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Budget Overview

Financial Summary, Revenue and Expenditures

Chicago city has been facing financial challenges in the recent past, with much of its resources going into its fixed costs. Analysts have explained that the city needs to ensure a proper planning and execution of its financial obligations to avoid wasteful expenditures on variable costs. At the moment, Bloomberg (2016) explain that the city is on a mission to settle more than $390 million in leases. All this can be avoided if there could be effective mechanisms of revenue collection and allocation. The city may be forced to increase some taxes if it aims to solve many of its short-term financial obligations. According to Bloomberg (2016), inasmuch as it may hurt businesses and other people, it will enable the city to remain operational until it reexamines its budgetary issues.

The revenue of any city is mostly comprised of various kinds of taxes that are levied on individual’s and businesses. Chicago city, having vast number of business investments hopes to raise most of its finances by taxing these people and businesses. alternatively, the city will also benefit from leases and rents that will be paid by investors into the city (Kinnersley & Magner, 2008). It si imporatnt that all these financies that will be allocated be accounted for and allocated to developmental expenditure and oterh income generating projects.

The following is a comprehensive display of the city’s sources of revenue as well as standards under which taxation is carried out in the city. These entail a list of revenues sources as well as a details description of assets and liabilities. The main significant discussed and analyzed include:

1. corporate fund sources

2. property tax levies

3. special revenue funds

4. City’s’ enterprise funds

However, The tax information contained here is based primarily on final audited statements.

This is a depiction of a city’s current and past trends of the city’s list of expenditure. It is important to study and analyze the expenditure records in the cities before making crucial financial decision. It is a display of the overall operation expenditure budget of a city. The main information contained in expenditure records include:

1. City’s operating expenditure

2. City employee salaries, wages, and benefits, and

3. Details of city’s contractual services

Additionally, it is possible to find informative expenditure information in the Annual Financial Analysis of a city. The analysis entails analyzed information on personnel and non-personnel expenditures. As part of this year’s process, the City is providing a more granular break out of non-personnel and personnel expenses across all funds (corporate, enterprise, own revenue) to more clearly reflect payment types and services paid from these funds. In some cases, amounts in certain categories have changed, as costs have been moved to take into account this full breakout of the data.

Department Budgets

The city of Chicago conducts a capital development initiative very year. This initiative projects helps the city’s management to review and reflect on the progress of their revenue and financial projects.

Funding

The city has a wide range of financial sources. It sources funds from taxes and bonds. The city also benefits from donat5ions and funding from the central government. These funds are used in infrastructural project developments. A city should maximize on revenue income sources since it is the main source of funding. Before embarking on a project, a city should focus on responsible expenditure by making informative financial decision. This means a city should maximize on revenue income and minimize on wasteful expenditure.

Capital Projects

This is a list of a city’s major infrastructural projects. Capital project in a city refer to government schemes and development strategies aimed at improving and proving basic amenities to the public. Capital projects are the main measure of development in a city. These reflect on the economic growth and hence a prediction of future economic state.

Chicago city CIP involves the development and maintenance of long term facilities and amenities. This involves the efforts to improve the cities transport efficiency. Chicago provides a detailed plan on how and which project to fund each year. The efforts by the city to fund infrastructure and facilities have led to significant economic development of the city. This has facilitated the improvement of neighborhoods, and the economy. The city priorities on CIP depends on infrastructure ages, level of destruction and as needs change

Debt Administration

Debt management strategies at Chicago City have in the past been directed towards ensuring the city reduces its unnecessary expenditures. For effective management and achievement of its financial goals in this financial year, there is an urgent need for proper and effective financial management. The city needs to cut down on many of expenditures to relieve people of taxes. The money saved will help in managing its liabilities while keeping enough for other essential expenditures.

Cost Analysis

Fixed Costs

The city’s fixed costs include recurrent expenditure that it has to honor on routine basis. These costs include the salaries of its workers, repairs to vehicle and other machinery as well as depreciation costs. At the same time, there are leases and rents that city has to managing effective service delivery to its people. These costs have to be catered for on monthly basis to keep the city running.

Step fixed cost

Chicago city has initiated mechanisms that should see it manage its debts, which is to be paid of using tax collections from properties. This debt stood at $1 from last year. This was a headache for its Mayor Emmanuel Rahm, who has been active in taking the ship on the path of recovery in managing the step-fixed costs (Dardick, 2016). The city has resorted to reducing on risk borrowing that has the ability to ruin the city’s credit rating.

Variable costs

Chicago city has decided to increase its property taxes for purposes of managing its variable costs. Going forward, this move will be essential in managing proper debt payments as explained by the mayor. According to Dardick (2016), the city’s financial report, there was up to $93 million in cash surplus, which was up from $51 million recorded the year before. This was attributed to reducing of its variable costs something that will be useful in future (Dardick, 2016).

Budget Challenges

One of the major challenges that has faced the budget planning of the city is economic recession. This challenge ahs meant that city has to stall on the projects that had been scheduled to be completed at certain times. Secondly, there are also the issue of accountability and proper financial management. According to Mattoon (2016), this is one of the issues that have placed the city into a debt of more than $390 million, which many of its citizens cannot manage to pay. At the moment, the city will be forced to increase its taxes to business people to tame this among other debts that have affected the city.

Variable costs

Chicago city has decided to increase its property taxes for purposes of managing its variable costs. Going forward the move will be essential in managing proper debt payments as explained by the mayor. According to Dardick (2016) the city’s financial report there was up to $93 million in cash surplus, which was up from $ 51 million recorded the year before.It attributed to reducing its variable costs something in future (Dardick, 2016).

Budget Challenges

In spite of the many savings the competence improvements and structural reforms, significant financial challenges remain both operating and legacy. Wages and benefits costs keep on growing, pension and liabilities are growing too. Emphasis on recurrent expenditure needs to be carefully put to check because it can leave the city in major financial challenges like has been the case in the previous years (Mattoon, 2016). According to Mattoon (2016), legacy debt needs tackling, this will be crucial in keeping the city in a position to rival other major cities in the country.

Chicago’s Recent Budget Plan

Budget Recommendations

· Keep on working with the State parliament to endorse comprehensive pension reform particular for the City police and fire pension funds, including not pushing off contributions and pursuing statewide public safety pension fund consolidation.

· End the practice of borrowing for procedures through the refunding of bonds. Advance the City’s debt management policy, including requiring level debt service payments for new bond issuance

· Put into practice a long-term financial planning process that includes the contribution of the City Council and the general public to take on the issues that are poised to harm the City’s fiscal future.

· Encourage public contribution in the budget process by holding many stand-alone public hearings.

Conclusion

The city of Chicago is making significant progress today; our economy continues to thrive we are creating more jobs and attracting families, and business to our city and the lives of our residents is improved. The city is on a strategy to reduce its variable-rate loans and acquire fixed rate bonds, which are assumed to manage as compared to the latter.

References

Bloomberg (2016). Chicago settling $390 million tab when city can least afford it Bloomberg. Retrieved from <http://www.chicagobusiness.com/article/20160317/NEWS07/160319825/chicago-settling-390-million-tab-when-city-can-least-afford-it>

Dardick H (2016). Latest sign of Chicago financial stress: City debt up by $1 billion. Tribune News. Retrieved from <http://www.chicagotribune.com/news/local/politics/ct-chicago-financial-report-debt-met-0709-20160708-story.html>

Kinnersley, R. L., & Magner, N. R. (2008). Fair Governmental Budgetary Procedures: Insights From Past Research And Implications For The Future. Journal of Public Budgeting, Accounting & Financial Management, Vol 20, no. 3, 355-374.

Mattoon, R. H. (2016). Improving transparency and accountability in state budgeting. Chicago Fed Letter, (351), 1-4.