U.S. News

Recession, snow put $31 million hole in Chicago budget

CHICAGO (Reuters) - Chicago’s budget has a new approximately $31 million budget hole as the recession cut revenues and unexpectedly heavy December snowfalls increased expenses, the city’s chief financial officer said on Friday.

Paul Volpe said some key revenue sources were performing below already-lowered projections for the fiscal 2008 budget, including real estate transfer, sales and income taxes, as well as fines.

Meanwhile, snow-related spending, which had been increased to $29.3 million for the year from $18.5 million, was expected to hit $33.6 million due to abnormal weather in December, he added.

While the city has not closed the books on fiscal 2008, which ended December 31, it is anticipating using about $21.8 million from locking in lower fuel prices for fiscal 2009 to cut costs.

Another $11 million in budget relief would come from taking advantage of lower U.S. Treasury bond interest rates by restructuring escrow accounts in place to retire Chicago Skyway bonds, Volpe said.

The city used some of the $1.83 billion in proceeds from a 2004 lease of the toll bridge to retire about $463 million of outstanding Skyway bonds.

Chicago already tackled a $469 million shortfall in its nearly $6 billion fiscal 2009 budget, mainly with job cuts, fee and revenue measures and $150 million from a lease of the city’s parking meter system.

“We also know the weakening economy will continue to have a sharp impact on the city’s budget in the coming year,” Volpe said.

He left the door open to tapping the more-than-$320 million the city put aside in a budget stabilization fund from the parking meter lease proceeds. Volpe said that fund would be used only in a responsible and prudent way if there is a sharp and unexpected decrease in revenue and increases in expenses.

Reporting by Karen Pierog; Editing by Dan Grebler