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Ready, Set, (Property Tax) Hike

How will Daley balance the 2010 budget? Prepare for higher property taxes—but not till after the 2016 Olympics are sited.

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On August 25, Mayor Daley officially kicked off the campaign to get his 2010 budget passed with a hearing at the South Shore Cultural Center. The mayor and his top aides hold a few of these hearings every year about this time, but this one was unusual for attracting hordes of reporters waiting to hear Daley say the city had "screwed up" the implementation of the parking meter privatization deal—language included in a draft of his remarks leaked the day before to the Sun-Times.

As you undoubtedly heard, he didn't come close to saying any such thing. But the media frenzy that ensued was an effective diversion from the far more pressing business at hand—namely, how he plans to close the gaping hole in the city's budget, estimated to hit at least half a billion dollars by the end of next year.

Here's my prediction: there's a property tax hike coming, but you won't hear about it until after October 2, which is when the International Olympic Committee decides whether Chicago—as opposed to Rio, Madrid, or Tokyo—gets to host the 2016 summer games.

The annual budget process takes place over almost three months, from mid-August through mid-November. First Mayor Daley holds three public hearings—the one at the South Shore Cultural Center was the first this year—where he unveils his "preliminary budget." It's an estimate—of how much he'll have to spend in the coming calendar year and where some of the money might come from.

After the hearings the action moves behind the scenes as Daley and his aides put the final touches on a budget to bring before the City Council. The council holds a couple weeks of hearings before voting on it sometime in November.

The preliminary budget is based on projections of how much the city expects to collect in taxes, fees, and fines. If the revenues appear to add up to less than officials hope to spend, they project a deficit. In the extraordinary event that it looked like they'd take in more than they planned to spend, they'd announce a surplus.

The projections are devised by budget office analysts who owe their jobs to Mayor Daley—not exactly a bunch of dispassionate bean counters. This ensures they become political animals if they weren't already, and their projections are based at least in part on the mayor's political needs. In truth, they could pretty much say whatever they want—no one's really holding them accountable for how accurate their predictions are or what methods they use to come up with them. No one—except for a few geeks like yours truly—even follows this stuff from one year to the next.

So it should come as no surprise that in budget seasons before mayoral elections—such as the fall of 2006—the analysts tend to paint a rosy picture, with the mayor playing the role of a financial wizard who makes the government run with a wave of his wand and a (mangled) incantation. Then he can go before the electorate and say, I collected your garbage, plowed your streets, and balanced the budget without raising your taxes.

As soon as the mayor's been safely reelected his budget team tends to turn right around and announce, Guess what? Our projections fell short. We'll have to raise fines, fees, or taxes after all—or else cut services.

At this point last year, the mayor and his budget aides began pointing to the global economic meltdown while projecting a 2009 deficit of more than $400 million. They promised to close it without a property tax hike, and instead to put together a package of fee hikes, services cuts, and employee furloughs.

Why that and not a tax increase? The mayor said he understood the plight of the ordinary home owner straining to pay the bills.

Maybe he did, and maybe he still does. But the mayor was also trying to avoid a tax revolt that would upset his efforts to bring the Olympics to town. Remember, at this time last year Chicago was vying with Los Angeles to get the U.S. Olympic Committee to back its bid. The last thing he needed was a populace upset by a tax hike.

So Daley claimed to have balanced the budget for 2009 by eliminating 1,600 vacant positions, laying off 635 employees, imposing fees on the use of Dumpsters, cutting back on hours at the blues and jazz festivals, raising library fines, and so on and so forth. In short, a little of this and a little of that—but not enough to stir up the masses.

The council went along as usual, voting 49-1 to pass the budget.

And now, a year later, it turns out the projections were wrong. The city has a $300 million deficit. But not to worry—the mayor says he'll fix it by making $34 million in "expense reductions" and spending $269 million from the money the city got from leasing the parking meters (or, as he and his aides call it, the "parking meters budget stabilization fund").

There's just one little problem—the 2010 budget. The mayor could predict that things will pick up and money will flow into the city's coffers, which would probably bolster his chances of landing the Olympics. But considering the recession, that would be too far-fetched for even his biggest boosters in City Council to buy.

So he projects a whopping deficit—almost $520 million, the largest the city has ever faced. And how will he erase it? Well, he can't lease the parking garages, the Skyway, or the parking meters, 'cause he's already done that.

If he has any new "budget stabilization" schemes up his sleeve, he hasn't talked about them at the hearings—or offered any other specifics explaining how he plans to erase the debt. But unlike last year, he's not repeating his vow of no new taxes.

There's probably a good reason for that. Daley doesn't have a lot of options. Unless his aides can come up with more creative projections, he'll have to make deeper cuts—or raise property taxes.

As I said, my guess is that he won't play his hand until after the IOC's meeting on October 2, when it won't matter anymore what people around here have to say.

To be fair, cities and states all over the country are struggling with the same problems. Perhaps the mayor could have staved some of them off by raising taxes last year. Or he could have closed a few TIF districts, so the property taxes they divert would go back to general revenues.

Speaking of TIFs—and you can't talk about the city's budget process without mentioning them—in 2007 TIFs diverted about $550 million in property tax dollars into slush funds controlled by the mayor and aldermen. In 2006 they diverted $500 million. The TIF diversion for 2008 will not be calculated until November, but it will probably approach $600 million.

These funds are piles of property tax money, yet in the past the mayor and the council wouldn't talk about them during the budget hearings. Will they this year? I'm doubtful.

The mayor can reach into these pots of gold for handouts to United Airlines, MillerCoors, the Willis Tower, the Block 37 underground station, the Olympics, or whatever other idea pops into his head while everyone else struggles with higher parking fees, slower garbage collection, and, almost inevitably, bigger tax bills.

I guarantee you one thing: you'll never hear him apologize for that.

For more, see our archive of Ben Joravsky's reporting on Chicago's Olympic bid.

Ben Joravsky discusses his work weekly with journalist Dave Glowacz at mrradio.org/theworks.

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