Income Inequality: A look at how all cities are not created unequal and some are more unequal than others

Income inequality is a growing problem in municipalities across the country. The latest U.S. Census Bureau data confirms that overall, big cities remain more unequal places by income than the rest of the country and the problem has gotten worse in recent years. The Brookings Institution released a study that shows the increases in income inequality in the country’s largest 50 cities.

Income inequality can be measured by using the “95/20 ratio”. This figure represents the income at which a household earns more than 95 percent of all other households, divided by the income at which a household earns more than only 20 percent of all other households. Essentially, it represents the distance between a household that just cracks the top 5 percent by income, and one that just falls into the bottom 20 percent. In the last 35 years, members of the top 5 percent have generally experienced rising incomes, while those in the bottom 20 percent have seen their incomes stagnate.

CityInequality2012The big cities with the highest 95/20 ratios in 2012 were Atlanta, San Francisco, Miami, and Boston. In each of these cities, a household at the 95th percentile of the income distribution earned at least 15 times the income of a household at the 20th percentile. In Atlanta, for instance, the richest 5 percent of households earned more than $280,000, while the poorest 20 percent earned less than $15,000. In another six cities (Washington, D.C., New York, Oakland, Chicago, Los Angeles, and Baltimore), the 95/20 ratio exceeded 12. Overall, 31 of the 50 largest U.S. cities exhibited a higher level of income inequality than the national average.

Source: The Brookings Institution

Source: The Brookings Institution

 

Interestingly, the study found that in many cities, inequality rose, not because the rich got richer while the poor got poorer – but because the rich became somewhat poorer while the poor got much poorer.

A city where the rich are very rich and the poor very poor means a far too narrow tax base from which to sustainably generate revenue that would allow the city to provide services. It also makes it increasingly difficult for cities to maintain mixed-income environments thus creating concentrations of poverty that have proven disastrous for residents living in those environments, especially in policy areas like housing, public safety, and education. For example, in education, research has shown that there exist tangible benefits for low-income children learning in mixed-income environments. The increased stratification in communities means a reduction in the benefits of learning in a mixed environment. Likewise, public housing projects decades ago demonstrated the public safety impact of concentrated poverty.

Death-of-the-Middle-ClassMoreover, this analysis requires an understanding of regional economic and mobility trends – particularly the fact that a larger percentage of people in poverty now live in suburbs as opposed to cities. Those whose incomes decline face increasingly limited options of where to live and are oftentimes forced out of the city. In Chicago for example, almost a quarter million residents  left the city over a 10 year period. A large number of these moved to areas immediately south and west of the cities borders – particularly areas with lower taxes, a lower cost of living, but less social service infrastructure to handle high-need populations. High-income households did not lose much ground during the recession. however, Alan Berube of Brookings states that low-income households lost ground and haven’t gained it back. The pressures around the cost of living are higher at the low end than they are at the high end, thus the resulting population loss in areas where residents can no longer afford to live.

No doubt, these factors have generated calls for action at various levels of municipal government and community organizations. In Chicago, the Workers Organizing Committee of Chicago’s  “Fight for 15″ calls for an increase in wages to $15 for workers. They argue that an increase in the living wage means fewer individuals and families relying on government assistance. New York’s new Mayor Bill de Blasio has identified income inequality as a key policy area for action. He proposes shifting the tax burden, but also the implementation of initiatives that would attract middle-class families with cheaper housing and better schools. Minneapolis Mayor Betsy Hodges has made equity a central part of her list of priorities and in San Francisco which saw one of the highest increases in income inequality, equity has become a hot topic.

It is incumbent upon mayors across the country to prioritize income inequality and develop sound policy that not only preserves growth, but also creates opportunities for individuals and families to rise out of poverty. Ensuring that large segments of the population are not being left behind economically is not only necessary for healthy, growing communities, it is necessary for a city to truly thrive.

 

 

Wage Wars! An analysis of the minimum wage debate and the potential impact on cities

In recent months, the fight for an increase in the minimum wage has raged at both the local and national levels with strong arguments on either side of the debate.

More than 30 states are set to consider legislation or ballot measures to hike the minimum wage in the coming months. Already, 22 bills have been introduced in 14 states and the District of Columbia on minimum wage increases and related issues in the first weeks of the 2014 legislative sessions, according to the National Conference of State Legislatures.

What role can municipalities play in shaping policies that are sound for the city’s growth and for individual, family, and community sustainability? A proper assessment requires that policy-makers and policy advocates step outside the realm of what plays well in political theater and take a long, hard look at the most feasible strategies.

For the most part, the fight for a minimum wage increase speaks to the frustration of stagnant wage rates, an increasing cost of living, and the ever-widening gap between CEO pay and that of a company’s employees (usually characteristic of large corporations). Many are frustrated by the fact that taxpayers essentially subsidize low-wage workers at such companies as Wal-Mart, especially after it was reported that a significant percentage of Wal-Mart employees received government assistance. In essence, the government subsidizes Wal-Mart by making up the difference for employees who work (often full-time), but are unable to rise above the poverty line.

However, the minimum wage debate has taken place largely on the extremes – on one side, McDonald’s employees Fighting for $15, and on the other side of the spectrum are Wal-Mart CEOs leading one of the biggest and most profitable companies in the world. I argue that the true heart of the debate rests on the impact on small businesses, a city’s ability to influence business attraction, and workforce development that values all communities.

In Chicago, small businesses are a critical part of the economy. The Chicago Metropolitan Area alone has more than 230,000 small businesses when small businesses are defined as having 1-99 employees. Microbusinesses are businesses with 1-9 employees. Based on 2010 Census Bureau data, 76% of those 230,000 small businesses are microbusinesses (roughly 175,000). And according to the Illinois Department of Employment Security, businesses with 1-4 employees make up the majority of all small businesses in the Chicago area.  These are the mom-&-pop stores, the sole proprietorships and enterprises that are more likely to be locally owned and operated.

Small businesses are probably the most important contributor to local economies. In communities, small business owners have proven more willing to hire from the community in which they reside. They are also more willing to hire individuals that are harder to employ such as ex-offenders, high-school dropouts, etc. Businesses like Brown Sugar Bakery on Chicago’s South Side, pride themselves on hiring people in high school and the role they have played in launching them into adulthood. Money from small businesses tends to circulate within the community more times before leaving the community. Moreover, small business owners are often important community partners – helping to lead on issues of safety, economic development, and community improvement.

A minimum wage increase would undoubtedly hurt the growth of these small businesses  – especially those in more challenged communities where both individuals and businesses alike struggle to survive.  They already contend with unwieldy licensing regulations from the city, competition from larger franchises, difficulty accessing start-up and operational capital, and the ever-growing threat that big box retailers pose to their survival. Despite these challenges, some small businesses pay higher than minimum to their employees. But for those who do not, a mandatory wage increase would only hurt the prospects for growth that are so crucial to the quality of life in local communities.

This does not, however, mean that there is no recourse for wage increase advocacy.  At the municipal policy level, it becomes an issue of principle and a question of how cities can value the entire eco-system of businesses that constitute the economic landscape.

Municipal governments can decide how strongly they want the business ecosystem to reflect the values and priorities that undergird their leadership. For example, if municipal leadership supports (as a matter of values) a living wage or  a minimum wage increase, generous pension benefits, and a bottom line that values profit as well as social impact, they can use their influence to facilitate the proliferation of companies that reflect those values. Municipalities do it all the time. Chicago’s Mayor, largely through World Business Chicago, has focused on attracting tech companies from around the world because of its desire to establish itself as a tech-hub. This has come by way of financial investments in entities like 1871, new bikelanes to attract Google employees, and the like.

In the same way, the mayor and the city’s economic development arm can use that influence to make values-based decisions on which companies to attract. A good example of an attractive company is WinCo, a 40 year old Texas-based employee-owned company where employee stockholders  have seen their Employee Stock Ownership Plan (Pension Plan) grow at a 21.51% annual compound growth rate. This has created an extremely dedicated workforce that is able to support themselves and their families on their Winco wages. Winco is now operating 93 employee-owned stores in seven states with nearly 15,000 employees and the company continues to grow by opening new stores every year. Costco, Trader Joe’s and Quick Trip are other examples of chains that value employees through solid pay and benefits plans. The key is to support the proliferation of these businesses through targeted marketing and outreach efforts that attract them to the city. This is where financial incentives and tax benefits for certain businesses would be effective. This strategy would bring in more employers that we do want (those that bring a significant number of jobs, pay higher wages, and are interested in investing in Chicago beyond just satisfying their bottom line). This strategy also acknowledges that while there are some companies for whose values we do not agree (i.e. Wal-Mart) we do not repel them because we understand that they too have a place in the city’s business eco-system. (Because the reality is that low wages are better than no wages, and low-priced goods are often the only option for those at the bottom rung of the socio-economic ladder).

(Niala Boodhoo/WBEZ) Stephanie Hart owns Brown Sugar Bakery in Greater Grand Crossing on Chicago's South Side.

(Niala Boodhoo/WBEZ)
Stephanie Hart owns Brown Sugar Bakery in Greater Grand Crossing on Chicago’s South Side.

In addition to supporting small businesses and values-based business attraction and retention strategy, the best long-term strategy to reduce poverty and encourage economic growth is to ensure that individuals have access (and take advantage of) workforce training programs that place them in high value add sectors in the economy. That is the municipality’s primary responsibility as a high quality labor force is one of the strongest incentives for attracting companies. Minimum wage jobs typically come with low or no skill requirements. There exist few of the barriers to entry such as education level, certification level, and years of experience that are required in higher-skilled positions, which explains why wages are low. However, there are jobs available in the economy, particularly in high value sectors like manufacturing, health care, and information technology. Many of these sectors are experiencing a shortage of individuals trained with the skill-sets and holding the necessary certifications needed to fill these jobs. A lot of times, these jobs do not require a college degree or even community college degree, but they do require sector-specific training.

Municipal leadership must prioritize comprehensive workforce training initiatives that start at the secondary school level and prepare individuals for college and/or careers. Students should be graduating from high school with relevant job skills that will allow them to obtain jobs upon graduation, increase their educational level in community colleges, move on to a 4-year institution, or do a combination of two or more of the three. We must also do a better job of providing training opportunities for individuals in that critical age of 18-25 as well as those with a criminal background so that they are able to re-enter the workforce and contribute to the local economy. And municipalities must invest in developing these workforce opportunities and recruitment efforts in the neighborhoods. For that, a municipality must value all of its residents – not just those who happen to live in the downtown areas.

After all, employed individuals are tax payers and the city’s priority should be expanding its tax base. By investing in workforce training and prioritizing attraction and  investment of high quality, socially conscious companies through values-based strategies, to all of our  communities, we demonstrate a commitment to ensuring that all workers are respected and that individuals, families and communities thrive.

Education policy reflects city policy: In Chicago’s public school system, why we must focus on where the buck stops

2010-01-22-schoolprivatizeThe biggest issue facing Chicago Public Schools can be boiled down to two key factors: bad policy, and lack of good faith and fair dealing as it relates to Chicago’s communities.

An organization is a reflection of its leadership. This goes for companies, school districts, and entire cities. The chaos that has characterized the CPS system is a reflection, not solely of CPS CEO Barbara Byrd Bennett (or her predecessor Jean Claude Brizard), but a reflection of the true leader of CPS – Mayor Rahm Emanuel. One benefit of mayoral control of the school district is that everyone knows where the buck stops. The events that have transpired over the last few years – the 2012 teachers strike (the first in 25 years), the 2013 closing of 50 schools in mainly Black and Latino communities, the current uproar over Charter school expansion – all of these things are traced to disconnected leadership and reflect a clear rift between policymakers and those that are impacted by policy.

Mayor Daley’s rationale for bringing control of CPS within the mayor’s office in 1995 made sense from a policy implementation and efficiency standpoint (though it caused concern about democratic governance). His desire for clear accountability for the district’s failings and need for more nimble and quick decision-making prompted the move. For certain, he wanted to more closely align the educational agenda with his overall agenda for the city. Educational systems do not operate in a vacuum from municipalities. This is why the principles that undergird a city’s leadership are so crucial to the types of policies that are developed.

Municipal policy that effects such areas as employment, public safety, housing, transportation, and economic development deeply impact that municipality’s educational system and vice versa. Policies that spur economic growth, create jobs, create safer communities, and create access to transportation and housing, indubitably impact the city’s educational institutions because of the positive net effect on families. These circumstances create security for children who are more likely to come from more stable families and communities, thus allowing them to participate in the educational process as learners, not as recipients of much-needed social services (which stretch the limited budget of the school system to provide those additional services and resources).

However, when municipal policy is destructive, it wreaks havoc on the communities for which the educational system serves. Chicago is experiencing the results of a clear disconnect between municipal leadership and the communities impacted by policy decision-making. This bad municipal policy is characterized by the privatization of public assets and services, and disinvestment in large swaths of the city – mainly on the South and West Sides. The lack of intentional investment has created circumstances of high unemployment, little to no economic development via large or small-scale development projects, and unwieldy crime rates. Privatization of public assets means cost increases for residents who can least afford them.

For example, with regard to crime, instead of doing what makes sense from a policy standpoint (hiring more police officers) the mayor would rather overwork already fatigued police officers and propose a mandatory minimum bill that would have disastrous effects on the life prospects of those in challenged communities already facing a keen disadvantage. From an economic standpoint, rigorous efforts to utilize tax increment financing and corporate subsidies to attract businesses to the city’s business district and certain favored communities have caused some neighborhoods to thrive while others experience a continued decline hastened by their obscurity in the city’s development plans.

The net result of the city’s policy is what we observe today – whole communities decimated by foreclosure, high crime rates, and high unemployment. The devastation is compounded by the increasing cost of living in the city. Taxes in Chicago are ranked at the top nationwide. Increases in fines and fees for everything from starting a business, to getting permits, licenses and stickers, all create a regressive tax on those who can least afford it. Add to that the privatization of parking meters, red light cameras and speed cameras, and the city’s most vulnerable populations are  nearly crippled with the cost burden.

Naturally, the population of the city began to decline – nearly a quarter million residents have left the city – mainly from the South and West sides. This means that schools in those communities have seen a similar decrease in enrollment. Instead of adopting a strategy of investment for Chicago’s public schools, CPS under the leadership of the mayor, committed two cardinal sins: they continued to advance a policy of disinvestment (mirroring the city’s policy), by starving struggling schools of resources and subsequently closing those schools while concomitantly opening Charter schools; and conducted its affairs with a complete lack of good faith and fair dealing. In other words, CPS disrespected the very communities which it serves by its lack of transparency, misleading of community groups and organizations through reporting misinformation, underestimating and overestimating statistics related to school closings, and numerous other missteps that served to obliterate any trust between the school district and the community.

Good faith is almost always underestimated when it comes to politics and policy. Good faith would have generated meaningful, transparent, honest interaction between CPS and the community, acknowledging the very real challenges and soliciting feedback. In other words, engagement that does not rely on half-truths and empty exercises via questionably developed and managed “community councils” to falsely obtain support for deleterious policies. The inevitable uncovering of those half-truths and deceptions by persistent advocacy groups, parents and community leaders created an almost insurmountable rift that puts CPS on one side, and parents and community members on the other. This is detrimental to both sides and inhibits any possibility for mutual understanding and collaboration to chart a path that makes sense for communities and for the school district.

In other words, the lack of trust has politicized everything, to the point of distraction. The reality is that whether a child is walking into a public school, private school or charter school, the most important factor is the quality of education that child receives. But a city policy that disinvests in its communities means that some children are walking into their schools with a clear disadvantage. Inequity – driving the same disinvestment policies in its public school system as it does in the communities merely exponentiates the disadvantage these children face and diminishes their life prospects.

Strong communities support strong public schools. Weak schools and empty schools are a reflection of the communities for which they inhabit. Advancing inequitable policies that starve public schools while simultaneously expanding charter schools, only rubs salt in the wound by deepening the disconnect and mistrust of both the city and school district and allows for the oversimplification of the debate to whether or not Charter schools are evil – completely missing the much larger, and much more significant question of how to create municipal policy that reflects values of investment, the value of public goods and assets for the public, transparency, good faith, and equity.

Until we change the leadership of the city to leaders who reflect those aforementioned values, Chicago’s communities will continue to experience chaos in the public school system, and Chicago’s future – the children who attend its schools – will continue to suffer.

Shiny new Ventra cards for dirtier trains – a public transit headache for CTA riders

Photo courtesy of Daniel Schwen: Howard bound red line train temporarily rerouted to elevated tracks at Randolph station, Chicago.

Photo courtesy of Daniel Schwen: Howard bound red line train temporarily rerouted to elevated tracks at Randolph station, Chicago.

The formula for public transportation is fairly simple – public transportation is a public good to be enjoyed by riders who pay for this service through fares, and by extension, property taxes. The more riders that use public transportation options, the better. When fewer people are utilizing public transportation, it becomes more expensive for those who continue to use it as a mode of transport – which typically are those who have no other choice – either because they can’t afford a vehicle or don’t want to use a vehicle,  and all of the trappings that come with owning a vehicle – permits, stickers, tickets, fines and fees, etc. And yet, the news is only growing worse for Chicago transit riders.

Recently, CTA  spokesman Brian Steele declared that CTA will no longer conduct day-time spot cleaning. Spot-cleaning involves trash pick-up and mopping and is currently conducted during the morning and afternoon.  Now, union officials said general cleanings which are more extensive than the spot-cleanings, will take place every 16 days (a reduction from the current 14-day cycle). President of the Local 308 of the Amalgamated Transit Union, Robert Kelly, said this change will become a serious health matter for the public.

On top of the impending degradation in train cleanliness, CTA announced that they will be ending a program that  hired 65 ex-offenders to conduct daily spot-cleaning at a rate of $9.50 an hour. The program is being ended on December 31st, which means 65 individuals who were able to find productive work will now be back in a brutal job market that is more conducive to ex-offenders heading back to prison than providing legitimate opportunities for employment and advancement. CTA spokesmen have blamed the union, saying that Kelly pushed to end the program while Kelly blames CTA for not negotiating the extension of the program’s contract through 2015.  Regardless of who is to blame, this is a blow to the 65 individuals who will not be able to complete the 9-month apprenticeship program which gives ex-offenders job experience and a reference that could lead to permanent employment. It’s also a blow to the individuals that could have taken advantage of this opportunity in the future.

Much has been made of the botched roll-out of the  CTA Ventra system. From glitches that resulted in fare-users being charged twice, to overly sensitive readers that charged fares if you simply walked by a fare-reader, to the fact that Cubic Systems, the vendor that developed the Ventra system is woefully short of minority contracting requirements. It now seems that riders can use their shiny new Ventra cards to ride filthy trains.

In most Western European and even some Canadian municipalities, public transportation is the preferred source of mobility for people, and for good reason. Specifically, many large European centers do what seems to be the opposite of Chicago’s transit policy – they increase transit usage by enhancing the quality, coverage and reliability of the service. Even those Western European and Canadian cities that are not frequented by tourists—such as Bremen, Germany; Halifax, Canada; and Lyons, France—have higher transit ridership levels than much larger U.S. cities with extensive public transportation systems, such as Chicago, Atlanta, and Philadelphia.

A quick analysis of Chicago shows Chicago transit users typically experience large gaps in network coverage, low schedule frequency, chronic delays, and excessive transfer waits. Add to this service cuts on a yearly basis, decreased coverage (with the exception of the long overdue extension of the red line train) and decreased reliability. To top it off, while never particularly high on the list in terms of cleanliness, this latest CTA announcement resulting in less frequently cleaned trains means that the quality of the rider experience will undoubtedly fall even more. This almost guarantees a subsequent decrease in ridership which means that fare hikes will be inevitable  to cover the cost of maintaining this public good – a vicious cycle for the public.

What does it take to sufficiently and efficiently operate and maintain a public transportation system in Chicago? Where are the performance standards that maintain accountability for CTA, especially considering taxpayers are paying for this service? Was it possible to maintain a much-needed program that hires ex-offenders and would keep trains a little bit more rider-friendly? This latest move by CTA is bad policy – and it’s the public that will suffer the consequences.

 

 

Insights from spending time in the “most violent city in the world”: What cities from San Pedro Sula to Chicago can learn about addressing violence

www.businessinsider.com A military police officer gestures while stopping a vehicle at a checkpoint in the neighbourhood of Flor del Campo in Tegucigalpa October 14, 2013. Read more: http://www.businessinsider.com/the-most-violent-cities-in-the-world-2013-11?op=1#ixzz2mHvMMsTI

http://www.businessinsider.com A military police officer gestures while stopping a vehicle at a checkpoint in the neighbourhood of Flor del Campo in Tegucigalpa October 14, 2013.
Read more: http://www.businessinsider.com/the-most-violent-cities-in-the-world-2013-11?op=1#ixzz2mHvMMsTI

I distinctly remember my experience from a couple years ago in San Pedro Sula, the second largest city in Honduras. I  arrived there by bus,  disembarking at the Gran Central Metropolitana de Autobuses de San Pedro Sula – the city’s main bus station and the busiest bus station in Central America. I briefly traversed the sizable mall that is attached to the bus station and went in search of my comida tipica – plantain, preferably with rice and beans. As I meandered down side streets, my senses were heightened in a way that I had rarely experienced, though by the time I got to Honduras I had experienced much by way of danger – from a Sendero Luminoso (Shining Path) encounter in Peru, to “mafioso” in the Dominican Republic, to somehow sharing a car with professed murderers in Algeria. I knew what danger felt like and it was palpable in this bustling city.

It was probably around 6:30 in the evening when I made it to my place of abode, but on the way there, I grimly observed shuttered storefronts, encased in metal bars and heavy metal slide-down doors. At dusk, the city felt eerily sluggish and quiet. Streetlights were few and far between. For sure, people were still about, but they peeped cautiously through closed blinds and shuttered windows. I suppose this is the way it feels in the “most violent city in the world.”  I wasn’t surprised to see San Pedro Sula at the top of the list. Of all the cities I’ve visited, it was probably the one where my awareness was most heightened. And as I perused the list, I realized I have been to more than half of the world’s 50 most dangerous cities. I also noted that most of the cities on the list are in Central and South America – 41 out of 50. Indeed, Latin America now boasts 40% of the world’s homicides despite comprising only 8% of the world population.

However, it is important to make clear an often conflated issue. It isn’t that Latin Americans are any more dangerous than North Americans, Europeans, Asians etc. All too often, policy makers  create policy that treats certain communities of people as inherently violent instead of addressing the issues that create circumstances where violence is able to thrive. And so the blame falls on “those” people in “those” communities – as though individuals are somehow born with a predilection to violence and decide to congregate in the same area where they can act out their violent tendencies. It is this flawed thinking that drives so much policy making around violence prevention.

My meanderings through tense, hushed neighborhoods in San Pedro Sula felt vaguely similar to my wanderings in neighborhoods in New Orleans, Bucharest, Oakland, and Chicago; that vague sense of unease. And it wasn’t necessarily the people. The common denominator were the obvious signs of economic disinvestment: crumbling buildings, unkempt grass, grafitti, dark streets, and, frankly, nothing to see or do. The Latin America report credits a toxic combination of organized crime, drug trafficking, internecine gang wars, government corruption, and desperate poverty to the homicide rate in many of these Latin American cities. It’s obvious that poverty, lack of empowerment, and inadequate infrastructure that provides a framework through which citizens can be adequately educated and employed creates a perfect environment for violence.

Many municipal governments – particularly those that are overwhelmed with great economic disparity and poverty –  address violence as a policing issue instead of a public health issue and thus attempt to treat violence one-dimensionally, instead of developing a multifaceted response to what is a multifaceted issue. Much of proposed violence policy focuses on the end result of violence – sentencing and policing – instead of focusing on prevention and the underlying social and economic issues that exist in communities that have been ignored.

 

Chicago police officials speak at a news conference Monday with a display of recently seized guns, part of the 574 that had been seized in the city since Jan. 1. The city suffered through its deadliest January in more than a decade. M. Spencer Green/AP In Pictures American Gun Culture

Chicago police officials speak at a news conference Monday with a display of recently seized guns, part of the 574 that had been seized in the city since Jan. 1. The city suffered through its deadliest January in more than a decade.
M. Spencer Green/AP
In Pictures American Gun Culture

In  Chicago, Mayor Emanuel has decided to focus on gun crimes as violence prevention strategy. But violence is more than a gun problem. Researchers do agree that increasing the number of police brings down gun crime. For example, New York City increased its police department by 41% in the 90s which was one of the keys to its historically low homicide level in subsequent years. However, Mayor Emanuel decided not to increase the number of police, instead opting to pay millions of dollars of over time to already taxed police officers and shifting officers from large police units to smaller beats. He also proposed mandatory minimum sentencing legislation for certain gun crimes – again, a narrow piece of policy that, although polls well for political points, does nothing to address the roots of violence.

Municipal governments must focus on the most effective areas in which violence – all violence –  would be impacted: economic investment. Depressed economic conditions within a given community, as well as individual cases of unemployment and underemployment, lead to significantly higher levels of violence. In Chicago, those communities are largely on the South and West Sides. Decades of disinvestment have left many of these communities with little by way of employment opportunities and an intentional oversight by municipal government on Chicago’s communities outside of the downtown and near north areas have left a gaping chasm of economic disparity and the resulting frequency in criminal activity and violence in those neglected communities.

Despite how difficult the undertaking, there are some very practical policies (in addition to increasing the number of police officers) municipal governments can implement that will either directly or tangentially decrease violence. Walking through the streets of San Pedro Sula, it is clear that small businesses are absolutely critical to the city. Whether it’s the woman selling home-made street food on a stand by the road, or the small business owner selling clothes and shoes out of a small storefront, small businesses are a crucial source of jobs that allow individuals to legitimately provide for their families in San Pedro Sula and in any other city. Municipalities should concentrate on reducing barriers to starting small businesses including streamlining the licensing process and focusing on supporting and attracting small businesses with the same fervor many municipal governments direct toward attracting big box retailers.

Small business entrepreneurship is not only a backbone to communities, but could also serve as a legitimate endeavor for ex-offenders who face substantial barriers to employment. Many of the most distressed communities receive high numbers of ex-offenders who, because of their background, are faced with few employment options, thus heightening the chances of recidivism. Entrepreneurship is one way individuals can become productive members of their communities while keeping money circulating through the community.

Targeted human capital development via training in high value-add economic sectors is absolutely crucial. All too often, municipalities focus on attracting employees from outside of the city to locate within the city limits. This policy ignores that vast amount of human capital already existing in communities – potential positive contributors to the labor force. High value add sectors like manufacturing and health care have  low barriers to entry, making job training in these areas an excellent opportunity to train individuals for jobs in these sectors – jobs that often pay family-sustaining wages which translate to stable communities.

The built environment cannot be overlooked as it relates to curbing violence. The same fervor with which graffiti is removed, streets are cleaned, and vacant buildings are secured in downtown areas, should also take place in these communities. After all, taxpayer dollars go in part to these city services, thus there must be equity in how services are administered. Dilapidated buildings, vacant lots, graffiti, and other signs of deterioration increase the sense of disempowerment and erode any sense of security for residents. In addition, municipal governments can be influential in guiding how areas of the city are developed. Targeting new development projects in economically depressed areas can inject new life into those communities, change the facade of the community, and create economic and social reasons for residents to live there and for visitors to travel to those neighborhoods.

Violence whether in San Pedro Sula, Acapulco, New York or Chicago, is a multi-dimensional issue that requires a multi-dimensional approach that takes into account both long term and short term strategies. It requires  intentional targeted investment in communities that have long been overlooked. It requires  changing the mindset of policy makers to understand violence as a product of poverty and poor policy. We cannot relegate violence to “those” communities. After all, those communities are our communities and violence does not recognize artificial neighborhood boundaries. The sooner policy makers realize this, the safer we will all be.

Breaking Bonds: Understanding Chicago’s fiscal crisis and how to avoid the tightening noose

city-hallFor the last couple of weeks, the Chicago Tribune has been running a series called “Broken Bonds” that throws the covers off of the obscure and complicated world of municipal finance and details what happens when cities turn to desperate and unsustainable mechanisms to address  financial woes. What lies beneath should concern the average citizen because the implications of the city’s spending and borrowing will indubitably impact quality of life for years to come.

A mayor who prides himself on making tough decisions, has instead opted to use short term fixes for the city’s long term problems by relying heavily on bond money. Municipal bonds are loans. The bond holder is the creditor, and the bond issuer is the borrower. The issuer of the bond in this case, is the city of Chicago and since the bond issuer is indebted to the bond holders, it is required to pay them interest and/or repay the principal at a later date. As Chicago issues bonds, it incurs more and more debt.

Municipal bonds are typically used to finance long-term infrastructure projects and investments such as schools, roads and highways, utilities, sewer and water systems, and other public projects.  However, a review of the city’s fiscal practices reveals that the City has become reliant on bond money for general day-to-day operations. Not only that, the city has used bond money to pay for other non-capital projects such as equipment, pension payments, and racial discrimination and policy brutality lawsuits, possibly abusing the federal tax code.

One tragic example is the story of Joseph Regalado. The City ended up covering the $28 million a jury awarded to him in 1999 after the jury found that, years earlier, a Chicago police officer had beaten him in the back of the head and neck with a blunt object, which ripped apart an artery and cut off the blood supply to his brain. The injuries left Regalado unable to walk, talk or care for himself. The judgment won’t be paid off until 2019 at the earliest; by then, the total cost will have grown to $53 million. About $54 million from a tax-exempt bond helped cover a legal judgment awarded to African-Americans who were denied a chance to become firefighters by a 1990s entrance exam that favored white applicants. Tax payers are essentially paying for the city’s misdeeds since future property taxes help pay interest on the bond debt used to pay off these judgments.

Photo by Zbigniew Bzdak - Chicago Tribune

Photo by Zbigniew Bzdak – Chicago Tribune

While cities across the country are grappling with fiscal challenges – not the least of these is Chicago’s northern neighbor, Detroit – Chicago has racked up more general obligation debt per capita than any of the 10 largest U.S. cities with the exception of New York. In fact, Chicago actually has more general obligation debt than Detroit, which became the largest city in the country’s history to file for bankruptcy earlier this year.

63 percent of all property taxes collected in Chicago go toward debt payments as of last year. At $7.2 billion of debt as of last year, the total bill will amount to twice that amount when interest is included. Several facts become apparent when considering possible solution to the city’s debt crisis. As it relates to spending, the city needs increased oversight, more accountability, more transparency, and more public input. As it stands there is very little oversight on the city’s bond practices. City Council is perhaps the only opportunity for bond deals to be vetted. With a decidedly weak council and strong mayor, ordinances that give the mayor wide latitude to issue debt have been passed time and time again.A referendum protocol, though costly, would provide more public accountability to projects funded by bond money. Moreover, this heightened public accountability and a stronger council would help minimize polluting the finance process with deals only embarked upon for political reasons, such as those detailed by the Chicago Tribune in which politically connected developers were able to complete pet projects with bond money.

It is absolutely imperative that the City of Chicago track bond-funded projects. City officials have stated that they have not done so because the computer program used to plan and budget for them doesn’t match up with the software that records actual spending. This is unacceptable. Bond-funded projects must be traceable and trackable. This facilitates higher accountability about just how bond money is spent. Moreover, Chicago is one of the very few municipalities across the country that does not put bond-funded projects to a public referendum. This would ensure much more transparency by requiring information on how bond money will be spent and also ensures buy-in and voter approval before projects are begun. It will also provide some checks on drastic cost overruns that end up costing taxpayers millions more dollars than originally anticipated for these projects.

Photo courtesy of the Chicago Tribune www.chicagotribune.com

Photo courtesy of the Chicago Tribune http://www.chicagotribune.com

The other factor that will be critical in assessing the city’s future fiscal health is its ability to retain population. The city has lost hundreds of thousands of residents over the last ten years, thus decreasing the tax base that is so vital to supporting the city financially. Moreover, the high volume of foreclosure solidifies the inability to maximize property taxes that are a critical source of revenue for the city. The current mayor’s strategy of destabilizing communities by closing public schools, and mental health clinics, and difficulty in curbing crime has negatively impacted the city’s ability to retain population. Coupled with increased fines and fees via speed cameras, red light cameras, and tickets, and it’s become more difficult than ever for the vast majority of Chicagoans to say in the city.

Securing the fiscal future of the city is about more than just the numbers; it’s about the people. Investment in Chicago’s human capital, particularly in the city’s neighborhoods, is critical to ensuring  a strong labor force. This, coupled with a push to both create and retain  jobs in high-wage, high-value sectors such as manufacturing and health care will help create a population that is financially able to pay the taxes that support municipal government. Supporting small businesses and creating stability in Chicago’s neighborhoods is just as important as devising creative ways to share debt load across generations.

Chicago must set an example for other municipalities by being willing to make the hard decisions that will secure both its present and its future and do so before the ties that bind the city’s future become a noose.

 

 

Fines, fees and frustration: Why balancing a budget on the backs of taxpayers is bad news for Chicago

budgetaddressMunicipal revenue generating schemes are becoming more and more like a noose – they keep getting tighter and tighter. Eventually, it will strangle its victims, the taxpayers. In announcing Chicago’s proposed 2014 budget, the first thing proponents giddily declare is that the budget contains no new property, sales, or gasoline taxes. A closer analysis of the budget includes measures that give residents little to celebrate, and in fact speak to a much more troubling, unsustainable trend of  revenue-seeking by the City.

The most recent budget includes $34.2 million in higher taxes, fees and fines. Many supporters of the Mayor Emanuel’s budget have applauded City Hall for trying to find ‘creative’ ways to raise revenue.  However, when the most obvious change focuses more on increasing fees and fines to taxpayers instead of more substantial and longer-lasting spending reductions, creativity seems hardly the appropriate word. The city’s focus on increasing fines and fees is unsustainable and creates even worse economic conditions for the entire city.

The issue not addressed by the budget is the city’s declining population. Over the last ten years Chicago lost roughly 200,000 residents – mainly from the city’s West and South sides. While some may say “good riddance” to those individuals and families, the truth of the matter is that those are tax dollars that are bleeding out to suburban municipalities. In other words, the city loses the property tax, sales tax, and any other tax the city would have gained by virtue of their still residing within city limits. Indeed, they event represent additional potential revenue from some of the tickets, fees and fines now concentrated on a smaller population. The math is simple. Fewer residents = less revenue. It stands to reason then, that the city’s leadership would put effort into understanding how to retain residents, such as intentional economic and human capital investment in some of the city’s most challenged community areas.

Photo courtesy of www.theguardian.com

Photo courtesy of http://www.theguardian.com

Instead, the new budget chips away at whatever good will exists on the part of residents.  For example, if you own a car in Chicago, now may be a good time to consider other transportation options (although if some aldermen have a say, switching to bicycles won’t alleviate fines and fees either). Mayor Emanuel is counting on $120 million in fines from red-light and speed cameras and $10 million more from higher parking fines and impounded vehicle storage fees to balance the $6.97 billion 2014 budget.

Most of the six parking fines targeted for increases have been frozen for years. They include: $60 for parking illegally on streets being cleaned; $110 for parking within 15 feet of a fire hydrant; a three-fold increase to $75 for RVs, taxicabs and trucks parked on residential streets; $100 for parking illegally during rush periods and $250 for parking in spaces designated for people with disabilities.

The easy response for those who point out the fines and fees for red light cameras and speed cameras is “don’t break the law”. But what happens when more drivers actually do follow the law? The revenue will decrease, and then what? How will the city recoup the lost revenue? At its core, taxpayer-driven revenue schemes are unsustainable because they do the very thing the city claims it wants them to do – it changes people’s behavior. Residents will  begin buying goods and services elsewhere. They’ll drive less. They’ll go and engage in citywide activities  less. And eventually, they will move out more thus sticking an ever decreasing population with the burden of plugging the city’s budget shortfall. Punitive fines should not be a revenue on which the city depends. Instead, they should be an excess of dollars for the treasury. Chicago’s city government has become overly reliant on these sources.

Instead of balancing the budget on the backs of taxpayers, it’s time for the mayor to take a long look at the way the city does business. As a start, strengthening the Office of the Inspector General could facilitate a complete audit of all insider deals that currently take place out of City Hall and end up costing taxpayers millions of dollars.  The Office should also investigate the business-dealings of elected officials, explore conflicts of interests, and root out under-the-table deal-making the benefits a select few politically connected individuals and corporations.

The city should also re-evaluate how we attract companies to locate here. Currently, Chicago (and many other municipalities and states, even), in an effort to attract companies, heavily subsidize them with tax incentives. This limits the benefits of having large companies locate here. In addition to jobs (which aren’t always going to benefit Chicago residents), the city could stand to benefit from taxes generated from companies that decide to locate in Chicago.

The city should also enact wholescale TIF reform. More transparency and oversight is imperative if taxpayers are to actually reap some of the benefits of TIF districts. Indeed, more oversight and public input could lead to funds that are spent on improving schools, infrastructure, and other capital projects that can benefit neighborhoods. TIF dollars should never be seen, or used, as a tool to wield power over city council members. That money belongs to the public.

These are a few suggestions that would enact long-term cost reductions that will save the city money and facilitate reduced spending and over-reliance on taxpayers to fill budget gaps. One hopes that the Mayor is sensitive to the outcry spurred by the 2014 budget, but the last two years have shown a glaring disconnect between the will of the people and the policies that emerge from City Hall across issues from education, public safety, economic development, and now, the budget. It’s beginning to feel as though the mantra from City Hall is “let them eat cake.” With 2015 elections around the corner, let’s hope Mayor Emanuel remembers the fate of Queen Marie Antoinette.