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City Needs To Raise Property Taxes, Lay Off Hundreds To Fill $1.2 Billion Budget Gap, Lightfoot Proposes

Mayor Lori Lightfoot's proposed property tax increase aims to raise $94 million as the city's finances have been wrecked by the pandemic. A homeowner with a $250,000 home will pay just $56 more per year, she said.

Chicago Mayor's Office
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CHICAGO — Mayor Lori Lightfoot is proposing a $94 million property tax increase, the layoffs of hundreds of city workers and more as the city grapples with budget issues, including a $1.2 billion shortfall.

Standing alone in City Council chambers because of coronavirus, Lightfoot’s speech was her first crack to shape the narrative around her plan to plug the massive hole expected for 2021.

Evoking the city’s past resurgence after the Great Chicago Fire in 1871, Lightfoot said the budget would require shared sacrifice, saying “togetherness, not individualism, is what will propel us toward a better tomorrow.”

The city’s revenues have been wrecked by the pandemic, and the mayor’s proposal comes as the city is facing a second wave of coronavirus cases. About 65 percent of the budget deficit can be traced directly back to the pandemic’s impact on the economy, according to the Mayor’s Office.

“We have worked very hard to be smart, prudent and strategic and make choices that spur growth and build wealth,” she said. “We have avoided grabbing for any revenue source without regard to the consequences for economic recovery.”

Lightfoot said all options would be on the table to close the deficit.

The mayor’s proposed property tax increase would raise about $94 million and would translate into homeowners paying an extra 1.3 percent per year, according to her office.

The move would help the city avoid further layoffs, furloughs or cuts to service, according to the Mayor’s Office. Lightfoot characterized the increase as “modest.”

“…For the average Chicago home valued at $250,000, you will pay just $56 additional dollars a year,” she said.

Beginning in 2021 and each year after, Lightfoot is proposing to tie future property tax increases to rises in the consumer price index, “in an effort to avoid another sudden, large property tax increase” the Mayor’s office said.”

The city would also do a mixture of layoffs, furloughs and elimination of vacant positions to get rid of 1,921 positions and save $106 million under Lightfoot’s plan.

Lightfoot pledged no one city staffers would be laid off until March 1, leaving open the possibility a new federal stimulus package could help plug the budget gap instead.

About 47 percent of those reductions would be in the Office of Emergency Management and Communications, according to the Mayor’s Office. The city would transfer school crossing guards to Chicago Public Schools. It would save the city about $14 million, according to Lightfoot’s plan — but the school district would then have to bear the costs of those employees.

Despite repeated calls from protesters and progressive aldermen, Lightfoot rejected calls to “defund the police,” saying she does not believe the “essential work of bias-free policing requires dismantling our police department.”

“Literal defunding means cutting officer positions in a department where close to 90 percent of the budget is allocated to personnel,” she said. “If we cut current jobs, we would be compelled to cut the youngest, most diverse and well trained officers in the department.”

But the plan does call for eliminating 614 vacancies from the police department, a move Lightfoot said was “done in concert with CPD.”

Saying police officers have been shot at 67 times in 2020, Lightfoot urged aldermen to “look beyond the hashtags, and think about the men and women who courageously report for duty every day on our behalf.”

During the speech, seven aldermen — Alds. Anthony Beale (9th), Raymond Lopez (15th), Stephanie Coleman (16th), Michael Scott Jr. (24th), Jason Ervin (28th), Chris Taliaferro (29th) and Emma Mitts (37th) — sent a press release calling on the city to allocate an additional $50 million to crime reduction efforts.

Beale said similar efforts supported by private donation reduced violent crime in Roseland by 33 percent. An additional $50 million from the city would help expand crime reduction efforts in five South and West Side neighborhoods.

The city also plans to refinance outstanding bonds, with hopes that can provide about $501 million relief for the 2021 budget.

Like in 2020, the city will declare a large tax-increment financing (TIF) surplus of $304 million, although the money will be split between the city and it’s sister agencies, including the CTA and Chicago Public Schools. The city’s share projects to be $76 million. The money is taken from the city’s TIF districts and would otherwise be used on specific infrastructure projects within the districts.

The budget increases the city’s cloud computing tax to 9.0 percent, in line with other taxes imposed on the lease or rental of personal property. The gas tax would be raised by $0.03 per gallon. Taken together, the city expects the increases to net an additional $25 million in revenue in 2021.

The city expects another $45 million from the sale of surplus city-owned land and tapping into the city’s rainy day fund to the tune of $30 million. Ervin, chair of the Council’s Black caucus, had previously called on Lightfoot to dip into that $900 million the city has set aside in reserves.

The city “could end up starving ourselves even though we have food in the refrigerator,” Ervin told the city’s chief financial officer Jennie Huang Bennett during a September committee meeting, WTTW reported at the time.

While the equation to close the city’s $1.2 billion budget gap is complex, the math to pass the mayor’s proposal is simple: She needs 26 aldermen to approve the budget by the end of the year.

“She doesn’t have 26 votes today,” said Ald. Brian Hopkins (2nd). “But she doesn’t need 26 votes today.”

Hopkins was one of several aldermen to question the prudence of the proposal to refinance and restructure over $500 million of the city’s debt.

“We need to make sure we don’t panic in the situation we’re in and make decisions that will literally affect our grandchildren,” he said.

Ald. Michele Smith (43rd) is also concerned the “lion’s share” of plugging the budget deficit comes from adjustments to the city’s debt, saying she’s “very, very skeptical,” of the plan.

Smith, who represents portions of the wealthy Lincoln Park and Gold Coast neighborhoods, said part of her job is to “keep our city’s tax base here in the city.”

“I took a pledge not to vote for property tax increases. I made good on that pledge last year. So this year, I think everyone appreciates it is unprecedented…I plan to listen very carefully to what ultimately gets proposed,” she said. “But I’m going into it with very serious and grave skepticism.”

Ald. Andre Vasquez (40th) said he’s not a “default no” vote, but he needed to dig into the numbers and evaluate the proposal. He also expressed concerns of the plan to restructure the city’s debt payments.

Vasquez also said there was a “disconnect” in Lightfoot’s remarks on the police department and the results of a city survey that showed nearly 9 of 10 residents who responded supported reallocating funds from the police budget to fund other city services.

“They are funded, they’re overly funded, and I don’t think there was enough emphasis on violence prevention and more proactive public safety measures,” he said.

Last year, 11 aldermen voted against Lightfoot’s 2020 spending plan, primarily from the council’s most progressive wing, but 15 aldermen rejected a separate revenue ordinance that included a smaller property tax increase to increase library services.

Lightfoot characterized the 2021 property tax increase as “modest” and said it wasn’t the hundreds of millions of dollar increase others had projected.

Hopkins was one of the 15 to vote against last year’s property tax increase. Despite the framing of this year’s plan, it will be a tough sell to his North side residents, he said.

“Telling my residents that the property tax increase isn’t as bad as it could have been is not really a message that I’m willing to sell,” he said.

Lightfoot has had a strained relationship with the City Council during her time in office, with some aldermen accusing her of leaving them out of the conversation. In August, Lightfoot pledged to work better with those interested in finding common ground.

Next week, City Council kicks off 11 days of budget hearings, with every department head and the mayor’s budget team fielding questions from aldermen in the Budget Committee.

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