Lightfoot plans $94 million property tax increase to help close $1.2B deficit

Mayor Lori Lightfoot

Crusader Staff Report

Mayor Lori Lightfoot unveiled a $94 million property tax increase to help close a $1.2 billion deficit caused by the coronavirus pandemic on October 21. In her $12.8 billion budget proposal, Lightfoot said 65 percent of the deficit is directly tied to the economic impacts of COVID-19. She said the budget reflects the city’s long-term financial goals and policy priorities while staying true to our values.

Lightfoot’s decision did not reflect those residents who gave input during budget hearings. Residents wanted the city to reduce funding for the police department considering recent national police killings of unarmed Black individuals. This month, the police department rejected 150 out of 155 recommendations to its use-of-force policies.

Lightfoot insists that the city gave a fair opportunity for activists to recommend changes to her proposed budget.

“Chicago’s 2021 budget represents our city’s roadmap toward an inclusive and fiscally responsible recovery from the extensive challenges of the unprecedented COVID-19 crisis,” said Lightfoot. “These decisions were developed through a robust community engagement process, prioritizing the long-term health and stability of our all our families and businesses, and rooted in our shared commitment to expanding opportunity across our entire city. It’s these same values that have guided us throughout this crisis and will continue to carry our great city through the choices we face now and in the successes that await us in the months and years ahead.”

Lightfoot said nearly 100,000 people participated in budget-related discussions and provided instructive feedback that guided the city through the budget process.

Lightfoot maintains that she accepted input from residents, along with feedback from elected leaders and other key stakeholders.

The city’s Office of Budget and Management partnered with city departments to go line-by-line through the budget and identified more than $537 million in savings and efficiencies, including $106 million in vacancy eliminations, layoffs and furloughs, nearly $114 million in non-personnel savings, and $59 million in savings achieved by sweeping aging revenue accounts.

After negotiating better healthcare rates, realizing savings from prior year audits and finding additional savings from union negotiations, the city also generated an additional $54 million in healthcare savings without reducing benefits.

To address the portion of the gap caused by revenue loss due to the pandemic, the city anticipates achieving $501 million from debt refinancing and restructuring by issuing general obligation and sales tax securitization corporation bonds for savings. The refinancing transaction will take advantage of current low interest rates to refinance outstanding debt, with a higher interest rate to a lower interest rate which will offset the cost of the debt restructuring that will generate the budgetary relief.

By addressing the one-time revenue loss with the refinancing, the City will still be able to make vital investments without resorting to drastic cuts or revenue increases.

Along with these reforms to government operations, savings and efficiencies, this budget includes nearly $185 million in increased revenues and reserves for Fiscal Year 2021. These include $76 million of Tax Increment Financing (TIF) surplus funding, which represents an increase of $33.5 million over the 2021 Budget Forecast, $30 million from the City’s Rainy Day Fund and a $51.4 million property tax adjustment that includes a yearly Consumer Price Index (CPI) increase, and the collection of new property not previously included in the property tax base.

Together with a loss of collection adjustment on the levy for pensions not previously budgeted, the $93.9 million proposed tax levy increase represents an estimated impact of approximately $56 annually on a median home valued at $250,000.

Two additional adjustments to existing revenues are included in this budget recommendation. First is a 1.75 percentage point increase to the Personal Property Lease Tax applied to non-possessory computer leases of cloud software and cloud infrastructure that brings this tax in alignment with the tax imposed on all other lease, rental or use of rented, personal property currently taxed at 9.0 percent. In addition, the 2021 budget calls for the Vehicle Fuel Tax on non-airline purchases to increase by $0.03 per gallon.

Even under challenging conditions, the city remains committed to investing in the future of our residents and businesses, and more than $18.6 million in new investments are included in the 2021 budget.

These investments include an additional $5.25 million in funding for community-based violence prevention and reduction efforts. These resources will support the expansion of violence prevention and domestic violence programming, provide funding for high-risk youth and launch of the co-responder model pilot that would involve trained mental health professionals, community paramedics and Crisis Intervention Team-trained police officers co-responding to certain 911 calls.

To build on community investments made in 2020, this budget will provide an additional $1.7 million for youth programming, $2.0 million in new funding for affordable housing and $7.0 million for economic recovery efforts to support workforce training, help small businesses build capacity and assist with job creation and recruitment.

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