of it's pledged already for a school, a park, a library. Most of it's pledged for economic development in depressed areas to bring back jobs or to keep jobs there.

The mayor doesn't "think" that his TIF network siphons off around a half-million dollars per year?  In 2008 alone, the TIF system siphoned $552 million off the tax rolls, based on annual reports signed by Daley himself. Cook County Clerk David Orr also tracks the numbers and reports that $555 million was diverted in 2007.

And what about the surplus Cuddy cites?

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This week property tax bills hit mailboxes across Cook County and many property owners were justifiably outraged by their skyrocketing rates. Elected officials all tried to dodge responsibility for their role, including Mayor Daley, who certainly deserves his fair share of criticism (after all, his extensive tax increment financing system deprived local taking bodies of $552 million last year alone.) The mayor tried unsuccessfully to pass the buck to Assessor Jim Houlihan. Houlihan, in turn, pointed to House Speaker Michael Madigan (D-Chicago) for opposing an extension of the 7 percent tax cap, which sunset this year. But it's the SouthownStar's Phil Kadner who hits the nail on the head, noting that the state's regressive tax policy is the real culprit:

All Daley has to do to lower property tax bills in Chicago is to tell the school board (which he controls) to cut the school system's levy in half. He's not going to do that, of course [...]

Why hasn't that happened?

Because new tax money would have to be generated to replace the lost money from the property tax. The Legislature would have to increase the income tax, the state sales tax and maybe both.

Some folks would say that makes for a fairer system because those taxes are based on income, the amount of money people earn and on how much they spend.

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Is Northwest Side Ald. Tom Allen (38th Ward) emerging as the Chicago City Council's leading tax increment financing (TIF) watchdog? Since Mayor Daley began to detail just how bad the city's finances have become, Allen has been one of the most vocal critics of the mayor's decision not to crack open his $1 billion "piggy bank" to ease the financial crisis. The Sun-Times' Fran Spielman caught his latest remarks during a budget hearing yesterday:

It was opening day of City Council budget hearings, and Chicago aldermen were loaded for bear [...]

They railed about the mayor’s plan to spend all but $730 million of the combined, $3 billion in Chicago Skyway and parking meter proceeds while allowing tax-increment-financing (TIF) districts to siphon $540 million-a-year away from the city’s property tax base.

“We should re-name it the ‘Over-tax fund’ — OTF. How can we with a straight face tell the citizens of Chicago that, ‘We have $1.1 billion of your money stuffed under our mattress, but don’t worry. We’re gonna give you $35 million in [property tax] relief?’ ’’ said Ald. Tom Allen (38th).

City officials have tried to quash the suggestion; for instance, CBS 2 reported their response this week that TIF funds are off limits and can't be tapped for general operating expenses. Perhaps if more local reporters understood how TIF districts operate, they wouldn't be so quick to take the bait.

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A week after Mayor Daley unveiled his bad news budget -- which relies on skimming $370 million from asset reserve funds to help plug a $520 million deficit -- aldermen began hearings on the city's finances this morning. Over the past five years, Chicago has collected upwards of $3 billion for privatizing several major public assets: specifically, the parking meters, downtown garages, and Skyway.  But due to the bad economy and the resulting drop in revenues, the Daley administration has tapped all but $730 million of the reserve funds.  But rather than own up to the fact he has been using these privatization deals as a crutch, the mayor has instead indicated that he is open to hawking additional public assets. "Everything is on the table," he told the Tribune editorial board last week, including the water and sewer systems.

On FOX Chicago Sunday this week, Ald. Scott Waguespack (32nd Ward) warned that if Daley is allowed to ram through another parking meter-style deal, the city would be "in big trouble." Moreover, he pointed out that the ongoing privatization talk is emblematic of a bigger problem. "[The city] needs a new influx of ideas and policies," he told co-hosts Jack Conaty and Dane Placko. "The old way of doing things no longer works." Watch it:

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After his administration received unprecedented criticism for leasing off Chicago's parking meter system, one might think Mayor Daley would cool it on the privatization schemes.  Instead, he appears to be looking for more public assets to sell off to the highest bidder. The Tribune reported yesterday that the same type of consultants who cooked up the parking meter deal (and profited off it) are now "tempting him" with "a menu of options."  "It whets your appetite," Daley told the paper's editorial board, "the things they see that we don't see." He went on say, "Nothing is off the table ... Everything is always on the table."

So there it is. Daley and consultants re already working the numbers behind closed doors. The scenario sounds reminiscent of the 75-year parking meter lease project that was rammed through the City Council in just two days, costing taxpayers upwards of $1 billion in potential revenue losses.

Today, the Sun-Times Fran Spielman ticks through the possibilities, concluding that there are five "viable" options: Midway Airport, O'Hare Airport, trash collection, the water system, and the sewage system.  The mayor has already attempted (unsuccessfully) to unload Midway. O'Hare is bogged down under loads of debt.  Meanwhile, the City Council has already put the kibosh on the trash proposal.  So it would seem that the water and sewer systems would be the most likely targets.

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As Mayor Daley unveiled his latest budget today, the big news surrounded his proposal to pull $370 million from the reserve fund created by Chicago's parking meter lease to help balance next year's $6.14 billion budget.  But as we listened to him address the City Council this morning, we wondered if he'd make mention of the city's other major reserve, the $1.4 billion that's squirreled away in off-the-books tax increment financing (TIF) accounts. After all, wouldn't this be the perfect opportunity for the mayor to make the case to skeptics -- Tribune columnists David Greising this week called the corporate TIF giveaways "a racket" -- that his economic development strategy is actually paying off?

Not surprisingly, Daley didn't deliver.

While he disclosed that $8 million in TIF funds will flow back into the general fund after two districts are retired, the mayor didn't make a single mention of how he plans to leverage the TIF system at large.  Listening to his speech, you'd never know that the TIF network is the single largest tool that the city has at its disposal to balance the budget and jumpstart the local economy.

So why the silence?

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With an Olympic development bonanza now out of the picture, there's been plenty of speculation over Mayor Daley's next move for boosting the city's sagging economy. Credit remains tight and the housing market is still  deeply distressed. But there are tools sitting in the Daley woodshed that could help ameliorate this problem; As we've pointed out before, the mayor is sitting on a $1.3 billion tax increment financing (TIF) surplus that could go a long way toward rejuvenating crumbling neighborhoods. The question is what will it take to get the mayor to finally dip into his honey pot?

Today, the Sweet Home Chicago Coalition ratcheted up the pressure on the mayor to begin spending in the communities that need it most. "Instead of waiting on the federal government to send us a stimulus package, we need to start our own stimulus," Ald. Walter Burnett (27th Ward) told members of the coalition early this afternoon as they rallied outside of a series of TIF-funded projects that transformed vacant Humboldt Park lots into thriving (and affordable) apartment buildings. Burnett and colleague Ald. Manny Flores (1st Ward) are currently crafting an ordinance that would require the city to commit 20 percent of all TIF revenues toward affordable housing.  Today, proponents of the plan built a symbolic yellow brick road paved with the TIF surpluses. Check out our slide show:

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After Mayor Daley's Olympics campaign came to a screeching halt in Copenhagen last week, the conversation in Chicago quickly turned to the 2011 municipal elections.  As recent polling shows, the mayor is as vulnerable as he's ever been.  The parking meter debacle, rising crime, a gaping budget deficit, and the string of City Hall indictments have all contributed to his weakened state.  But the conventional wisdom is that those poll numbers mean little until a challenger steps up.  Yesterday, political consultant Don Rose proposed one possible contender in his Chicago Daily Observer column:

Daley has become an unpopular mayor—his numbers are at 35 percent according to the most recent Tribune poll—and it’s hard to recover from that kind of slide. [...]

As I mentioned last week, however, it may be time to start thinking of replacements for 2011. [...]

[T]he regulars have a near perfect young man waiting in the wings—and this young man has done little if anything I can think of to engender any opposition from the reformers (though I have a few friends who will surely advise me about any hint of dirt under his fingernails.)

I speak here of Sheriff Tom Dart, who may be the hottest political property in the state. He is a former white state representative from a majority African American district who built a record of child protection and sensible anticrime measures.

Rose is quite right that Dart is sitting pretty these days.  He has national profile, a "good guy" reputation, and appears to be on decent terms with both the "regulars" and the "reformers."   Expect to see Dart's name floated often in the coming months. 

Since news first surfaced about the deal in July, we've been following Mayor Daley's efforts to convince United Airlines to move its operational headquarters from the Chicago suburbs to downtown's Willis Tower.  At first, the city offered the corporation $25 million tax increment financing (TIF) funds as an incentive, most of which would go to refurbishing the new offices.  Apparently that didn't cut it, so in August Mayor Daley added on an additional $10 million in public funds to sweeten the deal.  Yesterday, the City Council Finance Committee advanced the proposal, as the Tribune's Hal Dardick reports.

We're thankful that Dardick has stayed on top of this story (neither the Sun-Times or Crain's appear to have written anything on yesterday's development), but we wish he would have provided a bit more historical context.  Specifically, the Tribune article failed to note that, since early 2008, Daley has forked over an additional $15 million to United in return for moving its corporate offices to another downtown office building:

- $5.47 million in TIF funds to help refurbish United's new corporate headquarters at 77 W. Wacker Dr. (Early 2008)
- $10 million for "improvements at 77 W. Wacker Dr." to be doled out in $2 million annual increments to offset the local tax on jet fuel. (July 2009) 

Combined with the $35 million incentive package now working its way through the City Council, that brings the total amount of public subsidies secured by United to over $50 million in less than two years.

In his article, Hardick goes on to quote City Hall's estimate of how the company's move to Willis Tower will result in a boost in tax revenue:

[T]he city will net $44.5 million in revenue during that period [the next ten years] because of the move, [Community Development Department deputy commissioner William] Eager said. If United stays for 15 years, the city will net $101.4 million, he said.

That sounds great in theory. But will we ever know if these benchmarks are met?  Will we ever know if the company retains the required number of staff at these locations?  

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