Rahm and Reform: How Far Did He Go?
As Chicago Mayor Rahm Emanuel’s first term winds down, the Better Government Association is revisiting some of the major "good government" reforms introduced at the outset of his administration with an eye toward determining how much, if any, progress has been made.
Based on information in Emanuel’s 2011 Transition Plan, the BGA policy team focused on four reform pledges the mayor listed as high on his agenda: implementing budget reforms; improving transparency of tax increment financing (TIFs) districts; cutting red tape and simplifying government structure (especially for small business) and improving City Hall ethics.
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The BGA’s examination centers on these issues. The policy team did not delve deeply into other major city reforms raised in the mayor’s 71-page transition plan, which also addressed the areas of education, public safety and economic growth. The Mayor’s office did not respond to BGA questions regarding the four reform areas.
There’s no doubt, when Rahm Emanuel took office, he inherited a city whose finances were a mess.
For years, the city’s initial budget projections revealed a massive structural deficit—approaching $700 million the year Emanuel became mayor.
Under the previous Mayor Richard M. Daley, the city had routinely closed that gap using proceeds from the sale or lease of public assets, including the Chicago Skyway and the city’s parking meters. However, that well had run almost completely dry by the time Emanuel took office.
On top of that, the city had mountains of bond debt and unfunded public pension liabilities. And a legally required $600 million pension payment loomed over the city like a giant hammer.
Emanuel promised change.
In his 2011 Transition Plan, the mayor promised to implement budget reform claiming that "Chicago needs a more disciplined, exacting and transparent budget policy, that sets specific annual and long-term targets."
He promised to formalize the budgeting process by setting hard deadlines, incorporating input from city departments and producing analyses and forecasts that would lead to more realistic spending plans and sound financial policies.
And the mayor has delivered the analyses and forecasts he promised in the time frame he promised them. The budget process now includes an annual financial analysis that provides a 10-year look back and projects a three-year look-ahead.
But those changes may have not gone far enough, and they certainly haven’t yet steered the city off its disastrous financial course.
Although the city’s structural deficit is less than half the size it was when Emanuel took office, city projections show that the deficit will grow the next couple of years, approaching $590 million by 2017. The city’s massive long-range debt has risen even higher, growing each year Emanuel has been in office; some experts say the city needs an updated debt management policy. And the city’s pension crisis remains despite Emanuel’s successful efforts to advance a pension reform bill through the state legislature this past spring.
That legislation seeks to address the unfunded liabilities for the municipal employees and laborers pensions funds, which account for slightly more than half of the nearly $20 billion in unfunded liabilities for the city’s four major pension funds. However, reforming the city’s two remaining funds—for police officers and firefighters—will be more challenging since they don’t receive the compounded cost-of-living adjustments that were restructured in the pension reform bill for the municipal employees and laborers pension funds.
Furthermore, leaders of the municipal employees and laborers pension funds have said they will challenge the pension reform legislation in court. And it’s unclear how the city will generate the additional revenue needed to increase its contributions to those pension funds.
Initially, Emanuel floated plans for property tax increases in each of the next five years, but those plans were scrapped to secure support for the pension reform legislation. Instead, the Chicago City Council recently approved a telephone tax increase that will generate $50 million in additional revenue over the next year for pension payments, but the mayor hasn’t yet announced how the city will generate the extra money needed in future years.
To make matters worse, the city’s credit rating with one investment house has plummeted. Last year, Moody’s Investors Service lowered the city’s credit rating three levels. And in March, citing the city’s pension struggles, Moody’s downgraded Chicago another level.
The city’s credit rating is now just three levels above junk status. Detroit, which filed for bankruptcy in 2013, is the nation’s only major city with a lower credit rating than Chicago.
Ultimately, according to some observers, cleaning up the city’s finances will require more thoughtful long-term planning, making hard choices and exercising discipline, particularly with regard to pensions and long-term debt.
As the Civic Federation noted in its review of the 2014 budget, the city has to stop refinancing its long-term debt for future generations to cover in order to balance current budgets. The group also recommended expanding the city’s annual financial analysis to include financial policies, ratings of indicators and long-range strategies to provide baselines that illuminate whether the city is making progress.
The group also called for meaningful public input. While the city readily provides its annual financial analyses and other budget documents online, face-to-face budget discussions with citizens have been scarce in the last couple of years.
The mayor held public hearings during preparations of his first city budget in 2011.
However, just one such meeting was held in 2012 and none were held last year. In response, a group of aldermen have sponsored public meetings to discuss the city’s proposed budgets in each of the last two years. Several of them shared that feedback in city council budget discussions.
When Mayor Richard M. Daley was in office, community activist and watchdog Tom Tresser remembers, doing research on the city’s Tax Increment Financing (TIF) districts was an ordeal.
He went to City Hall and sat – under a staffer’s watchful eye – combing through hundreds of pages, prohibited from making copies. Today, much information about the city’s TIFs is available online, in a user-friendly portal with an interactive map.
Community activist and watchdog Tom Tresser / Twitter
During his campaign Rahm Emanuel promised to bring transparency and accountability to the city’s notorious TIFs – specially designated taxing districts wherein a portion of property tax dollars are diverted to projects chosen by the Mayor and City Council. The goal is improving blighted areas, but TIFs have long been criticized as a slush fund that benefits too many wealthy areas, politically connected developers or major corporations.
Watchdogs and civic leaders across the political spectrum say that while much more TIF information is indeed now available, full transparency and real accountability is still seriously lacking.
Emanuel’s transition plan promised that within 100 days, guidelines would be developed to "ensure TIF transparency, set standards for future TIF investments, and develop measurable performance criteria."
After his first year in office, Emanuel said he would have assessed all current TIFs, posted the information online and incorporated the findings into the FY2012 budget.
"Future decisions regarding TIF spending will be made and evaluated according to a clear set of return-on-investment expectations," the transition report promised.
Within a week of taking office Emanuel convened a task force to make recommendations meant to ensure TIFs are a tool for job creation and economic development. And he created the online TIF portal and added TIF information to the city budget.
Even harsh critics like Tresser – co-founder of the TIF Illumination Project and the group CivicLab – say it is a lot easier to keep tabs on TIFs these days. But the transparency has limits.
Tresser and his corps of volunteers have spent hundreds of hours compiling dossiers on how much TIF money has been generated by each ward and where that money has been spent.
No such sums are available online, and they have been compiled only with information obtained through Freedom of Information Act requests and information passed along from insiders, Tresser said.
"Try to recreate this document from the city website," said Tresser, waving a colorful poster that details allocations from 12 TIFs in the 27th ward. "You won’t be able to do it."
After Emanuel’s task force released their recommendations in August 2011, the Illinois PIRG Education Group released a report concluding transparency improvements were anemic.
Much information about TIF creation and allocation had been posted online, but little was posted about how TIF money was actually spent. Almost three years later, those criticisms still stand. The map on the portal doesn’t show how money was spent, and the TIF Balance Sheet is only updated through 2009. The TIF annual reports posted online are also less than revealing.
Illinois PIRG public interest advocate Dev Gowda has been reading through the 2013 TIF annual reports and been frustrated to see that the section on job creation (Section 7) is usually blank.
"Does that mean it created zero jobs or is it not required to create jobs?" Gowda asked. "Even if there’s no requirement you would hope some jobs would be created when you’re spending all that money. The blanks make it look like no one is being held accountable for creating jobs or seeing how many are created."
Meanwhile the major criticism of TIFs during Daley’s rule – that they were doled out at the Mayor’s whim for politically-connected projects and major corporations in well-off neighborhoods – has not changed under Emanuel’s administration.
This was made abundantly clear with the approval of up to $55 million in TIF funds for a hotel at McCormick Place.
Initially, the TIF money was to be used for a sports arena for DePaul University near the convention center. The project became a symbol of what many describe as Emanuel’s misplaced priorities, especially since the project was announced as his administration was closing nearly 50 public schools.
Emanuel has also pledged millions in TIF dollars for projects including an upscale grocery store in Greektown; a commercial development with a Whole Foods in Hyde Park; a riverfront plaza downtown.
Then there is the TIF money (up to $14 million and $60 million respectively) for an expansion at Walter Payton College Prep High School and the new high school named for President Barack Obama – both on the near north side, drawing ire considering the south and west side school closings.
Though Emanuel has canceled some TIFs and returned that money to general coffers, many TIFs remain in parts of the city that are clearly not "blighted."
Most notably, the LaSalle Central TIF downtown, including the Lyric Opera and United Airlines, where more than $132 million in TIF money has been approved by City Council.
Cook County Clerk David Orr / Facebook
"TIF can be a very creative economic tool used particularly to help blighted areas where you can’t get private capital," said Cook County Clerk David Orr. "But the key [problem] is lack of accountability, which today becomes even more critical because we’re facing a crisis in the city and its finances."
While Orr thinks that Emanuel has done a better job handling TIFs than Daley did, he still says, "This is public money treated like a private fiefdom."
Orr is calling for a comprehensive audit of all TIFs, with the results made public. This was a recommendation of the TIF task force, but it has not been carried out.
Transparent TIF auditing would give the public, independent experts and the media the ability to weigh in on the best uses of TIF money, resulting in better financial outcomes, said Orr.
"If there was really transparency people could say I do believe we should be spending half a million on this, or not," Orr said. He thinks auditing would help the city remove at least 10 percent of properties from TIFs, which he said would free up about $38.5 million a year, including $24 million for schools.
The Civic Federation has also recommended taking a harder look at whether TIFs are needed for redevelopment, with an eye toward canceling more TIFs or removing individual properties from them.
Then there’s the at least $170 million in unallocated TIF surplus funds left at the end of 2013. The mayor decides how much TIF money is considered surplus and what will be done with it. Emanuel has promised to use transparent metrics to do this, but critics say the process is still opaque and that not enough TIF surplus money is being kicked back to schools and other public bodies.
Aldermen Scott Waguespack and Robert Fioretti pushed an ordinance that would have funneled a relatively modest percentage of surplus TIF money back to public schools, including by triggering an automatic surplus designation in TIFs that took in more than $1 million. But even after obtaining 30 co-sponsors the ordinance was sent to the Rules Committee to die, a typical fate for measures not backed by the Mayor.
In November a measure was invoked allowing the full Council to vote on whether to move the ordinance out of committee. But despite the majority of Aldermen who had co-sponsored the ordinance, only 11 voted to bring it out of the Rules Committee. City Council watchers say that without Emanuel’s support, even Aldermen who claimed to back the measure were not willing to move it forward.
U.S. Rep. Mike Quigley (D-Chicago) gives Emanuel credit for increasing transparency on TIFs, including the portal and putting TIF information in the city budget. But Quigley still doesn’t think TIFs are being used effectively or fairly, as he outlined in a report back in 2007 when he was a Cook County Commissioner. "I’m not sure they do anything but rob from other taxing bodies," Quigley said.
The pension debacle has also cast more light on TIFs. An analysis by the Washington group Good Jobs First showed that taxpayers paid $457 million into TIFs in 2012, more than the $385.8 million the city spent on pensions.
Money can be shifted between adjacent TIFs, meaning money from a poorer TIF can actually be used in a wealthier one.
The Grassroots Collaborative, a coalition of faith, labor and community groups, is pushing for a "Robin Hood" TIF ordinance that would call for shifting money from wealthier TIFs to adjacent ones in lower-income areas.
"When you talk about TIF reform, the mayor has yet to make any change that you can really feel," said Grassroots Collaborative executive director Amisha Patel. "Yes there’s more information online, but there’s no way for people to really have a voice in the process. There needs to be agreed upon criteria where we can decide what really deserves this taxpayer money."
FEES, REGS, INSPECTIONS
On the campaign trail and in his transition report, Emanuel promised to make things easier for businesses, especially small businesses, by simplifying fees, regulations and inspections.
By his one-year mark, Emanuel promised that "Businesses will find interactions with the City much simpler, both when launching a new business and when periodically renewing licenses."
"Inconsistent enforcement of City regulations and a time-consuming, unpredictable licensing and permitting process deter businesses from opening in Chicago," said Emanuel’s transition report. "And the sheer quantity of fees and regulations can be frustrating if not downright debilitating to business owners."
In his 2014 budget address, Emanuel noted the progress made on this front:
"We’ve eliminated 60 percent of business license types; created a one-stop small business center; eliminated the anti-job head tax; dramatically expanded and improved our small business, MBE and WBE procurement programs; and streamlined inspections for new restaurants."
The Small Business Center in the Department of Business and Consumer Protection holds frequent workshops for business owners and staff shepherd entrepreneurs through the licensing and permitting process. City Hall says a Restaurant Start-up Program, launched in 2012, "has cut start-up times in half, helping nearly 200 restaurants open their doors more quickly."
The city also created a micro-loan program for small businesses turned down by banks, which Emanuel says has created 500 jobs, and he promised to make $500 million worth of such loans in 2014.
The Mayor made a specific effort to reduce costs, wait time and bureaucracy involved in installing solar panels. The city program Solar Express developed with a $750,000 grant from the U.S. Department of Energy reduces the wait for a permit from a month or more to one day, and reduces the fee for a residential rooftop solar permit from $375 to $275. In the program’s first year, according to Chicago Chief Sustainability Officer Karen Weigert, almost 20 applications had been made under the new procedure. But some solar installers said the city’s rooftop inspection requirements are still far too burdensome.
In the FY2014 budget address Emanuel pledged the small business office would go paperless by 2016: "Every business owner will be able to apply for their license online, from their home or office, and avoid a time-consuming trip to City Hall."
Such convenience counts for something. But avoiding trips to City Hall and jettisoning annoying paperwork doesn’t necessarily create jobs or make the difference between business success and failure.
Meanwhile Emanuel promised to "simplify" fees and regulations, not reduce them.
While business leaders celebrated the elimination of the head tax, Emanuel did increase a host of other fees, taxes, fines and rates that affect businesses.
He increased the cost of creating a loading zone, crucial to many businesses. Business owners railed against increased parking rates including a congestion tax for parking in lots and garages.
And Emanuel’s attempt to mollify drivers with free Sunday parking – part of the ongoing parking meter debacle -- backfired as business owners said this led to spots being tied up by residential parking.
Fees for zoning applications were increased, by a projected $4 million this year, and those who don’t want to go paperless and insist on filing an application by hand will pay an extra charge.
While businesses may have seen a decrease in red tape, residents feel they are being increasingly nickel-and-dimed, from the higher cost of a vehicle sticker to increased parking ticket and towing fees, cable taxes, cigarette taxes and increased fines for a host of infractions.
Many citizens are furious about the red light cameras and speed cameras placed around parks and schools, especially given the news that Emanuel’s own drivers have been repeatedly speeding through the zones or running red lights without paying fines.
These cameras are supposed to bring in $120 million this year, with an additional $10 million slated from towing, impoundment and other vehicle charges. Fines have also been increased for a host of minor violations including allowing weeds to grow too high, accumulating trash and junk and playing a radio too loud.
Emanuel punctuated his campaign for mayor with promises to end Chicago’s legacy of political patronage and other ethics abuses. After his election in 2011, he continued that theme in his transition plan with a promise to "initiate" ethics reform.
"The City owes it to the taxpayers to provide superior services free of corruption and waste," reads the mayor’s transition plan.
Nearly three years later, ethics reform may be the issue where Emanuel has most distanced himself from the previous administration of Richard M. Daley.
Still, some critics note that Emanuel has resisted some common-sense reforms, particularly those that affect oversight of the mayor.
In his transition plan, Emanuel promised to establish a two-year "revolving door" restriction on some city workers from lobbying the city after leaving their government jobs and making public loads of information about lobbyists and their lobbying activities.
Emanuel delivered on one of those promises his first day in office by signing an executive order establishing the revolving door provisions. He also signed executive orders banning lobbyist contributions to the mayor and imposing stronger gift restrictions for city workers.
Later on in 2011, Emanuel established an ethics reform task force to suggest changes to the city’s ethics ordinance. Over the next 18 months, Emanuel pushed two ethics reform measures through the Chicago City Council adopting many of the task force’s recommendations. Among other changes, the measures required ethics training for city workers, established ethics officers in every city department, tightened lobbying rules, and created whistleblower protections.
"Overall, I think that the administration has done a fairly good job," said Cindi Canary, a longtime good government advocate who chaired the mayor’s ethics task force and, for years, led the Illinois Campaign for Political Reform.
"While it's important to have a strong (inspector general), emphasis should be put on prevention," Canary added. "Leadership, clarity, education and having the opportunity to proactively identify and address problems before they get out of hand was the framework through which we considered our specific reforms."
In June, a federal court relinquished the city from federal hiring oversight due to internal controls the city has established to limit the widespread patronage hiring first revealed to the court more than 40 years ago.
While the mayor lived up to the ethics reform promises of the transition plan he released following his election in 2011, he has not followed through on some other key ethics reform promises he made while campaigning for mayor.
On the campaign trail, the mayor said he’d expand the authority and budget of the city’s inspector general, but neither has happened.
And while the relationship between the mayor and Inspector General Joe Ferguson has reportedly improved, Emanuel has publicly squabbled with Ferguson and rebuffed the inspector general’s subpoenas for documents held by the mayor’s office.
Last year, city council reformers proposed a number of ordinances to designate a percentage of the city budget to cover the inspector general’s office and to bolster the inspector general’s subpoena power among other changes.
In presenting the ordinances, the aldermen asked Emanuel to simply deliver on what he once promised. However, those proposals have gone nowhere.
Alderman Scott Waguespack (D-32) said Emanuel’s denials of Ferguson’s subpoenas and his inaction to strengthen the inspector general’s office speak louder about the mayor’s commitment to ethics reform than any other changes he’s made.
"To me it really trumps all of these other things," said Waguespack.
Kari Lydersen is a freelance writer for the BGA policy team. Alden Loury is a BGA senior policy analyst.