Thursday, February 7th, 2013

Chicagoism, Part 4: How Chicagoism Works Again by Robert Munson

The October 2012 publication of “Sustainable Chicago 2015” shows how much Chicago has changed under new management. In the Land of Clout (fairly or unfairly reputed), sustainable opportunity became the new operative.

Daley did his job well as Chicago’s booster-in-chief to global corporations. However at the other end of the spectrum, he knew his emphasis on “green” technology was being integrated too slowly to grow the enterprises of the new economy. Amidst all Daley’s enormous energy, Chicago still seemed to lack a clear strategy. I’d argue this let diversions creep in and contributed lots to Chicago’s reduced economic growth as revealed in the 2010 Census.

In the above 40 page booklet, Rahm clarifies this strategy by elevating economic sustainability to serve as policy partner to the environment. This Action Agenda has reasonably specific goals and synthesizes into a coherent whole many innovations of the Daley administration and those Rahm started to implement or propose.

The result: this Agenda paints The Big Picture and positions “Chicago as a hub for the growing sustainable economy.” With one key phrase, everyone gets it.

Rahm merges what Daley probably wanted to merge, but couldn’t given the distractions of fiscal fires and his Olympic quest. Rahm better seems to be persuading firms to expand offices here because he offers a more integrated vision. Pioneering a key part of the Chicagoism update, Rahm has prioritized finding the synergy in environmental and economic sustainability.

This concept’s rubber meets the road (or rails) in Rahm’s reshaping Chicago’s transportation-commerce nexus for the 21st Century. “2015” outlines several innovations, but gets back to basics by emphasizing upgrades for Chicago’s systems to move people and freight. Four of the 24 goals in the “Action Agenda” enhance mobility directly and a few more goals do so indirectly. This is key to serving as the Midwest’s commercial center and portal to the global economy.

To continue earning that role requires helping make products and services more sustainably. For that, Chicagoans must rekindle their entrepreneurial zeal and retool its consulting industry.

As a telling example of our post-Daley progress, recall the critique in this series’ second post: ten years of the Chicago Center for Green Technology had not developed traction that created jobs. So in July 2012, the City hired startup business consultants as part of CCGT’s new management team. Judging from CCGT’s December “Sustainability News”, the change is working well. This issue packages into the CCGT seven transit and energy innovations; including Chicago’s latest ambition to become a center to manufacture electric vehicles. Tell me if you know, does the City of Detroit have that platform to solve its job problems ?

Yet, the real debate in Chicago’s economic strategy is between specializing and staying diverse. I think the transition to sustainability can transcend this argument.

On the side of specificity creating value-added profits, an Urbanophile post argues how Chicago needs a calling card industry. Without this specialized high-profit edge, Chicago’s role in a global economy has fewer competitive rewards.

On the other side and describing a traditionally diverse economy, World Business Chicago’s “Plan For Economic Growth” has lots of something for everyone; offering ten strategies. To me, the document lacks strategic focus; reflecting Chicago’s economic diversity and its role in serving as transportation and commercial center … but minimizes our strength as an entrepreneurial problem-solver.

This dilemma of balancing higher-profit specification with diversity starts to get resolved in the “Action Agenda.” Of its twenty-four goals, ten add to economic opportunity and several more do so less directly. Not in the “Agenda” but serving as a more specific and transcendent resolution, consider converting Chicago’s 1990s role as the consultancy center that helped corporate America into the information economy and, now, re-tool those services to help corporations with the environment better. Largely, this point was made by the Urbanophile 30 months ago.

What About That Budget?

The second panel I see in Rahm’s Big Picture gives us hope: the Emanuel Administration has turned around a largely insolvent City (one that cannot pay its bills) and improved its chances of avoiding bankruptcy.

Since the City’s fiscal abyss was finally becoming public knowledge, Rahm’s January 2011 campaign promise of fiscal sustainability had its skeptics … including the author of this series. But the clearest bottom-line progress came with the September 2012 announcement (and fanfare) that the projected 2013 budget deficit would be 20% less than expected and the smallest since 2008. This was followed with a new budget that crowed about no new taxes or fees. (While “no new taxes” acknowledges the ‘de facto’ tax strike among even one of the nation’s most liberal citizenry, the “no new fees” is a promise to be watched before it can be believed.)

However, this fiscal progress should not conceal how the last penetrating recession exposed fatal flaws in most municipal budgets everywhere. The Daley Administration responded initially by treating a surface wound; by applying band aids, such as the sale of assets (as in parking meters.)

The Emanuel Administration has a more correct analysis; allowing for a more productive strategy. Yet, they have not gone public with a full prognoses: that the organs of government have been badly infected with unsustainable obligations and we need to rework radically those services and how they are paid for.

While some politicians and civic leaders have taken the easy route and pointed at pension obligations, the bigger truth should not be lost: facing chronic deficits, local government must actively develop alternatives to serve the public’s will and maximize tax dollars.

Even though Rahm reduces Daley’s deficit by more than 50%, he doesn’t solve the problem; he just sews up the hemorrhage. The slower bleeding from deficits still continues. This combines with the psychological pain of agencies failing to do better with less. Worse, another recession with a gridlocked federal government and its chronic fiscal cliff could re-open the hemorrhage and accelerate our day of reckoning.

Rahm’s partial progress toward fiscal balance is only a prerequisite to future growth. We also need to find the new investment that is required for us to compete. In this long, hard road back to health, fiscal sustainability’s middle steps must overcome these three forces: first, key costs are mostly contractual; second, bureaucracies resist improvements; third, policy remains corrupted. Let’s take a quick look at each force in order to reckon with it.

1. Controlling personnel costs requires near-constant focus. Since 78% of the City’s budget is personnel costs and most are contractual, the Emanuel Administration has an insufficient chance to convert a string of seven years of red ink into a surplus. To improve their chances (and ours), there are two options. First, they drastically cuts services and risks quickly becoming unpopular. Or second, labor contracts will need to be routinely renegotiated to facilitate the reinvention of services.

Without contract flexibility, the older and more bureaucratic services (which also are more likely to have expensive contracts) are more difficult to update. Suspecting that they are backing proven losers, taxpayers resist.

Worse… with personnel costs still voraciously eating the future at almost the same rate as Daley’s last years, there is no money to invest in the infrastructure required to compete.

2) Reinvention of services has a limited track record of producing fiscal savings required to avoid bankruptcy. To start that reinvention, Rahm early on told public employees that “competition” would be the operating principle for public services. Words like these seemed to improve City employees’ quality of work. But such talk also put unions on guard. Their tactical push-back seemingly meets most Mayoral moves. When these little resistances get taken to scale, anticipated or touted labor savings shrink to insignificance as tools to change century-long habits of spending more, yet getting less value for citizens.

Limits became obvious to me when teachers struck for a week last September, largely to minimize the discipline of poor teachers. Worse, teachers got a contract in which taxpayers will pay a premium to raise Chicago’s classroom hours closer to those of other large systems.

My question is: what caused Rahm’s lieutenants to take this bad deal? And specifically, did too many parents make the short-term complaint about losing their day care system for a week? Wouldn’t children be better if a longer strike resulted in teachers meeting real-world performance standards and, thus, reflect those that teachers are supposed to be preparing children for?

Today’s labor contract could be viewed as poison from a taxpayers’ standpoint. Over half the property tax goes to schools and is nearly their exclusive revenue source. Yet, this tax still bears no guarantee to get rid of the bad apples who lower the system’s standards. And of course, our fiscal reality is property taxes will have to go up to cover the premium cost of longer-hours which, again, carry no guarantee of improved performance. To boot, those taxes will go up on properties that have just lost 25% of their value.

Caught in this wasteful trap, who can believe that higher taxes will be invested well in our children’s education… or, even, our future? With our schools as a primary example, only radical reinvention leads to the belief that money is well spent.

3) Illinois’ 20th century corruption hangover went from worse to broke. While citizens and the media wag fingers at politicians for ethical improprieties, none cost as much as the decades-long deal for labor peace. There are multiple true costs; some discussed above. But the big one here is we have had decades of abusing democracy by letting public employee unions deliver campaign reelection funds and workers to legislators. Instead of protecting taxpayers and citizens, legislators have become dependent on public employees for reelection.

This political power gave leverage to employees that yielded generous benefits; often protecting them within the Illinois Constitution. These reelection gifts also bought their way into Illinois’ political hierarchy; best represented by the same man ruling the legislature for almost three decades.

This lack of political competition creates corruption and produces today’s lose-lose-lose situation: retirees cannot be paid the benefits promised; agencies will have to reduce benefits using disruptive insolvencies; and the resulting dysfunctional agencies inevitably hurt citizens and corporations who depend on public services.

What Is the Way Out of This Fix?

Rahm’s tactics worked well enough to get him through his sophomore year and still be popular. Despite his tremendous energy, substantial force of personality and genius at political maneuvers, I’m guessing Rahm has shown us his best stuff.

Look at his rebuilding the commerce-transportation nexus. This is at the heart of Chicagoism’s ambition for central status. Rahm put some of his best stuff into The Chicago Infrastructure Trust (CIT). He had to. Facing a broke state and a two decade backlog of fixing what we have, Rahm decided to raise private capital via the CIT. This is America’s first municipal experiment of such a Trust. And determined to make this work, Rahm used his best pay-back chips by bringing The Big Dog (President Clinton) to announce CIT over 11 months ago. CIT even got some seed capital from Clinton’s Sustainable Initiatives Foundation.

Since then, little of substance has happened. Talk and expectations remain high. They have to. We have paltry alternatives; given taxpayer resistance to fund these vital updates. Today with money scarce, expectations are muted.

The CIT is important for other reasons. The key one is CIT will require lots of public “buffer” capital to do the riskier, but needed, deals. With an expensive two-decade backlog of updates merely to put yesterday’s infrastructure into “a state of good repair,” taxpayers soon will have to back the riskier side of deals. Getting that public capital is an opportunity to strike a new deal with taxpayers; to give them a contract with the future.

How the CIT — and other initiatives — actually get going in earnest depends on how the above three obstacles start getting resolved in 2013. And that depends largely on Rahm’s level of citizen support. Will we tolerate the inconveniences when services get cut and labor peace gets frayed? Is our threshold high enough to tolerate a garbage strike in summer? To cut to the chase: Will those among us who squawk alot restrain ourselves enough for the common good and, instead, at least not squawk too much while better rules are written?

These inconveniences could be a tough test for a citizenry seemingly bred to bellyache.

But the bellyache, while not thoughtful, does indicate we are not getting our money’s worth.

So, the core question now becomes: how do we give citizens and taxpayers value?

Instead of Antiquated Labor Contracts, Focus on Future Social Contracts

Harken back to Chicagoism’s first installment which started with the 1933 Worlds Fair. This symbolically launched the consumer economy in the same year that Roosevelt coined its political complement, the New Deal.

How the 21st Century crafts a Sustainable Deal depends on the genius of someone like Rahm. For example, the CIT and its need for public capital is Rahm’s opportunity to craft prototypes that convert our ‘de facto’ tax strike into a deal in which we willingly invest in again… because we have to. What is more, investing well is our new civic responsibility.

Despite Rahm’s impressive progress in two short years, distrust of higher taxes is the primary obstacle to Chicagoism’s update. Distrust breeds from the lack of accountability to taxpayers. Hence as part of their contract to invest in future infrastructure, we should include Reforming accountability measures as key to the deal.

Think of the annotated graphic below as a guide to how Sustainability’s 3Rs serve as principles of the tripod that steadies a deal so taxpayers see that their investment in the next generation of infrastructure is money well spent.

As we define the terms of a sustainable social contract for Chicago (which also can serve as prototype for Chicagoland), we can probe into how a contract serves the common good; that quaint notion that made our nation… and the one that “The Greatest Generation” understood so well that they pulled together great responses to the crises of their times.

To respond well to ours, Americans will need to transcend today’s un-civil war between the reds and the blues. I’m not betting that happens soon. In the meantime, we can be a beacon in our little corner around Lake Michigan. In the next and final article, we will review Chicagoism and see how it applies to where you live and to what your fellow citizens need.

Chicagoism Series Index
Part 1: Lessons from the 20th Century
Part 2: Starting the Transition to Sustainability
Part 3: Reinventing Services, Starting Accountability Reforms
Part 4: How Chicagoism Works Again (this post)
Part 5: Where Do We Go From Here?

Robert Munson sharpened his interest in regional planning while serving on the Citizens Advisory Committee for the metropolitan plan released in 2010. Out of that experience, he started the website CCC or Chicagoland Citizens Central where you can find his profile. Readers can contact him directly at robertmunson@earthlink.net.

24 Comments
Topics: Economic Development, Public Policy, Strategic Planning, Sustainability
Cities: Chicago

24 Responses to “Chicagoism, Part 4: How Chicagoism Works Again by Robert Munson”

  1. James says:

    I would say that the teacher’s union contract represented a victory for the city and further confirmation of “sticky wages”. The previous deal had pay raises averaging 16% over 4 years which is a 4% a year hike. The new deal has a 3% increase the first year followed by 2% increases. If inflation heads north of 2% the city will cut salaries in real dollars.

    Ultimately Rahm is facing the challenge of many big cities in that labor costs are high but services are low. Chicago needs a lot more police personnel to tackle the crime problem, but doesn’t have the revenue stream to pay for it. It is a structural problem that will involve a lot of pain as the Southside continues to de-industrialize and de-populate. I don’t see any easy answers on how to fix Englewood.

  2. the urban politician says:

    James, I agree. The teachers union deal wasn’t a bad deal for the city, all things considered.

    However, I can think of plenty of solutions for “the southside” but there is no political will to implement them. However way you cut it, increasing the police force has to be a part of any solution but I’m not even remotely convinced that the city doesn’t have the resources to do so.

    The city has too many people working in too many departments, it has too many people on the streets directing traffic (what the hell are traffic lights for?), I feel there is still waste in the system. Cut those jobs and use the saved funds to hire more police officers, deploy them to the most gang-ridden areas of the south and west sides. In addition, create a deregulated “bubble” in the poorest areas to encourage private development. A property tax freeze, a simplified building code that just applies to those areas that includes some safety basics (2 means of egress, safe porches) but other words lightens up on the more expensive stuff (2 layers of fire rated gypsum, the need to use METAL on stairs and walkways, water booster pumps, the need for cast iron drainage stacks, the ban on BX for electric wiring, etc). Do more to attract immigrants to these areas of town as well. Oh, and abolish the CHA.

    Already sound impossible? It is. There’s no political will for any of this. Too many people benefit from the status quo.

  3. Robert Munson says:

    James–
    Thanks for your comment.
    Since labor contracts make it so hard to control costs, the broader range of savings will come from Reinventing services and there often is resistance.
    The crime problem you mention would be a case in point.
    Do you know what happened to the plan to hire former gang members to provide inside information on gang activities?
    It created quite a stir among the public and the patrolmen’s union.

  4. Robert Munson says:

    TUP–
    Thanks again for your insight: there is no political will for reinventing services……

    Clearly, vested interests prevent reinventing services on the scale that is required to avert bankruptcy. The building trades write the codes that create work for their members and raise housing costs to those families already struggling (some 10-12% if you’d like the study.)

    And as you mention… there is the CHA, a self-serving bureaucracy, that has a blizzard of unnecessary procedures that do not help families get off welfare and, instead, aggravate those landlords who actually take those families in. (A true waste, since the CHA has failed so miserably, it had to have its building torn down.)

    But I believe two factors create the opportunity for Reinventing services.
    First, bankruptcy is a very powerful incentive.
    Second, stopping campaign bribes from vested interests will go a long way to reducing the public’s costs.

    Let’s talk more!

  5. Racaille says:

    Yet another post on Chicago. Brilliant.

    I had posted a few years back that Chicago was going to have a renaissance like no other city in North America and that assertion appears to be verified.

    Bravo!

  6. Dan Wolf says:

    To Robert Munson
    Thank you for the honesty and courage to speak fairly plainly about the nature of the problem. An acurate definition of a problem is always a necessary starting point. Will the citizenry get serious along the lines suggested? Maybe the spectre city bankruptcy,cut services and shame and embarrassment will evoke action city wide. What are the survivors in Detroit doing with their situation? Do they have a good public spirit or have they given up all together? Building on the cornerstone of honesty and humilty in city government, the citizens may be willing to share some pain of reduced services if they know waste is forcefully being reduced and personnel mamoth costs are being reduced, legally.This approach along with both the “specific” and “diverse” industry efforts will possibly win the confidence of s sufficient segment of the citizenry.

  7. Robert Munson says:

    Dan–
    Thanks for the compliment. (It is sign of bad times when two citizens congratulate themselves for talking honestly about the debts they are figuring out how to pay.)

    I presume we are in basic agreement with my central point: sustainable urbanism will be stymied until it gets a new deal between broke governments and their citizens.

  8. John Morris says:

    Doesn’t hiding debt in that way constitute fraud? It once did in the private sector.

    Until people are actually thrown in jail and money is clawed back from fraudulent contracts and promises nothing will change.

  9. John Morris says:

    Sorry, I haven’t read all these posts yet.

    I guess my big question isn’t just about financial sustainability but social sustainability.

    I know very little about Chicago, but it seems like when compared to say, NYC it has a far larger percent of deeply socially damaged places.

    My guess is the effects of mass neighborhood destruction and forced displacement have a really huge lasting impact on the city, that plays out in crime and lack of organic business opportunity. That depletion of social capital and lack of trust created by urban renewal should be talked about.

  10. John Morris says:

    Sorry, after reading here a bit, I think Robert is ignorant of or evading the real problem.

    What is “the public good”, and how does one define it. The real answer is that beyond basic security, and rule of law there is no way to define it.

    The end result is that pull peddling in one form or another is built into the system. Clear accounting and disclosure of government liabilities is certainly a huge needed reform but imagining that one can cure corruption by just limiting campaign donations is naive and dangerous. As long as the honeypot of power is there, corruption will follow.

    I just skimmed these posts but that’s what seems to be on offer.

  11. John Morris says:

    Robert also seems to evade the real history in places like Chicago which goes far beyond busted budgets and corruption.

    The grim reality is than in many cities a very high percent of “infrastructure” actually subtracted value from the tax base. That doesn’t touch the social damage.

    Until places like Chicago & Newark are honest about the destruction so many government policies and “investments” have done in the past, they will repeat these mistakes. It might be a little late for trials, but I wouldn’t mind some contractors, politicians and officials being forced to publicly explain what they were thinking.

  12. costanza says:

    “Until places like Chicago & Newark are honest about the destruction so many government policies and “investments” have done in the past, they will repeat these mistakes.”

    Chicago and Newark? Why not compare SF and Akron?

  13. John Morris says:

    I’m hardly an expert on Chicago, but both cities share a history of huge scale urban renewal projects- mass displacement of black communities.

    I also don’t think the comparison with Newark is that far off base. First off, Newark had about half a million residents (I should check) and was a very major manufacturing center.

    Newark is also right across the Hudson from NYC and should have been positioned to become an attractive, thriving part of the massive New York metro region. It also had the start of good rail and transit access.

    Something happened that shifted that transition and Urban Renewal was likely a very big part of that.

  14. John Morris says:

    Currently, the county Newark is in, Essex has a population of almost 800,000. The county to the south, Union has over 536,000 people. Hudson County to the east has over 634,000 people. (many of these people fled from Newark)

    I could go on- across the river is Manhattan with over 2 million residents. I didn’t include the county south of Union which has over 750,000 residents.

    Newark is actually a pretty good city to compare to Chicago on many levels in terms of potential, industrial history, race relations, union power and political corruption.

    Of course no two cities are exactly the same and there are many differences.

  15. John Morris says:

    Costanza links to The Daily Kos which makes me think they would just like to drop this subject.

    Robert Munson seems to suggest that the problem is that tax payers get a bad return on investment. In many, many cases- government, “investments” have actually not just wasted money but left cities more damaged than before they were made.

    This isn’t just a doctor overbilling for surgery- but often a quack doctor removing limbs and organs, leaving the patient with infected open wounds. Before we enable more surgery, we need to look at the record of the so called doctor.

  16. Robert Munson says:

    John–
    Thanks for your comments.
    I think I largely agree with you on these key points.

    a) Newark’s “urban renewal” is not unlike Chicago’s (mostly the devastation to its Southside) or any other major city. Although the analogy weakens greatly given that Newark has 3 states involved; there still is lots that federal policy could do to bring the NY metropolis to work together.

    b) Mid and late 20th Century infrastructure investments did weaken cities and the federal government is at primary fault (in addition to us, as citizens.)

    c) If one equates my expanded definition of “corruption” to your “honeypot of power”, I think we are in agreement. I earnestly believe that the silver bullet to make government work adequately is public financing of campaigns. When public financing allows the public to buy their representatives instead of today’s special interests buying the public’s representatives, then the whole tenor of government changes and government is worth investing in again. I very much agree with you that other types of honest disclosure are needed in our toolbox, but as a practical on-going elixir, nothing beats public financing of elections.

    Of course, getting that reform is the challenge!

  17. John Morris says:

    We do agree on a lot. In the context of what you seem to know, your solution is simplistic and naive. The problem is the size of the honey pot of money and power the government has.

    China which has almost no democracy, has massive corruption and central planning failures. It also has many of the same deep social wounds and lack of trust we see in cities like Chicago today.

  18. costanza says:

    Newark is a city of 277,000.

  19. John Morris says:

    In a metro area of millions. Please read my comments again.

    Also, my comment is not just about what Newark is now, but what it was. It once had close to 700,000 residents or perhaps more. Many of them now live right in the surrounding counties.

    Your comment shows a deep ignorance of how important Newark once was and what happened to it.

  20. John Morris says:

    OK, I am partly wrong.

    The Wikipedia says the peak population was closer to 450,000. But the footprint of Newark is only 26 square miles or about 1/10 of Chicago’s

    If one extends a Chicago footprint over the Newark region one ends up with several million residents. The Newark area is very important.

  21. costanza says:

    Was/is Newark the heart of its metro?

  22. John Morris says:

    I freely admitted Newark and Chicago are not exactly alike. However, the “why not Akron” comment was dumb.

    Newark once had one of the major shopping areas in Northern, NJ, was a major manufacturing and port, a very Important city.

  23. Alon Levy says:

    Yes, Newark was the heart of a metro area. You can tell in Hudson County which cities are New York suburbs (Jersey City, the hill cities, Bayonne) and which are Newark suburbs (Kearny, Arlington), and there are many suburbs to the north and west of Newark that are also predominantly Newark-bound in commute patterns rather than New York-bound. Those suburbs are also New York suburbs in that a substantial fraction of their population works in New York, but they are more closely related by commute ties to Newark.

  24. John Morris says:

    Which fits with the manufacturing history. Old time waterfront Brooklyn and Queens were also not so much oriented around commuting to Manhattan as much as working in local factories.

    The huge difference between Chicago and Newark, isn’t so much the size of the cities- urban areas or their national importance, as much as that unlike Chicago- Newark actually had a large part of it’s central core actually torn apart.

    It’s one city where one feels like so many of the long term problems in the city came from that. (The one large area of Newark that remained untouched- Ironbound- managed to remain pretty stable)

    I just brought up Newark as one extreme example. Understanding how damaging this kind of social displacement can be is pretty key to curing some of these problems and more importantly avoiding the same mistakes.

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