The elected treasurer of the US city of Chicago has said that it will take a generation to repair its public finances.
Speaking at the CIPFA conference in Birmingham today, Stephanie Neely said that the city was trying to ask taxpayers how many services they were willing to give up in order to close the city's $700m deficit.
This is expected to reach $1bn in a few years, and will lead to ‘some extremely difficult choices that will drastically change Chicago for the next generation’, she said.
Sharing her experience since taking the post in 2006, she said: ‘In this time of austerity we are going to have to decide what services are essential and what are not.’
Among the cost-cutting proposals being considered is opening up some of the city’s services for bids from private companies in a managed competition, and potentially privatising public assets.
She said: ‘A combination of options will in time solve our financial problems, but it took us a generation to create these problems, and it will take us a generation to solve them.’
Neely also told the conference that she expects that the amount the US federal government is able to borrow will be raised. The limit is currently $14.3 trillion (£8.7trn) and there are fears that the US could default on its debt repayments if President Obama and Congress do not agree an increase by the end of this month.
Neely buys US government debt in her role as manager of the city’s $8bn investment portfolio and said that she was ‘very concerned’ about hitting the limit.
However, she added: ‘I believe there will be an extension of the debt limit, a three-month extension [initially] and then we’ll figure it out. We will have to increase it because we can’t default on anything, but we’re going to have to find a way of cutting expenses.’
In questions from delegates after her speech, she said that Tax Increment Financing was ‘a creative way to get economic development’. Tif allows local authorities to borrow against future business rates income, and English councils are set to be given powers in a local government finance Bill.
Neely said: ‘It’s been used successfully throughout the city of Chicago. As with most things in life, a good thing can go bad, but I think that the sprit of Tif is very positive, and I do think there are ways of being transparent and controlling any of the benefits that a developer would have.’
She said in Chicago, developers needed Tif incentives to undertake a project. ‘I don’t think the developers would have gone in anyway, because there’s too much growth going on in our suburbs. We are in competition to make sure we’re attracting business to Chicago, and if we don’t give incentives they will go elsewhere.’
