CHICAGO (WBBM NEWSRADIO) – Mayor Lightfoot presented the nearly $13-billion 2021 budget plan on Wednesday to City Council, which contained some tough news, and words of hope.
It was as much as a State of the City Address, as a budget speech highlighting how Chicago has withstood various crises and praising heroes who went above and beyond the call.
The 2021 plan is said to be a fiscally responsible spending plan that "leads the city along the road to recovery from the economic downturn caused by the COVID-19 pandemic."
The $12.8 billion budget proposal includes closing a $1.2 billion Corporate Fund budget deficit in fiscal year 2021 – 65 percent of which is directly tied to the economic impacts of COVID-19, the Mayor's Office said. The budget also identifies savings and efficiencies, new revenues, and targeted investments that expand opportunities across the city and support "our long-term financial goals and policy priorities while staying true to our values."
“Chicago’s 2021 Budget represents our city’s roadmap toward an inclusive and fiscally responsible recovery from the extensive challenges of the unprecedented COVID-19 crisis,” said Mayor Lightfoot, in a statement. “These decisions were developed through a robust community engagement process, prioritizing the long-term health and stability of all our families and businesses, and rooted in our shared commitment to expanding opportunity across our entire city. It’s these same values that have guided us throughout this crisis and will continue to carry our great city through the choices we face now, and in the successes that await us in the months and years ahead.”
The 2021 budget plan also includes some 350 actual layoffs and a property tax hike.
"We seek a modest property tax increase of $93.9 million. Now some have predicted that this budget would be predicated of hundreds of millions on new property tax dollars - not so. And for the average Chicago home valued at $250,000 - you will pay just $56 additional for the whole year," Lightfoot said.
“During this horrible pandemic, every time that we have shown strength as a city is when we have worked together as partners, making shared sacrifices and facing the challenges head on, together."
The Mayor also said she is seeking five furlough days from all city employees, and will take those days herself. She also said there will be 350 employee layoffs.
"This budget assumes that no layoff notices will be issued until next year, and any layoffs will not be effective until March 1," Lightfoot said. "This schedule will allow us to see if there is any new federal stimulus on the horizon."
But while the police department will lose some 600 unfilled vacancies, the Mayor rejected calls to defund the police, saying the city must fund public safety and community programs.
The shutdown forced by COVID-19 caused destruction on the economy, creating an $800 million gap in this year’s budget and a $1.2 billion gap in the city’s 2021 budget. But, Mayor Lightfoot made an early commitment to present the city’s financial challenges through an honest, transparent and inclusive process.
To begin, the city embarked on a robust public engagement campaign that included a series of events to expand outreach to the community, including virtual budget town hall meetings that were live-streamed on Facebook, a new interactive website, a multilingual online survey, and City Council revenue hearings where subject matter experts discussed potential new or enhanced revenue options. Nearly 100,000 people participated in budget-related discussions and provided instructive feedback that guided the city through the budget process.
Using resident input, along with feedback from elected leaders and other key stakeholders, the Office of Budget and Management partnered with city departments to go line-by-line through the budget, and identified more than $537 million in savings and efficiencies including $106 million in vacancy eliminations, layoffs and furloughs, nearly $114 million in non-personnel savings, and $59 million in savings achieved by sweeping aging revenue accounts. After negotiating better healthcare rates, realizing savings from prior year audits and finding additional savings from union negotiations, the city also generated an additional $54 million in healthcare savings without reducing benefits.
Lightfoot outlined some of the damage caused by COVID-19: a 77.5 percent decline in the hotel tax; a 49.5 percent decline in the amusement tax; ground transportation tax down 47.8 percent; parking taxes down 48 percent; motor vehicle fuel tax down 48.5 percent; and the city’s share of the sales tax down 35 percent.
To address the portion of the gap caused by revenue loss due to the pandemic, the city anticipates achieving $501 million from debt refinancing and restructuring by issuing general obligation and sales tax securitization corporation bonds for savings. The refinancing transaction will take advantage of current low-interest rates to refinance outstanding debt with a higher interest rate to a lower interest rate which will offset the cost of the debt restructuring that will generate the budgetary relief.
Along with these reforms to government operations, savings and efficiencies, this budget includes nearly $185 million in increased revenues and reserves for fiscal year 2021. These include $76 million of TIF surplus funding, which represents an increase of $33.5 million over the 2021 Budget Forecast, $30 million from the city’s Rainy Day Fund and a $51.4 million property tax adjustment that includes a yearly CPI increase, and the collection of new property not previously included in the property tax base.
According to the Sun-Times, the Lightfoot administration is pointing to that doubling of Chicago’s property tax levy as evidence for why the city now needs an automatic escalator tied to the consumer price index to avoid massive jumps.
The document states that Chicago’s property tax levy was frozen “for the greater part of two decades” and, therefore, did not “proportionately grow with the city’s economy." And even with the massive 2015 increase for police and fire pensions and school construction, Chicago still has “the lowest residential property tax rate in Cook County, with an effective tax rate of 1.74 percent.”
“In an effort to avoid another sudden, large property tax increase, the city has included a consumer price index (CPI) increase to begin with the 2021 levy and for each year thereafter,” the city’s supporting document states.
“For 2021, the CPI increase was calculated utilizing the December 2018 to December 2019 CPI rate of 2.3 percent, resulting in an increase of $35.4 million. The proposed CPI increase is in line with other units of government that are subject to the Property Tax Extension Law Limit, such as Chicago Public Schools, Chicago Park District and City Colleges, which increase their levy annually using the same calculation the city is proposing.”
In addition, the 2021 budget calls for the Vehicle Fuel Tax on non-airline purchases to increase by $0.03 per gallon.
The Mayor stressed the budget does not abandon the administration's focus on equity with new investments in struggling communities. More than $18.6 million in new investments are included in the 2021 budget, the Mayor's Office said. These investments include an additional $5.25 million in funding for community-based violence prevention and reduction efforts.
To build on community investments made in 2020, this budget will provide an additional $1.7 million for youth programming, $2.0 million in new funding for affordable housing, and $7 million for economic recovery efforts to support workforce training, help small businesses build capacity and assist with job creation and recruitment.
With the largest budget deficit in Chicago’s history and a once-in-a-lifetime global pandemic crippling the economy, the Mayor said the city has remained committed to making budgetary decisions that lead to long-term financial stability while continuing to prioritize its values of equity, transparency and inclusion.
Mayor Lightfoot said the 2021 budget proposal addresses the city’s obligations, finds cost-saving reforms and community investments, and preserves key services to ensure Chicago's fiscal and economic stability for future generations.