When you once thought of Chicago, Al Capone and Michael Jordan immediately came to mind — along with the Lakefront, vibrant neighborhoods, world class universities, multinational and entrepreneurial business, inspiring architecture, fine boutiques and great restaurants. But times have changed: Now crime, schools, the business environment, operating budgets, and pensions are clouding the Windy City’s image.

Chicago, “that toddlin’ town” and the nation’s third largest city, goes to the polls on February 28 to elect a mayor. If no one gets a majority on that ballot, there will be a runoff in early April. There are eight candidates challenging incumbent Democratic Mayor Lori Lightfoot. There are no Republican candidates running for mayor — indeed, Chicago has not had a Republican mayor since 1931.

As the election approaches, there is bad news out there. A main accomplishment of Mayor Lightfoot of improved financial management has passed relatively unnoticed, as more emotional issues such as crime have captured public attention.

According to a recent union poll, 70 percent of the sample said that crime and public safety were the top two issues — with nothing else even close in importance. While the Chicago Police Department advises that 2022 homicides and shootings are down 15 percent and 20 percent from a year earlier, respectively, they are nonetheless higher than pre-pandemic levels, according to the University of Chicago Crime Lab. Carjackings are common, with vehicle theft nearly doubling to about 19,000 in 2022. Further, the Crime Lab advises that violence in Chicago remains at high levels, while in New York and Los Angeles it has moderated in recent years. A retail vacancy rate of 30 percent on Michigan Avenue, known as the Magnificent Mile, said to be worse than during the 2008 recession, means less traffic on the premier shopping street and the need for situational awareness.

The news regarding the Chicago Public Schools (CPS) is not encouraging. According to the Illinois Policy Institute, a nonpartisan 501(c)(3), the Illinois State Board of Education has released statistics confirming that almost 80 percent of CPS students are unable to read at their grade level, and only 15 percent perform in mathematics as expected. Moreover, this represents deterioration from pre-pandemic levels.

The attractiveness of Chicago as a business center also has diminished in recent years. Crimes and taxes are cited as major impediments in some cases. While some of the factors relate more broadly to competitive and corporate needs and to the Illinois environment, well beyond the scope of City Hall, the several leading firms that have left Chicago or the area have hurt its reputation. Citadel, a highly successful hedge fund, has moved to Miami. Boeing is moving to Arlington, Va., to be closer to the Pentagon, regulators, and Congress. Caterpillar has moved it headquarters from Deerfield, Ill., to Texas, citing deficit spending and taxes in Illinois. And McDonald’s has expressed concern over crime in Chicago. Further, Macy’s pulled out of the premier Water Tower shopping center as an anchor tenant, as a corporate right-sizing initiative.

Memories of the 2020 riots following the murder of George Floyd remain. A February 2021 report by the City of Chicago Inspector General in the aftermath of the George Floyd riots concluded that the Chicago Police Department was “under-prepared and ill-equipped.” Further, the effects of COVID-19 are still evident on tourist and convention activity, the Chicago Transit Authority, dark stores, and less pedestrian traffic in the Loop, as reported by the Chicago Tribune on Sunday.

The finances of the City of Chicago are improving but the operating and pension situations are still difficult. The projected deficit for 2023 of $128 million is substantially less than the $733 million deficit of the previous year, and the $1.2 billion deficit of 2020, the year of the pandemic. However, Chicago has been allocated $1.9 billion under the American Rescue Plan (ARP) of 2021 to offset COVID-19 economic consequences from March of 2021 to December of 2024. Further, deficits of $475 million to $550 million are projected for 2024 and 2025, as also reported by the Tribune. A principal vulnerability of the budget cited in an analysis by the Civic Federation is nonrecurring revenue.

The unfunded pension liability for Chicago’s four pensions is almost $34 billion. Assets to fund pensions represent about 25 percent of future liabilities, while the average funding for state and local pensions approximates 70 percent, according to a Bloomberg report.

In November, Chicago announced that Moody’s had upgraded its general obligation bonds one level from junk bond to Baa3 investment grade — and a number of higher quality revenue bonds were upgraded as well. These upgrades were due in large part to increases in pension funding — Chicago advanced over $500 million in funding before it was due in 2022 and early this year. About 80 percent of Chicago’s property taxes fund pensions; they are a live wire with residents, noting that they have doubled since 2014; however, they were not increased for 2023 (same Bloomberg).

So will Chicago toddle again? To do so, it must reduce crime in the streets and see restoration of its once vibrant retail sector. More Loop workers migrating from working at home to the business district will also help. Chicago has a great civic spirit — some problems are surmountable, although it is hard to imagine how the pension overhang can be substantially mitigated.

Whoever wins the election for mayor will be presiding over a critical turnaround.

Frank Schell is a business strategy consultant and former senior vice president of the First National Bank of Chicago. He was a Lecturer at the Harris School of Public Policy, University of Chicago and is a contributor of opinion pieces to various journals.