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Chicago’s Property Taxes, Pay Hikes Face Inflation Squeeze

Mayor Lori Lightfoot is under an unflattering spotlight for her signature move tying taxes annually to the consumer price index. Meanwhile, the city council is about to receive a huge inflation-linked pay raise.

(TNS) — Mayor Lori Lightfoot set out early in her first term to chart a path to ease the financial and political turmoil that confronts mayors who try to increase Chicagoans’ property taxes, especially in election years.

But six months out from the mayor and aldermen appearing on the ballot for reelection, Lightfoot finds herself in a political fight over property taxes anyway.

The nation’s nearly unprecedented spike in inflation has cast an unflattering spotlight on her signature move tying taxes annually to the consumer price index, while at the same time a huge 2023 inflation-linked aldermanic pay raise is placing City Council members she needs to approve her budget in a bit of a trick box.

The issue will take center stage at City Hall this month when aldermen decide whether to accept a nearly 10 percent salary bump for themselves and then later this year when they’ll be asked whether to hike property taxes on constituents who are struggling to fill their gas tanks and who, in most cases, could never dream of such a pay increase.

While some of the headwinds conspiring to complicate the mayor’s best laid tax plans are out of her control, others are squarely her responsibility.

Lightfoot has often had a difficult relationship with many of the 50 men and women on the council and she has proudly vowed not to horse trade with aldermen for votes. As that sometimes caustic relationship plays out, one alderman has moved to abolish her automatic property tax increase. And the mayor’s repeated clashes with council members, even those on her leadership team, now makes it more difficult for her to cajole them into supporting an unpopular tax hike while they’re facing their own election fights.

The mayor has to navigate all these potential roadblocks for her proposed $42.7 million property tax hike to pass this fall as part of her budget.

South Side Ald. Howard Brookins Jr., 21st, who Lightfoot picked to chair the council’s Transportation Committee, laid out the difficulties she’ll face swaying 26 members of the council to join her after she has spent much of her first term at odds with many of them: “That hasn’t been her brand of politics. She’s never operated that way. I’m one who wants her to be successful, but it’s going to be tough for the mayor to do that now.”

When she unveiled her property tax plan in 2020, Lightfoot’s justification for it was simple: Raising property taxes each year by the rate of inflation would give taxpayers more certainty than the more politically expedient Chicago tradition of mayors increasing them by a huge amount right after an election and then freezing them when election season approaches to avoid angering homeowners.

For this year, the first in which the mayor’s inflation-linked tax increase automatically took effect, it was 1.4 percent, which is in line with yearly growth in the consumer price index over the past two decades.

But with inflation now roaring to levels not seen in at least two generations, Lightfoot announced this month she won’t seek a 2023 tax increase of 5 percent, the ceiling allowed under her plan linking the annual tax to the consumer price index. Instead, she called for a 2.5 percent bump, totaling $42.7 million.

During a mid-August budget address, Lightfoot framed the 2.5 percent hike as reasonable, saying 5 percent would have been “too high a burden for our taxpayers to bear,” and the cost of the 2.5 percent tax increase to the owner of a $250,000 home would total only $34 annually, “about the price of Al’s Italian beef sandwiches — hot, dipped and with extra cheese — for a family of four.”

Despite the mayor’s smaller ask and her invoking of Chicago’s tres hip cable TV-famous sandwich gift to the world to help justify it, downtown Ald. Brendan Reilly, 42nd, said the current inflation spike proves it’s far too volatile an index to use for yearly hikes.

Reilly, Lightfoot’s president pro tempore of the City Council, has introduced an ordinance to end her annual tax plan, and expects it will get a committee hearing in September.

“My colleagues aren’t very excited by the mayor’s proposed 2.5 percent property tax increase, but many agree it’s time to decouple future tax increases from CPI,” Reilly said in a text to the Tribune. “As the past year has shown, that’s very risky for taxpayers.”

“I haven’t spoken to a single alderman comfortable with the mayor’s proposed tax increase for her budget,” Reilly said. “And many aldermen also have buyer’s remorse on the perpetual CPI tax increase that some of us fought against when it was first proposed.”

To be sure, even given Lightfoot’s sometimes rocky relationship with aldermen, a City Council majority is usually inclined to fall in line with her major initiatives. She passed her $16.7 billion 2022 budget 35-15. The accompanying property tax levy, with $76.5 million in total tax increases, passed 32-18, despite opposition from many aldermen from wards with more expensive homes, where residents are increasingly fed up with the property tax situation.

The mayor could always tweak her tax proposal in coming weeks. Asking the council to instead approve a smaller increase would make it easier for them to vote for it by giving them political cover to say they saved homeowners money by threatening to oppose her initial 2.5 percent request. Still, doing so could open Lightfoot to criticism she’s engaging in the very kind of politically motivated, financially questionable budgeting she pledged to end with the inflation link.

And aldermen have also complained about the compounding effect of the mayor’s annual tax bump, noting her inflation-tied increases will carry on year after year as part of Lightfoot’s attempt to improve the financial health of the city’s woefully underfunded public pension systems.

Complicating her efforts even more are the ugly optics of aldermanic salaries. Each City Council member must decide by mid-September whether to accept or decline a historically large pay raise of nearly 10 percent for 2023 — a number itself tied to the rate of inflation — which will kick the wages of the highest paid among them to over $142,000.

Aldermen are privately concerned about what voters will think if they give themselves such healthy bumps ahead of an election, then squeeze property owners with yet higher property taxes.

As she counts council votes in support of her tax, Lightfoot can find some good news in the fact many aldermen aren’t running for another term, a number that could grow as the election approaches.

Those representatives who are bidding farewell to the council could give themselves the big raise to boost their last several paychecks and their pensions if they’ve served long enough and then also support the mayor’s property tax initiative without worrying about the wrath of Chicago voters costing them another four years at City Hall.

©2022 Chicago Tribune. Distributed by Tribune Content Agency, LLC.
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