For the ‘Not Rahm’ mayor, there are no easy answers to Chicago’s fiscal woes

Lori Lightfoot needs help from Springfield, but those chances look remote.

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Chicago City Hall.

Chicago City Hall, with the Board of Trade building in the background.

Sun-Times file

There’s never a good time for a Chicago mayor to publicly plumb the city’s fiscal crisis, but Mayor Lori Lightfoot is headed straight there — though her chances of getting help from Springfield appear slim.

Not that she has much choice in the timing. Lightfoot this fall must prepare a 2020 city budget that’s expected to have a deficit of more than $700 million, much of it due to state-mandated increases in pension payments. She has scheduled a televised speech Thursday night to address the problem and broach solutions.

Start with the property tax. Lightfoot has not ruled out raising it, and it’s an easy, go-to revenue source. But it is politically fraught and cannot be the centerpiece of a strategy.

ANALYSIS

So she must consider options that require permission from state lawmakers. Lightfoot has publicly mentioned two that would hit businesses or their wealthy clientele: a sales tax on professional consulting from lawyers, accountants and other high-end services, and an increased transfer tax on property sales of $1 million or more.

There’s where she could run into a brick wall of opposition. Experts in government finance and Springfield politics said even with Democrats securely in charge, state government won’t be disposed to grant Lightfoot any big-money requests.

To address the state’s pension issues, the General Assembly and Gov. J.B. Pritzker might need to hit taxpayers again soon. Lightfoot would just get in the way, or further anger the electorate just when it votes in November 2020 on a state constitutional amendment for a graduated income tax, which would tax higher incomes at increased rates.

“You put all this together and it could be sending a very frightening signal to people with higher incomes,” said Laurence Msall, president of the nonpartisan Civic Federation, known for its analyses of state and city budgets.

Laurence Msall is president of the Civic Federation.

Laurence Msall, president of the Civic Federation.

Sun-Times file photo

A longtime political consultant said: “It’s a terrible time for Lightfoot to go for approvals from the state legislature. There’s too much chaos and it will be hard to focus on the city’s problems. ... The quicker she could do things that would not require Springfield approval, the better.”

If the mayor presses her case for state help, she’ll have to define what she’s talking about and face the consequences. A tax on certain services could be limited to lawyers or accountants, or it could be broadened to include spa visits or financial counseling, touching middle-class customers. Similarly, a higher tax on $1 million-plus property sales could cover only homes, or include commercial buildings, making it far more lucrative.

Carol Portman, president of the nonpartisan Taxpayers’ Federation of Illinois, said law or consulting firms with multiple offices and staff who work from home might easily evade a tax levied within city limits. Another issue, she said, is whether it would apply just to consumers or to business-to-business dealings.

Cook County Commissioner Larry Suffredin (D-13th), the registered lobbyist for the Chicago Bar Association, said a tax on legal services might violate the equal protection clause of the U.S. Constitution.

“We will be prepared to look at it to determine if it’s allowable under the Constitution,” he said, adding that any such tax “limits people’s ability to get access to justice.”

The increased tax on expensive property sales remains a top priority of progressive groups and some aldermen, but there’s disagreement about what it should be for. Some want funding for the homeless, others want it to support pensions, but Lightfoot may need it just for general revenue.

Cook County Commissioner Larry Suffredin, D-Evanston.

Cook County Commissioner Larry Suffredin, D-Evanston, believes a tax on legal services might violate the equal protection clause of the U.S. Constitution.

Rich Hein/Sun-Times

Michael Cornicelli, executive vice president of the Building Owners and Managers Association of Chicago, said he assumes any such tax will cover commercial buildings and not just homes. “It’s a tax on business and employment in the city” that, coupled with a slowing economy and spikes in property tax assessments, “has alarm bells going off everywhere.”

Lightfoot will need to bargain to get anything through the legislature, Cornicelli said.

“My gut is that in order to get something like that, she’ll have to give something,” he said. His suggestion: allowing a referendum on a state constitutional amendment to let governments reduce employee pensions.

One source familiar with the Lightfoot transition team said besides the property tax, the mayor will consider issuing pension obligation bonds. Former Mayor Rahm Emanuel advocated that move in 2018.  But bond-rating agencies already have published warnings about the city’s high debt levels, which the Civic Federation said rose by 57 percent, or $3.5 billion, from 2008 to 2017.

Lightfoot as a campaigner drew a sharp contrast between herself and Emanuel, promising a more collaborative approach and to invest more in neglected neighborhoods. For now, she’s stuck between progressives’ demands for more spending and promised cash infusions from gambling and marijuana sales that could prove illusory or be years away.

Her response could be a classic political tactic: Hit taxpayers hardest and offend core supporters early in your term and hope the anger dissipates by the next election.

The danger is the “not Rahm” mayor will start looking more like her predecessor.

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