Chicago is sitting on $900 million in reserves generated by former Mayor Richard M. Daley’s decision to privatize the Chicago Skyway, the city’s parking meters and downtown parking garages.
Why can’t those reserves be used to reduce a $1.25 billion budget shortfall in 2021 caused, in large part, by the coronavirus and minimize the pain on Chicago taxpayers?
That was one of the overriding questions Friday as the City Council’s Finance Committee held its second “subject matter hearing” of the week on the revenue choices available to Mayor Lori Lightfoot and the City Council.
Ald. Jason Ervin (28th), chairman of the City Council’s Black Caucus, was in no mood to talk about ways to sock it to his West Side constituents by raising taxes or slashing services.
Not after Chief Financial Officer Jennie Huang Bennett acknowledged under his questioning that the city has $900 million in reserves, including the amount known to accountants as the “unassigned fund balance.”
“To turn around and say we’re gonna have to slash our way to some level of austerity and also increase revenue on taxpayers when you’re sitting on [nearly] $1 billion — that’s a hard sell,” Ervin said.
“What purpose do reserves serve if we don’t utilize ‘em … when you have a problem? It’s like you get evicted and you’ve got the money in the bank, but [you’re saying], ‘Oh, I can’t use that money.’ ... Why wouldn’t we try to use those reserves to smooth things out, knowing that we have to re-pay those? It’s like borrowing from yourself.”
Bennett noted the stay-at-home shutdown triggered by the coronavirus cost the city $800 million this year and is projected to cost $783 million in lost revenue in 2021.
“It may be raining now. But it could also be pouring. We don’t know what’s to come. And we need to make sure that we have the ability to pay for what may come next year if it is that we see COVID extended,” the CFO said.
“The reserves are really important in our ability to weather what might come in the future. It’s the most liquid of all of our various assets. And it’s basically the one thing we have to prevent against what happens if COVID lasts for an additional year.”
Ervin was not convinced.
“In essence, you’re saying that we may end up starving ourselves, even though we have food in the refrigerator, because we don’t know what tomorrow’s gonna bring,” Ervin said.
“It’s like we’re putting ourselves through unnecessary pain not knowing … To say we’re not gonna use this money ‘cause tomorrow might be a monsoon — I mean, that’s the classic insurance case ... I don’t think that’s what people want to hear right now.”
Lincoln Park Ald. Michele Smith (43rd) said she was “bothered” by what Bennett said about property taxes in her opening statement.
The CFO appeared to Smith to be laying the ground work for yet another massive property tax increase by saying the doubling of Chicago’s property tax levy engineered by former Mayor Rahm Emanuel “has not really increased the level of tax burden on property taxpayers as measured by the tax rate.”
“I do represent a community that pays a lot in property taxes. And many longtime homeowners who are valuable parts of our community have seen their property taxes go up so much that they may leave,” Smith said.
Bennett cautioned Smith not to “read between the lines” of her comments about the impact of Emanuel’s $588 million property tax increase for police and fire pensions and school construction or about her comments about Chicago property tax bills still being a relative bargain compared to surround suburbs.
She was simply saying the impact of the Emanuel tax increase was “muted” by a “significant increase” in equalized assessed valuation and “ultimately, by new property that’s come on the tax rolls.”
“We saw the highest amount of new property in 2019. We have new property taxpayers or new value of property — largely commercial — which helps to absorb that tax burden. It’s not to say there wasn’t an increase in the tax burden. But a lot of that has been muted by these other considerations,” the CFO said.
The city’s $900 million in reserves include: $524.9 million from the Skyway; $184.6 million in unassigned fund balance; $128.8 million from the parking meters; $39.9 million from other funds; and $30 million from an operating liquidity fund.