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City financial plan warns of looming land mines, more cuts

Mayor Rahm Emanuel plays game 'thumb wrestling' with Adrian Molin6 years old opening UniLeague Boys   Girls Club completely

Mayor Rahm Emanuel plays a game of 'thumb wrestling' with Adrian Molina, 6 years old, at opening of Union League Boys & Girls Club, a completely renovated community center in Pilsen, 2157 W. 19th Street, Tuesday, July 31, 2012. | John H. White~Sun-Times

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Updated: September 2, 2012 6:18AM

Even as he bragged about cutting the city’s 2013 budget shortfall in half — to $369 million — Mayor Rahm Emanuel warned of financial land mines ahead that will require more cost-cutting.

On Tuesday, City Hall released an annual financial analysis that includes a map of that minefield.

It talks about everything from Chicago’s rising debt, skyrocketing personnel and health care costs and vanishing parking meter and Skyway reserves to declining revenues and the looming, $25 billion pension crisis that will require property taxes to double by 2015 without changes in both retirement benefits and employee contributions.

“The city’s total required contributions will grow from an anticipated $476 million in 2012 to $1.2 billion in 2015 and increase steadily to $1.35 billion,” thanks to state-mandated changes that impact police officers and firefighters alone, the report states.

“The additional pension contributions that will be required in 2015 … is equal to the annual cost of keeping almost 4,400 police officers on the street or over 3,800 firefighters on duty. This amount could fund the resurfacing of over 16,000 city blocks and is more than twice the annual operating budget for Midway airport.”

Earlier this week, City Hall disclosed that Chicago is facing a $369 million budget gap in 2013 — less than half the $741 million budget abyss forecast a year ago — thanks to Emanuel’s aggressive efforts to cut costs, raise revenue and dun deadbeats.

The shortfall assumes $106 million more corporate fund spending in 2013, an increase of 3.4 percent, in part, to finance the citywide switch to blue-cart recycling that Emanuel has promised.

It was not known what, if any, pay raises the preliminary spending plan assumes for police officers, firefighters and other unionized city employees whose contracts expired on June 30.

The last time police and fire contracts were settled, the city had to borrow money to bankroll retroactive pay raises.

“We are in the middle of negotiations and cannot comment on cost estimates for employee raises,” Kathleen Strand, a spokesperson for the city’s Office and Budget and Management, said in an e-mail to the Chicago Sun-Times.

Emanuel’s first budget was balanced with $220 million in taxes, fines and fees and 535 layoffs.

The new financial plan — substituted for the old preliminary budget released each year by Aug. 1 — makes the case for another round of cost-cutting and new revenue in 2013.

Only $623 million remains from the $2.98 billion paid to the city after former Mayor Richard M. Daley privatized the Chicago Skyway and Chicago parking meters. The windfall was supposed to last for 99 and 75 years respectively and replace the continuing income once generated by those assets.

Utility taxes are coming in “significantly below” budget in 2012, thanks to Chicago’s unseasonably warm winter and spring and a decline in natural gas prices, the report states. Utility tax revenues are expected to bring in $442 million this year, down from $524.8 million just four years ago.

Telecommunications taxes that generated $154.2 million for the city a decade ago are expected to produce just $137.2 million this year, thanks to the steady migration from land lines to cell phones and Skype.

“Federal law exempts most wireless data services, such as mobile broadband, from taxation,” so the growth in such wireless services “has not resulted in new revenue for the city,” the report states.

Annual health care costs have skyrocketed — from $309.8 million in 2003 to $405.4 million in 2010, before dipping slightly last year in advance of Emanuel’s plan to raise monthly health insurance premiums by $50 for employees who fail to participate in a “wellness program” to manage chronic health problems.

Worker’s compensation costs now the subject of a jurisdictional dispute between Inspector General Joe Ferguson and Finance Committee Chairman Edward M. Burke (14th) have also continued their steady climb — from $58.4 million in 2003 to $114.5 million last year.

The city’s cost-cutting efforts have even extended to the salt used to de-ice Chicago streets during winter months. To save money, the city is now starting the winter with less salt on the ground and relying on “just-in-time deliveries” from salt vendors, the report states.

The real estate transaction tax that plunged to $61.9 million in 2009 has made a bit of a comeback, but it’s still nowhere near the housing boom year of 2006, when it was a $242.3 million cash cow for the city, the report states.

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