Annual Financial Analysis
Special Revenue Funds

Special Revenue Funds

The City’s special revenue funds are used to account for revenue from specific sources that by law must be used to finance specific functions, such as road repair, libraries, 911 services, and special events and tourism promotion. This section describes the revenue sources of the City’s special revenue funds. Select each special revenue fund listed below to review specific revenue details for each fund.

Click here for special revenue fund expenditure details.

Vehicle Tax Fund

The vehicle tax fund receives revenue from vehicle sticker sales, impoundment fees, abandoned auto sale fees, pavement cut fees, and beginning in 2015, $10 million from the garage parking tax for the maintenance of the public way. These funds are used to pay for street repair and right of way maintenance throughout Chicago.

Proceeds from the sale of City vehicle stickers have consistently made up the largest portion of the vehicle tax fund revenues. The growth in vehicle sticker revenue in recent years is due to an increase in vehicle sticker prices in 2012 and the transition to year-round sticker sales in 2014. Prior to 2014, motorists had a short-time frame each year to obtain a vehicle sticker. The City transitioned to year-round sticker sales in 2014 along with indexing vehicle sticker rates to the rate of inflation with adjustments every two years. During the transition vehicle owners were given the option of purchasing stickers valid for periods of one month up to 24 months with pricing on a pro rata basis. Because many owners chose to purchase stickers valid for 12 months or longer, sticker sales had a one-time boost, reaching a record high in 2014, increasing by nearly 12.0 percent, and then decreasing by 11.0 percent in 2015. Additionally, City ordinance requires the price of vehicle stickers be adjusted every other year based on the current Consumer Price Index (CPI). As a result, 0.84 percent adjustment occurred in 2016. The current vehicle sticker cost for a typical passenger vehicle in Chicago is $86.69. The vehicle sticker tax revenue appears to have normalized in 2016 and 2017 following the initial increase in 2014.

Revenue from vehicle impoundment fees benefitted from an increase in 2014 in storage fees, but fewer infractions and a lower redemption rate coupled with the decline in revenue from the sale of abandoned vehicles, due to low scrap metal prices, offset gains in this area.

For much of the past decade, the vehicle tax fund operated at a deficit as revenues routinely came in below budgeted levels, and street repair and maintenance expenses outpaced those revenues. This deficit decreased each year after 2008 as the City worked to more realistically assess the resources that will flow into the fund and manage spending accordingly. A positive balance has been carried each year since 2012 and the City will continue to budget this fund in a manner that prevents the build-up of operating deficits like those seen in prior years.

Motor Fuel Tax Fund

Motor fuel tax (MFT) revenues are generated primarily through a $0.19 cent per gallon tax on gasoline and $0.215 cents per gallon tax on diesel imposed by the State, of which the City receives a population-based distributive share. MFT fund revenue is used to support bridge repair, traffic signals, street maintenance, street lights and their associated energy costs, as well as the purchase of road salt for snow and ice removal.

Annual MFT revenue steadily decreased in past years as vehicle fuel economy standards became more stringent and, at least through mid-2014, as the price of fuel increased.

From 2010 through 2014, the City received $12.5 million each year from the State’s “Illinois Jobs Now!” program, which was allocated to the MFT fund. That program terminated at the end of 2014. This additional revenue is reflected in the “Other Revenue” in the chart above. In addition, the City received a $12.5 million supplement in 2014 which was dedicated to specific projects.

In 2013, the City pledged MFT revenue to the federal government for a low interest rate loan through the U.S. Department of Transportation’s Transportation Infrastructure Finance Innovation Act (TIFIA) program to fund the expansion of the Chicago Riverwalk. While MFT revenue is pledged as a source of Riverwalk debt service payments, revenue from concessions and tour boat operations have covered the loan payments. Beginning in 2014, revenue from fees charged to tour boat operators and, beginning in 2015, revenues related to vendors along the new Riverwalk, were dedicated to making TIFIA loan repayments. This is indicated in the chart above as “Other Revenue.” In 2016, the City received $2.47 million in fees from Riverwalk concessionaires and tour boat operators; in 2017, the City expects to receive $3.08 million in fees.

Over the past decade, annual expenditures from the MFT fund have often been greater than revenues coming in from motor fuel taxes. By realistically estimating revenues and assessing the City’s ability to control these expenses, this deficit was eliminated and the City has carried a positive fund balance since 2012. Carryover such as this mitigates, in part, the effect of future fluctuations due to increasing fuel efficiencies standards as well as unpredictable weather events, allowing the City to build up reserves for high snow years.

Special Events and Hotel Operators’ Occupation Tax Fund

The special events and hotel operators’ occupation tax fund supports the promotion of tourism and cultural and recreational activities in Chicago. These activities are funded primarily through the hotel operators’ occupation tax, a State tax imposed on hotel operators at a rate of 1.0 percent of gross receipts, revenue from special events and related recreation fees, and revenue from the City’s contract for street furniture maintenance and advertising. Historically, these revenue sources were accounted for in separate funds. The City merged the funds in 2011 while also merging the Department of Cultural Affairs, which oversees the Office of Tourism, with the Mayor’s Office of Special Events.

This fund’s revenue is tied to local convention business, tourist travel to Chicago, and the success of the City’s special events. Both hotel operators’ occupation tax revenues and recreation fee revenues saw a general pattern of growth between 2005 and 2008, followed by a drop in 2009 with the downturn in the economy. Hotel tax revenue began to pick up again in 2011, as Chicago tourism industry grew. Similar to revenue trends seen in the City’s hotel accommodation tax, tax revenue from hotel accommodations is expected to remain relatively flat in 2017, compared to 2016.

Revenue from special events recreation fees decreased in 2011, because the operation of the Taste of Chicago was transferred to the Chicago Park District for that year. The Taste of Chicago returned to City operations in 2012, and at the same time, the festival was reduced in length from ten to five days; accordingly, revenues did not return to 2010 levels. The City’s recreation fee revenues are expected to remain around $11 million annually.

Library Fund

The City maintains a segregated fund to support the maintenance and operations of the Chicago Public Library system and its central, regional, and branch locations. Revenue to this fund comes primarily from property taxes and an annual subsidy from the City’s corporate fund that has grown in recent years. The library property tax levy has remained relatively flat since 2008, and is budgeted at $89.9 million in 2017. The library fund property tax levy is discussed in detail in the property tax expenditure section of this report. As the library fund expenses increased in recent years, the corporate subsidy to the fund increased from $7.5 million in 2015 to $18.3 million in 2016 and $19.0 million in 2017. The growth in the corporate fund subsidy is partially the result of the City moving the cost of new books – approximately $7.5 million annually – into the operating budget and off long-term bonds. This recent action is part of the City’s ongoing work to remove working capital expenses from long-term bonds.

The remainder of revenue to the library fund comes primarily from library fines, interest earnings, and income from the rental of library facilities, totaling an estimated $2.3 million in 2017.

CTA Real Property Transfer Tax Fund

In 2008, a supplemental tax on real estate transfers was adopted for the purpose of providing financial assistance to the CTA, and this fund was established to receive the proceeds from that tax, which are then transferred to the CTA. Because this fund’s revenue is generated through real estate transfers, it has followed the same trends as other economically sensitive and transaction-based tax revenues.

Revenues remained relatively stagnant due to slow real estate activity during the first two years following this fund’s inception, averaging $29.5 million annually. Reflecting the improving economy and the recovery in real estate market, these revenues started growing significantly from $32.7 million in 2010 to $79.3 million in 2016. Revenues are expected to end 2017 at $68.2 million. Similar to real property transfer tax revenue in the corporate fund, this revenue benefited from multiple large transfers in 2016 with fewer anticipated in 2017.

Emergency Communication Funds

The City maintains two segregated funds to support the 911 and emergency preparedness related functions of the Office of Emergency Management and Communications (OEMC) – one fund for operational expenses and one fund to pay debt service on bonds issued for the construction of the City’s 911 call center.

Revenue to the emergency communication fund comes through the collection of the emergency communication surcharge or 911 surcharge on all billed subscribers of telecommunications services in Chicago. Each year, the City uses a portion of the revenue from the emergency communication surcharge to pay debt service due on 911 call center bonds, and then transfers the remaining revenue to the corporate fund for expenses specifically related to the 911 and emergency preparedness related activities of OEMC. The emergency communication surcharge is authorized by State law and the allowable rate for the surcharge is set by the State. Since September 2014, the surcharge is levied at a rate of $3.90 per month per landline or wireless connection and since October 2014, 9.0 percent of the cost of prepaid wireless services. Revenue from the emergency communication surcharge is expected to decrease in 2017 as residents continue to move away from paying for both a residential landline and a cellular device.

Garbage Fee Fund

Starting in 2016, Chicago residences receiving City-provided garbage collection services pay a $9.50 monthly fee per dwelling unit. City garbage collection services collect refuse from single family homes and multi-family buildings with four units or fewer. The garbage fee is included as a separate line on the City’s water, sewer, and garbage utility bill. The City collected $54.4 million in 2016, and expects to collect $61.2 million in garbage fee revenue in 2017 as collection rates improve and late payment penalties are charged on delinquent garbage fee charges for the first time beginning in 2017.

Garbage fee billing began in April 2016, and therefore, the City does not yet have collection information based on a full calendar year of billing (January through December). Based on 2016 collections and 2017 year end estimates, the City anticipates collection rates in 2017 – the first full year of billing – to be consistent with the average water and sewer charges annual collection rate of 95 percent or higher.

Affordable Housing Fund

The City first included the affordable housing fund in the 2016 budget. The revenue in this fund is collected through the City’s density bonus program and the Affordable Requirements Ordinance (ARO). ARO requires residential developments that are downtown Planned Developments or that receive increased density to provide a percentage of units at affordable prices or to contribute to affordable housing elsewhere. These revenues are used to meet permanent housing needs of Chicago’s low income residents.

In 2016, $29.4 million was collected, and the City estimates another $35 million will be collected in 2017 to support affordable housing.

Neighborhood Opportunity Bonus Fund

The Neighborhood Opportunity Bonus (NOB) represents or collects payments made by downtown development projects. The payments are in exchange for density bonuses that allow developers to exceed zoning limits for a specific development site. NOB reforms the City’s zoning system to allow larger buildings to be built downtown and thereby generates resources to support economic activity in the neighborhoods most in need in the City. Specifically, NOB fees are paid when projects pull permits for construction, approximately $4.7 million has been generated as of July 2017.