Updated at 3:15 p.m.
Chicago Mayor Lori Lightfoot wants to help close the city’s projected $838 million budget gap with higher taxes on ride-shares, restaurant bills and high-priced home sales — but she stopped short of proposing a major property tax hike.
The mayor unveiled her proposed 2020 spending plan in a speech to the City Council Wednesday morning. Her blueprint also helps close the massive deficit with a one-time windfall from refinancing city debt, and $31 million in surplus money from some of the city’s special taxing districts, among other measures.
The mayor also underscored one big thing that is not in her spending plan: a large property tax hike that Lightfoot had refused to rule out in recent months as her administration grappled with the huge deficit.
“But what we heard — time and again — was that residents don’t want to see their property taxes increased,” she said Wednesday morning. Her budget does, however, include a small property tax hike in order to keep libraries open seven days a week.
In order to stave off a bigger increase down the road, however, Lightfoot reiterated Wednesday that the city also needs some relief from Springfield.
“Now, I must caution: If we don’t get the authorization that we need, we will be forced to make more painful choices when it comes to new sources of revenue,” Lightfoot said. “And we all know what those choices are.”
The mayor again said that she plans to lobby state lawmakers for changes to a huge gambling expansion bill that finally allowed for a long-sought Chicago casino. An independent study released in August found it would be “very onerous” for any casino operator to turn a profit here, based on the effective 72% tax rate that’s baked into state law.
Lightfoot’s hoping she can get the state to accept less tax revenue in order to make the casino feasible.
She also said she planned to push Springfield for a “statewide pension reform package” to bolster the city’s woefully underfunded government worker retirement systems, though she didn’t offer specifics. The Generally Assembly reconvenes for its fall veto session Monday, but it’s far from certain whether there’s an appetite to bail Chicago out of yet another financial mess.
Ald. Pat Dowell, 3rd Ward, said that wishlist will require a major push in Springfield during the veto session next week.
“We obviously can't close this gap without Springfield support,” Dowell said, noting that the proposal to cut more than 200 vacant positions out of the budget will help. “I think people want to see that the city is actually tightening its belt before we ask people for more money.”
Ald. Ray Lopez, 15th Ward, a frequent critic of the new mayor, said the budget proposal is risky in that it relies on “happy-go-lucky assumptions that everything's going to go our way.” He also raised concerns that Lightfoot’s budget doesn’t cut enough vacant positions.
“We are still leaving ... bloat in this budget at a time when you're going to go to Springfield and say we need your help because we don't have enough money,” Lopez said.
The rookie mayor’s proposal comes as she needs to find money to meet the city’s ever-rising pension payments for city workers. For the 2020 budget, the city is on the hook for nearly $1.7 billion in state-mandated pension payments to its four retirement funds. That’s a more than $371 million increase over 2019.
And the budget isn’t Lightfoot’s only problem to solve at the moment. She was greeted Wednesday morning by throngs of striking Chicago teachers outside City Hall. The strike, now in its fifth day, has the mayor in a tough spot as she negotiates with aldermen for budget approval, which traditionally happens before Thanksgiving.
Refinancing, restaurant tax and ride-share fees
The mayor’s 2020 budget proposal calls for $537 million in spending cuts and $352 million in new revenue.
Lightfoot’s top finance adviser told reporters on Monday that about 40 percent of the $838 million hole will be filled using one-time fixes. That includes the city’s $31.4 million share of a $300 million surplus the mayor declared for some of city’s special taxing districts, known as TIFs, and a plan to refinance much of City Hall’s outstanding debt for $200 million in up-front, one-time savings.
But Lightfoot is also banking on a host of new taxes and fees to shore up the city budget next year, and they’ll hit everyone from downtown diners to home sellers to riders using Uber or Lyft.
The mayor wants to hike the sales tax for all food and beverages purchased at restaurants and retail establishments. That would amount to an additional $0.25 on a $100 bill. The move is forecast to rake in $20 million for the city.
The mayor also laid out plans last week for the city to hike fees yet again on ride-hailing services, such as Lyft and Uber. The mayor’s office expects that and other measures aimed at reducing traffic congestion will generate $47 million.
Lightfoot’s plan would reduce the city’s tax on shared ride-hailing trips, from $.60 per trip down to $.53. But solo riders would see the tax nearly double, to $1.13 per trip. And ride-share passengers would be hit with a new surcharge of up to $1.75 per trip to downtown destinations.
Lightfoot also lashed out at the “multi-millionaire owners” of ride-share companies, which she said have had “essentially free reign in Chicago.”
“This congestion tax would apply during the key hours between 6 a.m. and 10 p.m. when the central business district faces its highest levels of gridlock,” Lightfoot said. “And if we are smart about this, making this small increase will not hurt our neighborhoods or impair accessibility for disability riders.”
The mayor is also proposing a hike on the city’s tax on real estate transactions so the sales of high-end homes would be taxed at a higher rate. That move is expected to bring in about $50 million next year, according to the mayor’s office.
Finally, the city also seems poised to tax soon-to-be-legal recreational marijuana sales at up to 3%.
Cost-cutting and belt-tightening
Lightfoot is also proposing the department that oversees the city’s 311 call system, the data portal and other technologies be combined with the department that maintains city vehicles. Lightfoot said combining the Department of Innovation and Technology with the Department of Fleet and Facilities Management would save the city about $1 million.
Lightfoot also wants to combine the city’s public safety departments into one entity. Public safety is one of the city’s largest expenses, after accounting for pension and debt payments.
By consolidating the Chicago Police Department, the Fire Department and the Office of Emergency Management into one mega-division, the city will save money on administrative costs in the long run by taking beat cops off desk duty and putting them back on the street.
“By consolidating these units, we will be putting more than 160 police officers and uniform fire members back on the streets where they can do the most good,” Lightfoot said. “That means more police doing police work in your neighborhoods and wards.”
On the spending side, Lightfoot has said she plans to dramatically increase the money City Hall sets aside for legal payouts and settlements to nearly $153 million next year. Last year’s budget under Mayor Rahm Emanuel allocated just $47 million for legal payouts, even though the city ended up spending $142 million — most of which was for police misconduct cases.
Legal settlements have ballooned in recent years mainly from some high-profile police involved cases that put the city on the hook for millions of dollars. The city’s Law Department often favors settling cases, as that can be cheaper than going to trial and risking bigger court-mandated payouts.
The mayor has also proposed putting more money toward affordable housing and homelessness, even as homeless advocates say it’s not enough. The mayor’s budget materials also say she plans to spend another $9 million on violence prevention.
How we got here
Lightfoot first revealed next year’s whopping $838 million budget gap in a rare prime-time speech in August.
To plug past budget holes, mayors have relied on one-shot revenue streams or borrowed money. For Richard M. Daley, that meant leasing the city’s parking meters and the Skyway to cover general services. For Rahm Emanuel, that meant borrowing billions of dollars to cover old debt and city operations.
In preparation of what could end up being one of her most difficult budgets as mayor, Lightfoot held public hearings across the city to collect ideas for how the city could find new sources of revenue or service cuts.
On the campaign trail, Lightfoot said she’d rather trim existing costs than burden taxpayers. To handle the city’s growing pension tab, her predecessor hiked up taxes on homeowners at the start of his second term.
In addition to a four-year, phased-in property tax hike to cover police and fire pensions, the City Council hiked taxes on water and sewer bills, instituted a monthly garbage fee, and raised the 911 surcharge on phone bills to $5. All of those changes freed up money in the city’s general fund to cover state-required increases to the city’s four pension funds.
Claudia Morell and Becky Vevea cover city politics for WBEZ.