Sunday, January 2, 2011

Chicago Is One of 18 Cities Most Likely to Go Bankrupt in 2011: Can We Afford More TIFS, RIFs, and Corporate Welfare?

The Business Insider has compiled a list of the cities most likely to go bankrupt, and Chicago is No. 17.

The Insider points out that the budget for 2011 uses up nearly all of the revenue generated by selling a long-term lease on the city's parking meters. That money was supposed to last for decades Thus, we've balanced the budget for 2011 by destroying our finances for many decades out unless we can manage to produce a miracle, and it looks like we will have no other way to meet urgent needs, like funding our essential services, except to raise taxes to confiscatory levels, or build the casino that Daley has so long hankered for. We'll probably have to do both, for there's no guarantee that a casino could generate the revenue

However, the parlous condition of the city's finances seems to be a non-issue not only with the city's sitting aldermen, but with aspirants in the current race as well. Among the candidates for alderman in the 2011 race, only a handful, notably 48th Ward contender Phillip Bernstein, seem cognizant of the city's current desperate situation and propose realistic solutions.

Here in the 49th Ward, Joe Moore's only real opponent, Brian White, seems focused solely on devising more ways to divert tax revenues from city coffers to non-public purposes, namely the rehabilitation of 1500 rental apartments in the area via the 49th Ward RIF (Rental Improvement Fund), which will divert money generated from future property tax increases from city services to Rogers Park landlords, who will receive funds to improve their properties on the condition set aside rental units for low-income tenants. This is only one of many, many major diversions of public funds to private interest.

Will it take a major crisis, like the day the city can no longer afford the gasoline for fire trucks and police cars, to motivate our political leaders to re-order their spending priorities and take steps to reverse the outflow of public funds to non-essential private purposes?


Nudge said...

That linked article (Business Insider) is both scary and illuminating.

Chicago is not alone in failing to adjust its outlook & expectations to the fiscal realities of this year, next year, or the next two decades.

Although the article doesn't address this point specifically, it certainly gives a reader pause to consider what's worse, the economic realities of the present & future or the continued failure to recognize them for what they are?

Mayor Daly seems to be running under the latter paradigm, particularly if he's dreaming of a casino for Chicago – and this in a time when the number of people with discretionary income and the volume of total discretionary income are both shrinking rapidly. Casino revenues are what we might call nonproductive revenues; that is, relatively few people benefit from them, and the number of decent-paying jobs (relative to the total take of the casino) is minuscule compared with the number of decent-paying jobs supported by a manufacturing concern with the same gross profit levels.

Consider it: a manufacturing concern (socks, underwear, machine screws, ball bearings, it doesn't matter what) with annual revenues of $100M would pay the same to the city in taxes as the fabled casino with an annual revenue of $100M. It would employ more people at higher-paying jobs than the casino would. It would provide jobs for the residents of the city, a benefit that seems not to be subject to consideration by the Mayor's office. The money spent on the manufacturer's products would be returned to the purchasers in the form of useful goods. Compare that to, say, blowing 2 weeks' pay at a casino and coming home with nothing to show for it except a hangover and an empty wallet.

Casinos are excellent at extracting money from a community and benefiting the few at the expense of the many. It's very interesting that the Mayor seems not to be putting the same energy into attracting manufacturing activity as he is nonproductive economic activity like casinos or sports stadiums. Is the Mayor merely hanging out with the wrong crowd (you can tell them by their membership in the upper-2% set) or is he simply one of the wrong crowd?

The North Coast said...

Ya, Nudge, I would say Da Mare is hanging out with the wrong crowd, given that some of his biggest fans are Republicans from rich North Shore suburbs.

What does that tell you?

Nudge said...

How transparent are Chicago's spending practices? How can the citizens know what sweetheart pension/overtime/vendor deals are lurking within the city's expenses?

Consider what the residents of Bell, CA learned in 2010 about the salaries that city manager Rizzo and his cronies had voted for themselves. What gross failure of budget transparency allowed Rizzo's annual salary & benefits package of approx $1.5M to be considered “normal” for a city of <37K people? His annual pension is in the high 6 figures.

Has Chicago's budget got the sort of nonsense hiding within it that was uncovered regarding the recently retired fire chief of Santa Clarita County, CA?


/begin quote

Retirement is a loosely defined term for many Silicon Valley civil servants, who as young as age 50 can begin drawing their pensions even while performing other lucrative jobs on the taxpayer dime.

Newly retired Santa Clara County Fire Chief Kenneth Waldvogel becomes the latest example next week, when he returns to work as a contractor, earning up to $108,480 for the next six months - on top of his $200,000 annual state pension - while the county searches for his replacement.

He joins five other retired Santa Clara County officials who have recently been hired back and are benefiting from a practice critics call "double-dipping." Meanwhile, the fire chief in the city of Santa Clara has been working under such an arrangement since 2004, when he retired at 53, then immediately returned to his old job, where he continues as a part-timer earning $100 an hour.

/end quote

Categorically, we'll never have anything remotely like healthy, balanced state & municipal budgets until we deal with all the waste and foppery of the 1950-2010 period.

Kheris said...

Have you seen this?

The North Coast said...

OHMYGOD, Kheris.

I mean, but WOW, is this ever going to inspire hatred of public employees. I would suggest to our city employees that they voluntarily offer to cut their pension benefits before an exasperated public decides to do the cutting... something has to give.

How will we fund these services when lavish pensions are "a priori" - that is, they come ahead of meeting every other need, possibly including the services the employees in question are there to provide, like fire and police protection.

Our financial failure is now cascading rapidly, and it will push many, many people into dirt poverty. This is very scary.

Nudge said...

Oh yes, this is going to be ugly ..

MSNBC: supersized pensions and a doomsday scenario

Nudge said...

And then you've got those University of California executives publicly demanding to be paid enormous retirement packages ..

UC executives threaten lawsuit over pension benefits

/begin quote

Some of the University of California's highest-paid employees have threatened to sue the UC system if it does not follow through on a promise to boost their retirement payments.

In a letter to UC regents this month, 36 employees making at least $245,000 per year said many had turned down jobs at other schools or companies based on UC's promise. The university is in the midst of a pension overhaul to make up a $20 billion deficit caused by a 20-year hiatus in contributions to the fund.

The executives want UC to honor what it says is a promise to allow them to accrue retirement benefits based on their full salaries, rather than at a federal cap set at $245,000. The current system, according to the letter, pays retired employees who made $500,000 per year the same benefits as those who made $245,000, which equates to an annual pension of $184,000. Implementing the higher pension benefit would cost the university about $5.5 million a year, in addition to a one-time cost of $51 million for making the change retroactive to 2007, the letter said.

/end quote

Perhaps situational awareness is uncommon in the ivory tower?

consultant said...

Happy New Year to everyone.


Just about every leader in the good old USA is kicking the can down the road. Every last one of them.

Now we've got the Tea Party/Republican clowns who are proposing some fake schemes that make it look like they're going to cut spending. Cut spending? The same people and thinking that help break the bank are now talking about fixing it.

Of course it's all BS. We've created an American culture that went broke by wanting more of everything. We had no limits and still want to act like there are none. But now reality has stepped in to set things straight.

I've always used the metaphor of the Titanic to describe what is and will happen to us. A big, slowly sinking ship that at some point will go down quickly.

Somewhere along the time when the ship well under water, a big precipitating event will take this sucker down very quickly.

I'm thinking in our greatly weakened state we'll be attacked by some other countries. I think this will happen before we get much further into the Peak Oil scenario.

Regarding Chicago Laura, think of it this way. Right now you're living in the last of the good old days in the city.

Brian White said...

Hi Laura:
Thanks for promoting my campaign. If you would like to learn what I have to say about creating jobs, re-engineering Sheridan Road, encouraging greater engagement in our schools, fighting to hold big banks accountable, or a host of other issues that I've talked about, take a look at my website. It's at www.brianwhite2011.org.

In terms of the budget, every candidate will tell voters he's for lower taxes, better services, more efficient government performance, and less cost. And he will also tell you he'll make sure you get curbside recycling, more police, and a garbage truck in every ward.

The reality is the candidate who promises the first has no idea how the government actually works. The second one assumes you don't either.


The North Coast said...

Brian, I don't expect and never have expected any politician to meet his unrealistic promises, such as lower taxes in combo with improved services.

What I expect, exactly, is for my officials to be realistic enough about this country's economic prospects to realize that we are going to have to make very painful choices. We are probably going to have to raise taxes and cut services just to keep the city functioning at a level sufficient for the safety and health of its residents, and we're probably going to have to eliminate many of the extra frills we've enjoyed for the past few decades.

In our current context, it is INSANE to propose another diversion of tax monies, present of future, away from the public till and to any private purpose, including a RIF that would benefit some landlords at the expense of every taxpayer in Rogers Park and the rest of Chicago. The "increment" of taxes that will fund this will be taken away from critical infrastructure (now in pretty poor condition)and essential services for 23 years... and what's worse, every other alderman will want a RIF for his ward.

Brian, we are going to have enough trouble just keeping this city safe and sanitary in the near future and for the next several decades. If you think the city is broke NOW, wait till you see what it costs to run it when gasoline is at $5 or more a gallon, and the cost of doing absolutely everything rises as a result.

So far, you and our incumbent seem airily unconcerned with Chicago's financial problems. What will you do to address them?

Anonymous said...

This is humorous.
Tick, tock, tick, tock. Just a matter of time for cities like Chicago, and there is no help for it. Individuals must look to themselves for solutions. The group-think, slow-mo slide down the slope is seductive. Wake up. Look at the writing on the wall and quit trying to paint it over, for pete's sake.