Skip to comments.The Second-Rate City? (Chicago - stunning, detailed report on the fall & fail)
Posted on 06/11/2012 1:08:43 PM PDT by STARWISE
Chicagos swift, surprising decline presents formidable challenges for new mayor Rahm Emanuel.
In the 1990s, Chicago enthusiastically joined the urban renaissance that swept through many of Americas major cities. Emerging from the squalor and decay of the seventies and eighties, Chicago grew for the first time since 1950by more than 100,000 people over the decade. The unemployment rate in the nations third-biggest city was lower than in its two larger rivals, and per-capita income growth was higher.
Fiscal problems are commonplace these days among local governments, but Chicagos are particularly grim and far predate the Great Recession. Cook County treasurer Maria Pappas estimates that within the city of Chicago, theres a stunning $63,525 in total local government liabilities per household.
Not all of this is city debt; the regions byzantine political structure includes many layers of government, including hundreds of local taxing districts. But pensions for city workers alone are $12 billion underfunded. If benefits arent reduced, the city will have to increase its contributions to the pension fund by $710 million a year for the next 50 years, according to the Civic Federation. Chicagos annual budget, too, has been structurally out of balance, running an annual deficit of about $650 million in recent years.
As dire as Chicagos finances are, those of Illinois are in even worse shape. The primary cause, once again, is pensions, which are underfunded to the tune of $83 billion. Retirees future health care is underfunded an additional $43 billion. Theres a lot of regular debt, tooabout $44 billion of it. And Illinois, like Chicago, has run large deficits for some time. Despite raising the individual income tax 66 percent and the corporate tax 46 percent in 2011, the state is projected to end the current fiscal year with an accumulated deficit of $5.2 billion.
While California has made headlines by issuing IOUs to companies to which it owes money, Illinois has taken an easier route: it just stopped paying its bills, at one point last year racking up 208,000 of them, totaling $4.5 billion. Some businesses have gone unpaid for nine months or even longer. Unsurprisingly, Illinois has the worst credit rating of any state. Unable to pay its bills, it is de facto bankrupt.
What accounts for Chicagos miserable performance in the 2000s? The fiscal mess is the easiest part to account for: it is the result of poor leadership and powerful interest groups that benefit from the status quo.
Public-union clout is literally written into the state constitution, which prohibits the diminution of state employees retirement benefits. Tales of abuse abound, such as the recent story of two lobbyists for a local teachers union who, though they had never held government jobs, obtained full government pensions by doing a single day of substitute teaching apiece.
The state has also employed a series of gimmicks to cover up persistent deficitsfor example, using borrowed money to shore up its pension system and even to pay for current operations. At the city level, Mayor Richard M. Daley papered over deficits with such tricks as a now-infamous parking-meter lease.
The city sold the right to parking revenues for 75 years to get $1.1 billion up front. Just two years into the deal, all but $180 million had been spent.
The debt and obligations begin to explain why jobs are leaving Chicago. It isnt a matter, as in many cities, of high taxes driving away businesses and residents.
Though Chicago has the nations highest sales tax, Illinois isnt a high-tax state; it scores 28th in the Tax Foundations ranking of the best state tax climates. But the sheer scale of the states debts means that last years income-tax hikes are probably just a taste of whats to come. (Cutting costs is another option, but that may be tricky, since Illinois is surprisingly lean in some areas already; it has the lowest number of state government employees per capita of any state, for example.) The expectation of higher future taxes has cast a cloud over the states business climate and contributed to the bleak economic numbers.
Its easy to understand why being a global city is the focus of civic leadership. Who wouldnt want the cachet of being a command node of the global economy, as urbanists put it? Its difficult, too, to think of a different template for Chicago to follow; its structural costs are too high for it easily to emulate Texas cities and become a low-cost location.
But just because the challenge is stiff doesnt mean that it shouldnt be tackled. Chicago isnt even trying; rather, its doubling down on the global-city square. Senator Mark Kirk wants to make OHare the most Asia-friendly airport in America and lure flights to central China, for example. A prominent civic leader suggests that the city should avoid branding itself as part of the Midwest. One of Mayor Emanuels signature moves to date has been luring the NATO summit to Chicago.
Another reason for Chicagos troubles is that its business climate is terrible, especially for small firms. When the state pushed through the recent tax increases, certain big businesses had the clout to negotiate better deals for themselves. For example, the financial exchanges threatened to leave town until the state legislature gave them a special tax break, with an extension of a tax break for Sears thrown in for good measure.
And so the deck seems to be stacked against the little guys, who get stuck with the bill while the big boys are plied with favors and subsidies.
It also hurts small businesses that Chicago operates under a system called aldermanic privilege. Matters handled administratively in many cities require a special ordinance in Chicago, and ordinances affecting a specific council districtcalled a ward in Chicagocant be passed unless the city council member for that ward, its alderman, signs off.
One downside of the system is that, as the Chicago Reader reported, over 95 percent of city council legislation is consumed by ward housekeeping tasks. More important is that it hands the 50 aldermen nearly dictatorial control over what happens in their wards, from zoning changes to sidewalk café permits. This dumps political risk onto the shoulders of every would-be entrepreneur, who knows that he must stay on the aldermans good side to be in business.
Its also a recipe for sleaze: 31 aldermen have been convicted of corruption since 1970.
Red tape is another problem for small businesses. Outrages are legion.
Scooters Frozen Custard was cited by the city for illegally providing outdoor chairs for customersafter being told by the local alderman that it didnt need a permit. Logan Square Kitchen, a licensed and inspected shared-kitchen operation for upscale food entrepreneurs, has had to clear numerous regulatory hurdles: each of the companies using its kitchen space had to get and pay for a separate license and reinspection, for example, and after the city retroactively classified the kitchen as a banquet hall, its application for various other licenses was rejected until it provided parking spaces.
An entrepreneur who wanted to open a childrens playroom to serve families visiting Northwestern Memorial Hospital was told that he needed to get a Public Place of Amusement licensewhich he couldnt get, it turned out, because the proposed playroom was too close to a hospital!
And these are exactly the kind of hip, high-end businesses that the city claims to want. Who else stands a chance if even they get caught in a regulatory quagmire? As Chicagoland Chamber of Commerce CEO Jerry Roper has noted, unnecessary and burdensome regulation puts Chicago at a competitive disadvantage with other cities.
Companies also fear Cook Countys litigation environment, which the U.S. Chamber of Commerce has called the most unfair and unreasonable in the country. Its not hard to figure out why Chief Executive ranked Illinois 48th on its list of best states in which to do business.
Chicagos notorious corruption interferes with attempts to fix things. Since 1970, 340 officials in Chicago and Cook County have been convicted of corruption. So have three governors. The corruption has been bipartisan: both Governor George Ryan, a Republican, and Governor Rod Blagojevich, a Democrat, are currently in federal prison. A recent study named Chicago the most corrupt city in the United States.
But an even greater problem than outright corruption is Chicagos culture of clout, a system of personal loyalty and influence radiating from city hall.
Influencing the mayor, and influencing the influencers on down the line, is how you get things done. There is only one power structure in the cityincluding not just politicians but the business and social elite and their hangers-onand it brings to mind the court of Louis XIV: when conflicts do arise, they are palace intrigues.
Ones standing is generally not, as in most cities, the result of having an independent power base that others must respect; it is the result of personal favor from on high. One drawback with this system is that it practically demands what columnist Greg Hinz calls a Big Daddystyle leader to sustain itself.
Another is that fear of being kicked out of the circle looms large in the minds of important Chicagoans. Beginning in 2007, Mayor Daley launched an ultimately unsuccessful bid for the 2016 Olympics. Later, commentator Ramsin Canon observed that Daley was able to get everybody that matteredeverybodyon board behind the push. . . . Nobody, from the largest, most conservative institutions to the most active progressive advocacy group, was willing to step out against him.
These organizations have good reason to fear reprisal for not toeing the line. When Daley signed his disastrous parking-meter deal, an advocacy group called the Active Transportation Alliance issued a critical report.
After a furious reaction by the Daley administration, the organization issued a groveling retraction. I would like to simply state that we should not have published this report, said executive director Rob Sadowsky. I am embarrassed that it not only contains factual errors, but that it also paints an incorrect interpretation of the leases overall goals. Sadowsky is no longer in Chicago.
Its easy to see how fiascoes like the parking-meter lease happen where civic culture is rotten and new ideas cant get a hearing. Chicagos location already isolates it somewhat from outside views. Combine that with the culture of clout, and you get a city thats too often an echo chamber of boosterism lacking a candid assessment of the challenges it faces.
Some of those challenges defy easy solutions: no government can conjure up a calling-card industry, and it isnt obvious how Chicago could turn around the Midwest. Mayor Emanuel is hobbled by some of the deals of the pastthe parking-meter lease, for example, and various union contracts that dont expire until 2017 and that Daley signed to guarantee labor peace during the citys failed Olympic bid.
Rest of the report .. click ..HERE
~~~~~~~~ City Journal
A quarterly magazine of urban affairs, published by the Manhattan Institute, edited by Brian C. Anderson.
Aaron M. Renn is an urban analyst, consultant, and publisher of the urban policy website The Urbanophile.
Those who have spent their lives in the slums know nothing but that lifestyle....
when you force contracts on the taxpayer KNOWING FULL WELL that it is insanity, then the unionsist are as much to blame as anyone....
but these corrupt creeps will get the best of us..you,me and the guy next door will be working well past our normal retirement age just so we can shuffle off these govt thugs to a nice lazy exodus...
You didn’t hear about the roving gangs beating up people?....of course you didn’t......
The dumb*** Mayor never figured there was a secret bank account into which the Comptroller deposited govt funds.
Trying to explain how that much money could disappear unnoticed, braindead Mayor James Burke said Dixon has struggled financially because "the state" is far behind on income tax disbursements to munis.....(now there's a red flag is there ever was one).
How Comptroller Crundwell could sustain such an extravagant lifestyle on an $80,000 salary was mostly attributed to her success in the horse industry, the dumbest Mayor in the world stupidly said.
"She definitely was a trusted employee, although I've had some suspicion for quite a while just because of her lifestyle," Burke said in an interview.
A Chicago-based corruption watchdog, the Better Government Association, called Dixon a wakeup call for state and local officials to put in place better safeguards, especially in smaller towns that lack rigorous oversight.
"Tens of billions of our tax dollars flow through 7,000 plus units of government in Illinois every year. And we can only watch a few of them," said the association's president, Andy Shaw.
"Most of them don't have inspector generals. Most of them don't have auditor generals. Most of them don't have watchdog groups looking closely.... It's ripe for rip-offs."
A Chicago-based corruption watchdog, the Better Government Association, called the Dixon, Ill $53 million govt theft, a wakeup call for state and local officials to put in place better safeguards, especially in smaller towns that lack rigorous oversight.
“Tens of billions of our tax dollars flow through 7,000 plus units of government in Illinois every year. And we can only watch a few of them,” said the association’s president, Andy Shaw.
“Most of them don’t have inspector generals. Most of them don’t have auditor generals. Most of them don’t have watchdog groups looking closely.... It’s ripe for rip-offs.”
I know ... beyond insane and incomprehensible. Speaks a lot for credible oversight
bump & a ping