Illinois Government Consultants Incorporated

City Hall faces a budget shortfall next year of $654 million, Mayor Richard Daley’s top budget officials told aldermen this morning.

The large gap is a result of continued weak tax revenue, rising city worker pay rates, union contract settlements and the costs of lawsuits, said Ald. Robert Fioretti, 2nd, who attended a meeting of aldermen and the budget officials, including Chief Financial Officer Gene Saffold and Budget Director Eugene Munin.

Saffold and Munin plan to brief the media at noon, and city budget officials declined to comment before then.

It’s the second year in a row that the city faces a shortfall of more than half a billion dollars, but this year the city has less in reserve to help close the gap.

So the Daley administration is looking for new, so far unspecified ways to make up the difference, Fioretti said. Some aldermen recommended taking money out of tax increment finance district funds dedicated to rehabilitating blighted neighborhoods, but other aldermen spoke out against that idea.

Aldermen, including Fioretti and Ald. Richard Mell, 33rd, made it clear that they want to see more police officers hired.

“If anything came out of it, one thing they heard loud and clear is keep our streets safe and increasing the ranks is the most important priority here,” Fioretti said.

Last year, Daley relied mostly on onetime funding sources to close the gap.

He pulled $102 million out of a rainy day fund created when the city leased its parking meter system for $1.15 billion. And he “borrowed” $270 million in parking meter funds intended to generate revenue for the 75-year life of the lease.

He also used other parking meter and Skyway lease funds, as planned, to cover costs in this year’s $6.2 billion budget. By the end of the year, the city will only have $223 million left from the proceeds of the parking meter lease.

The city this year also saved $118 million by refinancing debt. Much of the remaining 2010 budget gap was closed by getting some union and all non-union workers to take a total of 24 days off work without pay — which city officials said today would remain the same next year.

But city costs not anticipated in this year’s budget have made the city’s financial condition in these tough economic times even more uncertain.

After an arbitrator settled a police contract dispute, the city owes $160 million in back pay. When firefighters settle their dispute, they could be owed up to $40 million.

As a result, the city plans to borrow money to cover those costs and $45 million to $100 million it will owe as a result of a U.S. Supreme Court ruling in a lawsuit brought by black applicants for firefighters’ jobs who said the city’s 1995 entry exam discriminated against them.

In May, Daley ruled out raising property taxes to close any gap in next year’s budget. He stuck to a similar pledge last year. City elections are in February, and a tax increase so close to decision day would be politically unpopular.

The mayor each year issues his preliminary budget by the end of July and then goes to a series of community meetings in August to get citizen input. People who attend those sessions typically raise a myriad of concerns but rarely address the budget itself.

Daley’s full budget proposal for next year is due in October. The City Council then holds hearings and votes on the budget by the end of the year.
————–
Source: The Chicago Tribune