Top mayoral aides acknowledge graduated real estate transfer tax is dead, come clean about Plan B

As late as last week, Mayor Lori Lightfoot was feeling good about her ambitious Springfield agenda and insisting there was “no need for Plan B because we’re still on Plan A.”

That changed Tuesday while the rookie mayor was still on a lobbying trip to Springfield.

Top mayoral aides acknowledged Lightfoot’s plan for a graduated real estate transfer tax is dead — at least for now — and told aldermen they can make up for the $50 million in lost revenue without raising taxes.

But there’s a catch: Aldermen also were told the city’s property tax levy will rise by roughly $65 million — not the $18 million needed to open Chicago Public libraries on Sundays.

Of that amount, $32 million is tied to “debt service” needed to retire a general obligation bond issue approved by the City Council last spring. Another $15 million comes from capturing the growth from new construction.

“The levy amount will go up by $65 million. That is an accurate statement. But, it’s part of the increase that has gone on for years,” said Chief Financial Officer Jennie Huang Bennett.

“The only part of it [tied to] gap closing is $18 million. … That’s the library levy. … The other components of the levy increase were previously passed under the previous administration, which we’re now just reflecting in the levy.”

As for the real estate transfer tax, Lightfoot was counting on the tax to generate just $50 million in 2020. That’s because she was conservatively assuming it would pass by the simple-majority needed for a July 1 effective date — not the super-majority needed to begin collecting the graduated tax on Jan. 1.

Instead, she came up empty after 13 Democratic lawmakers — 10 with districts that include parts of Chicago — threatened to withhold their votes unless “at least 60%” of the annual funding is “statutorily dedicated” to combat homelessness.

That’s something Lightfoot said was “never gonna happen.”

On Tuesday, skeptical aldermen were essentially told the revenue wasn’t needed after all. Lightfoot can make up the difference by:

• Claiming an additional $15 million in savings up-front — up from $200 million — by refinancing $1.3 billion in city debt.

“The market has moved since we first proposed the re-funding,” Huang Bennett said.

“In addition to that, we’ve created a more efficient tax structure in terms of how the bonds are amortized as well as being able to use more tax-exempt debt.”

• Saving an additional $20 million by hiring at 2019 rates instead of speeding it up.

• Shaving $6 million more from the city’s $400 million in annual health care costs.

• Reducing the increase for the mayor’s office — from $3.8 million to $2.5 million — without touching new positions for the offices of violence prevention, risk management, equity and sustainability.

• Cutting the Chicago Fire Department’s overtime budget by $2 million — to $38 million.

Aldermen emerged from Tuesday’s briefings more convinced than ever that Lightfoot’s budget is more smoke-and-mirrors than real.

“Quit trying to fudge the numbers. Quit trying to make the rosier picture. Quit lying to the people of Chicago and be honest with them about where we are…That’s what they elected her to do,” said Ald. Ray Lopez (15^th), one of the mayor’s most outspoken City Council critics.

“All of this is playing fast and loose with numbers just to get through the budget…This budget was presented out of whack. It’s still out of whack. ... We’re still not prepared for what happens if we don’t get the [ambulance fee] reimbursement in time. If you don’t have the long-term real estate transfer tax that she’s banking on, we’ll be back here with a $300 million property tax increase if all of this falls apart.”

Chief of staff Maurice Classen countered: “This is not smoke-and-mirrors. We feel very confident in the assumptions we’ve made. This has been a transparent process. We’ve made conservative assumptions.”

Ald. Carlos Ramirez Rosa (35^th) wants Lightfoot to consider his proposal to reinstate the hated employee head tax, but at $35-a-month-per-employee. Ramirez Rosa and Ald. Leslie Hairston (5^th) also talked about a tax on hotel rooms, at 75-cents-to-$1-per room.

Classen shot down both ideas.

“We’re not considering a head tax. As the mayor has said, the evidence indicates it actually leads to decreased hiring and it’s actually quite a regressive tax,” Classen said.

“When it comes to hotel taxes, we’re already one of the highest hotel taxes in the entire country. To increase that even higher would begin to hurt the industry and actually decrease revenue. We’ve tried to be very smart about the revenues chosen so we don’t hurt hiring, don’t hurt employment and don’t hurt the economy while driving a very progressive value based budget.”