City Hall can’t even tally up estimated $8 billion debt backlog, let alone collect it, watchdog finds

A cash-strapped City Hall has missed out more than $8 billion in sorely needed revenue because it “lacks foundational management tools” to chip away at the mountain of delinquent debt it’s owed dating back three decades, Chicago’s top government watchdog warned Thursday.

The report released by Inspector General Deborah Witzburg confirms years of Sun-Times reporting that has detailed just how lousy a job the city has done of collecting on old fines, fees and other outstanding payments since former Mayor Richard M. Daley occupied the fifth floor in the 1990s.

But the Department of Finance hasn’t gotten any better at making scofflaws pay up under Rahm Emanuel, Lori Lightfoot or Brandon Johnson, whose administration has seen the backlog pile up another $1 billion while confronting massive budget deficits during his term, the Sun-Times found.

And though the city’s fiscal picture continues to deteriorate, it “does not have overarching policies, tools, or goals to manage and collect” desperately needed dollars, the inspector general’s office found.

“The City is in dire financial straits,” Witzburg said in a statement. “We simply cannot operate without a clear view of this mountain of uncollected debt which is at least $8.1 billion high. Comprehensive management, an accurate accounting of collectible City debt, and an equitable plan for appropriate collections could dramatically improve the City’s fragile financial footing.”

The Sun-Times crunched that number to $8.2 billion after poring through some 30 years’ worth of debt data. That includes $810.5 million in unpaid water and sewer debt, $1.5 billion in ambulance fees and more than $3 billion in delinquent administrative hearing debt — all figures that have ballooned with interest and collection costs.

But it’s impossible to nail the full tab down to the penny because “no City department has knowledge or management oversight of all debt owed to the City, and the City may therefore be unable even to quantify the total outstanding debt,” Witzburg’s office found.

“Owing money to the City disproportionately impacts economically vulnerable residents, who may live in communities where fines and fees are highly concentrated and correlate with higher levels of poverty,” according to the OIG. “Without comprehensive debt management, the City is poorly situated to plan and implement equitable debt collection strategies.”

The city puts some of the debt out for bounty by law firms, but finance officials have acknowledged they’re unlikely to recoup the vast majority of the $8 billion, much of which is tied to businesses that have dissolved, people who have died or criminals who have absconded.

But the city has also failed to get its own employees to pay up. Nearly 13,000 city workers collectively owe almost $20 million in overdue water bills, parking violations, speeding tickets, building code violations and other infractions, the Sun-Times has found.

Many of those workers are on payment plans, but “employee indebtedness persists, in part, because of the logistical challenges of garnishing wages,” according to the 80-page city watchdog report.

Some are already having their wages garnished for child support or other purposes, and state and local law bars garnishment beyond a quarter of a debtor’s paycheck.

Outdated technology systems are also to blame, though, preventing finance officials “from considering all available City data related to employee debt when performing its debt checks,” the OIG found.

The process covers utility bills, administrative hearing fees, parking and vehicle costs, “but does not include a search for business debt associated with the employee or debts associated with properties other than the employee’s primary residence,” the report found.

Witzburg’s office recommended the city create a formal debt management plan, standardize definitions across departments, better supervise contracted collectors and find “technical solutions to better track and collect debt.”

The city’s response included in the report said, “while we value OIG’s assessment, we disagree with the recommendations in that a clear plan for debt management, collection, and decreasing the City’s overall debt load has already been established and is being implemented.”

City officials pointed to the launch of a consolidated debt check portal, payment plan reforms and the work of a revenue monitoring committee as part of an overall plan that “is both deliberate and intentional with the goal of debt collections.”

“Although the City no longer suspends driver’s licenses for unpaid vehicle violations or performs water shut-offs for non-payment due to detrimental impacts on low-income residents, [Dept. of Finance] collections have continued to rise since 2020,” city officials wrote.