CHICAGO -- To Richard Phelan, the new president of the Cook County Board of Commissioners, raising property taxes is a last resort.

'We have to husband our resources a little bit better, and we have to be sure our levies and expenses are able to meet without the necessity of increasing real estate taxes," he explained in a recent interview.

Instead, he said he wants to raise user fees and capture more federal matching dollars for health care to balance the county's budget.

"With a maturing county like Cook, you always have the question of whether or not your tax base out there is growing and whether your levies will continue to grow as you grow," Mr. Phelan said.

Over the past 20 years, the county's population has shrunk 7.6% and has been shifting out of Chicago -- the county seat -- to the suburbs.

The two main pressure points for the county, according to a May credit report by Moody's Investors Service, are public safety and health care for the indigent. The county currently faces major capital expenditures to improve its health-care network and to build more detention facilities.

At the same time, it must contend with the increased displeasure of property owners who do not want higher real estate tax bills -- a key issue during the county board election campaign last year.

Despite the fact that he ran against many tax-adverse Democrats in the primary election and a Republican in the general election, Mr. Phelan said he had the tax message voters wanted to hear. "We are going to make certain that property taxes are not raised unless it was absolutely necessary to do so," he sated, adding that he also promised a more "streamlined, open, and responsive government."

Given the county's 21 years under the static leadership of George Dunne, who retired from office last year, Mr. Phelan also packaged himself as a break with the politics of the past.

The county board presidency was not Mr. Phelan's first foray into the political spotlight. In 1988, the trial lawyer and founder of a Chicago law firm showcased his legal skills for a national audience as the special outside counsel to the U.S. House Ethics Committee in charge of grilling then-House Speaker Jim Wright, who had been accused of ethics violations.

Immediately after taking over at the county's helm on Dec. 3, Mr. Phelan set about making good on his campaign promises. As one of his first declarations, he installed brighter lightbulbs in the crypt-like county building that had been dimly lit for years as a response to a bygone energy crisis.

Outside Audit

On the financial side, he plans to shed light on the county's books by bringing in Arthur Andersen & Co. to conduct an outside audit for the first time in the county's history.

"We want to see if we are presenting a true and accurate financial condition of the county," Mr. Phelan said. The audit will cover the county's 1990 financial statements and may include performance audits of three county departments, "to see whether in fact we're using people as well as we should have and whether we need all the people we have," he added.

According to Woods Bowman, the county's chief financial officer, the audit is expected to be completed by September. Previous audits of the county's books were conducted by the county auditor's staff.

Mr. Phelan said he wants to do away with "antiquated" financial practices -- such as not having an approved budget until the end of February even though the fiscal year begins on the first Monday in December. For example, the $1.6 billion budget for the current fiscal year was passed on Feb. 21.

"It seems to us the way to go about clearing up and organizing your budgetary and fiscal responsibility was to take on the budget before the beginning of the fiscal year and make sure the budget actually reflected the use of manpower in the county," he explained.

As for debt issuance, Mr. Phelan inherited a 1987 $460 million capital improvement plan that calls for the use of general obligation tender notes to fund construction of major projects for detention facilities and hospital renovations. Under the plan, once the projects are completed, the county would issue bonds to retire the notes. About $236 million of the note authorization is scheduled to be used this year. Of that amount, $60 million of notes were issued in March.

Mr. Phelan said the county may do other note issues in August and December. He added that the county also was looking at refinancing some of its callable long-term debt. Mr. Bowman said specifics on the county's debt plan would not be available until a two-year schedule for debt issuance is completed.

Plans for Health Care

Mr. Phelan's own capital plan draws upon his campaign pledge to improve the county's health-care network, which is centered around Cook County Hospital. The hospital earlier this year lost its accreditation from the Joint Commission on the Accreditation of Healthcare Organizations, because of fire and safety violations.

Mr. Phelan said he would replace the crumbling 90-year-old hospital -- which currently handles the bulk of the indigent medical case load -- with a network of existing hospitals, as well as a new women's and children's facility on Chicago's near west side. Mr. Phelan pegged the cost of the new network at a minimum of $100 million.

In the meantime, Mr. Phelan's pledge to restore permission to the county hospital to perform abortions has prompted the Pro-Life Action League to threaten a property tax boycott. But the new county board president said he did not believe the group represented "the voters of this county" and added that threatened tax boycotts are "never actualized."

Property taxes, the bedrock of county revenues, which make up 39% of the current budget, have also been a big issue for some county board members. They wanted to adopt a "tax accountability" resolution requiring a three-fifths vote for any increase in the tax levy. Mr. Phelan said checks with legal authorities have confirmed his stance that such a restriction would impair the marketability of Cook County's bonds, thereby forcing the county to offer higher interest rates and "thus defeating the purpose of their so-called tax accountability amendment."

"To my knowledge, it's a dead issue," he added.

Still, Mr. Phelan is sticking to his pledge to ease the county's reliance on property taxes. Last month, the Illinois General Assembly passed legislation that would enable the county to raise user fees in areas outside of its home-rule powers, such as the circuit court system. Mr. Bowman said that would mean another $8 million for the county each year. In addition, the county was relying on the passage of a bill that would bring in more federal matching dollars for Medicaid.

Mr. Phelan said those two plans, along with normal growth in the tax levy, should cover the increased costs to the county. He added that he believed the changes he has in mind for the county's finances should impress Moody's Investors Service "that we're running a tight ship," and perhaps improve the county's GO rating of A1.

Paul Devine, a vice president and manager of the Great Lakes region at Moody's said, "A county like Cook is always going to need to be flexible and diligent in identifying new revenues and cost efficiencies in order to maintain good fiscal operations.

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