Mayor Daley's recently released 2007 budget starts with a whopper and goes downhill from there. "We are confident that next year we will once again meet our responsible revenue projections," Daley said in his October 11 budget address to the City Council. "That's why next year the city of Chicago will make new investment in our people and neighborhoods without raising property taxes or any other tax or fee. This will be the third year in a row without a city of Chicago property tax increase."
Oh, brother. The mayor has been steadily raising taxes over the last three years, as anyone who pays them can tell you. The chief culprit is his favorite money-raising scheme: tax increment financing districts, which put a cap on the tax revenues that go to the schools, the parks, the county, and other bodies and feed the rest into off-budget slush funds he controls. As of August the city had established 143, more than 100 of them over the last ten years. Others are being considered--the LaSalle Central TIF, which targets the financial district, is lined up and awaiting City Council approval, which it'll probably get on November 1.
From 2003 to 2005, the years Daley supposedly held the line on taxes, the TIF take rose from $287 million to $387 million. In all likelihood it will rise above $400 million this year, and there's no telling how high it will soar in 2007. But the budget isn't so much an actuarial statement as a public relations spectacle--particularly in an election year. It starts with the mayor's City Council address, in which he pats himself and the aldermen on the back for a job well done. Then he's off to meet with the editorial boards of the downtown dailies, while his aides disseminate the budget document itself, a fat, glossy book filled with color pictures of happy citizens and praise for the wisdom and compassion of our dear leader ("part of Mayor Daley's continuing commitment to ensure the health and welfare of newborn children"--you get the idea).
As for the numbers themselves, they're grossly misleading. They're projections of money Daley expects to raise offset by the money he expects to spend. Reality will set in next summer when the mayor turns to Cook County clerk David Orr and officially asks him to fork over (or "extend," to use budget terminology) the property tax dollars he needs to pay city expenses. Last August Orr's office extended about $737 million to the city, up from $719 million the year before.
The aldermen and the dailies fell in line with the budget spectacle, hailing the mayor for his masterful leadership. "The 2007 budget that Mayor Daley unveiled last week is much like this year's budget and doesn't call for any tax hikes or fee increases," the Sun-Times editorialized. "The city will spend about $500 million more, but will pay for that with natural revenue growth. For many Chicagoans, knowing that their city tax bill won't go up may be all they care to know about the budget."
Well, I hate to be the bearer of bad news. The budget may not call for any new taxes, but the city tax bill for most Chicagoans will most certainly go up, just as it did last year and the year before that. Who will get hit hardest is far from certain. It all has to do with the murky politics of the so-called property tax cap.
Simplifying somewhat, the county calculates what you owe by multiplying the tax rate by the assessable value of your property. When Daley says he's not raising property taxes he really means he's not raising the tax rate. Big deal--he doesn't have to. Every three years Cook County assessor James Houlihan's office reassesses property values. Because of the rising real estate market, property assessments keep going up. So Daley can cut the tax rate and still take in more property taxes.
Sensing that Chicago's property-tax-paying peasants would revolt over skyrocketing assessments three years ago, the powers that be (Houlihan, Daley, Governor Blagojevich, house speaker Michael Madigan, and senate president Emil Jones) got the General Assembly to put a three-year cap on the amount assessments could rise by increasing the home owner's exemption. About 80 percent of home owners got protected; the other 20 percent still got walloped.
What does this mean in bottom-line dollars and cents? Let's look at a few local politicians. Former Cook County Board president John Stroger paid $3,755 in taxes on his south-side home in 2003, before the tax cap was passed. In 2004, his assessment rose but, thanks to the cap, he only paid $3,082 in property taxes--his tax bill actually went down. Same thing for 29th Ward alderman Isaac Carothers, whose property taxes in Austin fell from $1,638 in 2003 to $1,550 in 2004. Meanwhile, Congressman Bobby Rush, who lives in Bronzeville, saw his tax bill go up by $3,205, a 286 percent jump. I presume he was able to handle it. Some of his neighbors--particularly seniors on fixed incomes who bought their houses years ago--can't.
Of course, when the tax cap expires next year and tax bills come out in August, people who were protected in the 2003 reassessment will get hammered. Reassessment represents a potential windfall in property taxes, and Daley's got Millennium Park to pay off, an Olympics to pay for, Wal-Marts to subsidize, and big TIF expenditures in the Loop. If he's reelected, look for him to cut the rate by a tad, reap a reassessment bonanza, and continue to brag about how he's holding the line on taxes.
In a sense, the budget unveiling is just a small step in a long journey. Over the next few months Daley, Houlihan, Madigan, Jones, and whoever gets elected governor will try to construct a scheme that keeps the peasants from revolting while the property tax dollars flow in.
Department of Redistributed Resources
The Daley administration's recent sale of the four parking garages under Grant and Millennium parks is one of those confusing City Hall transactions that cries out for a little back-of-the-envelope math.
On October 13 Mayor Daley announced good news for beleaguered property tax payers: he was leasing the Grant Park South, Grant Park North, East Monroe, and Millennium Park garages to Morgan Stanley for $563 million over the next 99 years. "It's an outstanding deal for the taxpayers of the city of Chicago," Daley proclaimed.
That does seem like a lot of money--until you consider that $278 million is needed to erase existing debt on the garages, $120 million goes to a reserve fund to make up for the $5 million a year in revenue the garages currently generate for the Park District, $35 million goes to rebuild Daley Bicentennial Park, and $8 million goes to pay for various legal and transactional costs. "It allows for a massive shift of capital resources from downtown parking garages to neighborhood parks throughout the city," Daley said.
Actually, not really. The neighborhood parks are left with $122 million from the transactions. Using the city's own $5 million a year figure, the parks would have been better off had we simply held on to the garages, which would have raised about $495 million for them over the next 99 years. When all is said and done, most neighborhood parks will probably make less money from the deal than the lawyers and financiers who consummated it.
So why, then, is Daley really leasing the garages? He desperately needs the money to pay back the loans borrowed to help build Millennium Park. He was supposed to pay off those bonds with parking fees generated at the Millennium Park garage, but business there was worse than expected. He might have paid for Millennium Park by raising the hotel-motel tax. But he raised that in order to rebuild Soldier Field (remember the long lines in the washrooms?). As city officials constantly tell me, 100 years from now no one will care about how we financed Millennium Park and the new Soldier Field. A fat lot of good that does us now.
Art accompanying story in printed newspaper (not available in this archive): illustration/Paul Dolan.