Chicago property taxes will rise by $42.7 million — half what an automatic escalator allowed — thanks to a $127.9 million budget deficit for 2023, the lowest on record, Mayor Lori Lightfoot said on Wednesday.
By exercising fiscal discipline and making “tough decisions,” Lightfoot has managed to reduce the deficit in a budget that will serve as a platform for her re-election from $733 million last year and $1.2 billion during to reduce the peak of the pandemic.
The automatic escalator, which mayoral challenger Paul Vallas and others have promised to repeal, will allow Lightfoot to raise property taxes by 5% or the inflation rate, whichever is lower.
But with inflation now rising to levels not seen in 40 years — 8.5% in July versus 9.1% in June — the mayor had promised to “put up some guardrails” to help Chicago’s beleaguered homeowners and businesses to protect and prevent the city from doing so Total.
On Wednesday, City Hall announced that these “guard rails” would halve the automatic property tax hike associated with consumer price hikes.
“We will not aim for a CPI of 8.5%. We are not aiming for a 5% CPI. Instead, we will give taxpayers a much-needed rest and lower the CPI to 2.5%, which is in line with 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 right thing to do.”
Since the city’s total property tax is $1.6 billion, that would still translate to a sizable $42.7 million earmarked solely for pension payments.
That’s in addition to the $40 million upfront payment the mayor required from Bally’s before accepting the company’s $1.7 billion plan to build a permanent casino in River West and a temporary casino at the Medinah Temple in River North .
Lightfoot argued that the 2.5 percent increase would only cost the owner of a $250,000 home $34 more per year.
“To put it in terms I can understand, that’s about the price of an Italian beef from Al’s — hot, dunked, with extra cheese — for a family of four,” the mayor said.
“The average house price of $250,000? An additional tax of $34? I think people can live with that. I think that’s reasonable… Nobody wants to pay taxes. But, [if] The choice being non-delivery of city resources, laying off city workers, or a modest tax hike, most people would say, “Okay, Mayor. I get that. I might not like it. But I understand it.’ “
The mayor said she expects backlash from the same city council members who opposed the automatic escalator the first time. However, she argued that the annual trigger makes sense because it gives home and business owners the “predictability” they crave.
“For years, the mayors of this city failed to make the difficult decisions about how pensions should be funded. As a result, pensions were severely underfunded. We would skip the property tax hikes every year. And then suddenly, year after year, the highest property tax increase in the city’s history. That didn’t help anyone. And it certainly didn’t help the City Council members who had to do those difficult votes. It certainly didn’t help our taxpayers, who were ripped off with these huge tax increases every two or three years.”
“In an election year, it’s easy to say, ‘Let’s do nothing.’ But our pension obligation is growing every year. So if we don’t do anything, rest assured, taxpayers. They’ll come back for you later. I don’t think that’s the right thing. I think we need to treat our taxpayers like the adults they are.”
Chicago’s $1.6 billion in property tax collection nearly doubled between 2012 and 2021.
The revised 2.5% increase is based on the five-year average consumer price index — less than the 7% December-to-December increase that would have been allowed under the ordinance, the city said.
Chicago mayors have a history of inflating budget deficits after an election — and raising taxes, fines and fees immediately after confronting voters. They then have historically low deficit projections ahead of the mayor and council elections, allowing incumbents to face voters without raising taxes.
The Lightfoot automatic escalator convinced a reluctant Chicago City Councilman to change that equation a little, but not much, within their 2021 budget.
The $127.9 million budget gap is likely to be filled without further significant increases in taxes, fines and fees.
Four months ago, Lightfoot said Chicago was poised for “the best economic recovery of any major city in the nation, without exception,” despite “what the naysayers say.”
The city’s annual certified financial report for 2021 provided the mayor with 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, Chicago closed the books in 2021 with a “total fund balance” of $679.1 million — $318.1 million of it “unallocated” — thanks to “recovery of revenue.” affected by the pandemic,” and expenditures transferred to federal grant funds received for the COVID response.
The 2023 budget forecast, which replaced the city’s preliminary budget, also includes projections for the next three years.
If Chicago’s economy flies high, the forecast projects a deficit of $306.1 million in 2024 and $265.7 million in 2025. If there is a “negative” outlook, the deficit will be $951.3 million in 2024 and to a staggering $1.4 billion in 2025.