DETAILS MATTER by Bob Ginsburg September 7, 2020
The Good, the Bad, the Incomplete, and the Unsaid: What the Chicago Budget Forecast Tells Us. I: INVEST South/West and Silos; II: Airports.
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The Good, the Bad, the Incomplete, and the Unsaid: What the Chicago Budget Forecast Tells Us. I: INVEST South/West and Silos; II: Airports.
INVEST South/West and Silos
Given the truly massive budget deficits Chicago and Cook County face, we need to find ways to still move forward. Part of that is making the most out of whatever resources can be made available. I know it is nearly politically impossible to coordinate on the County and regional level but we should be able to “think outside the box” within the City rather than just accept the irrational division and waste created a century ago. I have discussed several options but I want to focus on the INVEST South/West initiative as an example our failure to link and integrate the transportation, housing and planning/development resources already available therefore not maximizing the impact or the ability to sustain over years.
The Sun Times had an editorial Sunday both praising and cautioning about the INVEST South/West initiative. I agree the effort is the most explicit and coherent approach to investing outside of the Central Business District in many years and deserves credit. However, it is not clear if it will be different enough For all of its new emphasis, INVEST South/West still reflects the priorities and approaches of the last two mayors and still lacks specificity, accountability and integration. It also does not take advantage of all the resources available especially housing and transportation.
Despite having new, innovative and experienced chiefs at Planning and Development, Housing and CDOT they appear to be operating in their own silos without clear coordination and integration along with the Chicago Transit Authority which will likely be the first to access funds if the Federal government ever passes a Transportation and Infrastructure Bill. The lack of coordination and integration in putting resources into underserved and underdeveloped communities reduces the initiative to the old “Trophy Project” model. In that model a major project provides a needed and useful addition to a community (such as the Harold Washington Cultural Center in Bronzeville or the Whole Foods grocery store in Englewood) without any clear idea of how people will access the Trophy or how to build up the community so that it doesn’t need subsidized “Trophy Projects.”
So why aren’t trophy projects enough? Trophy projects only work when people live near them or can easily get to them and have the financial resources to patronize them. The underlying idea is that communities change from the top down. Putting up a glitzy development will attract more businesses because of more foot traffic, which will in turn spur other development and finally private developers will invest in the community. It is a fine idea; it is just one that has not worked very well or very often. Trophy projects look nice and are important when they fill a resource void in a community. However, they are not successful without being able to build upon or take advantage of a good base of transportation (for convenient and reasonable access to jobs and commercial areas), a good base of housing and solid buildings, access to reasonable local schools, and positive improvements in public safety. Looking at Chicago communities that have made significant transitions over 20+ years you see a different pattern that reflects more of a “bottom up” development process. While most have been on the north side (which is a reflection of other problems in the City), none were driven by Trophy projects but by basic improvements in the communities especially housing, transportation, safety and schools/training.
In the 1980s communities along the CTA Brown line had always had good housing but there were crime problems, schools were not performing well, commercial areas were stagnant or declining (6 corners, Lincoln/Belmont/Ashland, Roscoe Village) and ridership on the Brown line had deteriorated to a point that CTA considered closing the line. Obviously it is a different story today which started in the late 80s. Trophy projects did not drive the growth and changes.
In the 1970s and early 80s Wicker Park was synonymous with gangs and drugs though 35% of the homes were owner occupied and it still had a viable commercial area. Many factors led to the changes in Wicker Park including public safety improvements, the presence of lofts converted to artist’s studios and the renovation of solid homes and buildings – but no trophy projects.
So what is missing in the new proposals? We should assume that these developments are a major need identified by the community and build off the strengths in those communities which also includes existing home ownership, a public transportation framework and the remaining core of commercial areas. The artist’s rendering of the vacant Laramie State Bank and adjacent parcels in Austin shows dozens of people walking around patronizing the new stores. However, there will not be people there without real progress on housing (for both existing residents as well as new residents), more frequent, reliable and safe public transportation in the area, better schools, and tangible progress in improving public safety (which is not the same as putting in more police officers.) Putting the new $330 Million Affordable Housing initiative (with the Community Investment Corp) (CIC) in the same paragraph does not mean they are connected and integrated. Mentioning the CTA track improvements along with INVEST South/West does not mean that there are any plans to address the transit needs such as eliminating transit deserts and reduced commuting times in these areas and how they will be planned. The City Transition Team plans emphasized equitable Transit Oriented Development and creating stronger links between Transportation and Housing and Planning Department funding and projects.
For the last few weeks I have suggested some initial performance measures that could be modified by the community and which would provide real measures in progress across all the critical community areas while the trophy projects proceed. (reprinted at the end.) Once residents and people outside the neighborhoods (including developers) see general progress, there will be other investment.
Department of Aviation and Chicago Airports.
There is general acknowledgement on the value and importance of O’Hare to Chicago and the regional economy The budget forecast projects a regular increase in airport revenues in 2020. Most national data report airline passenger levels at 30% of 2019 levels and an uncertain recovery of business travel at least for 3 to 5 years Yet the Budget forecast is remarkable silent about the airport’s budget challenges and their impact on the City budget.
The Enterprise Fund budgets for O’Hare and Midway in the FY2020 Chicago budget include $935M for O’Hare and $482M for Midway to cover costs for a number of City departments/agencies including procurement, legal, personnel, Treasurer and, of course, Finance General to cover debt and pension payments. The Budget Forecast has little discussion of lower revenue estimates and their impact on Department of Aviation revenues and expenses. There is also no discussion of the reliance on debt service reserves and other unrestricted cash to cover debt and pension expenses. The Budget Forecast report lists actual 2019 non-grant operating and non-operating revenues (e.g. Landing Fees, Terminal Area Use Charges Rents, Concessions, and Other Non-Operating Revenues) and 2020 estimates as follows with no changes in Debt service or pension payments. The $70 Million in cuts to the Aviation Department and O’Hare and Midway operations (on top of the $800 Million in corporate fund shortfalls) were not discussed.
According to a Moody’s Illinois Economic Briefing in June 2020, O’Hare and Midway will have to lean heavily on their liquidity reserves in the next few months. They cite several positive factors mitigating the revenue shortfalls including unrestricted cash, debt service reserves, federal stimulus and residual agreements to support large cash balances. Moody’s said that those factors give O’Hare and Midway financial cushions of 38 months and 18 months, respectively, to cover debt payments but are silent on operating cost reserves.
Any discussion of the FY20 and FY21 budgets should include how the City is implementing the $70 Million in cuts at the Department of Aviation, O’Hare and Midway.
PERFORMANCE MEASURES FOR COMMUNITY INVESTMENTS (how to commit to and measure improvements over time)
Too often performance measures are not based on what will produce desired changes but on data that is already available. These are a first cut at measures that could represent measurable and visible changes in these communities but would have to be refined and revised locally. I suggest them as a starting point. Additional explanations were included in the July 27 newsletter (robertginsburg.substanck.com/archives).
1. Public Transit:
a. Change in number of jobs available within 45 minute commute on public transit
b. Decrease in travel times to jobs
c. Increase in frequency of bus and train service to job centers
d. Increase in reliability of bus and trains service to job centers
2. Affordable Housing:
a. Projects announced
b. # of Affordable units proposed
c. Projects funded and/or approved
d. Projects linked to transit stations or locations where 3 bus routes intersect
e. Funding approved (total amount and # of houses) for mortgages, energy efficiency/repairs
3. Summer jobs programs (to provide needed jobs and fiscal stimulus to local commercial areas)
a. # of jobs funded/year
b. location of jobs,
c. years of funding secured including private sector funding for local jobs as well as internships
4. Improvements Approved and/or financed for Local Commercial Areas:
a. Façade, walkway and Lighting improvements approved/started
b. Funding for improved pedestrian access
c. Increased transit service to priority communities/areas
d. Food and Transit Deserts identified and addressed
e. New Bank branches located in designated communities