Chicago businesses and property owners feared the worst in Mayor Lori Lightfoot’s 2020 budget proposal. With its introduction Wednesday, they barely took a glancing hit.
That could change if the mayor doesn’t get what’s on her Springfield shopping list.
For now, the reaction of some civic groups and bond-rating agencies carried an almost audible sigh of relief. “In a sense, this is pretty good news,” said Drazzel Feliu, research director at the left-leaning Center for Tax and Budget Accountability.
On the business side, Jack Lavin, CEO of the Chicagoland Chamber of Commerce, offered muted praise. “We’re certainly encouraged that there is no large property tax increase,” he said. “We applaud the mayor’s efforts in difficult times. We’re encouraged. I think she went through and found a lot of cuts. There are more cuts to be had.”
Lightfoot accomplished the feat of closing an $838 million deficit by reaching into the property tax for only an extra $18 million, and that’s so libraries can have Sunday hours.
She did it with a combination of expense cuts, debt refinancing and new revenue that most people can avoid paying if they wish. Lightfoot wants a ride-share tax, higher rates for parking meters and more places getting them, and a ¼-percentage-point increase in the tax on restaurant meals.
She also has proposed a graduated tax on real estate transfers that would give most home sellers a slight break while applying higher rates to sales of more expensive homes and commercial buildings. Along with changes to casino gambling, that’s her biggest ask in the General Assembly, where lawmakers must give Chicago the authority to enact the change.
Included in her budget was a large line item of revenue, an estimated $163 million of new money from higher reimbursement rates for ambulances and other service calls. In an interview with the Chicago Sun-Times Editorial Board, Lightfoot and her aides said the state will help implement the higher rates for emergency services providers throughout Illinois. They also said it will apply to insurance providers including Medicaid, not self-payers.
Budget Director Susie Park said each emergency transport costs the city about $2,500, and it’s been getting reimbursed for only 8% to 36% of that.
The mayor also relies on onetime revenue sources, such as $200 million from restructuring debt at lower rates without extending the payment timeline. The city is recording the longterm savings in a lump sum now. But that doesn’t bother some municipal budget analysts.
“It’s a good thing that the mayor has included various structural reforms,” said Carol Spain, director with S&P Global Ratings. “And the revenue measures are politically feasible.”
Spain said, “Given the alternative being the property tax and with the feedback she’s received, these are more viable options.”
Using onetime budget fixes isn’t ideal, but it represents a lesser evil, analysts said.
“This is a smart funding strategy, especially with the challenges today that need to be addressed,” said Michael Pagano, director of the Government Finance Research Center at the University of Illinois at Chicago.
Arlene Bohner, senior director at Fitch Ratings, was more negative in her review, noting the city’s use of non-recurring revenue and its need for Springfield cooperation. “If these are not realized as expected, the city will need to make additional budgetary adjustments to compensate,” she said.
That’s where trouble will await Lightfoot, who has promised not to lay heavy new burdens on homeowners or businesses.
Lavin said Lightfoot has more work ahead to cut costs, such as by using better technology and taking a hard look at the city’s real estate. And he’s opposed to changes in the real estate transfer tax, even if the alternative is a property tax hike that would fall heavily on businesses.
“The business community has already been hit with higher property taxes, higher minimum wages and scheduling mandates,” he said. “It is starting to stunt growth. We are hearing that from businesses and [real estate] developers,” he said.
