March 13, 2008

Mayor Daley Announces Management Steps That Will Save $20 Million

Mayor Richard M. Daley today announced management steps the city will take to cut spending by $20 million.
Mayor's Press Office    312.744.3334

Mayor Richard M. Daley today announced management steps the city will take to cut spending by $20 million.

"Even with our responsible projections for the 2008 budget, because the nation's economy is bordering on a recession and because of the deepening housing foreclosure crisis we're on softer ground economically and in terms of our revenues this year. In addition, the harsh winter weather has forced greater spending," Daley said.

"Looking to the future, we all know the nation's economy is growing worse day by day and every city and state needs to be concerned," he added.

"That's why today - to protect our taxpayers -- we're announcing major steps to cut spending and even better manage government. We're not alone. Every city and state in the nation is taking these kinds of steps to responsibly manage their budgets," Daley said.

Daley said that our nation's economy is getting worse day by day. National job losses are increasing. Housing foreclosures continue at record highs across the nation.

Household credit is weakening and the cost of gas, food and other everyday goods continues to increase.

He said that in good economic times and bad, he has been guided by a commitment to better manage government to protect taxpayers.

"Since I've been Mayor, we've cut over $2.5 billion in spending even as we've improved services. We've leveraged technology to reduce the size of government, consolidated and merged departments, better managed health care, reduced energy costs and streamlined government operations.

Daley said the city continues to implement the new management efficiencies that were announced as part of the 2008 budget, which he believes will save $67 million this year.

This includes delaying non union wage increases for six months, eliminating 800 non critical vacancies and closing loopholes that give cable and online hotel reservation companies a tax advantage.

Daley said that the city also continues to pursue the long term lease of three infrastructure assets. Seven firms have indicated interest in leasing the three city owned MRRFs and we are expecting responses from teams interested in bidding for and operating the city's metered parking system and Midway International Airport. Each of these steps, if concluded, will take the pressure off taxpayers.

"And, our commitment to good management is why we've been able to keep City of Chicago property tax increases limited to just over 1.3% a year since I've been Mayor, which is less than half the rate of inflation," Daley went on to say.

Nonetheless, the city continues to operate in a mixed revenue environment in which it benefits from growth in some areas and suffers from decline in others, Daley said.

Some of those revenues that are sensitive to the economy - hotel and amusement taxes - came in stronger than anticipated at the end of last year.

Others, such as the sales tax show only minimal growth, impacted by the slow housing market, weakening household credit and increased gas prices.

Further, a softening of the real estate market has had a dampening effect on the real estate transaction tax which finished the year below expectations, he said.

Additionally, the real estate market is expected to impact the sale of city-owned land and building permit revenue. Several other revenues did not meet 2007 year-end projections including the cigarette tax, he said.

"Adding pressure to our budget, of course, is the record harsh winter we've experienced. So far, there have been 40 measurable snow days which means we must get plows on the streets and expenditures for salt were needed.

"The especially cold weather means that we had to rebuild water mains and address a record demand to repair pot holes. The bottom line is that the worse the winter, the more it costs the city to deal with it," Daley said.

Daley ordered the following actions, which he estimated will reduce spending by $20 million:

  • An immediate hiring freeze across all departments, excluding positions vital to public safety, revenue-generating positions, grant-funded positions or other critical jobs. This step will save $11 million before the end of the year.
  • A 3 percent across-the-board cut on all 2008 non-personnel costs, excluding those critical to public safety and contractually-obligated expenses. City departments will work with the Budget Office to ensure cuts have least impact on services.
  • Police, Fire, and OEMC will also be required to make some non-personnel reductions in a way that will not impact the safety and security of Chicago residents.

This step will save $5 million before the end of the year.

  • A suspension of all overtime not needed for safety and security. This includes building maintenance activities, administrative tasks and other work that can be accomplished on straight time.
  • Police, Fire, and OEMC will not be excluded from overtime reductions, but they will be limited to efforts not critical to the safety and security of Chicago residents. This is expected to save $2 million before the end of the year.
  • Renegotiation by the Budget and the Procurement Offices of the price, terms and scope of some vendor contracts. Contracts will be chosen based on the dollar value and savings potential. This could save as much as $2.5 million before the end of the year.
  • Suspension of all non-critical out-of-town travel. Exceptions will include senior city officials on official city business and to report on critical city matters, as well as regulatory or other required events. This is expected to save $250,000 before the end of the year.
  • Request managers at City Hall who want to voluntarily participate in the furlough program to do so. The City has mandated six furlough days since 2002. Increased use of this program is expected to save an additional $250,000 before the end of the year.

"I want to be clear. Because we've substantially reduced spending over the years, we're at that point where people may begin to feel an impact in some service delivery. We'll work to minimize it, but, there is no alternative," Daley warned.

"As always, if we need to take additional steps down the road to stay ahead of a slowing economy, we'll do so. We must always act responsibly to protect our taxpayers and that's what we're doing today," Daley said.