In the summer of 1984, Chicagoan Ken Cox made a series of major life decisions: He got married and soon after bought a so-called “jumbo bungalow” in West Rogers Park.
“It was the best thing I ever did in my life. We just love this house. I even remember saying, ‘I think this could be our forever house,’” Cox, 65, said.
Since then, Cox’s wife has died, his son is a fully grown college graduate, he’s remarried, but is no longer certain he can stay forever in the North Side abode, as his property tax bill pushes $10,000 a year, he said.
Across town in Little Village, 27-year-old Bianca Renteria has similar worries. Rising property taxes have led to conversations about whether her family will be able to keep a four-unit apartment building her grandparents have owned since the 70s and have forced her to consider whether she can stay in the community she’s called home.
“I’ve realized that I will not be able to afford a home in Little Village even though I’ve been here my entire life,” Renteria said.
Candidates in the runoff race for Chicago mayor are trying to convince voters like Cox and Renteria they will keep their pocketbooks a priority if elected, as growing property taxes and the city’s pension crisis take center stage on the campaign trail.
It’s an issue residents care about. Out of nearly 2,000 people who wrote into WBEZ/Sun-Times’ People’s Agenda survey asking what problems they want the next mayor to address, more than 17% mentioned fiscal issues, with more than 100 people mentioning property taxes.
Cook County Commissioner Brandon Johnson said he will not raise property taxes if elected. Former Chicago Public Schools CEO Paul Vallas said he would cap the city’s property tax levy, but has been less clear about whether that means we would not raise property taxes at all. A spokesperson said Vallas is “committed to not raising city property taxes.”
Johnson is proposing a slew of new revenues, mostly in new taxes on big businesses. Vallas, meanwhile, promises to use budgetary acumen to work within the existing budget’s bounds. Neither plan is failsafe, with many revenue fixes that will require City Council or state approval, financial experts tell WBEZ.
In 2020, Mayor Lori Lightfoot and the City Council moved to tie the city’s annual property tax increase to the rate of inflation in an effort, Lightfoot said, to make property tax hikes more predictable and avoid politically-motivated tax freezes.
A Chicagoan’s property tax bill is the culmination of multiple equations and generates revenue for Chicago Public Schools, which is its own taxing body, as well as Cook County and Chicago.
The city’s inflation-tied increase — which is capped at 5% and helps pay for the vastly underfunded pensions each year — is just one small piece of the tax bill puzzle. In 2022, for instance, the expected increase from the city would have translated to about $34 for owners of an average, $250,000 property (though Lightfoot canceled the hike altogether).
Still, both Johnson and Vallas said they would nix the policy that automatically ties increases to inflation, with Vallas promising to “cap” individual property tax bills, though the city’s mayor only controls a portion of that bill.
In his mayoral bid four years ago, Vallas said he would limit property tax increases at 5% or the rate of inflation, whichever is less, according to his campaign website at the time. The lack of specificity this time around is a point Johnson has seized on, arguing Vallas is leaving himself wiggle room.
“The truth of the matter is he has not put forth a budget plan, because when he put forth the budget plan four years ago he came in ninth place,” Johnson said at a recent debate. “So he decided to only put three sentences up on his website, because he’s gonna raise property taxes.”
Later in the debate, Vallas responded to that line of criticism, saying: “I’m going to take a holistic approach and long term planning approach to the budgets, and I’m going to look at all aspects of the budgets to ensure that we can meet critical needs while holding the line on property taxes.”
At another debate, Johnson again pressed Vallas to clarify his stance on raising property taxes, saying, “This is about creating a pathway to homeownership and that requires down payment assistance but it also requires us not to raise property taxes. That’s the difference between Paul and I.” Vallas shook his head in disagreement and criticized Johnson’s proposals to raise or create several other taxes, but did not actually address his own stance on property taxes in that answer.
On his website, Vallas says “under NO circumstance” would he raise property taxes to pay city pensions — but doesn’t say whether he would use increases for other purposes.
Regardless, talk from both candidates of forgoing or capping property tax increases, or detangling them from the rate of inflation, is raising alarm for some veteran fiscal experts.
“I don’t feel as if it’s a responsible fiscal position for the next mayor to take,” said Ralph Martire, executive director of the Center for Budget and Tax Accountability.
“People may or may not like the current mayor, but one of the really fiscally responsible things she did was support the passage of that resolution that tied the property tax levy to an automatic adjustment that was based on inflation, because that just keeps the value of that property tax revenue the same from year to year.”
New taxes and new lines of revenue
The two candidates are diametrically opposed on their approaches to multiple issues. That’s perhaps best illustrated by how they plan to pay for their priorities, said Justin Marlowe, a research professor at the University of Chicago’s Harris School of Public Policy and associate director of its Center for Municipal Finance.
“It seems like in Vallas’s case, there’s an assumption that there’s enough money in the system to accomplish the things he wants to accomplish. It’s really just a matter of managing the money differently…” Marlowe said. “In Johnson’s case, there’s clearly a focus on new revenue, that he does not seem to think there’s enough dollars in the system.”
Johnson has proposed several new or increased taxes to generate millions in revenue and make the “ultra-rich pay their fair share,” according to his website.
Among Johnson’s new tax ideas is the reinstatement of the city’s so-called “big business head tax” — where large businesses that do the majority of their work in the city would pay up to a $4 tax for each employee. He estimates the new tax would bring in more than $20 million in revenue. Under former Mayor Rahm Emanuel, the City Council moved to eliminate the tax, which was phased out by 2014.
Johnson also pitches “strengthening” the city’s hotel accommodations tax and jet fuel tax, increasing the tax on the sale of high-end properties, implementing a tax on securities trading contracts and broadening the city sales tax to include professional services.
Johnson’s tax increases would likely be actively fought by the business community.
Asked about Johnson’s proposal to increase the hotel tax, Michael Jacobson, president and CEO of the Illinois Hotel and Lodging Association, said in a statement that “any increase in that tax would be a gift for the other cities we compete with for conventions.”
“Tourism is an economic engine for Chicago and the State of Illinois and we believe leaders need to support policies that result in opportunities here,” Jacobson said.
Vallas has said he does not support any of the above tax increases, though he has expressed his support for allowing video gambling in the city limits — “which of course I would support and legalize,” he said at a debate last week.
“Raising the head tax and raising the tax on hotel/motel, which is already highest in the nation, is not going to balance the budget,” Vallas said.
Johnson has already backpedaled from some of his proposals that have garnered criticism, such as a surcharge on suburban Metra riders that he estimated would bring in $40 million in revenue. In a statement, Johnson said he intended to use that revenue to make investments in the CTA.
“But I listened to commuters and transit advocates who convinced me that this wasn’t the right way to do it,” Johnson said. “Iron fists don’t get the job done…”
When pressed on the details of the head tax proposal during a debate last week, Johnson said his plan is a “living document” and welcomed feedback from residents.
“If people do not like that particular tax then help me find $20 million, right?” Johnson said. “We can’t just simply say, ‘No.’ ”
Vallas has proposed little in the way of new revenue streams for the city. But one of his more innovative ideas includes creating a municipal bank — which would dole out loans to bolster investments in the South and West sides and “capture the profit that private banks presently keep for themselves.”
How the candidates would fund Chicago’s pensions
One of the city’s biggest financial pressures facing the next mayor is an approximate $2.5 billion-and-counting pension payment it makes each year. The pension system is drastically underfunded after officials for decades skipped paying into the pot of money for teacher, police, firefighter and other municipal employee retirement funds.
The forthcoming Chicago casino is expected to relieve a little of that pressure. The casino is slated to bring in nearly $200 million in annual revenue for retirement funds. But that money will cover just 9% of the pension payment, according to city budget officials, which is expected to grow by tens of millions of dollars each year.
“I just would really reinforce to people that part of the reason for the pension system being so underfunded today is tied to keeping property taxes flat,” said Amanda Kass, an assistant professor at DePaul University’s School of Public Service who researches public finance.
“And so we kind of can’t have it both ways of … we can’t properly fund the pension system and reduce property taxes. It’s an ugly reality.”
Both Vallas and Johnson have committed to paying the city’s required pension bill even in the face of a fiscal downturn.
In response to questions about how they would meet the requirement without raising taxes, Johnson said he would do so by “auditing waste in government, prioritizing payments on our high-interest debts and spending smarter.”
Vallas has said he would use surpluses from Tax Increment Financing districts to fund pension obligation bonds — a tool the Chicago-based Government Finance Officers Association recommends against because of the bonds’ risky nature.
Vallas also floated using TIF surpluses to finance homelessness prevention services, and Johnson also mentions tapping TIF surpluses.
“But the TIF surplus itself is not exactly the kind of thing that you could rely on — the amount varies significantly from year to year,” Martire said. “So it’s just not a reliable revenue source.”
To increase the city’s pension contributions, Vallas has also suggested getting Springfield to increase its share of contributions going toward the Chicago Teachers’ Pension Fund. If the state does so, he argues $500 million in annual city contributions to school pensions will be freed up that can go toward paying the city pension funds instead.
But that wouldn’t be possible, Martire said, pointing to state law he said “authorizes CPS, not the city of Chicago, to impose a property tax levy of a specified amount to cover this specific obligation.” The Vallas campaign did not respond to that criticism.
Ameya Pawar — a senior fellow with the Economic Security Project and former 47th Ward alderman — said the “million dollar question” is how both candidates will make the required pension contributions without raising significant amounts of revenue.
“No matter who the mayor is,” Pawar said, “they are almost in an impossible situation.”