Wednesday, October 21, 2020

Laying the groundwork for future tax increases too

Lightfoot’s pandemic budget includes annual increase in property taxes tied to inflation rate


There will be a $94 million property tax increase in 2021, with an annual adjustment tied to the consumer price increase kicking in after that. 


By Fran Spielman Oct 21, 2020, 10:00am CDT

Mayor Lori Lightfoot unveiled her 2021 budget on Wednesday. Ashlee Rezin Garcia/Sun-Times




Chicago homeowners and business owners struggling to hold onto their property will have to endure not only a $94 million property tax increase, but also an annual property tax hike every year forward tied to the rate of inflation.

That was among the unpleasant surprises Wednesday as Mayor Lori Lightfoot’s $12.8 billion “pandemic budget” for 2021 landed like a thud in an otherwise empty City Council chambers.

Lightfoot called the property tax increase “modest” in her prepared remarks.

“Some had predicted that this budget would be predicated on hundreds of millions of dollars in new property taxes. Not so. And for the average Chicago home valued at $250,000, you will pay just $56 additional dollars a year. That’s right, just $56 new dollars per year. “

Chicago aldermen weren’t in their seats to show their discontent. Who knows how they would have reacted to a budget that rivals former Mayor Rahm Emanuel’s 2015 plan to raise property taxes by $588 million for police and fire pensions and school construction?

“During this horrible pandemic, every time that we have shown strength as a city is when we have worked together as partners, making shared sacrifices and facing the challenges head on, together,” the mayor said in her prepared remarks.

The shutdown forced by COVID-19 wreaked havoc on the economy, creating an $800 million gap in this year’s budget and a $1.2 billion hole in the city’s 2021 budget.

Lightfoot outlined some of the damage: a 77.5% decline in the hotel tax; a 49.5% decline in the amusement tax; ground transportation tax down 47.8%; parking taxes down 48%; motor vehicle fuel tax down 48.5%; and the city’s share of the sales tax down 35%.

Without naming Emanuel, the Lightfoot administration is pointing to that doubling of Chicago’s property tax levy as evidence for why the city now needs an automatic escalator tied to the consumer price index to avoid massive jumps. City sticker fees and water and sewer rates already are tied to the rate of inflation.


The document states that Chicago’s property tax levy was frozen “for the greater part of two decades” and, therefore, did not “proportionately grow with the city’s economy. And even with the massive 2015 increase for police and fire pensions and school construction, Chicago still has “the lowest residential property tax rate in Cook County, with an effective tax rate of 1.74 percent.”

“In an effort to avoid another sudden, large property tax increase, the city has included a consumer price index (CPI) increase to begin with the 2021 levy and for each year thereafter,” the city’s supporting document states.

“For 2021, the CPI increase was calculated utilizing the December 2018 to December 2019 CPI rate of 2.3 percent, resulting in an increase of $35.4 million. The proposed CPI increase is in line with other units of government that are subject to the Property Tax Extension Law Limit, such as Chicago Public Schools, Chicago Park District and City Colleges, which increase their levy annually using the same calculation the city is proposing.”Mayor Lori Lightfoot unveiled her 2021 budget on Wednesday in an empty City Council chambers. Ashlee Rezin Garcia/Sun-Times

In all, the mayor’s budget includes $185 million in tax increases.

That includes:

• The $94 million property tax increase will cost the owner of a home valued at $250,000 an extra $56-a-year.

• A 60% increase in Chicago’s nickel-a-gallon tax on gasoline—to eight cents-a-gallon.

• And an increase of 1.75 percentage points — to 9% — in the personal property lease tax applied to “non-possessory computer lease of cloud software and cloud infrastructure.”

The budget pain doesn’t end there.

To chip away at that $1.2 billion budget shortfall, 65% of it triggered by the pandemic, Lightfoot wants to eliminate 1,921 vacancies, 618 of them in the Chicago Police Department.

That will surely please activists who have been demanding that Lightfoot “de-fund” the Chicago Police Department since the death of George Floyd.


But any plan to eliminate police vacancies would face stiff resistance from the City Council, with homicides and shootings up 50% from last year and officers being pulled from neighborhood districts to patrol downtown.

Together with 350 layoffs — delayed until March 1 to give Congress time to ride to the rescue — and five unpaid furlough days for non-union employees (Lightfoot said that includes her), the personnel cuts are expected to generate $106 million in savings. Non-personnel cuts are expected to save $114 million.

Lightfoot was forced to, as she put it, “fix it ourselves” after negotiations on another round of federal stimulus funds that includes replacement revenue for cities and states stalled in Washington.

As the talks continue, the mayor had no choice but to go it alone. She is required by law to propose a balanced budget and round up the 26 votes to pass it by Dec. 31.

The mayor avoided the property tax increase widely known as the third-rail of Chicago politics by balancing her first budget with one-time revenues.

This year’s version is no different — even with increased taxes on property, gas and computer leases.

To eliminate a combined $2 billion shortfall for this year and next, the mayor plans to refinance $1.7 billion in general obligation and sales tax securitization bonds. By taking advantage of lower interest rates, the mayor hopes to save $448 million this year and $501 million next year.

But, it will also saddle another generation of Chicago taxpayers with debt at a time when the city’s existing level of debt is already a major concern to Wall Street rating agencies.

A $304 million tax-incrementing financing surplus will create a $76 million windfall for the city. The budget also includes: $114 million in “non-personnel” savings; $68 million in “enhanced fine enforcement initiatives”; $59 million by “sweeping aging accounts”; a $30 million raid on the city’s $900 million in reserves and $54 million in savings by transferring the cost of pensions and crossing guards from the city to Chicago Public Schools.

It once again includes $91.3 million for police overtime—even though CPD is once again expected to end the year for $140 million in OT spending.

Lightfoot has warned Chicago aldermen to prepare for their toughest budget vote “probably ever” given the size of the shortfall and their shared desire to invest in people and neighborhoods in spite of it.

But, the investments she’s promising are certain to fall short of their demands.

The mayor’s budget includes $5.25 million in violence prevention funds in addition to last year’s modest $9 million investment; a continued $9.3 million investment in mental health services; the same $10 million to reduce homelessness and $250,000 for “West Side Initiatives.”

Civic Federation President Laurence Msall had urged Lightfoot to steer clear of raising property taxes in the middle of a pandemic and erase a $1.2 billion shortfall by confronting the sacred cows of city government.

Lightfoot’s decision to raise property taxes by $94 million and gas taxes by three-cents-a-gallon was a bitter disappointment.

“It’s a very difficult time to ask the citizens, the taxpayers in Chicago to contribute more in the way of taxes when we have record levels of unemployment . We have property owners who are having a difficult time maintaining occupancy in office buildings and people are fighting to stay in their homes and pay the existing tax burden that they’re experiencing,” Msall said.

“In some of its own reports, the city has begun forecasting significant increases in losses from uncollectible property tax returns.”

Msall was referring to a warning buried in the city’s three-year financial plan.

It warned that the pandemic has had such a catastrophic effect on the Chicago homeowners and businesses, 10% of property owners may not have the wherewithal to pay their existing property tax bills. That’s compared to 3% in a normal year. That would deprive the city of $65 million in normally reliable revenue.

Over the years, the City Council’s final budget vote has been a test of the mayor’s political muscle.

Former Mayor Richard M. Daley tried to pitch a shut-out—and often did. So did Emanuel, who worked hard to build trust and a close personal relationship with aldermen and was rewarded with several unanimous budget votes.

Lightfoot has a strained relationship with the City Council stemming, in part, from her decision to issue an executive order hours after taking office stripping them of their unbridled control over licensing and permitting in their wards.

The mayor has said she doesn’t care about the margin of victory for her initiatives, so long as she rounds of the 26 votes needed for passage.

The budget she unveiled Wednesday includes so much across-the-board pain, even that minimum standard may be difficult to achieve.

“I have one last ask of this body,” Lightfoot said in her prepared remarks.

“As the hearings commence and the debate ensues, please remember to be kind to each other. We and you may not agree on every issue, but let’s have this City Council budget season be a model for the nation on how, democracy, messy as it always is, can also be filled with efforts to build bridges to each other and continue on our path toward that more perfect union.”

8 comments:

  1. Anonymous10/21/2020

    Don't be surprised by a city income tax. Florida home prices are already climbing.

    ReplyDelete
  2. Anonymous10/21/2020

    Tell mayor Light head to stop living in LALA land. 1000 job cuts with 619 in police is a slap in the face of every taxpayer. You can cut more in other areas. And you can cut more than 1000 jobs. Time to recall this Mayor.

    ReplyDelete
  3. Anonymous10/21/2020

    City income tax coming with putzkers fair tax.

    ReplyDelete
  4. Anonymous10/21/2020

    Democrat = High taxes

    ReplyDelete
  5. Anonymous10/22/2020

    She so nasty

    ReplyDelete
  6. Anonymous10/22/2020

    I've seen the same thing happen in numerous minority majority south suburbs. Unqualified folks get elected to municipal office and surround themselves with bodyguards. All the while acting like royalty, until the money runs out. Towns that were economically viable for a hundred plus years swirling down the drain. Vallas was the only one with the financial acumen to prevent this downward spiral. Unfortunately that ship has sailed.

    ReplyDelete
  7. Anonymous10/23/2020

    Are you going to keep voting Democrat when your clout cant save your job?

    ReplyDelete