The last time a newly elected Chicago mayor laid out a spending plan, aldermen were confronted with a dark picture of the city’s financial state — and were warned that tough, politically perilous decisions would be necessary to steer the city back from the edge of the abyss.
That new mayor was Rahm Emanuel, who left office five months ago declaring that his policies had pushed Chicago back from the brink of financial disaster and onto firmer footing.
But his successor, Lightfoot — who vowed to chart a progressive course as mayor and reverse the deep cuts imposed by Emanuel — is set to tell all 50 aldermen that Chicago once again faces a financial abyss that requires not only a new approach to the city’s debt, but also painful tax and fee hikes.
The big question Lightfoot will answer Wednesday is how much of the budget deficit will have to be filled with a property tax hike at a time when many aldermen still have political scars from the 2015 vote to increase property taxes by $543 million over four years to fund police and fire pensions.
The mayor has cast the property tax hike as a last resort if state officials do not back her push to make the city’s Real Estate Transfer Tax graduated. That proposal would offer relief for those who sell homes for less than $500,000, while increasing the tax on the sale of more expensive properties. Lightfoot has also asked state lawmakers to change the tax and fee structure of a planned Chicago casino to make it more attractive to investors and operators.
The city’s financial woes have trapped the mayor, who won all 50 wards by promising to usher in a new progressive era, between a rock and a hard place.
While Lightfoot has said she remains determined to make good on the progressive proposals that she campaigned on, crafting a budget that stanches the flow of red ink will force her to spend the political capital she accumulated in her sweeping victory in April’s runoff.
That political reality has already stalled an effort to raise the city’s minimum wage to $15 by 2021, four years faster than the rest of the state, and forced Lightfoot to reject pleas from advocates to use the revenue from an increase in the Real Estate Transfer Tax to shelter Chicagoans experiencing homelessness.
In addition, Lightfoot is not expected to propose reversing Emanuel’s decision to close six mental health clinics in 2011.
During the mayoral campaign, Lightfoot vowed to “expand access to health care through public health clinics” and make “access to mental health services … a mayoral priority.”
As part of her policy platform, Lightfoot promised to use funds generated by raising the Real Estate Transfer Tax on the sale of luxury homes to reopen the clinics.
The pressure facing Lightfoot from the left will be on stark display Wednesday, as eight rookie aldermen and one veteran alderman will rally before and after the mayor’s speech with the independent political organization United Working Families outside City Hall.
Ten aldermen have backed UWF’s Budget for the Many campaign, which has urged the mayor to close the budget gap by taxing large corporations, imposing an income tax on high-earning commuters and Chicagoans and emptying the city’s tax-increment financing districts.
Lightfoot has been cool to those suggestions, although her budget is expected to bridge a portion of the gap with surplus funds from the city’s tax-increment financing districts.
Lightfoot’s proposal also comes after a concerted effort by the mayor and her team to roll back aldermanic prerogative and end aldermen’s unchecked power in their wards.
With no easy solutions on the horizon, Lightfoot has no choice to to ask aldermen to take difficult — and potentially career-threatening — votes to raise a host of taxes and fees after having spent months scaling back their power.
Strike enters 5th day
As Lightfoot grapples with the city’s dire financial condition, 300,000 students will spend their fifth day out of school as the two sides remain far apart on major issues, including on how to enforce class size limits as well as pay, benefits and the length of the contract.
City Hall is likely to be surrounded during her speech by striking members of the Chicago Teachers Union and Service Employee International Union members, who announced plans Tuesday to bring the picket line to the doors of the City Council chambers.
The lack of a deal — and a final price tag on any additional city funds needed to settle the eventual labor agreement — will add another layer of uncertainty to the city’s dark financial picture for 2020, which is projected to get much worse in 2021 and 2022.
Nearly a third of the city’s budget gap is due to a change in state law that ties payments to actuarial estimates. By 2022, the city will owe $2.5 billion to its four pension funds — an increase of another $500 million more than the bill due in 2020.
Lightfoot revealed some details about her spending plan in the days leading up to Wednesday’s speech, including a plan to save $200 million, wiping out a quarter of the deficit facing officials in 2020, by refinancing $1.3 billion of the city’s debt.
An effort to crack down on unpaid bills is expected to save $25 million, while the city hopes to save $22 million by terminating $1.4 billion worth of unused lines of credit.
City officials have also unveiled plans to generate $40 million a year by imposing new taxes on ride-hailing services and $20 million from a 0.25 percent hike of the city’s restaurant tax.
Lightfoot has repeatedly said she understands that the city’s financial woes could end her nascent political career.
“Yes, some of our solutions will be hard,” Lightfoot said in August. “Yes, they may involve putting ourselves at risk. And if it means that I sacrifice myself politically, so be it in pursuit of the right thing.”
The budget is scheduled to be approved Nov. 26.