Thar She Blows 

The white whale lurking behind the mayor's new tax increases

The first thing you need to know about Mayor Daley's budget, released on October 10, is that it's nothing more than a projection. The mayor's bean counters calculate how much money the city can expect to take in through fees, fines, and taxes over the next year and balance that against the amount they plan to spend. If, one year later, the city brings in more or spends less than anticipated, there's a surplus and taxpayers would theoretically get a refund (ha ha ha). If it brings in less or spends more, there's a deficit, requiring new fees and taxes to make up the difference.

Last October Daley, feeling pretty good about the city's economic condition, projected that he could fund city services--policing streets, clearing snow, hauling garbage, etc--without demanding much in the way of new taxes. Holding the line on taxes was a key theme in his subsequent reelection campaign.

Now, a year later, ensconced in office for another four years after his easy win in February, the mayor's reversed himself. The real numbers are in and his assessment of the future is gloomy: he says he'll need about $293 million in new fees, fines, and taxes to keep the city afloat.

The budget speech he gave announcing the news was classic Daley. He blamed everyone but himself for the city's woes, starting with state legislators, who he said were too stingy with funds and too slow to pass residential property tax relief (keep in mind that he barely lifted a finger to lobby on either front). "If I propose raising taxes, it's because we've exhausted every other option," he said.

He promised to use some of the new tax revenue to "build or renovate more than ten libraries across the city." That pledge caught most listeners by surprise. Nothing against libraries. But with all the problems facing the city--failing schools, mass layoffs of teachers, nurses, and prosecutors, the CTA yet again threatening to raise fares and shut down routes, and the county crying for its own huge tax hike--are branch libraries really a top priority? Most aldermen figured the mayor was using them to conceal his true purposes.

In fact, the budget address raised a number of questions about the mayor's motives, not the least of which is why he's proposing to raise taxes and fees at a time when many people are already buckling under the burden. Remember, Daley's proposed tax hike comes on top of the whopping second-installment tax bill home owners will be receiving in the next few weeks. If November's tax bill doesn't drive you out of your house, next year's first installment bill threatens to.

It's hard to see any dramatic difference between this year and last year that would justify such steep increases. Yes, the housing market is softening, but it's not that soft, at least not yet. And the downturn in housing sales was predicted by many experts last year, when the mayor was so upbeat. Politically, it's just plain stupid to raise taxes when services remain so poor. The more we pay the less we get.

So what's really going on? The budget itself won't tell you. For one thing, it doesn't itemize the city's fastest-growing drain on revenue, tax increment financing districts. There are now 156 TIFs in the city, consuming more than $400 million in property taxes annually. Originally intended to eradicate blight in low-income communities that would otherwise get no investment, they're mainly used to hand out money to developers and businesses in the Loop and on the near west and south sides. If Daley truly wanted to ease the tax burden, he'd start shutting down the TIFs. Instead he insists they're untouchable and keeps creating new ones.

So if the budget won't explain the pressing need for higher taxes and fees, where can we find an answer? One place to start is page eight of the Tribune sports section from October 14. In a short article squeezed between a story about the Bulls and an ad targeting erectile dysfunction, Phil Hersh reported the latest development in Daley's impassioned pursuit of the Olympics: representatives of Chicago 2016, the committee of business and civic leaders overseeing the city's bid, were off to Lausanne, Switzerland, that week to attend the International Olympic Committee's applicant cities seminar.

There, my friends, is a clue to where your future tax dollars will be going and why they need a major boost. And it has nothing to do with libraries. Chicagoans may think of the Olympics as a pipe dream, too far down the road and too unlikely to come here to be worth worrying about. But as Hersh's article indicates, the fight to win the Olympic bid is on. By January 14, 2008, the seven cities still in the running for the 2016 games will have to submit a "mini bid book"--a detailed description of their vision, plans, budget, and funding--to the IOC. (Aside from Chicago, the other bidders are Tokyo; Rio de Janeiro; Madrid; Prague; Doha, Qatar; and Baku, Azerbaijan.) In June the IOC will eliminate three candidates, narrowing the field to four entrants, who will vie for the prize that will be announced in 2011. For Daley and his Olympic planners it's crunch time.

The IOC will be taking a close look at how much money each applicant is willing to put on the line for Olympics-related building: stadiums, arenas, housing, and so forth. In this regard Prague is already in trouble. The center-right Christian Democrats, who wield considerable influence in the Czech Republic, have announced their opposition to spending public money on the games.

Mayor Daley, of course, spent the better part of a year promising not to spend any public money on the Olympics. He only openly committed to doing so after the U.S. Olympic Committee forced his hand. "We definitely want the government to have some skin in the game," Bob Ctvrtlik, an official with the USOC told reporters in March. "We had been assured by the mayor that this is the case with the city of Chicago."

Apparently, while Daley was telling the public we wouldn't have to pay for the games he was privately assuring U.S. Olympic officials we would. Within a week of Ctvrtlik's remarks the mayor pushed legislation through the City Council guaranteeing up to $500 million in public money for financing.

But $500 million will only be a start. At last report, estimated costs for the London games in 2012 were up to $18 billion, triple the original estimate. Athens wound up paying twice as much as anticipated for the 2004 Olympics. It's hard to believe Chicago would get off any easier.

Mayor Daley continues to claim that private backers have been lined up to underwrite the games, but neither he nor Chicago 2016 has released any names. He says he has to keep the investors secret to avoid divulging critical trade secrets to rival cities.

But I suspect the bulk of the games will be financed with money from the city's TIF accounts. That's why Daley's proposed tax hikes are so critical. TIFs work by freezing the amount of property tax revenue the parks, schools, county, and other taxing bodies can draw on. As property values rise, the TIF funds get all the additional tax money the property generates. By calling for a hike in the property tax rate, Daley's accelerating the amount of money pouring into TIF funds at the same time he's looking to impress the IOC with Chicago's ability to pay for the games--a master stroke.

Best of all, Daley alone controls the TIFs, as I'm sure his Olympic planners will make clear to the IOC. The TIFs are off budget. They're not on tax bills, so few taxpayers even know they exist. Almost no one, except a few TIF geeks, pays attention to how TIF money's spent. The TIF oversight boards are rubber stamps filled with mayoral appointees who know enough not to ask questions. TIF rules and regulations are riddled with so many loopholes they might as well not exist. TIFs truly function as a mayoral slush fund--that's why Daley likes them so much.

Most outside observers rank Chicago as a long shot to win the games. But don't underestimate Daley's determination: he's like Ahab, obsessed with the great white whale. Schools, parks, trains may fall apart, folks may be forced from their homes by taxes and gentrification, but Daley's going to get his games, ship be damned.

I really can't say I blame the mayor for thinking he can get away with it all. At no point during his 18-year reign have voters ever held him accountable. Besides, a mass delusion seems to have set in at City Hall when it comes to TIFs. I've heard everyone from the mayor to aldermen to planning department officials say they don't really raise taxes. They may even believe it. If you look at it from this perspective, the games are magically free even if they cost us a fortune.

For more on politics, see our blog Clout City at chicagoreader.com.

Art accompanying story in printed newspaper (not available in this archive): illustration by Kurt Mitchell.

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