Mayor Brandon Johnson is all but giving up on his proposed $300 million property tax hike before aldermen kill it, and pushing them to find other revenue in its place to avert layoffs.
Johnson’s administration is combing over alternatives to the tax jump ahead of a meeting Wednesday where the City Council is expected to vote it down. His team has presented an array of options to cut the property tax increase in half, potentially replacing that money with federal COVID-19 funds, a higher monthly garbage collection fee or various smaller tax hikes.
What the council and mayor ultimately land on will almost surely mix the various choices now on the table. But the focus is finding lasting revenue streams alongside aldermen, Johnson’s senior adviser Jason Lee said.
“We’ve all inherited tough situations, and that requires tough choices,” Lee said. “It doesn’t make sense to impose those choices, it makes sense to build tough choices by consensus.”
Johnson’s administration believes the city’s budget needs to maintain investments in the city and avoid balancing the budget “on the backs of working people” through layoffs or regressive taxes, Lee said. Lee would not say what potential solutions the mayor is backing, citing a need to avoid putting a “thumb on the scale” before a deal is reached.
A property tax hike smaller than the $300 million one at the heart of Johnson’s original budget proposal is possible, and the administration “never had a target number” as it met with over 20 aldermen this weekend, Lee said.
Johnson’s team does not plan to fight back against the effort from aldermen to preemptively vote down that towering tax hike Wednesday.
“There’s no need to fight it, because that was never what we were committed to,” Lee said. “We’re committed to a balanced budget that holds the values.”
But to Ald. Anthony Beale, 9th, Johnson’s apparent decision to forfeit the property tax hike is a “retreat.” 29 aldermen teamed up last week to call Wednesday’s meeting, and far more plan to vote against the tax hike at the crux of Johnson’s spending plan. That City Council majority — while short of veto-proof — is forcing Johnson’s hand.
“The administration has accepted defeat on that one and now they are trying to regroup,” said Beale, typically an opponent of the mayor’s.
As he lays out a buffet of options aldermen can pluck from to fill the city’s budget gap, the mayor remains at the center of the high-stakes negotiations. But in the rafters, many of the more conservative aldermen who often find themselves at odds with the mayor’s progressive ambitions are still trying to take control of the discussion.
Johnson’s team seems to be talking with “everybody else” but the aldermen who first publicly demanded the administration not fill its budget gap with a property tax hike, Beale said. The South Side alderman criticized the mayor for trying to balance the budget by raising revenue instead of making cuts.
“They don’t want to belt-tighten,” Beale said. “They don’t want to trim the fat that’s in the budget. They just want to keep spending and keep hiring and keep spending.”
Progressive Caucus co-chair Ald. Maria Hadden, 49th, declined to discuss the options Johnson’s team presented, but said she is “cautiously optimistic” about the direction of budget negotiations. She credited both aldermen and the mayor’s staff for coming up with alternatives.
An array of new options
In private meetings, Johnson’s team told aldermen how much money different proposals would raise, memos obtained by the Tribune show. Those included ending planned projects funded by federal COVID-19 stimulus, enacting various tax and fee hikes and even reducing the city’s supplemental pension payment.
The city could redirect up to $280 million in American Rescue Plan Act money, the memos showed, including closing out dozens of ARPA-funded community programs. However, every dollar used to plug next year’s budget hole would mean either layoffs or the premature end of those programs, and would amount to a one-time fix that does not address the city’s structural deficit.
Among the options presented: Aldermen could cut the $11.8 million still “unobligated” for community violence intervention, $28.7 million for a small business support program, or $15 million for developing a unified shelter system for people experiencing homelessness. Those funds have been budgeted, but not yet assigned to a nonprofit, business, or contractors for actual spending.
The city could also choose to break Mayor Brandon Johnson’s promise to fund a second round guaranteed basic income program. Combined with nixing out plans for small business grants, that could save $60 million.
Johnson’s budget team also explored the potential impact of 10 different tax and fee hikes. A top potential money-getter would be raising the city’s $9.50 garbage collection fee, stagnant since 2016. If the fee were doubled, it would bring $68.5 million, while a smaller inflation adjustment would net $17.2 million, according to the mayor’s budget team. But charging Chicago property owners more for trash pick-up would be sure to face strong resistance from some aldermen who see doing so as a regressive way to raise money on the backs of low-income homeowners.
Another potential heavy hitter: the personal property lease tax. Initially charged on things like car or equipment leases, it expanded in recent years to include digital leases of “cloud” services or software.
The current rate is 9%. Raising it to 10.25% to match the city’s sales tax rate would bring in nearly $96 million annually, though the city cautioned the rate “is already high.”
Raising the city’s amusement tax on streaming services from 9% to 10.25% would bring in another $9 million.
The seven cent checkout bag fee, last amended in 2017, could raise more if the city went beyond Johnson’s proposal to claw back two of the seven cents retailers kept to implement it. The mayor’s proposal would bring in an extra $4.6 million. Raising it to 9 cents – which would match the inflation rate since 2017 — would bring in $5.1 million.
More than doubling the charge to 15 cents would bring in $19.3 million, which city officials said might bring a “slight shift” in customer behavior. Similarly, raising the 5 cent tax on bottled water to 8 cents would bring in $8.3 million, while a 15 cent tax would bring in $26.5 million.
Johnson had planned to make the weekend parking tax for valets and garages the same as weekday rates: 22% (weekends are currently 20%), raising $3.1 million. Raising that rate to 25% each day would bring in $18.4 million, and would likely lead to “some drop off” in valet use because of the big year-over-year increase, the Johnson administration said.
‘Optimism’ from Johnson allies amid reset
One piece of a hodgepodge solution could be a smaller property tax hike tied to inflation, Hadden said. That possibility won tentative approval from Ald. Byron Sigcho-Lopez, a close Johnson ally who quickly broke from the mayor last month to strongly oppose the $300 million proposal, though Sigcho-Lopez added Monday that he hopes a property tax increase can be totally avoided.
“The conversations have actually given me some optimism that we can reach an agreement, that we can prevent a property tax increase,” he said.
While the City Council and mayor are unlikely to piece together what new revenue and cuts will be made before Wednesday’s meeting, many aldermen already view certain options as optimal favorites or abhorrent third-rails.
The City Council’s Black Caucus is opposed to raising Chicago’s garbage collection fee, Budget Committee chair Ald. Jason Ervin, 28th, said. Sigcho-Lopez hopes the city cuts or trims its $272 million advance pension payment, a move bond ratings agencies and Johnson’s finance team have warned against.
“Every dollar deducted from the advance payment reduces future-year savings,” the budget office warned in a memo. A 10% cut in the payment planned for next year “will cost $380 million over the next 30 years,” they estimated, a 20% cut, or $54.4 million, would cost $760 million over the next 30 years.
Cuts to the payment now would also delay the “crossover point” when the city can start saving money on its annual pension contributions, which are already approaching $3 billion annually.
Ald. Carlos Ramirez-Rosa, 35th, thinks “the bill has come due” and that payment must be made.
But there is time to figure out the thorny question of how the budget is balanced before the state’s Dec. 31 deadline, Ramirez-Rosa said. The Northwest Side alderman and close Johnson ally praised the mayor’s effort to work out a solution with the council.
”Wednesday’s a pretty quick turn around for something so complicated, but I feel really good. This is exactly the way we should be approaching governance,” he said.
Johnson’s Vice Mayor, Ald. Walter Burnett Jr., framed the original $300 million property tax as an negotiation starting point between aldermen and the mayor.
“The tax increase is a last resort, but we had to put it out there so people can start thinking about stuff and coming back with some things,” Burnett, 27th, said. “It forced everyone to come up with other options… it’s a way to bargain.”
Some options are looking unlikely, like the cuts to the city’s workforce that have become less discussed as union leaders visit City Hall daily and add pressure, Burnett said.
If the City Council wants to get rid of the property tax increase, it will need to plug that hole another way, Burnett said. And aldermen gaining the power to do that is a good thing, he added.
“You can’t take anything away without giving something back,” Burnett said. “I think it’s refreshing that they are allowing us to get this deep in the weeds.”
