To reduce or avoid what could be a massive, politically dangerous property tax hike, Lightfoot wants the state legislature and Gov. J.B. Pritzker to come through with a graduated real estate transfer tax so she can start charging way more starting next year for sales of high-end residential and commercial properties.
Problem is, lawmakers haven’t even met yet for their fall veto session, leaving the new mayor to explain her financial blueprint to skeptical aldermen without knowing whether she can accomplish the daunting task of rounding up the votes in Springfield to deliver a key piece of it.
On the eve of the speech, Lightfoot said she would have “a lot of good news for taxpayers.”
During briefings with City Council members Tuesday, they said Lightfoot laid out a way to potentially avoid the property tax hike if Springfield comes through with the transfer tax change.
Lightfoot plans to sunset five tax increment financing districts, which would bring in a big one-time cash infusion to the city, school district and other local taxing bodies, aldermen said.
One alderman cautioned they didn’t hear her definitively say no property tax increase if Springfield comes through, but the budget briefing was less dire than once feared.
And she expects to save hundreds of millions through efficiencies, according to aldermen. Those include $200 million she previously announced via refinancing bond debt, and more thanks to closing vacant positions on the city payroll and other efficiencies.
Lightfoot pushed back Tuesday against the idea that she’s going to need to hedge in her speech because of the uncertainty over the transfer tax. “It’s unusual, but I wouldn’t characterize it as a hedge,” Lightfoot said. “It’s not a hedge when you’re really transparent about what the options are, but also what the consequences are if those options don’t come through. We’ve been very upfront about that.”
The mayor refused to scoop herself Tuesday by divulging any specifics ahead of the speech. She continued to say she would like to avoid a property tax hike, but she “can’t take that off the table.”
“I won’t preview what we’re doing tomorrow, but you’ll see there’s a plan in place, but a lot depends on what happens in Springfield,” she said.
The mayor did lay out a budget ideal of sorts.
“We have definitely taken the approach that we need to make sure that we continue investing in our people in the city,” Lightfoot said. “Budgets are a statement of values, and I believe that wholeheartedly. And we will be speaking our values (Wednesday).”
Adding to the theater of the event, the striking Chicago Teachers Union certainly will use Lightfoot’s address as a high-profile chance to flex its muscles by bringing a huge crowd of teachers to City Hall. Service Employees International Union Local 73, representing school support staff, also will likely be there in force.
So far, Lightfoot publicly has identified $260 million in budget gap solutions. That leaves about $578 million the mayor hasn’t yet said how the administration will fill.
The biggest financial measure announced so far is a plan to refinance $1.3 billion in city debt to save $200 million in next year’s budget. All the existing bonds that are being refinanced are due in 2040, and the new bond deal also would be due in 2040, the administration said.
Lightfoot would use all of the savings over the life of the refinancing deal upfront, opening the door for criticism from observers and analysts who think the savings shouldn't be spent as a one-time fix.
Last week, Lightfoot said she will seek to more than triple the tax charged on most solo ride-share patrons heading in and out of downtown Chicago as part of a plan to bring in $40 million more a year. Under her plan, the city also would hike the tax on solo riders using services such as Uber and Lyft elsewhere in the city by 74%.
The mayor will propose a tax hike on all food and drinks sold in Chicago restaurants, which she hopes will raise an extra $20 million in 2020.
But she also has spent weeks saying she doesn’t want a property tax increase, declining to give any estimate, and saying it won’t happen if Springfield gives the city help. That could help her redirect voters’ anger over any property tax hike toward state lawmakers. But it also would anger Pritzker, House Speaker Michael Madigan and other Democrats whose help she needs on many other issues, including changing the terms of a proposed Chicago casino to make it more inviting to potential investors.
By contrast, when Mayor Rahm Emanuel announced a record-breaking $588 million property tax hike in 2015, he spent weeks working to soften the blow. On the same night protesters forced him from the stage at a budget hearing, City Hall leaked that the hike would be somewhere between $450 million and $550 million.
Lightfoot has a handful of other options. The mayor has said she will hike parking meter rates as part of the 2020 budget, in a move that she said will allow the city to keep additional revenue rather than make higher payments to the company that leased the parking meters in a much-maligned deal pushed through by Mayor Richard M. Daley. But Lightfoot hasn’t detailed her proposal or explained how it would work.
It’s unclear how much help the legislature will provide on the transfer tax as Pritzker prepares a push for his own signature graduated income tax plan. Lightfoot has said she favors giving a break to people who sell their homes for $500,000 or less and gradually ramping up the tax on more expensive properties.
She also wants help restructuring the Chicago casino to lower taxes on potential operators, which could be a challenge to push through with lawmakers who are only set to meet for six days.
Passing a budget could be challenging on numerous fronts. Progressives could balk if it doesn’t address enough social issues, fiscal hawks may decide it doesn’t do enough to address the city’s problems and others could raise a range of objections.
South Side Ald. David Moore, a Lightfoot ally, has said he will only support the budget if the mayor implements speed camera reforms and eliminates its garbage fee.
On Tuesday, Lightfoot also announced what she called a new package of investments in order to create more affordable housing. The city is committing $5 million toward the Low-Income Housing Trust Fund, which will be used to pay for housing units for lower-income residents. In addition, $5 million is being placed in the Flexible Housing Pool to house homeless youth, city officials said during a news conference.
Some city sources expect the mayor to link the budget with an ordinance implementing a $15 minimum wage as a sweetener for progressive aldermen.
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