Annual Financial Analysis
Corporate Fund Expenditures

Corporate Fund Expenditures

The corporate fund is the City’s operating fund. It supports basic City operations and services, such as public safety, public health, and rodent control.

Over the years, a number of City departments have been combined or merged into new or existing departments. References in this section to specific existing departments and the resources dedicated to them include predecessor departments and the resources dedicated to those functions in the past. Click here for the discussion on the corporate fund’s revenue history .

Spending by City Service

Since 2005, total corporate fund expenditures have ranged from a low of $2,895.1 million in 2004 to a high of $3,432.6 million in 2015. Generally, the relative proportion of total corporate fund spending devoted to different activities and expense types has remained consistent over the years.

Activities and spending patterns by city service are discussed in detail below.

Public Safety

Each year, the largest portion of corporate fund spending is dedicated to public safety functions, including police services provided through Chicago Police Department, the Fire Department, the Office of Emergency Management and Communications, the Police Board and Independent Police Review Authority. As spending has been reduced in other areas, public safety continues to make up the largest portion of corporate fund spending.

Infrastructure Services

Infrastructure services are provided by the Department of Streets and Sanitation and the Department of Transportation. Corporate funds are used to provide city services – collect the City’s recycling and waste; trim trees and remove graffiti; build, repair, and maintain Chicago’s streets, sidewalks, and bridges; and complete the planning and engineering behind this infrastructure. Much of the City’s major infrastructure construction is funded through state and federal grants, TIF, and general obligation bond financing, and thus is not represented as corporate fund expenditure. These other funds and the projects they support are discussed in more detail in the Capital Investments section.

City Development

City development activities provided through the Department of Planning and Development include planning and zoning; the promotion of retail, industrial, and commercial projects; and affordable housing support. These activities are mostly funded through state and federal grants. This grant funding and the projects they support are discussed in more detail in the Grants section. The Department of Cultural Affairs and Special Events, which manages the promotion of tourism, cultural planning, and the coordination of special events, is supported almost solely by the City’s hotel tax and special events fund.

Community Services

Community services are provided through the Department of Family and Support Services, the Department of Public Health, the Chicago Public Libraries, and the Mayor’s Office for People with Disabilities. These departments are heavily grant-funded and the services provided through this funding are discussed in greater detail in the Grants section. While the Chicago Public Libraries receives some corporate funding, it is primarily funded through its dedicated property tax levy.

Regulatory

Regulatory services include the activities of the Department of Buildings which ensures the safety of residential and commercial buildings in Chicago by enforcing design, construction, and maintenance standards and promoting conservation and rehabilitation through permitting and inspection processes. The Department of Business Affairs and Consumer Protection is responsible for business licensing and support and consumer protection activities, including the regulation of the local taxicab industry. Additional regulatory departments include, the Board of Ethics, Commission on Animal Care, office of the Inspector General and Control and License Appeal Commission.

Fleet and Facility Management, Finance, and Administration

These support functions provide essential City services, including accounting, contract management, legal advice, administrative services, and technology and systems expertise provided through the City Clerk, City Treasurer, Department of Finance, Department of Human Resources, Department of Innovation and Technology, Department of Law, Department of Procurement Services, Office of Budget and Management, and the Office of the Mayor. Additionally, the Department of Fleet and Facility Management coordinates the repair and maintenance of City vehicles and facilities, such as police cars, libraries, fire stations, and street sweepers.

Citywide Expenses

Citywide expenses include pension payments, employee benefits and other costs that are budgeted separately from the City’s operational departments. These expenses are largely personnel-related and are discussed in greater detail in the Workforce section.


Spending by Expense Type

The chart below provides detail on multiple areas of corporate fund expenditures. The 2016 Annual Financial Analysis provides further detail on specific non-personnel costs above the level of detail provided in pervious Annual Financial Analysis.

Personnel

Across all departments and City services, personnel-related expenditures have, and will continue to, make up the largest portion of the corporate fund budget. These personnel-related expenses, and the trends and factors that affect them, are discussed on a citywide basis in the Workforce section. The Personnel vs. Non-Personnel chart above reflects pension allocations for the first time in 2015. This is a result of a change to the way that the City budgets its non-property tax pension contributions in 2015 to more clearly reflect the allocation of these expenses across funds. Historically, the non-property share of the City’s pension contributions were paid from personal property replacement tax (PPRT) and no pension expenses showed on the corporate fund. Instead PPRT revenues were diverted from the corporate fund. PPRT revenues are now recorded in the corporate fund and pension contributions made directly from the corporate fund are recorded as expenses to the corporate fund. The change appears to have increased the corporate fund revenues and expenditures; however, this is simply an appropriation change which more clearly reflects the allocation of pension expenses.

Contractual Services

Contractual service expenditures include the cost of information technology systems, maintenance, and licensing; tipping fees for waste disposal; property rental; custodial services for City facilities; and landscaping, engineering, and other professional service contracts.

As governments, businesses, and residents increasingly utilize technology to conduct business and communicate, the City’s technology-related costs have increased. In addition to corporate fund resources, the City utilizes proceeds of general obligation bonds to finance certain information technology expenses, as further discussed in the Debt section of this document. A significant portion of the increase in technology costs on the corporate fund is not due to an overall increase in expenses but is the result of the City shifting the cost of certain technology expenses from general obligation bond proceeds to the operating budget. This shift is part of the City’s overall practice of moving working capital expenses to the operating budgets.

Property rental and building services expenses have steadily decreased as the City reduces the number of properties that it leases. The City is maximizing the utilization of City-owned space, such as City Hall, and reducing long-term rental expenses while grouping similar departmental functions together in order to increase efficiencies and facilitate coordination. Space consolidations in the past year include City operations moving from two previously leased locations to City-owned facilities, as well as a facility where the City does not pay rent. Space consolidations are on-going and the City estimates that the cost of these relocations and related renovations will be fully recouped with lease savings once completed.

Commodities

Expenditures for commodities and materials followed a similar pattern as those for contractual services, but on a much smaller scale. These expenditures include spending on office supplies, postage, small tools, electrical supplies, and repair parts for vehicles and other equipment.

Utilities

Market prices have been the primary driver of the City’s utility expenditures. Significant year-over-year increases were due largely to rising energy prices, which drove up the City’s electricity and natural gas costs. As energy prices decreased, so did the City’s utility expenditures.

In order to reduce its utility costs, energy use, and environmental footprint, the City has undertaken a number of initiatives in recent years to improve its energy efficiency. In 2014, the City implemented Retrofit 1, a self-funded comprehensive energy efficiency program that reduces utility costs. Under the program, 60 municipal buildings are being retrofitted, including projects to replace lighting, energy systems, and windows. This and other energy efficiency initiatives together with broader trends in the market, including record-low natural gas prices in 2012, resulted in a decline in corporate fund utilities expenditures.

The City of Chicago takes a two-pronged approach to energy procurement by taking advantage of favorable market pricing without sacrificing budget certainty. After assessing supply and demand, along with seasonal conditions for each commodity, technical and statistical analysis is conducted on price trends and various purchase scenarios. The City’s strategy is to be 80 percent hedged with 20 percent of purchases made on the spot market. The 20 percent spot market provides a buffer in the event that utilization is less than predicted and provides flexibility in making advantageous purchases given market price fluctuations. For the remainder of 2016, all commodities (electricity, natural gas, diesel fuel, and gasoline) are hedged at 80 percent, with smaller hedge positions extending into 2017 and 2018.

The City’s fuel expenditures have also been primarily driven by market prices over the past decade. Spikes in the oil market have affected City costs, much as they have increased gasoline prices for individuals and businesses. In recognition of fluctuating fuel prices and the environmental impact of its gasoline and diesel fuel usage, the City has implemented a number of initiatives to reduce the City’s vehicle fleet and curtail fuel usage. The City has increased the proportion of its fleet that operates on alternative fuels. Currently, the City utilizes electric, hybrid, and alternative fuel vehicles, including police vehicles, light-duty trucks for street work, and larger trucks for completing electrical work and tree trimming. In 2011, the City also ended its shared lease program and contracted with Zipcar to provide City employees with access to short-term vehicles, utilizing Zipcar reservation technology to facilitate the efficient use of City pool vehicles.

Settlements and Judgments and Associated Legal Costs

Each year, the City uses both corporate fund and enterprise fund resources, as well as bond proceeds, to pay for expenses incurred in connection with claims and judgments against the City. Expenses in excess of the amount paid from the local funds are paid with bond proceeds. The amounts presented in the chart represent the City’s total claim and judgment-related expenses, including both local fund and bond-funded expenses.

The City’s total claim and judgment-related expenses vary from year-to-year depending upon the volume and nature of claims filed and settled, the value of judgments entered, and the extent to which the City utilizes outside legal counsel to address these claims. Claims related to one year are often not settled until years later, and judgments are often paid out over a number of years, so the distribution of expenses is not necessarily representative of the events or activities of that year.

Each year, the City utilizes outside legal counsel to represent the City in unique matters in which there is no in-house expertise, when there are insufficient in-house resources, or where there is a conflict that requires separate representation. In 2011, the City took measures to reduce these costs by right-sizing the number of in-house attorneys and engaging some of the top law firms in Chicago to handle matters on a pro-bono basis. The right-sizing of the Law Department has resulted in the reduction of outside counsel engagements, reducing expenses over the long-term.