September 27, 2012
On June 30, 2011 the Civic Federation released Recommendations for a Financially Sustainable City of Chicago. The report offered a comprehensive set of forty recommendations to improve the City’s long-term fiscal condition. The reforms could be implemented over the next few fiscal years and covered a wide array of functions from pensions to public safety.
Next month the City will release its proposed FY2013 budget. Despite cost saving initiatives implemented by the City over the past year, the City has estimated the budget deficit to be nearly $300 million. Still, this marks progress over recent years where projected budget deficits have reached over $600 million.
This blog provides an update to the Federation’s report by analyzing the City of Chicago’s progress on each recommendation, including an updated index of all forty recommendations and their current status, identifying where the City has failed to take action and details on the City’s progress for each recommendation where action has been taken. To determine the status of the recommendations, the Civic Federation reviewed the Annual Financial Analysis 2012, first-year progress report and other documents prepared by the Mayor’s office, monitored City Council meetings and analyzed the FY2012 budget. The Federation will learn more about how well the City has implemented its FY2012 budget initiatives with the release of the FY2013 proposed budget and its updated 2012 estimates. In this blog, the Federation uses cost savings estimates either calculated by the City of Chicago or from the City’s approved Appropriations Ordinances.
In over one year, Mayor Rahm Emanuel has produced a budget and implemented initiatives that reflect significant progress on recommendations made by the Civic Federation. Some cost savings reforms include major expenditure reductions in personnel and evaluating the procurement process for efficiencies. Initiatives that have increased operational efficiencies include reducing the number of required business licenses in the City, pursuing managed competition for recycling and other city services and implementing grid-based garbage collection. The Federation also commends the Mayor for addressing the City’s aging water infrastructure and increasing public works coordination between the City’s departments and across unit governments, in part through the implementation of the Infrastructure Trust Fund. However, despite these achievements, the City still faces enormous financial challenges with its long-term liabilities.
The Civic Federation is deeply concerned by the continued lack of action taken to address the sustainability of the City’s four employee pension funds. Although the Mayor presented his own vision for pension reform to the Illinois General Assembly, the subsequent lack of action on the part of the legislature and the City is a serious cause for concern. The pending fiscal crisis is an immediate concern for all taxpayers and can only be resolved through strong leadership, cooperation with relevant unions and engagement with the Illinois General Assembly.
The chart below shows estimated cost savings for the City of Chicago’s initiatives that advance the Civic Federation’s recommendations.
The following sections describe the initiatives that the City has implemented or begun to implement that advance the Civic Federation’s recommendations.
Anticipated Savings: $33.5 million in FY2011, $57.6 million in FY2012
With personnel expenses comprising 83.4% of the final FY2012 Corporate Fund appropriations, it is necessary to examine the City’s workforce in order to identify any significant savings in operating expenses. The Civic Federation commends the Mayor’s efforts to restructure the workforce, reform work orders and cut waste. The Civic Federation identifies the following actions announced by the City as of September 2012:
- Reduction in Workforce and Elimination of Vacancies: The proposed FY2012 budget included a reduction of 2,299 positions, or 7.0% of the workforce from the FY2011 proposed budget. Total personnel services appropriations in the Corporate Fund declined by $132.7 million, or 4.9%, from the FY2011 approved budget. The most significant cuts proposed were 1,252 eliminated sworn officer vacancies in the Police Department. These cuts are reflected in a $56.6 million decline in Corporate Fund personnel services appropriations for the Police Department. However, personnel services appropriations for all public safety departments are collectively down only 1.7% due to a $33.3 million increase for the Fire Department. 
- Cuts in Management Payroll and Board and Commission Compensation: Approximately $30 million in savings were expected in FY2011 with cuts to middle and senior management payrolls and a 50% reduction in compensation for members of City boards and commissions. 
- Merge Overlapping Functions Across Departments: With the elimination of redundant positions (and non-personnel costs), $3.5 million was estimated to be saved in FY2011. 
- Vacation Rule Changes: Non-represented employees will be allowed to carry over a maximum of five vacation days from one year to the next, reducing the monetary compensation of unused vacation days for retiring employees. 
- New Reimbursement Policies: The City implemented new credit card and travel reimbursement policies aimed at increasing accountability and efficiency, which reduced the number of citywide credit cards from more than 500 to 8 and is projected to save approximately $1 million in travel expenditures in 2012. 
The City has taken action on the following recommendation:
- Reduced Subsidy of CPS’ Employer Contribution to the Municipal Pension Fund: Beginning with the FY2012 City budget, Chicago Public Schools (CPS) began reimbursing the City for part of the statutory employer contribution for its employees participating in the Municipal Fund. The reimbursement amount proposed by the City for FY2012 was $32.5 million.  However, CPS’ FY2012 actual reimbursement was $9.1 million.  The District’s FY2013 proposed budget included an estimated $53.0 million contribution from the City and a $6.3 million reimbursement. 
On May 8, 2012, Mayor Emanuel addressed the Illinois General Assembly Personnel and Pension Committee with his roadmap to retirement security. The plan outline included an increase in the retirement age for most civilian workers, a one percent annual increase in employee contributions for five years and a ten-year freeze in annual cost-of-living adjustments for current retirees. The Civic Federation was encouraged by Mayor Emanuel’s pension reform initiative as it provided a strong outline of a comprehensive, balanced solution to the City of Chicago, CPS and Park District pension crises that included shared sacrifice by retirees, current employees and eventually taxpayers.
In addition to the Mayor’s pension reform initiative, the City has provided information on the City’s pension funds to the public via a new pension website and in its Annual Financial Analysis 2012. The information includes current funding statuses, the effect of unfunded liabilities on city finances and the City’s historic and projected pension contributions.
However, much more must be done. The Municipal and Laborers’ pension funds are on a path to deplete their assets within twenty years if reform measures are not implemented. The Police and Fire funds require an increase in statutory employer contribution in 2015 that will increase the City’s total required contributions from $476 million in 2012 to $1.2 billion in 2015.  The pension liabilities have grown so large and the contributions needed to rescue the funds are so substantial that the City will have great difficulty funding the current pension promises it has made to its employees. Further delay in implementing reforms will only increase the severity of the actions that must be taken. The Federation strongly urges the City to work with relevant unions and to engage members of the Illinois General Assembly for immediate action on the much needed reform.
Police and Fire Departments
Anticipated Savings: at least $56.6 million in FY2012
The public safety departments, including the Office of Emergency Management, comprise 59.3% of the City’s FY2012 approved Corporate Fund budget. Mayor Emanuel and Police Superintendent Garry McCarthy have taken some actions to evaluate and reorganize the Chicago Police Department.
- Reorganizing the Command Structure of the Police Department: Superintendent McCarthy’s reorganization of the Chicago Police Department (CPD) eliminated two assistant superintendent and four deputy superintendent positions, creating a management system more similar to police departments in other major U.S. cities. 
- Re-deployment of Additional Officers to the Beat: The Mayor and CPD have deployed more officers previously assigned as Mobile Strike Force and Targeted Response Unit officers, administrative positions and detention aides to patrol higher crime areas. 
- Consolidation of Space and Increased Coordination: The FY2012 budget closed three police stations and consolidated the Police and Fire headquarters. The City anticipates savings in administrative expenses, better coordination between the public safety departments and combined strength of special units such as helicopter and marine operations. 
- Reduction in Expenses: The FY2012 proposed budget included a significant reduction in the City’s workforce, including the elimination of 1,252 sworn officer vacancies in the Police Department. The vacancy eliminations were reflected in a $56.6 million decline in final Corporate Fund personnel services appropriations for the Police Department. 
Anticipated Savings: $2.8 million in FY2012, up to $25.0 million by FY2013
Mayor Emanuel implemented the Procurement Modernization Initiative on August 18, 2011. However, the Federation strongly urges the City to address the underlying structural issues that contribute to costly inefficiencies and a lack of accountability, including excessively complex contracts and slow procurement processes.
- Procurement Modernization Initiative: Mayor Emanuel has hired Accenture to perform a complete evaluation of citywide procurement services, which includes identifying contracts to be renegotiated or re-bid and working with City staff to redefine contracts and reduce costs, for a projected savings of up to $25 million by 2013. 
- Intergovernmental Joint Purchasing: The City Council approved an intergovernmental agreement to increase the City’s ability to work with other governments on procurement agreements, allowing the City to save an estimated $2.8 million in FY2012 with increased coordination, efficiency and purchasing power. 
- Reform Competitive Bidding Process with Reverse Auction: The Reverse Auction initiative will operate an open and competitive bidding process online, where vendors will have more than one chance to bid on a contract. 
The Federation is encouraged by the “Building a New Chicago” program, but strongly urges the City to address the inefficiencies within its infrastructure management which include numerous overlapping functions in project management, maintenance, procurement, construction and compliance services.
- Consolidation of Inspection Services: The City Council approved an ordinance that will eliminate 16 unnecessary inspections across five departments, reducing on-site required inspections for businesses, improving inspector efficiency and increasing the City’s focus on safety and areas of need. 
- Increased Coordination of Infrastructure Projects: Mayor Emanuel initiated a three-year infrastructure plan called “Building a New Chicago.” A major component of the program is increased coordination between City departments, unit governments and private sector utilities, allowing the entities to share information on long-term plans and schedules so that projects can be synchronized, reducing costs and burdens on residents. 
- Increased Coordination with Unit Governments with the Chicago Infrastructure Trust: On April 24, 2012 the City Council approved an ordinance to establish an Infrastructure Trust. The Trust is designed to open new investment opportunities for the private sector to finance long-term infrastructure projects of the City and its unit governments. If implemented properly, the Infrastructure Trust could bring about much-needed coordination between governments in the Chicago area with regard to infrastructure.
Water and Sewer Enterprise Funds
- Increased Revenues for Water Infrastructure Maintenance: The FY2012 proposed budget includes increases in water rates for residents and modifications of the water service fee waiver system. The increased rates are reflected in a projected revenue increase of $147.8 million, or 21.9%, from FY2011 year-end estimates. The increased revenues will help fund the Mayor’s plan to replace 100% of the City’s century-old water pipes, re-line or replace over half of the City’s sewer lines, re-line 140,000 sewer catch-basins and upgrade the four pumping stations in the next decade. 
- Multi-year Water Management Plan: The Department of Water Management made progress in the development of a comprehensive water plan which will focus on water meter installation, overhauling the water main replacement program and developing green infrastructure incentives. 
- Collection of Past-Due Water Services from Suburbs: The City developed plans to recover nearly $15 million owed to the City from neighboring suburban municipalities, of which two-thirds are expected to be recovered by 2013. 
Alternative Service Delivery
Anticipated Savings: $2.2 million in FY2012
- Managed Competition with Blue Cart Recycling: Starting in October 2011, public and private crews both collect blue cart residential recycling in different areas of the City. The City will evaluate the different teams’ performance and identify ways to improve service and lower costs for the City in the future. In the first six months of the program, the City saved $2.2 million and plans to expand service citywide and begin competition in the delivery of tree trimming and street marking. 
- City-County Collaboration on Revenue Collection: The Joint Committee on City-County Collaboration identified possible increased revenues that would result from sharing tax enforcement data and resources to increase compliance with similar City and County taxes, such as the cigarette tax. 
Tax Increment Financing (TIF)
- TIF Task Force: Mayor Emanuel created the TIF Task Force, which included Civic Federation President Laurence Msall, to craft TIF policy and guidelines and make recommendations on how to improve the performance, transparency and accountability of the City’s TIF program.  The Task Force produced a report that provides summaries of TIF revenues and expenditures and recommends that the City Council develop a multi-year economic development plan that includes coordination of TIF with the City’s capital budget.
- TIF Data: The City made more TIF data available online to download or embed, including individual TIF district plans and projection reports, annual reports, redevelopment agreements and recent news.
Public Health Department
- Transfer of Primary Care Clinics: The FY2012 proposed budget included transferring some primary health care clinics to community-based federally qualified health clinics by July 2012, allowing the Chicago Department of Public Health to focus on citywide health policy.  In addition, the City has worked to consolidate City-operated mental health clinics and strengthen partnerships with private mental health organizations in order to maintain the same level of service. 
Surplus Vacant Property and Assets
- Ordinance Addressing Vacant Buildings: The Mayor and City Council worked together to pass an ordinance in October 2011 that shifts the financial burden of maintaining foreclosed-upon properties from the City to the banks, including routine maintenance issues such as boarding entrances, responding to complaints related to the building, cutting grass and shoveling snow. 
Chicago City Council
- Grid-Based Garbage Collection: The Department of Streets and Sanitation began implementation of a new program to pick up residential garbage on a grid-based rather than a ward-based system in 2012. 
Chicago Board of Elections Commissioners
- Transfer Election Function to Cook County: Through city-county collaboration, the City announced that 3,000 fewer election judges and polling place administrators will be hired to staff elections. 
Budget Process and Format
- Executive Order for Long-Term Financial Analysis: In May 2011 the Mayor signed an executive order to create an Annual Financial Analysis that includes a trend analysis of all City funds, a three-year baseline and alternative financial forecast and analyses of the City’s reserves, capital program and financial policies. 
- Data Portal: The City administration has made efforts to increase the amount of data available on the City’s website by including information on city contracts, salaries, crime data, lobbyist disclosures, vacant properties and TIF data.  Some data related to the FY2012 budget was released on the portal, including line-item budget recommendations.
- Performance Metrics and ROI Standards for Capital Spending: The Office of Budget and Management finalized a long-term capital planning process that will use performance metrics and return-on-investment (ROI) standards. 
- Grant Funding Reforms: The newly created Grant Management Unit within the Office of Budget and Management will oversee management, coordination and expenditures of all state and federal grant funding, creating a centralized process of identifying, pursuing, collecting and analyzing grant funds. 
 City of Chicago, FY2011 Appropriation Ordinance, Summary D; FY2012 Budget Recommendations, Summary D.
 City of Chicago, Office of the Mayor, "2011 Savings Update at First 100 Days," press release, August 22, 2011; "Mayor Emanuel Announces Additional $25 Million in Savings Through Middle and Senior Management Cuts," press release, October 3, 2011; and "Mayor Emanuel Announces Reduction in City Board and Commission Compensation," press release, August 29, 2011.
 City of Chicago, Office of the Mayor, "2011 Savings Update at First 100 Days," press release, August 22, 2011.
 City of Chicago, Office of the Mayor, "City Council Adopts City Employee Vacation Reform," press release, October 5, 2011.
 City of Chicago, Office of the Mayor, "Mayor Emanuel Announces New City Employee Mileage Reimbursement and Local Transportation Policy to Increase Efficiency and Accountability," press release, October 8, 2011.
 City of Chicago, FY2012 Budget Overview, pp. 6 and 15.
 Information provided by CPS Budget Office, July 17, 2012.
 CPS FY2013 Proposed Budget, p. 26. This contribution from the City is recorded as revenue for the CPS 2013 fiscal year, which is July 1 to June 30, not the City's fiscal year, which runs January 1 - December 31. Actual contribution amount information provided by CPS Budget Office, July 17, 2012.
 Public Act 96-1495.
 See Chicago Police Department website for Organizational Chart available at https://portal.chicagopolice.org (last visited on October 4, 2011).
 City of Chicago, Office of the Mayor, "Mayor Emanuel and Superintendent Garry McCarthy Announce the Deployment of Additional Police Officers to Communities Across Chicago," press release, July 17, 2011. FY2012 Budget Overview, p. 3.
 City of Chicago, FY2012 Budget Overview, p. 3.
 City of Chicago, FY2011 Appropriation Ordinance, Summary D; FY2012 Appropriation Ordinance, Summary D.
 City of Chicago, Office of the Mayor, "Mayor Emanuel Announces Unprecedented City Procurement Modernization Initiative that Will Find Up to $25 Million in Savings by 2013," press release, August 18, 2011.
 City of Chicago, Office of the Mayor, "City Council Approves Resolution that Allows Joint Procurement with Other Governments," press release, October 5, 2011.
 City of Chicago, Office of the Mayor, "Mayor Emanuel Announces New Reforms to Ensure More Fairness, Competitiveness in City Contracting," press release, July 21, 2011.
 City of Chicago, Office of the Mayor, "City Council Passes Mayor Emanuel's New Reforms for Businesses and Reduces the Time it Takes to Obtain Business Licenses," press release, October 5, 2011.
 City of Chicago, Annual Financial Analysis 2012, pp. 64-65.
 City of Chicago, FY2012 Budget Recommendations, Summary F; FY2012 Budget Overview, pp. 4-5; Mayor Rahm Emanuel's 2012 Budget Address, October 12, 2011.
 City of Chicago, Office of the Mayor, "The First 30 Days of the Emanuel Administration," press release, June 16, 2011.
 City of Chicago, Office of the Mayor, "Mayor Emanuel Announces Plans to Recover Nearly $15 Million in Past-Due Water Services from Suburban Municipalities," press release, October 2, 2011.
 City of Chicago, Office of the Mayor, "Mayor Rahm Emanuel Announces Citywide Recycling in 2013," press release, April 5, 2012.
 Cityof Chicago, Joint Commtitee on City-County Collaboration, June 2011, p. 81.
 City of Chicago, Office of the Mayor, "Mayor Emanuel Announces Formation of Task Force on TIF," press release, May 19, 2011.
 City of Chicago, FY2012 Budget Overview, p. 75.
 Naomi Nix and Peter Nickeas, "23 arrested while protesting closure of mental facility," Chicago Tribune, April 14, 2012.
 City of Chicago, Office of the Mayor, "Mayor Emanuel Commends City Council and Alderman Pat Dowell for Passing Ordinance Addressing Vacant Buildings and Lender Responsibility," press release, July 28, 2011. An amendment to the original ordinance was passed by the City Council Committee on Housing and Real Estate on October 17, 2011 following the threat of legal action from affected banks. Hal Dardick, "Watered down vacant house measure passes City Council panel," Chicago Tribune, October 17, 2011.
 City of Chicago, FY2012 Budget Overview, p. 114.
 Kristen Mack, "City, county say $33.4 million to be saved through cooperation," Chicago Tribune, July 2, 2012.
 City of Chicago, Office of the Mayor, "Mayor Emanuel Signs Executive Order Creating a Long-Term Budgeting and Financial Planning Process for the City of Chicago," press release, May 20, 2011.
 City of Chicago, Office of the Mayor, "Mayor Emanuel Continues Commitment to Transparency, Posts Over 90,000 City Contracts Online," press release, August 3, 2011.
 City of Chicago, Office of the Mayor, "The First 100 Days of the Emanuel Administration," press release, August 22, 2011.
 City of Chicago, Office of the Mayor, "Mayor Emanuel Announces Grant Funding Reforms to Prevent City from Leaving Millions on the Table, Saving $20 Million in 2012," press release, October 6, 2011.