Chicago property taxes will rise by $42.7 million—half of what an automatic escalator allowed—thanks to a $127.9 million budget shortfall for 2023 that’s the lowest in recent memory, Mayor Lori Lightfoot said Wednesday.
By exercising fiscal discipline and making “tough choices,” Lightfoot said she has managed to reduce the deficit in a budget that will serve as her re-election platform from $733 million last year and $1.2 billion during the height of the pandemic.
The automatic escalator that mayoral challenger Paul Vallas and others have vowed to repeal allows Lightfoot to raise property taxes by 5% or the inflation rate, whichever is less.
But with inflation now soaring to levels not seen in 40 years — 8.5% in July, down from 9.1% in June — the mayor had vowed to “put some guardrails” up to shield beleaguered Chicago homeowners and businesses and prevent the city from seeking the full amount.
On Wednesday, City Hall revealed those “guardrails” would cut the automatic property tax increase tied to the consumer price increase in half.
“We will not seek a CPI of 8.5%. We will not seek a CPI of 5%. Instead, we will provide taxpayers with a much-needed break and lower the CPI to 2.5%, which is the five-year CPI average,” Lightfoot said during a lengthy campaign-style address at the Chicago Cultural Center.
“I believe — we believe — that this is the fair thing to do.”
Since the city’s overall property tax levy is $1.6 billion, that would amount to a still significant $42.7 million, earmarked exclusively for pension payments.
That’s in addition to the $40 million up-front payment the mayor demanded from Bally’s before embracing the company’s $1.7 billion plan to build a permanent casino in River West and a temporary casino at Medinah Temple in River North.
Lightfoot argued that the 2.5% increase would cost the owner of a home valued at $250,000 just $34 more each year.
“To put that in terms that I can understand, that’s about the price of an Al’s Italian beef — hot, dipped, with extra cheese — for a family of four,” the mayor said.
“The average home price of $250,000? A $34 additional tax? I think people can live with that. I think that’s reasonable…Nobody wants to pay taxes. But, [if] the choice is non-delivery of city resources, layoffs of city workers or a modest tax increase, most people would say, `Okay mayor. I get that. I may not like it. But, I get it.’ “
The mayor said she anticipates pushback from the same City Council members who opposed the automatic escalator the first time around. But, she argued that the annual trigger makes sense because it gives home and business owners the “predictability” they crave.
“For years, mayors in this town wouldn’t make the tough decisions around funding pensions properly. So, pensions became grossly under-funded. We’d skip property tax increases every single year. And then, suddenly, year after year, you’d have the highest property tax increase in the history of the city. That benefited no one. And it certainly didn’t benefit members of the City Couuncil who had to take those tough votes. It certainly didn’t benefit our taxpayers who got socked every two or three years with these huge tax increases.”
“It’s easy in an election year to say, `let’s do nothing.’ But our pension obligation continues to grow year after year. So, if we do nothing, be sure, taxpayers. They’re coming back for you later. I don’t think that’s the right thing to do. I think we’ve got to treat our taxpayers like the adults that they are.”
Chicago’s $1.6 billion property tax levy nearly doubled between 2012 and 2021.
The revised 2.5% increase is based on the five-year average of the consumer price index — that’s lower than the 7% increase from December to December that would have been allowed under the ordinance, according to the city.
Chicago mayors have a history of inflating budget shortfalls after an election — and raising taxes, fines and fees immediately after facing voters. They then have historically low-balled deficit projections in the run-up to mayoral and aldermanic elections, allowing incumbents to face the voters without raising taxes.
The automatic escalator Lightfoot persuaded a reluctant Chicago City Council to approve as part of her 2021 budget changes that equation somewhat, but not a lot.
The $127.9 million budget gap is likely to be filled without any other significant increase in taxes, fines and fees.
Four months ago, Lightfoot declared Chicago was poised for the “best economic recovery of any big city in the nation, bar none,” in spite of “what the naysayers claim.”
The city’s annual Certified Annual Financial Report for 2021 gave the mayor some hard numbers to back up the bold claim that laid the groundwork for her re-election bid.
As the Sun-Times reported last week, it shows Chicago closed the books on 2021 with a “total fund balance” of $679.1 million — $318.1 million of it “unassigned”—thanks to “recovering revenues impacted by” the pandemic and spending transferred to federal grant funds received for COVID response.
The 2023 budget forecast that replaced the city’s preliminary budget also includes projections for the next three years.
If the Chicago economy is flying high, the forecast projects a $306.1 million shortfall in 2024 and $265.7 million in 2025. If there is a “negative” outlook, the deficit will rise to $951.3 million in 2024 and a staggering, $1.4 billion in 2025.
Read More: Chicago’s Budget Forecast Includes $42.7M Increase in Property Taxes – NBC Chicago