City CFOs Report from the Frontlines of Public Finance

Chicago Financial Performance and Strategy

• Faced a pre-pandemic structural deficit requiring a 1-year, $1 billion pension funding ramp for four pension funds in 2019.
• Incurred approximately $1.5 billion in lost revenues during 2020–2021 due to the pandemic, largely treated as one-time losses.
• Projected to achieve structural balance by 2023 following the passage of the 2022 budget, which climbed the pension funding ramp.
• Recorded $173 million in excess revenue (5.2% of the $4 billion 2021 corporate fund budget) by year-end 2021.
  • Income taxes outperformed budget by $60 million.
  • Sales taxes outperformed budget by $55 million.
  • Real estate taxes exceeded budget by $92 million.
• Identified lagging revenue trends in work-from-home dependent categories: garage taxes, rideshare (GTT), utility taxes, and tourism/hotel taxes.
• Maintained tax competitiveness despite trimming the personal property lease tax, anticipating strong growth in the city's tech sector.
• Allocated $1.2 billion in the 2022 Chicago Recovery Plan to address community safety and root causes of crime.
  • $117 million allocated to homelessness supports.
  • $67 million allocated to a vacant lot strategy.
  • $65 million allocated to youth programming.
  • $45 million allocated to community safety initiatives.
• Launched "Invest Southwest," a billion-dollar initiative to revitalize commercial corridors across 77 neighborhoods to diversify economic development beyond downtown.

Dallas Economic Resilience and Revenue

• Economy has largely recovered from the April 2020 shock, excluding weekday hotel occupancy which remains below pre-pandemic levels.
• Sales tax revenue has fully recovered and exceeded budget expectations, driven by stimulus, online shopping, and inflation.
• Exceeded the budget by $10.5 million in the first two months of the current fiscal year (October and November).
• Property tax values grew by 4.56% in 2021, with commercial growth outpacing residential growth.
  • New construction value totaled $3.2 billion.
• Expanded general fund reserves from 42 days (2016) to 74 days of operating expenses ($296 million).
• Received over $800 million in federal funding, allocated to one-time infrastructure and economic development rather than ongoing operations.
  • Strategic ARPA investments include water/sewer access for unserved areas, affordable housing incentives, and digital divide bridging.
• Maintained service levels during the pandemic through immediate expense cuts, avoiding service reductions despite initial interruptions.

Denver Budgetary Constraints and Recovery

• Operates on a $1.5 billion general fund budget, heavily dependent on volatile sales and use tax revenues.
• Lost $200 million in revenue during 2020, requiring budget gap closures primarily through personnel savings.
• Avoided layoffs by utilizing retirement incentives and leveraging vacant positions while maintaining an equity focus on at-risk community services.
• Facing significant inflation-driven pressure on personnel costs, which constitute 70% of the expenditure profile.
• Prioritizing community-led investment of federal funds (CARES, ARPA, Infrastructure) into mental health, safety response, and substance misuse programs.
• Monitoring downtown core vacancy rates, which peaked at 30% in 2020, to determine future flexible usage policies.

Downtown Real Estate Trends

• Dallas: Downtown residential sector outperformed all others, with projected 5.7% vacancy for stabilized properties in 2021; 30 new restaurants opened downtown post-pandemic versus 25 that closed.
  • Office vacancy decreased healthily in 2021; 50% of sublet vacancy from early pandemic was re-leased by 2021.
  • In-person office occupancy averages 45–55%, rebounding after Omicron dips.
• Denver: Facing 30% downtown vacancy at the pandemic's height; seeking to calibrate mixed-use policies along the 16th Street Mall to encourage residential commercial integration.
  • Property transaction prices at pre-pandemic levels have been maintained as a positive indicator.
• Chicago: Experienced reaffirmation of urban living with 172 corporate decisions (expansions/relocations) in 2021.
  • Downtown apartment occupancy is higher than pre-pandemic levels.
  • Saw a 60% increase in tech unicorns (12 in 2021), driving demand for high-quality Class A office space with strong health amenities.
  • Strategizing adaptive reuse of Class B office space to diversify the downtown base.

Cybersecurity and Risk Management

• Denver: Adopting the stance that cyber incidents are a "when" rather than "if," focusing on continuity of operations for payroll and vendor payments.
  • Developing secondary manual systems to operate if primary digital infrastructure fails.
  • Addressing the 2021 Kronos system outage as a catalyst for deeper stress testing.
• Chicago: Implemented a formalized Enterprise Risk Management (ERM) process led by a Chief Risk Officer reporting directly to the Mayor.
  • Mandating robust cyber security training for all city employees.
  • Considering self-insurance for cyber risks due to rising premiums and stricter controls on commercial policies.
• Dallas: Utilizing the NIST common security framework and collaborating on a regional cyber threat center with the private sector.
  • Identifying gaps in maturity and allocating resources to close security deficiencies.
• General Trends: All cities recognize infrastructure bill funding for cybersecurity as a temporary fix (approx. 5 years) requiring future budget planning for sustainable, ongoing expenses.

Crime and Public Safety

• Chicago: Attributes rising violent crime to root causes including homelessness, mental health, and lack of youth enrichment; addressing these via the $1.2B Recovery Plan.
• Dallas: Reported a 9.1% decrease in violent crime and a 13.4% decrease in murders in 2021, bucking the national trend.
  • Implemented "Real Change" initiatives, including "Right Care Teams" and mobile crisis response for behavioral health calls.
• Denver: Facing challenges with both violent and property crime; utilizing the STAR program for non-police responses to specific calls.
  • Experiencing significant hiring challenges in public safety and front-counter operations due to inflation and labor market conditions.