Mayor Brandon Johnson on Wednesday will propose Chicago’s largest property tax hike in almost a decade as part of his $17.3 billion budget plan for next year.
The $300 million increase that would hit Chicago homeowners, landlords and other property owners is a major flip-flop from Johnson’s campaign vow not to employ the widely unpopular, and often politically toxic, revenue-raising tactic. It is also one his team justified as necessary in order to balance a projected $982.4 million shortfall in 2025, along with sweeping tax increment financing funds and eliminating hundreds of vacant positions across city government. More than half of those will come from the Chicago Police Department.
In unveiling his second budget proposal as mayor, Johnson acknowledged his earlier red line against raising property taxes, but blamed his predecessors for the city’s financial predicament and said the primary alternative — layoffs — would be devastating to the city’s workforce.
“Look, this a very difficult decision, but to be quite frank with you … we’ve just have had irresponsible administration after administration that has kicked the can down the road, and now it’s in front of my door,” Johnson said about his backtrack when talking to reporters Tuesday about the tax hike. “This was a very excruciating process, but it’s one that I recognize in this moment that the alternative is just not acceptable.”
Asked repeatedly how much the hike will raise the bill for an average Chicago homeowner — a data point mayors have commonly provided to show the impact of property tax increases — the Johnson administration did not respond ahead of his Wednesday morning speech.
The mayor maintained the progressive promises he ran on are not on the backburner, pointing to continued support for the three mental health clinics reopened under his administration as well as bolstered investments in anti-violence and homelessness support. A $150 million allocation for migrant services, on the other hand, would be cut under his 2025 spending proposal as the city downsizes its bed availability and shifts to a unified shelter system for all homeless Chicagoans.
The mayor’s budget team in August outlined the nearly $1 billion deficit, which they attributed to rising personnel costs, an ongoing pension payment dispute with Chicago Public Schools, the migrant mission and depressed revenues.
In addition to leaning on property taxes, Johnson’s team hopes to plug in that hole by declaring a record $570 million surplus in tax increment financing districts across the city. He also wants to increase the tax on alcohol sales, the administration said ahead of his annual budget speech Wednesday morning.
And on pensions, Johnson will continue to make the advance payments that began under his predecessor Lori Lightfoot.
Meanwhile, the threat of layoffs — a concern among city unions that certainly was on the vocally pro-labor mayor’s radar — did not come to pass. Instead, 743 vacant positions would be slashed, about 400 of them coming from the Chicago Police Department. City officials did not say how those cuts would affect sworn officer positions.
Overall, the $17.3 billion budget is a 3.2% increase from Johnson’s first spending plan for this year, and includes about 36,000 full time positions. But upcoming negotiations will be leagues more arduous than they were for the mayor’s 2024 budget, which sailed through City Council thanks to a lack of tax hikes or layoffs.
Johnson now has until the end of the year to whip up support from at least 26 out of the 50 aldermen, many of whom were already resentful of his administration’s move to delay the budget vote from next month to early December. Tack on the property tax hike, and the mayor faces a bumpy road ahead in defending the controversial move that he himself decried as candidate.
“Let’s make sure that people don’t lose their homes because they can’t afford it, because property taxes continue to be the only way in which this city can balance its budget,” Johnson said during one mayoral runoff debate in 2023. “Under my administration, we will not balance the budget off the backs of Black people and working people.”
Taxes and TIFs
Johnson’s plan to raise property taxes represents the largest levy hike since the 2016 budget, when Mayor Rahm Emanuel announced a $318 million hike to pay for major infusions to police and firefighter pensions.
That was part of a new bundle of increases totaling $543 million over four years, starting in 2015. The city’s levy was just $860 million in 2014; after the Emanuel-fueled jump rose steadily and stood at $1.77 billion for 2024.
Acknowledging both the political quicksand of enacting another major hike and the fiscal certainty of rising pension obligations, Lightfoot moved to instead boost the levy by a predictable amount each year: The rate of inflation or 5%, whichever was lower.
That led to annual increases that were smaller though still painful amidst high inflation during the pandemic, with the biggest jump totaling $94 million in 2021.
Upon exiting office in the spring of 2023, Lightfoot projected a shortfall of just $85 million heading into 2024 and $124 million for 2025, imploring her successor to not “screw it up” by deviating from her administration’s financial practices.
“We’re delivering this up on a silver platter: continue to work, stay the course, and things will continue to shine bright for the city of Chicago,” she said.
But the cost of the migrant crisis, raises in union contracts, and foregoing Lightfoot’s inflation-tied property tax hike drove up the deficit for Johnson’s first budget to $538 million.
Lightfoot also began making extra pension payments to chip away at the long-term liability across the four retirement funds for municipal workers. The city made a $242 million supplemental payment last year, Lightfoot’s last spending plan, and budgeted for a $306.6 million payment under Johnson’s first budget in 2024.
Despite next year’s acute fiscal pressures, Johnson plans to keep the practice up and will make a $272 million supplemental payment in 2025. Those extra payments — slated to continue every year through 2030 — will cut down the city’s future payments by $3.9 billion, his budget team said.
The total pension payment for this year is about $2.75 billion. Asked why he didn’t opt to nix the extra installments to avoid raising property taxes, Johnson said he was ending past practices of stalling.
“Other administrations historically have said, ‘Let’s let the next generation deal with it.’ I’m not going to do that,” the mayor said. “As much as we’re working to balance this budget in a responsible way, it is just as responsible to make sure that the retirement security for the people of Chicago is no longer questionable.”
Other factors that will be at play by the time tax bills land: Next year will reflect new Chicago assessments from Fritz Kaegi’s office as well as levies from separate government bodies.
The mayor’s 2025 budget plan also returned to a time-honored short term fix: surplusing revenues from the city’s tax increment financing districts. He plans to break last year’s record and declare a $570 million TIF surplus.
Because TIF surplus funds are split up between taxing districts, the city will net $132 million. Chicago Public Schools will collect even more: $311 million. Despite the hefty sum, Johnson promised that the move would not delay or stall any projects for which aldermen are currently counting on their TIFs.
Budget officials said that declared surplus will allow CPS to make its disputed $175 million pension payment for nonteacher retirees. That was an obligation that the city had covered until Lightfoot shifted it back onto the district, but CPS CEO Pedro Martinez and Johnson’s handpicked Board of Education rejected that payment in its upcoming budget package, triggering an explosive power struggle that ultimately led to Johnson replacing the entire board.
With that $175 million payment now on track to bounce back to CPS’s purview, Johnson said his new school board must “grapple” with whether to still go forward with plans for a costly loan to cover other costs, including a still-to-be-determined sum for the new Chicago Teachers Union contract.
CPS’s failure to pony up that $175 million made up for the bulk of Chicago’s updated $223 million budget gap for the rest of 2024. Offloading that burden — along with enacting an ongoing hiring freeze and collecting better-than-expected savings from a planned $1.5 billion bond refinancing — will cover that gap, city officials said.
Lastly, the Johnson administration said it will increase the city’s alcohol tax charged to wholesalers, in order to keep up with inflation, netting $10.6 million. The city collected about $31 million in such taxes in 2023, according to the budget forecast. It will also claw back the two-cent fee that retailers got to keep when collecting the city’s seven-cent bag tax. The city brought in just over $15 million from that tax in 2023 and expects to net $4.6 million more in 2025.
Progressive agenda hobbled, but labor avoids layoffs
The tight budget also slowed progress on some of Johnson’s top progressive goals.
After budgeting $5.2 million for this year to open three city-run mental health clinics and another $15.9 million to double staffing in the emergency response teams dispatched to mental health and substance abuse crises, Johnson is calling for little new money in that realm. The administration proposed spending $2 million on a new emergency call center team tasked with handling mental health calls but otherwise did not announce major expansions in what Johnson and grassroots organizers have dubbed the “Treatment not Trauma” campaign.
The mayor did tout $200 million in anti-violence funding and more than $350 million in investments for homelessness support in 2024, crediting those ongoing priorities for Chicago’s drop in shootings and homicides so far this year. His team cited a $40 million spend on the city’s unified shelter system for both migrants and homeless people, a change the administration announced this month while casting the shrinking bed capacity as a turning point from the city’s earlier migrant humanitarian crisis.
Johnson did not go in depth when talking to reporters Tuesday on the status of the $800 million package of new revenue proposals from his mayoral campaign besides hinting that those ideas could have averted the city’s current predicament. Among his 2023 suggestions were a revived corporate head tax, a charge on securities trades and a higher hotel tax. Many would require buy-in from the state — an unlikely prospect given the fragile state of City Hall-Springfield relations.
And he lamented the loss of his Bring Chicago Home tax referendum in March and a failed statewide ballot measure to enact a graduated income tax structure in 2020, arguing that “the extreme wealthy in this city and in this state got in the way of passing these progressive revenue ideas.”
Even with the limited new investments in progressive goals, Johnson still catered to his labor base with his 2025 spending package by avoiding what many union leaders feared when the budget gap was first announced: layoffs. The city would have had to reduce its workforce by 17% if it were not for the property tax increase, including nearly 2,500 CPD positions, Johnson’s team projected. His administration also shot down the idea of using furlough days, a measure less drastic than layoffs that would have had to be negotiated with government worker unions.
“What I did not want to do in this budget is exacerbate the situation by cutting and laying people off. No one wants to see their neighbor who is a police officer lose their job,” Johnson said. “We protected jobs. This is still the most pro-worker city in America.”
That will surely be part of Johnson’s pitch to aldermen, particularly those who were mulling whether to pick a fight with the administration over layoffs. But overall, Johnson indicated his message to City Council will focus on convincing them to see their vote as not just about the loaded property tax hike but about Chicago’s commitment to public safety, affordable housing, behavioral health and other “investments in people.”
Asked whether that would be enough to clinch him 26 votes, the mayor chuckled: “Do I look worried?”
