Facing a brick wall of opposition on the Chicago City Council, Mayor Lori Lightfoot announced Thursday she would drop her proposal to hike property taxes by $42.7 million in 2023.
Lightfoot, who already faces more than a half-dozen opponents in her bid for a second term, is set to unveil her detailed 2023 spending plan on Monday, which now must close a deficit of $170.6 million.
Lightfoot made the announcement in a statement released on the second day of a four-day trip to Mexico touting the city’s economy. That statement did not acknowledge that her proposal was politically dead-on-arrival in an election year at a time when her relationships with City Council members remain at a low point.
Instead, Lightfoot said the faster than expected recovery of the city’s economy from the fiscal catastrophe unleashed by the COVID-19 pandemic meant the property tax hike was no longer necessary.
“We have determined it is important to give our taxpayers some additional relief,” Lightfoot said.
Lightfoot said Aug. 10 that the property tax hike was necessary because of the surging cost of inflation, which is at a 40-year high.
Calling the hike “the fair thing to do,” Lightfoot told reporters the owners of a home worth $250,000 would pay just $34 more a year.
“That’s about the price of Al’s Beef sandwiches — hot, dipped and with extra cheese — for a family of four,” Lightfoot said.
Ald. Pat Dowell (3rd Ward), the chair of the City Council’s Budget Committee, said in August the property hike would be a “hard sell” during an election year, and no members of the City Council publically backed the plan.
Lightfoot indicated Thursday that she would not support an effort to reverse a provision approved by the Chicago City Council in 2021 at her request that automatically hikes property taxes every year to keep pace with inflation.
Lightfoot said her decision to reverse her proposal to hike property taxes in 2023 offered “one-time relief” to taxpayers.
“To be clear, our pension obligations are real and continue to grow,” Lightfoot said.
In 2023, Chicago will pay more than $2.34 billion to its four pension funds — more than an additional $1 billion directly from the city taxpayers than it paid just three years earlier.
Under rules put in place by Lightfoot before inflation surged after the pandemic, property taxes would have risen $85.4 million, or 5%, because of the rapid increase in the cost of living. In August, Lightfoot said she would ask the City Council to approve a hike half as big as initially called for.
Lightfoot’s statement did not explain how she would propose to bridge the city’s budget shortfall, which is now 33% larger than the gap she detailed nearly two months ago.
Lightfoot’s speech on Monday will kick off the monthslong process that will end with the adoption of the 2023 budget before the end of the year. The fact that Lightfoot dropped the proposal before she made her first public pitch for her election year spending plan indicates its deep unpopularity.
Chicago’s financial picture has been buoyed by the city’s red-hot real estate market and nearly $2 billion in federal aid designed to help the city withstand the ravages of the pandemic. Chicago ended 2021 with a surplus of $318 million, according to the city’s annual financial report.
Chicago’s 2023 spending plan is the first that will reflect revenues from a casino, with Bally’s cutting the city a $40 million check after the City Council gave their plan to build a casino and resort in River North the green light and a temporary casino set to open at the Medinah Temple next summer.
In addition, city officials still have more than $152 million to spend from the federal COVID-19 relief package signed into law by President Joe Biden in March 2021.
However, the city’s finances will continue to be pinched by soaring pension payments, as the city complies with a state law that requires Chicago’s four funds be funded at a 90% level by 2045, ensuring they can pay benefits to employees as they retire.
Chicago’s $16.7 billion budget for 2022 included nearly $2 billion in spending on affordable housing, mental health, violence prevention, youth job programs and help for unhoused Chicagoans. Those funds can be spent during 2022, 2023 and 2024, under federal law.
Much of the debate over the 2023 budget — which will take place simultaneously with the elections for mayor and all 50 alderpeople — is likely to focus on whether those programs, funded by the Chicago Rescue Plan, will continue or be expanded.
Lightfoot’s 2022 spending plan would not have passed without the support of progressive members of the City Council.
The Chicago Rescue Plan calls for the city to borrow $660 million to fund its programs. That debt has not yet been incurred, officials said.
City officials have not said how much of the plan’s funding will carry over into 2023 and beyond.
The debate over the police budget — which totaled $1.9 billion in 2022 — will also be a flashpoint during negotiations over the city’s budget. Progressive members of the City Council are likely to push to reduce it to instead fund violence prevention efforts and to strengthen the city’s social safety net.
At the same time, conservative members of the City Council are likely to push for more money to hire more officers and help those on-the-job cope with the trauma of policing.
In 2020, the city faced a budget gap of $838 million. In 2021, the city faced a budget gap of $1.2 billion. In 2022, the gap was $733 million.