Since he proposed his budget for 2010, Mayor Daley has been busy with reporters' questions and increasingly louder calls for reform of the city's tax increment financing program. The TIF program is complicated—but no one is going to understand it any better by listening to Daley talk about it. In his comments after a tree-planting event on the southwest side this weekend and during a wide-ranging interview with Chicago Public Radio that aired November 1, the mayor played fast and loose with the facts when he wasn't ducking the question altogether. Here's some of what he had to say—and what was wrong with it.
DALEY On his decision to use $270 million of the $400 million in "rainy day funds" generated by the parking meter lease deal to balance the 2010 city budget: "A rainy day fund is for a rainy day, but when you have a flood—for example, just go out in the city and find out how many foreclosed homes there are. Find out how many homeless people there are. . . . And so the rainy day fund was set aside strictly for this economic crisis. It wasn't set aside for the good days."
REALLY? The rainy day fund was set aside strictly to "replace the annual revenue that was generated by the parking meter system" when the city had control of it, according to a summary of the meter deal distributed to aldermen earlier this year.
If the $400 million remained untouched and collected 5 percent annual interest, city budget officials said, it would yield $20 million a year—roughly what the city brought in from meters before the system was privatized. Now, with only $130 million of that money left, the city will get only $6.5 million a year. And that's assuming that the money does in fact collect 5 percent interest for the remaining 73 years of the deal.
In addition, the mayor and his budget team previously argued that this sizable fund would improve the city's bond rating, reducing the cost of borrowing "when the city issues debt to complete neighborhood improvement projects and address other critical needs." But in fact borrowing is now likely to be more expensive, which will mean either a slowdown in neighborhood improvement projects or an increase in taxes to pay the difference.
As attorney John Schmidt, one of the brokers of the Skyway deal, warned the Wall Street Journal last year in a discussion about privatization: "That is the danger: someone could take the capital from an infrastructure sale and use it to cover a deficit. That's an issue."
DALEY On how the reserve money is going to be replenished: "You replace money as the economy gets better, and we all go to our synagogues, our temples, our churches, our mosques, and pray it's going to get better. You have to have faith that there's light at the end of the tunnel, and someone sees it, there's light there. Government is to service people, not to service themselves."
REALLY? I'm relieved to hear that the Daley administration isn't out to service itself. But really—pray? This is the plan?
In his budget speech a couple weeks back, the mayor was no more specific, promising to pay back the reserve fund "after city revenues return to more normal levels." What are normal levels? It's hard to say. Before the economy collapsed, the city was bringing in historically high levels of what it calls "economically sensitive tax revenue." For example, in 2003 it collected a healthy $242 million in taxes on real estate transfers and property leases. By 2007, as the housing market continued to thrive, that figure had soared to an all-time high of $305 million, and the city used every penny to balance its $5.7 billion budget. Then the market fell apart. The city predicts it will bring in just $173 million from these taxes in 2010, when total city spending is anticipated to hit a record level of $6.1 billion. It's likely to be years before tax revenues catch up with budget needs again, and even longer before there's enough excess to pay back the meter funds—if ever.
DALEY On leasing the Skyway, downtown parking garages, and meter system: "I'm the one who started talking about leasing public assets. No other city has done this in America."
REALLY? Investment firms interested in profiting from privatization deals were the ones who first proposed them to Daley's administration.
The Skyway lease was first pitched to Daley's top finance aides by officials with Goldman Sachs, which was later paid $8.4 million to advise the city on the deal, and Macquarie Infrastructure, one of the firms that teamed up to submit the winning bid.
The proposals to lease out the garages and meters were brought to the city by William Blair & Company, which the administration then hired to serve as its financial analyst and adviser on the deals. William Blair was paid a total of about $6.4 million for its work.
In the Chicago Public Radio interview the mayor admitted that the meters should have been transferred to their new private operators over a period of six months rather than over one night. But he defended the deal as a winner for taxpayers, arguing that other municipalities were following Chicago's lead: "You have to understand, every other city's done this."
So no other cities are doing this, or they all are?
Well, since Chicago's parking meters got leased, a few other local governments have moved forward with their own privatization plans, and several others have explored the idea. But none has done it the Chicago way, with the research, analysis, and bidding taking place behind closed doors and approval from city legislators coming just days after they'd been briefed (barely) on the deal.
Officials in Pittsburgh and Allegheny County, Pennsylvania, floated privatization to the public, commissioned studies by experts whose results were shared with local legislators, and discussed and debated the idea in the media for months. Before voting on a lease deal approved by Mayor Antonio Villaraigosa, the Los Angeles City Council approved a half-million-dollar contract to study parking meter privatization. The city of Indianapolis commissioned a study on how to get money out of its meter system, and a long-term lease was just one of several options considered. Denver officials have also talked about meter privatization—but quite cautiously. "We welcome ideas, but this one is incredibly complex and one that has to be studied thoroughly," the city's public works manager told a local newspaper.
The long and short of it is that none of these cities has completed a meter deal yet.
DALEY On why aldermen and other watchdogs are calling for reforms of the TIF program: "To be perfectly frank, I think it's just a lack of marketing about what they do and account for. We just have to show, with better marketing, we have to show what the benefits to the community are." The mayor added that TIF funds go mostly toward building new libraries, parks, and schools. "We would not be doing these things in the community if you didn't have TIF money," he said. He added: "I'll go over each TIF to show you."
REALLY? We at the Reader have been asking for more details on TIFs for years. It would be a fantastic public service if the mayor would personally show us where TIF money is going in each district.
As it stands, though, regular citizens aren't privy to that information. As Ben Joravsky and I detailed in the October 22 Reader cover story, "The Shadow Budget," only TIF deals involving a private company are subject to public disclosure and City Council oversight. Under state law, the administration can and does allocate other TIF money behind closed doors to anything else it deems a "public improvement," to the tune of millions of dollars a year. Among the projects TIFs fund are new CTA stations, sidewalk repaving, and streetlight upgrades—along with school and library construction.
Worthy as many of these projects are, it's simply not true that none would happen without the TIF program. There's an entire agency whose purpose is to invest tens of millions of taxpayer dollars annually in public infrastructure like fire stations and schools. It's called the Public Building Commission, and it's overseen by a board of mayoral appointees that meets publicly every month.
Moreover, building schools and libraries isn't supposed to be the point of the TIF program, which was created as a means to eradicate blight and spur private development in depressed neighborhoods. And there's a reason government bodies usually pay for infrastructure with low-cost borrowing instead of draining their bank accounts: it's a lot cheaper in the long run, and it allows them to save their cash for things that can't be bonded out like service delivery and, well, economic development. So Mayor Daley is breeding double trouble here: he's depleting the cash reserves that made it possible to borrow cheaply for infrastructure at the same time he's running through another pot of cash that would be better spent on things besides infrastructure.
The mayor's administration has denied our Freedom of Information Act requests to examine the citywide TIF budget. What we've seen of it, thanks to aldermen willing to share the portions relating to their own wards—which is all they each received—shows that the TIF program is used for a whole lot more than basic community infrastructure. The biggest chunks of the taxpayer funds have been handed over as subsidies to for-profit corporations such as United Airlines, MillerCoors, and Willis Group Holdings, the chief tenant at the former Sears Tower. And yet . . .
DALEY On how improving our schools and job-training programs is the best way to attract new employers to Chicago: "It's talent that's going to bring companies to our city or to America—that's what India and China have proved. It isn't that I'm going to give a tax credit or something to a company."