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.

Click here for the discussion on the corporate fund’s revenue history .

Spending by City Service

Corporate fund expenditures for City services remained relatively consistent from 2007 through 2014, but in recent years, expenses have increased to support additional investments in public safety departments and expanded community service programs.

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. 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 services provided through the Chicago Police Department, the Chicago Fire Department, the Office of Emergency Management and Communications, the Police Board, and Independent Police Review Authority (now referred to as the Civilian Office of Police Accountability). Public safety departments have not experienced reductions to the extent that other segments of the workforce have over the past ten years. Over the last ten years, public safety positions have made up approximately 60 percent of total corporate fund expenditures each year.

Infrastructure Services

Infrastructure services are provided by the Department of Streets and Sanitation (DSS) and the Chicago Department of Transportation (CDOT). Corporate funds are used to provide city services –recycling and garbage collection; trim trees and remove graffiti; build, repair, and maintain Chicago’s streets, sidewalks, and bridges; and complete the planning and engineering behind this infrastructure. DSS is primarily funded through the corporate fund with additional expenditures, including garbage collection, towing and vehicle impoundment, and snow removal funded with special revenue funds.

Much of the City’s major infrastructure construction performed by CDOT is funded through special revenue funds, state and federal grants, TIF, and general obligation bond financing, and thus is not represented as corporate fund expenditure.

City Development

City development activities provided through the Department of Planning and Development (DPD) include planning and zoning; the promotion of retail, industrial, and commercial projects; and affordable housing support. While these activities are mostly funded through state and federal grants, the corporate budget in 2016 included $20.9 million in funding for DPD. Grant funding for DPD 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 Chicago Department of Public Health, the Chicago Public Library, 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 Library receives some corporate funding subsidy, 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. The Department of Business Affairs and Consumer Protection is responsible for business licensing and consumer protection activities, including the regulation of businesses that sell cigarettes, the taxi industry and food trucks. Additional regulatory departments include, the Board of Ethics, Commission on Animal Care and Control, Office of the Inspector General and License Appeal Commission.

Finance and Administration

Finance and administration functions include essential City services, such as accounting, contract management, legal and administrative services, and technology and systems expertise. The departments that perform these functions include the City Clerk, the 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 oversees the repair and maintenance of City vehicles, such as police cars, snow plows, and street sweepers, and facilities, such as libraries, fire stations, and City Hall.

Citywide Expenses (Finance General)

Citywide expenses include pension payments, employee benefits and other costs that are budgeted separately from the City’s operating 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.

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 starting in 2015 to more clearly reflect the allocation of these expenses across funds. Historically, the non-property tax 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.

While total pension contributions in 2015 were significantly higher, the total corporate fund pension contribution was $71.8 million. This includes $13.9 million for the Municipal pension fund, $50.7 million for the Police pension fund, and $7.2 million for the Fire pension fund. In 2016, the pension contribution from the corporate fund was $11.6 million for the Municipal pension fund, reflecting a shift of Police and Fire pension costs from other corporate fund revenues to the property tax levy. The corporate fund pension contributions will continue to grow in the coming years as the City increases contributions to all four pension funds as discussed in the pension section of this report.

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. 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. The City still utilizes proceeds of general obligation bonds to finance certain information technology expenses, but the amount funded with bond proceeds continues to decrease. 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. Since 2011, the City has vacated 19 leases. 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 2017, all commodities (electricity, natural gas, diesel fuel, and gasoline) are hedged at 80 percent. For 2018, electricity is hedged at 80% while natural gas, diesel fuel and gasoline are hedged at 75%.

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. While in recent years fuel costs have declined, the City has implemented multiple strategies to reduce the potential impact fluctuating fuel prices may have on the City’s expenditure by reducing the City’s vehicle fleet and curtailing 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 for conducting City business, utilizing Zipcar reservation technology to facilitate the efficient use of City pool vehicles.

Other

The City maintains a segregated fund to support the maintenance and operations of the Chicago Public Library system. Revenue to this fund comes primarily from property taxes and an annual subsidy from the City’s corporate fund. As the library fund expenses increased in recent years so has the corporate subsidy. The other expenditure category in the chart above reflects the corporate fund subsidy for 2016 of $18.3 million.

The City committed to eliminating the need for the practice of “scoop and toss” – in with the City restructures its near term debt payments with long-term debt – by 2019. Beginning in 2016, the City transferred $67.3 million from the corporate fund to the debt service fund in order to take the first step toward eliminating “scoop and toss”. This payment is reflected as a corporate fund expense in the other expenditure category above.

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 settlements 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 settlement and judgment-related expenses, including both local fund and bond-funded expenses.

The City’s total settlement 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. Settlements 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.

The City has also moved to reduce the amount of settlement and judgment costs paid for with bond proceeds. In each budget since 2012, the city increased the amount of corporate fund resources available to pay for routine settlements and judgments costs. Additionally, at the end of the fiscal year, if there are additional operating funds available, the City regularly allocates the additional funds to paying for settlements and judgments. The 2016 settlements and judgment costs were entirely funded with enterprise fund resources and corporate fund money.