Chicago's current credit ratings
As of October 2009:
- The Fitch rating of “AA” is the highest rating Chicago has received since Fitch began rating the city in 1997.
- The Moody’s Investors Service rating of “Aa3” is the highest rating the city has received since 1979
- The Standard & Poor’s rating of “AA-” is the highest rating the City has received from S&P since 1978.
Source: Chicago Office of Budget and Management
Civic leaders’ reaction to Mayor Daley’s 2010 budget proposal illustrates how difficult his choices are. While all praise his decision not to raise taxes, agreement ends there. Under Daley’s proposal, taxpayers won’t see any new fees. Instead, the mayor is opting to use $370 million from the lease of the city’s parking meters, paired with $114 million in spending cuts, to close the massive budget gap.
Some say dipping into the 75-year, $1.15 billion lease of the city’s parking meters is short-sighted.
“It’s an awful lot of reliance on one-time savings,” said Lawrence Msall, president of the Civic Federation, a tax policy and government research organization. “A $520 million deficit, to be effectively closed, needs more than one-time revenue sources to address it.”
Msall is concerned that using money from the lease will hurt Chicago’s credit rating, and its ability to borrow money in the future.
“The rating agencies have said that drawing down reserves will impact credit ratings,” Msall said.
According to Chicago’s Office of Budget and Management, the city’s bond ratings remain high. (See current ratings in sidebar)
Using money from the parking meter lease doesn’t solve the problem, it just defers it, adds Ralph Martire, executive director at the Center for Tax and Budget Accountability.
“This is very much a one-time temporary bailout,” Martire said. “Next year, when the mayor goes back to the budget, he is going to need to find that $370 million he used from the reserves this year. Where will he find it?”
Other civic leaders say Daley’s choice to tap the reserve was an inventive way to spare taxpayers.
“I believe that during very difficult times, he did exactly what business would do,” said Jerry Roper, president of the Chicagoland Chamber of Commerce. “If you can’t borrow money, you go into your reserves with the thought in mind that if you use those reserves, you have to pay them back. We applaud him for that because that’s what reserves are there for.”
City labor unions are also standing behind Daley’s decision.
“The mayor is right to use city reserves to fill the budget hole and protect services and jobs,” said Anders Lindall, spokesman for the Chicago chapter of the American Federation of State, County and Municipal Employees. “The reason those reserves exist is to address just the kind of crisis we’re in now.”
Lindall is urging the aldermen not to approve spending cuts beyond the $114 million already proposed by the mayor.
“We certainly hope there will be no further cuts to the essential city services residents rely on,” Lindall said. “Those services are needed more than ever in this recession.”
However, Msall says it is irresponsible for the Mayor to maintain city spending, especially when revenue from income, sales and real estate taxes have dropped nearly one-third since 2007.
“There is no city service that can be overlooked in terms of possible reductions and eliminations,” Msall said.
Roper agrees that more spending cuts are necessary, but warns that the proposed cuts to the Chicago Convention and Tourism Bureau will hurt the city’s economy. Under the mayor’s proposal, the bureau stands to lose as much as $1.5 million, or 10.6 percent of its budget.
“They are our marketing arm for attracting conventions and trade shows to Chicago,” Roper said. “We believe strongly that the bureau is willfully under-funded.”
Roper says the chamber will join other organizations to raise private money to help attract and retain business.