Nov. 20 (Bloomberg) -- Hawkins Fairley, a World War II veteran who celebrates his 100th birthday tomorrow, is an involuntary soldier in Chicago’s effort to return to fiscal stability, dollar by dollar -- or in his case, 43,113 of them.
That’s what the city says the retired steelworker owes in water bills that have multiplied from $3,200 three years ago, and that Fairley says he doesn’t owe. The disputed charge, which the city has been trying to collect since 2008, is one scene of a larger financial drama in Chicago, which has the worst-funded pension system among large U.S. cities and a projected $339 million deficit. Fitch Ratings lowered its credit three steps on Nov. 8 because of “unsustainable” retirement-fund burdens.
Unless Illinois lawmakers enact pension changes that reduce costs, Chicago’s budget solution will fall on individual residents such as Fairley, who will collectively fill the financial abyss.
“That’s what life is -- fight, fight, fight,” said Fairley, who as widower moved out of his South Side home in April and into a nursing-care facility. “And when you die, you’re still fighting.”
Chicago’s push to double water rates by 2015 is one step Mayor Rahm Emanuel has taken to repair the utility as well as the finances of the third-most-populous U.S. city. Emanuel is discussing the future of his and other municipalities today at The Year Ahead: 2014, a two-day conference in Chicago hosted by Bloomberg LP.
Emanuel has said the city will have to double property taxes or eliminate vital services if lawmakers don’t restructure pension laws so Chicago can avoid in 2015 almost doubling its required contribution, to $1.2 billion. Even those steps might not be enough.
“There’s simply no way that we can cut or tax our way out of this crisis and still leave Chicago a good place to work and live,” Emanuel, a 53-year-old Democrat who served as President Barack Obama’s chief of staff, said in a budget presentation to the city council on Oct. 23.
Chicago’s ills reflect a municipal malaise coast to coast. Economies in one third of U.S. metropolitan areas will decline or stagnate this year, worse than in 2012, according to a report this week by the Washington-based U.S. Conference of Mayors. While the mounting pressure on Chicago so far hasn’t attained the level that led to Detroit’s filing the largest municipal bankruptcy in U.S. history in July, the budget mess worsens with each passing year. Unfunded pension liabilities in the city’s four retirement plans have soared to $20 billion, a 265 percent increase in the past decade.
“There are no easy fixes,” the Civic Federation, a nonprofit research group that specializes in state and municipal finance, said in an analysis released Nov. 13.
All four of the city’s retirement funds reported steep drops in funding levels this year, and two face insolvency within 20 years unless they are restructured, the report said.
That’s where Fairley and many thousands of other Chicagoans figure into the financial solution: raising smaller taxes and fees and going after unpaid bills in the absence of the state legislature’s coming to the rescue. For instance, the mayor’s proposed $8.7 billion budget includes a proposal to raise the cigarette tax by 75 cents per pack, the highest levy among U.S. cities. That would generate $9.4 million in 2014, according to estimates.
Emanuel’s budget also would raise parking fees and costs to recover impounded vehicles.
While the dispute over Fairley’s water bill centers on money, it also extends to what actually flowed or didn’t flow from the spigots in his now-empty brick two-flat home.
“Where the hell did all that water go?” asked William Spielberger, Fairley’s attorney.
Emanuel’s communications director, Sarah Hamilton, referred questions to Tom LaPorte, spokesman for the city’s Department of Water Management. LaPorte said the department is “re-investigating the reported leak.”
“The Department of Water Management has been working with this resident for years and will continue to try to get him on a payment plan that works,” LaPorte said in a statement.
Court filings record a dramatic increase in Fairley’s bills from the water department: $3,188 in May 2010; $7,462 the following September; and $14,190 in May 2011, the month Emanuel took office.
Spielberger appealed to the City of Chicago Municipal Court, and an administrative law judge ruled in October 2011 that Fairley did not owe the amounts billed. Five weeks later, in November 2011, he received another bill, this one for $17,885.
Spielberger said a plumber he hired to examine the water line into Fairley’s home found nothing. Fairley’s water bill has peaked at $43,113.
Whatever is happening with his pipes, Chicago itself continues to leak.
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