CHICAGO’S ESTIMATED SHORTFALL UP TO $700M
Lightfoot won’t rule out property tax increase
The stay-at-home shutdown of the Chicago economy triggered by the coronavirus has blown a $700 million hole in the city’s 2020 budget, Mayor Lori Lightfoot said Tuesday, refusing to rule out a property tax increase she wants desperately to avoid.
“We are hurting as a city: landlords, renters and workers. Our entire economy — the rug has been pulled out from under us because of the massive impact” that has affected every single business, the mayor said.
The $700 million figure is 40% higher than the $500 million figure Chief Financial Officer Jennie Huang Bennett told the City Council’s Finance Committee about just over three weeks ago.
It’s also “conservative” and could go even higher, the mayor said.
In March and April alone, the city lost $175 million in revenue as hotels, restaurants and businesses closed, conventions, sporting events, theater and concerts were canceled and Chicagoans with non-essential jobs were forced to work from home — if they were lucky enough to still have jobs.
A similar loss is expected when May figures are in, the mayor said.
“What we have seen is a complete change in consumer behavior as a result of COVID-19, the stay-at-home order and other things that have affected the way in which people are consuming goods and services. People aren’t driving. And they’re just not consuming goods and services in the same way,” she said.
Lightfoot said she would first use the $100 million in higher-than-expected savings from a January refinancing to reduce the shortfall, then “identify additional refinancing savings when market conditions improve.”
She has also asked city departments that took a hit in her first budget to identify even more savings and “maybe push off projects to an out year,” she said.
“Obviously, one of the tools we can use is to do a hiring freeze, to eliminate vacancies, to put off significant hiring until the next cycle. But the reality is, 2021 isn’t looking great, either. So we are gonna have a significant hill to climb there,” the mayor said of a 2021 shortfall her CFO has pegged at $1 billion.
Lightfoot, for the umpteenth time, called increasing property taxes a last resort, even though it is the most reliable revenue source.
“In this time, people are hurting — significantly hurting. Part of the reason why we placed such emphasis on providing housing support is because renters and landlords are really in dire straits,” she said.
“In this reality, the last thing that I want to do is raise property taxes. I can’t take that off the table. But, it is truly the last thing that I want to do. And as our finance team can attest, when we talk about options, they know that that has to be at the end of the table.”
For weeks after the shutdown, Lightfoot said Chicago was well-positioned to weather the storm without blowing a giant hole in her precariously balanced budget.
Her claims about city finances ignored the fact that when the stock market drops and city pension funds don’t meet expected investment returns, Chicago taxpayers make up the difference. The mayor even ridiculed former mayoral challenger Paul Vallas for writing an opinion column claiming Chicago was “facing a codered fiscal crisis” and Lightfoot’s “claim that Chicago’s budget is in good shape strains credulity.”
Vallas served as city revenue director, budget director and Schools CEO under Mayor Richard M. Daley.
On April 7, the mayor said a massive shortfall that might require raising taxes was possible.
Tuesday, Vallas sent a text message to the Sun-Times that essentially said, “I told you so.”
“In my . . . op ed in March, I noted that, if corporate fund revenues fell just 10% short of what was projected, they would fall $445 million short this year [in the corporate fund] alone. I am still a pretty decent numbers cruncher,” Vallas wrote.
“City budget plan is to pray that Trump signs a new relief bill that replaces all of the city’s lost revenues and money from casinos solves the pension problem. Trump and casinos! There is more than just a little irony in that. Just ask Atlantic City.”