Mayor Lightfoot's 2020 Budget Recommendations
Pictured: Budget infographic provided by the Mayor's office
On Wednesday, Mayor Lightfoot convened a special City Council meeting to release her 2020 Budget Recommendations and deliver her budget address. In the address, the Mayor outlined her plans for the $11.65 billion 2020 Budget. The proposal will avoid large property tax increases should Springfield grant requests from Chicago during its upcoming veto session. If the requests are not approved during the veto session, however, City Council and the Mayor's office will be faced with difficult decisions on how to close the staggering $838 million gap in the city's budget.
You can watch a recording of the address here. A full copy of the 2020 Budget overview is available here, and full copy of the 2020 recommendations are available here.
New Revenue Streams:
During the Springfield veto session, which begins on Monday, Chicago will be asking state legislators to change the structure of the Real Estate Transfer Tax (RETT) for home sales in the city. The changes to RETT would be structure progressively to reduce the disproportionate impact the current flat tax has on lower-income households. The proposal calls for a hike for properties over $1 million, a decrease for properties under $500,000 and no change for sales valued at $1 million. If approved during the veto session, it is projected to bring in $50 million in 2020 and $100 million in 2021.
An additional stream of revenue identified in the budget address includes a $40 million increase in taxes from ride-hailing services, such as Lyft and Uber. The proposal calls for a hike in fees for single riders and is in step with changes many other cities are beginning to propose. The increased fee would only impact riders who are riding alone (rather than in a pool) and those riding downtown during peak hours. Those taking pools within neighborhoods will see a decrease in the fee they pay.
In addition to improving congestion downtown, a portion of this tax will be dedicated to improving public transit. The proposal was drafted with the intention to address downtown congestion while keeping rideshare accessible to those who are using it in transit poor areas.
Another identified revenue stream is doubling the current tax on food and drinks sold at retail establishments and restaurants. The increase would amount to a quarter of 1 percent, or $0.25 for every $100 spent. It is anticipated to bring in an additional $20 million in 2020.
Additionally, Mayor Lightfoot announced that there will be an increase in parking meter fees downtown and the installation of new parking meters in the West Loop. The additional parking meters are projected to bring in an additional $7 million in 2020.
A deal reached with Governor Pritzker's administration will bring in $163 in new revenue, which accounts for nearly half of the new revenue in the budget proposal. The funds are for emergency services reimbursements that would come from the state, and not ambulance users.
Finally, the Mayor called for Tax Increment Financing (TIF) reform in her address this week. This would usher in an additional $31.4 million from TIF surplus for the city and $163 to Chicago Public Schools. The allocation of TIF surplus funds is stipulated by state law through a formula. The Mayor also promised reforms to the TIF program, the specifics of which will be unveiled at a later date.
The Mayor's proposal did not include a reinstatement of the head tax, a LaSalle Street Tax on financial transactions, or the Payment in Lieu of Taxes (PILOT) program. Earlier this fall, I co-sponsored ordinances that were introduced at City Council to usher in these progressive streams of revenue that would help make sure we could afford the programs and services our residents need. During the Budget Address, no commitment was made to advance any of these ordinances.
Savings & Efficiencies:
The 2020 Budget proposal includes a variety of cost-saving measures to reduce the burden on taxpayers. This includes $200 million in savings from refinancing the city's existing debt. The proposal calls for the old debt to be replaced with new bonds that carry a lower interest rate with new sales-tax-securitization bonds. The proposal is for motor fuel tax receipts only. The plans do not call for any extension of the maturity dates of the new debt beyond what is already specified in the old bonds.
The refinancing of the debt is considered risky by some investors and raters. As an alternative, my colleagues in the Progressive Caucus and I have been looking at incremental investments to pension obligation bonds.
The city will be merging some departments to reduce spending and has implemented a zero-based budgeting plan. This calls to cut the city's workforce, but does not call for any layoffs. This is anticipated to save the city $150 million.
Despite identifying cost-saving measures to reduce the amount of money the city spends, the Mayor's budget proposal did include some proposals for new spending at City Hall. It was announced on Wednesday that there will be a minor increase to the line item for the Chicago Public Library on property tax bills. This is going to bring in an additional $18 million so libraries can remain open on Sundays.
Additionally, the Mayor's plan includes a $10 million allocation to address affordable housing in the city and fight homelessness. $5 million will be set aside for the Chicago Low Income Housing Trust Fund and the other $5 million toward youth homelessness services. The budget will also include a break on water fees for Chicago's lowest earners, or those earning less than 150 percent of the poverty level.
Finally, the proposal calls for $9 million to create a new office at City Hall dedicated to reducing violence throughout the city, and $9.3 million in mental health spending which represents a 36% increase from 2019. The increase in mental health spending does not call to reverse the closing of mental health facilities, but will go toward a new comprehensive plan yet to be released.
Over the next several weeks, City Council members will be attending hearings on each department's proposed budget to discern whether the Mayor's recommendations should be approved by council. We will have the opportunity to propose changes and introduce new ideas. There will be a Public Hearing on November 13 at 10am, another City Council meeting on November 20 at 10am, and finally, a City Council meeting for voting on final budget proposal on November 26 at 10am.
We will continue to provide updates on the budget hearings, Springfield's veto session, and other budget-related news as it becomes available.