Posted on 06/11/2012 1:08:43 PM PDT by STARWISE
Chicago’s swift, surprising decline presents formidable challenges for new mayor Rahm Emanuel.
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In the 1990s, Chicago enthusiastically joined the urban renaissance that swept through many of America’s major cities. Emerging from the squalor and decay of the seventies and eighties, Chicago grew for the first time since 1950—by more than 100,000 people over the decade. The unemployment rate in the nation’s third-biggest city was lower than in its two larger rivals, and per-capita income growth was higher.
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Fiscal problems are commonplace these days among local governments, but Chicago’s are particularly grim and far predate the Great Recession. Cook County treasurer Maria Pappas estimates that within the city of Chicago, there’s a stunning $63,525 in total local government liabilities per household.
Not all of this is city debt; the region’s byzantine political structure includes many layers of government, including hundreds of local taxing districts. But pensions for city workers alone are $12 billion underfunded. If benefits aren’t reduced, the city will have to increase its contributions to the pension fund by $710 million a year for the next 50 years, according to the Civic Federation. Chicago’s annual budget, too, has been structurally out of balance, running an annual deficit of about $650 million in recent years.
As dire as Chicago’s finances are, those of Illinois are in even worse shape. The primary cause, once again, is pensions, which are underfunded to the tune of $83 billion. Retirees’ future health care is underfunded an additional $43 billion. There’s a lot of regular debt, too—about $44 billion of it. And Illinois, like Chicago, has run large deficits for some time. Despite raising the individual income tax 66 percent and the corporate tax 46 percent in 2011, the state is projected to end the current fiscal year with an accumulated deficit of $5.2 billion.
While California has made headlines by issuing IOUs to companies to which it owes money, Illinois has taken an easier route: it just stopped paying its bills, at one point last year racking up 208,000 of them, totaling $4.5 billion. Some businesses have gone unpaid for nine months or even longer. Unsurprisingly, Illinois has the worst credit rating of any state. Unable to pay its bills, it is de facto bankrupt.
What accounts for Chicago’s miserable performance in the 2000s? The fiscal mess is the easiest part to account for: it is the result of poor leadership and powerful interest groups that benefit from the status quo.
Public-union clout is literally written into the state constitution, which prohibits the diminution of state employees’ retirement benefits. Tales of abuse abound, such as the recent story of two lobbyists for a local teachers’ union who, though they had never held government jobs, obtained full government pensions by doing a single day of substitute teaching apiece.
*snip*
The state has also employed a series of gimmicks to cover up persistent deficits—for example, using borrowed money to shore up its pension system and even to pay for current operations. At the city level, Mayor Richard M. Daley papered over deficits with such tricks as a now-infamous parking-meter lease.
The city sold the right to parking revenues for 75 years to get $1.1 billion up front. Just two years into the deal, all but $180 million had been spent.
The debt and obligations begin to explain why jobs are leaving Chicago. It isn’t a matter, as in many cities, of high taxes driving away businesses and residents.
Though Chicago has the nation’s highest sales tax, Illinois isn’t a high-tax state; it scores 28th in the Tax Foundation’s ranking of the best state tax climates. But the sheer scale of the state’s debts means that last year’s income-tax hikes are probably just a taste of what’s to come. (Cutting costs is another option, but that may be tricky, since Illinois is surprisingly lean in some areas already; it has the lowest number of state government employees per capita of any state, for example.) The expectation of higher future taxes has cast a cloud over the state’s business climate and contributed to the bleak economic numbers.
*snip*
It’s easy to understand why being a global city is the focus of civic leadership. Who wouldn’t want the cachet of being a “command node” of the global economy, as urbanists put it? It’s difficult, too, to think of a different template for Chicago to follow; its structural costs are too high for it easily to emulate Texas cities and become a low-cost location.
But just because the challenge is stiff doesn’t mean that it shouldn’t be tackled. Chicago isn’t even trying; rather, it’s doubling down on the global-city square. Senator Mark Kirk wants to make O’Hare the most “Asia-friendly” airport in America and lure flights to central China, for example. A prominent civic leader suggests that the city should avoid branding itself as part of the Midwest. One of Mayor Emanuel’s signature moves to date has been luring the NATO summit to Chicago.
Another reason for Chicago’s troubles is that its business climate is terrible, especially for small firms. When the state pushed through the recent tax increases, certain big businesses had the clout to negotiate better deals for themselves. For example, the financial exchanges threatened to leave town until the state legislature gave them a special tax break, with an extension of a tax break for Sears thrown in for good measure.
And so the deck seems to be stacked against the little guys, who get stuck with the bill while the big boys are plied with favors and subsidies.
It also hurts small businesses that Chicago operates under a system called “aldermanic privilege.” Matters handled administratively in many cities require a special ordinance in Chicago, and ordinances affecting a specific council district—called a “ward” in Chicago—can’t be passed unless the city council member for that ward, its “alderman,” signs off.
One downside of the system is that, as the Chicago Reader reported, over 95 percent of city council legislation is consumed by “ward housekeeping” tasks. More important is that it hands the 50 aldermen nearly dictatorial control over what happens in their wards, from zoning changes to sidewalk café permits. This dumps political risk onto the shoulders of every would-be entrepreneur, who knows that he must stay on the alderman’s good side to be in business.
It’s also a recipe for sleaze: 31 aldermen have been convicted of corruption since 1970.
Red tape is another problem for small businesses. Outrages are legion.
Scooter’s Frozen Custard was cited by the city for illegally providing outdoor chairs for customers—after being told by the local alderman that it didn’t need a permit. Logan Square Kitchen, a licensed and inspected shared-kitchen operation for upscale food entrepreneurs, has had to clear numerous regulatory hurdles: each of the companies using its kitchen space had to get and pay for a separate license and reinspection, for example, and after the city retroactively classified the kitchen as a banquet hall, its application for various other licenses was rejected until it provided parking spaces.
An entrepreneur who wanted to open a children’s playroom to serve families visiting Northwestern Memorial Hospital was told that he needed to get a Public Place of Amusement license—which he couldn’t get, it turned out, because the proposed playroom was too close to a hospital!
And these are exactly the kind of hip, high-end businesses that the city claims to want. Who else stands a chance if even they get caught in a regulatory quagmire? As Chicagoland Chamber of Commerce CEO Jerry Roper has noted, “unnecessary and burdensome regulation” puts Chicago “at a competitive disadvantage with other cities.”
Companies also fear Cook County’s litigation environment, which the U.S. Chamber of Commerce has called the most unfair and unreasonable in the country. It’s not hard to figure out why Chief Executive ranked Illinois 48th on its list of best states in which to do business.
Chicago’s notorious corruption interferes with attempts to fix things. Since 1970, 340 officials in Chicago and Cook County have been convicted of corruption. So have three governors. The corruption has been bipartisan: both Governor George Ryan, a Republican, and Governor Rod Blagojevich, a Democrat, are currently in federal prison. A recent study named Chicago the most corrupt city in the United States.
But an even greater problem than outright corruption is Chicago’s culture of clout, a system of personal loyalty and influence radiating from city hall.
Influencing the mayor, and influencing the influencers on down the line, is how you get things done. There is only one power structure in the city—including not just politicians but the business and social elite and their hangers-on—and it brings to mind the court of Louis XIV: when conflicts do arise, they are palace intrigues.
One’s standing is generally not, as in most cities, the result of having an independent power base that others must respect; it is the result of personal favor from on high. One drawback with this system is that it practically demands what columnist Greg Hinz calls a “Big Daddy”–style leader to sustain itself.
Another is that fear of being kicked out of the circle looms large in the minds of important Chicagoans. Beginning in 2007, Mayor Daley launched an ultimately unsuccessful bid for the 2016 Olympics. Later, commentator Ramsin Canon observed that Daley “was able to get everybody that mattered—everybody—on board behind the push. . . . Nobody, from the largest, most conservative institutions to the most active progressive advocacy group, was willing to step out against him.”
These organizations have good reason to fear reprisal for not toeing the line. When Daley signed his disastrous parking-meter deal, an advocacy group called the Active Transportation Alliance issued a critical report.
After a furious reaction by the Daley administration, the organization issued a groveling retraction. “I would like to simply state that we should not have published this report,” said executive director Rob Sadowsky. “I am embarrassed that it not only contains factual errors, but that it also paints an incorrect interpretation of the lease’s overall goals.” Sadowsky is no longer in Chicago.
It’s easy to see how fiascoes like the parking-meter lease happen where civic culture is rotten and new ideas can’t get a hearing. Chicago’s location already isolates it somewhat from outside views. Combine that with the culture of clout, and you get a city that’s too often an echo chamber of boosterism lacking a candid assessment of the challenges it faces.
Some of those challenges defy easy solutions: no government can conjure up a calling-card industry, and it isn’t obvious how Chicago could turn around the Midwest. Mayor Emanuel is hobbled by some of the deals of the past—the parking-meter lease, for example, and various union contracts that don’t expire until 2017 and that Daley signed to guarantee labor peace during the city’s failed Olympic bid.
Rest of the report .. click ..HERE
~~~~~~~~ City Journal
A quarterly magazine of urban affairs, published by the Manhattan Institute, edited by Brian C. Anderson.
Aaron M. Renn is an urban analyst, consultant, and publisher of the urban policy website The Urbanophile.
It's stunning and sickening to see photos from Democrat controlled Detroit... this is why elections matter so vitally.
God help us fight for and keep this great nation.
The answer is obvious. More taxes on businesses and more Federal dollars.
Chicago ran out of other peoples’ money. Sucks to be them.
When I was a prosecutor in Central Indiana, getting ANYTHING out of Chicago PD or the Cook County Courts was a nightmare. We sent investigators up on a major murder case and they literally had to “go rogue” because the locals would not give them the time of day. It’s customary when doing a major investigation to have a local cop assigned to help show you around and let you know the lay of the land. Especially when you want to recover property from a pawn shop. We would do that for anyone with a case in our jurisdiction. That doesn’t happen in Chicago.
And getting any official records is impossible because our office functioned honestly; we didn’t have a “slush fund” to grease the palms of the local clerks to get them to do their jobs.
On the other hand, Chicago PD did take a car theft report from me when my car was stolen. And that was after an “extra inning” game at Wrigley Field. (You sure you parked your car here buddy? All these streets look the same...) Four weeks later they called to tell me they found the frame.
The Detroitization of Chicago?
When that takes place cities are reduced to little more than welfare distribution centers and shooting galleries for gang bangers.
We could think of it as “Social Justice” - after all, it is their “Fair Share”.
The Detroitization of Chicago?
When that takes place cities are reduced to little more than welfare distribution centers and shooting galleries for gang bangers.
We could think of it as “Social Justice” - after all, it is their “Fair Share”.
No mention of crime in the article. Wonder why.
No mention of crime? Why would they?
9 dead and 46 wounded this past weekend!
http://www.suntimes.com/news/metro/13101374-418/nine-dead-46-wounded-in-weekend-shootings.html
Chicago: Like Mogadishu with more stylish clothes.
“No mention of crime in the article. Wonder why.”
A major omission in my opinion.
"Since 1970, 340 officials in Chicago and Cook County have been convicted of corruption. So have three governors."
"31 aldermen have been convicted of corruption since 1970."
Well, there is mention of crime, but I don't think it is the kind you were thinking.
This is the ultimate short term thinking... it's what's destroying Chicago - destroying the nation. It's like renting furniture, borrowing from a pay check advance, maxing out credit cards at grocery stores and casinos... Stupid. Stupid. Stupid.
Yeah, I would have said 'Detroit' too - or maybe Miami. Cities run by Democrats ... ideas have consequences.
I grew up in Chicago and can attest to the fact that Chicago is - by far - the most corrupt city in the union. Add I would remind my fellow freepers that our Chief Executive hails from this most corrupt system. He must go.
I spent all day Saturday walking around downtown Chicago, and I guarantee you it is no Detroit II.
It is almost completely gentrified for miles and miles surrounding the downtown area.
All 500K condos, expensive foreign cars, $4000 bicycles and women pushing strollers in high heels.
And the Loop area is spectacular and thriving.
I’m sure Chicago as a city has its share of problems - but it didn’t get the rug pulled out from under it like Detroit.
It is a shame that our leaders and the press fail to address “the problem that won't be spoken of.”
Here are some stats for Chicago:
Roughly 80% of murder victims in Chicago are black.
Roughly 80% of people committing murder in Chicago are black.
Blacks make up roughly 36% percent of the population of Chicago.
Despite this, the author of the article fails to give even the slightest hint that black on black crime might be a problem in Chicago.
I guess blacks don't count in the author's eyes.
No story about Chicago and it’s criminal ways is complete without mentioning Michael Madigan, the filthiest criminal of them all - he runs the whole damn state.
I HAVE to move out of this state!!!
Wow .. you’re right about Madigan! He’s apparently declared himself the Monarch of Illinois! Found this
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When it comes to Madigan, there’s no debate: It’s time to take out the trash
The Boss’ political protection racket stinks
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