Mayor Brandon Johnson asks for 3% price drop from city contractors, cites tough times

Mayor Brandon Johnson is trying to put a 3% squeeze on city contractors, asking them to agree to reduce their prices by that amount on all invoices sent to the city to help Chicago get past “difficult economic times.”

Chief Procurement Officer Sharla Roberts’ surprise request was sent this week to all main contractors doing business with the city. The letter does not describe the nature of the economic crisis and doesn't say what, if any, repercussions there might be for companies that refuse the cost-cutting request.

It states that “in light of the economic times,” the city “faces new challenges to reduce its costs and allocate resources in a way that accomplishes more with less” to maintain city services.

The mayor’s request comes during what amounts to crunch time for the city and the Chicago Board of Education.

If the partially elected, partially appointed school board does not reimburse the city for a $175 million pension payment for nonteaching school employees by March 30, Chicago will close the books on 2024 with a shortfall that could leave City Hall with no choice but to dip into its reserves.

That would risk yet another costly drop in Chicago’s already reduced bond rating, which determines city borrowing costs.

“The City has an obligation to taxpayers to pursue all avenues involving cost-cutting measures. Vendors doing business with the city are no exception,” Roberts wrote.

Asked to explain her attempt to cut costs on city contracts, Roberts replied, “I don’t have the answer right now. ... You’re going to have to call me back on Monday."

Ald. Gilbert Villegas (36th), chair of the City Council’s Committee on Economic and Capital Development, urged city contractors to reject the mayor’s request and hold the city to the prices included in their legally binding agreements.

“When you’re a low-bid contractor, you’re already putting as much savings as possible into it. When you’re talking about 3%, you’re potentially talking about half of someone’s profit,” Villegas said.

“Why would someone want to do business with the city — spend thousands of dollars, and in some cases tens of thousands of dollars, putting together proposals — only to have the city come back and pull the rug out from under you and say, 'You know that fair contracting opportunity you had? We want 3% of it,'" he said.

Ald. Ray Lopez (15th), one of Johnson’s most outspoken Council critics, said the “3% squeeze” on city contractors "reeks of bad fiscal management."

"If things are that dire, he and his team need to have an immediate conversation with members of the City Council so that if we need to decide where to cut, what to raise, and what to do next, we do it in a very public and transparent way," Lopez said. "Trying to put the squeeze on people privately is not how you run good government."

Civic Federation President Joe Ferguson said there’s nothing wrong with trying to get city contractors to reduce their prices.

“It’s the sort of thing we should want the city to do," he said, while adding, “The timing is interesting.”

Johnson’s $17.1 billion budget was narrowly approved in mid-December after a marathon stalemate that saw a bitterly divided Council reject a property tax increase of any size.

The 27-23 vote exposed the deep distrust between an emboldened Council and an embattled mayor who steadfastly refused to consider layoffs or furlough days for fear it would alienate the unions that put him on office.

Downtown Ald. Brendan Reilly (42nd) said he’s glad the mayor is finally searching for efficiencies after persuading his Council allies to pass what Reilly called an “incredibly irresponsible budget.”

“I’m glad they’re at least understanding that we have a spending problem — not a revenue problem — and that it’s going to take a lot of efficiencies to get us out of these holes,” he said.

But Reilly said the mayor is making a “ridiculous ask” of private companies with legally binding contracts.

“If this is a choice between having a profit margin or suffering a loss, they probably need to voluntarily decline the administration’s offer," Reilly said. "You certainly don’t want to put contractors in a position where they can’t make the numbers work."