Mega-cities such as Chicago will confront major challenges in the Post Peak Oil era. The core problem facing our largest and most densely populated cities will be economic: we will have to meet rapidly increasing costs in day-to-day operation of our critical systems for transportation, water treatment, emergency response, sewage and waste treatment and disposal, law enforcement, and the maintenance of critical infrastructure necessary to deliver these services, in a climate of rapid and geometric increases in costs due to the draw-down of liquid fuels, production of which is projected to drop 5% a year or more from 2012 forward.
Is it wise to divert future tax revenues to subsidies for private purposes, no matter what their merits may be, when Chicago currently is struggling financially and is unprepared for the post-Peak Oil era? At this time, the city's systems and infrastructure are in need of substantial repair and upgrading, and any further diversion, present or future, of public money to private purposes could further impair our ability to maintain a safe, orderly civil environment.
TIF and RIF financing mean the diversion of future tax increases (the "increment") from general revenues to private purposes, in this case the rehabilitation and winterization of rental properties in the 49th Ward. The amount of money involved is often substantial; in the case of the proposed 49th Ward RIF, up to $54 M will be diverted from general revenues in an era of steeply increased costs of operating the city in an era of steep reduction in available energy and vastly increased operating costs.
Additionally, other wards will also demand RIFs for similar purposes, which means that the amount of future property tax revenues diverted could be multiplied by 50, since many of the the south side and west side wards are burdened with much more rental housing stock in much worse physical condition than that of the 49th Ward. This could mean that, ultimately, up to $2.5 Billion could be diverted from general revenues to the purpose of rehabilitating rental properties, over the next 25 years,in addition to other subsidies for other private purposes, to the detriment of the City's ability to fund daily operations and make necessary investment in the upgrading and expansion of critical infrastructure to keep the city minimally safe and sanitary in an era of crippling shortages and rapidly escalating cost s for nearly all services and goods.
Given that Chicago's water and sewer infrastructure is decrepit and outdated, and will need substantial repair and upgrading to continue to meet current needs, and that its public transportation system is also in poor condition and ill-equipped to handle a steep and rapid increase in ridership that could occur if the cost of auto ownership were to become too expensive for low and medium income residents due to rapid escalation in fuel costs. Considering all of the foregoing, Chicago and the surrounding Cook County suburbs are currently ill prepared for the vicissitudes of Peak Oil and the terminal decline in oil and other fossil fuel production.
While the costs of running our city in such a manner as to ensure basic safety and sanitation will rise steeply and rapidly, tax revenues could well be in free fall due to declining incomes of residents and in business activity, as declines in fuel supplies will raise the costs of all business activities in proportion. Many businesses will fail and nearly all will face major challenges, while employment opportunities will wither. Property taxes, sales taxes, and all other taxes and fees will most likely have to be increased steeply to meet daily operational expenses and perform "patch" repairs in critical transportation, water, and sewer infrastructure, and expansion and improvement of these systems will quickly become prohibitive. The capital necessary for expansion simply will not be there because of the debt overhang from the early 2000s that has absorbed all the capital that otherwise might be available to invest in replacing aged infrastructure and expanding our utilities and public transportation. Yet this investment will be necessary if the city is to maintain services at their current level for the current population of approximately 2.9 million and surrounding suburbs that rely upon our water treatment and sewer systems. Additionally, massive investment in the regional public transportation system will be necessary for the system to accommodate new riders as driving becomes prohibitively expensive for tens of thousands more local residents than currently use the system.
Chicago will therefore have to find a way to finance vastly more expensive daily operations and maintain and expand as needed the utility and transportation infrastructure needed to ensure that the city will remain safe and livable with steeply reduced energy imputs from that point forward. There is at this time no substitute for oil and other fossil fuels that will meet all energy needs,, and plans for alternative energy, such as expanded nuclear capacity, will take at least a decade and most likely two decades to be fully implemented. Expansion of our power generating capacity will also be problematic because of the shortage of capital.
In short, the city will have great difficulty in funding its daily operations and in finding the capital to invest in necessary infrastructure repairs and upgrades, with the revenues that will be available for the purpose. It will most likely be necessary to raise taxes substantially just to maintain services at their current levels and make emergency repairs on critical infrastructure. Investment in expansion and upgrades of that infrastructure to meet the needs of an expanding population of ex-suburbanites and immigrants from other cities and towns, in an economy that is shrinking in response to steeply higher fuel costs, will require massive capital outlays that will be possible only if tax revenues increase steeply.
Any further diversion of tax revenues from public purposes to private purposes, by means of a TIF, RIF, tax abatement, or any other direct or indirect public subsidy, will mean that less money is available to prepare the City of Chicago's systems and infrastructure, which are already somewhat underfunded and have critical deficiencies, and that the city could end up in a financial bind impossible to negotiate as costs increase 25% or more and it becomes impossible to operate on the revenues available. This could mean steep reduction of necessary services, such as sanitation, emergency response, and law enforcement; and cascading failures in critical systems such as water and sewage treatment, and transportation infrastructure, greatly endangering the health and lives of 2.9 million (and possibly many more) city residents; and rendering the city much less attractive as a place to do business.
Our most important task in preparing for the post-peak era is rendering our community more resilient and self-reliant in a context where government subsidies and services may be steeply reduced, or non-existent. In the future that is almost upon us, our governments will be increasingly unable to function as they have for the past century, and will be unable to provide funding and assistance for any but the basic functions of a local government, and surely will not have the means to provide subsidies to individuals for private purposes, no matter how worthy.
For these reasons, any further diversions of tax revenues, present or future, for private purposes, would mean putting our basic services at risk and would endanger the health and lives of Chicago's 2.9 Million residents, and possibly many more in Cook County that are dependent upon the same systems for essential services. As it is, large diversions of revenues from the public till to private purposes have crippled Chicago financially, and retarded the city's progress in upgrading its critical infrastructure and funding daily operations.Therefore, the proposed 49th Ward RIF, should be tabled, and no future TIF or RIF financing should be considered.
Additionally, extant TIFs and other subsidies to business entities should be reviewed and re-considered in light of their true benefits, if any, and the negative offsets to those benefits, with the aim of reducing as much as possible the drain on public finances, and building reserves for the expenditures we will need to make to keep our city and its environs livable and economically viable.