Politics
Mayor Brandon Johnson Calls for $300M Property Tax Hike To Close Budget Gap, Avoid Draconian Cuts
Mayor Brandon Johnson called Wednesday for a $300 million property tax hike, the largest increase since 2016, saying he had no choice but to break one of his central campaign promises in order to avoid draconian cuts to city services and thousands of layoffs.
Johnson said proposing the tax hike, the second largest in modern Chicago history after the $588 million property tax hike pushed through by former Mayor Rahm Emanuel in 2016 and implemented during a four-year period, was a “difficult decision” that was the result of an “excruciating process.”
Johnson blamed the city’s dire financial condition on mismanagement by his predecessors in a briefing with reporters Tuesday afternoon.
“We have just had irresponsible administration after administration that has kicked the can down the road and now it is in front of my door,” Johnson said. “The alternative is just not acceptable, reducing services and compromising overall safety.”
Johnson’s $17.3 billion spending plan for 2025 eliminates a $982.4 million projected shortfall. Officials also closed a $222.9 million deficit the city was facing this year by declaring a record amount of property taxes earmarked to fight blight to be “surplus,” sending $311 million to the Chicago Public Schools. CPS will use those funds to make a required pension payment, easing the city’s financial crunch, officials said.
Johnson’s decision not to propose layoffs or furloughs avoids a fight with the city’s labor unions, which were likely to vehemently oppose any effort to balance the city’s budget by cutting their members’ pay or eliminating their jobs.
The owners of a property worth $250,000 will likely pay approximately $240 more a year, if Johnson’s proposed tax hike is approved by at least 26 members of the Chicago City Council, according to a WTTW News analysis. Hours after Johnson’s speech, city officials said the proposed property tax hike would amount to an annual increase of $222 for those who own properties worth $250,000.
Early Monday, a city spokesperson told reporters the city’s property tax levy would rise 4%, but hours later officials said the actual hike was 4.8%. Residents’ final tax bills will be determined by the ongoing reassessment of the value of every property in Chicago by the Cook County Assessor’s office.
In a nearly 50-minute speech, Johnson touted what he described as the progress the city has made since he took office in May 2023, and acknowledged the city’s dire financial straits.
“When I ran for office, I promised to tell people the truth, and that I would not support programs that we did not have funds for. And I’m gonna stick to that promise,” Johnson said. “This is tough. It is it is something that I grappled with for weeks. We didn’t make this decision lightly. I would certainly much rather tax the rich.”
Ald. Byron Sigcho Lopez (25th Ward), one of the mayor’s closest allies, told reporters he would vote against any spending plan that included a property tax hike, saying it was certain to fuel displacement in Pilsen. The city should instead audit the Chicago Police Department, which accounts for nearly 46% of Chicago’s discretionary spending.
Johnson’s spending plan proposes cutting 456 vacant positions from CPD’s budget, which would have 13,656 employees under the proposal. Because most CPD members are due raises of 5% under the city’s contract with the Fraternal Order of Police, the department’s budget is set to grow by nearly 3% to $2.09 billion, according to the proposal.
Other members of the City Council’s Progressive Caucus said they were pleased the proposed spending plan did not include any layoffs or service cuts.
Chicago’s finances remain structurally unbalanced, pinched by soaring pension costs, spiraling personnel costs and a massive amount of debt. Officials are staring into a financial abyss after hitting the so-called “fiscal cliff,” with Chicago’s federal COVID-19 relief funds exhausted and tax revenues lagging after a period of high inflation.
Johnson’s second budget is an acknowledgment that he has so far failed to increase the amount of money flowing into the city’s coffers and use that new revenue to invest in Chicagoans “without breaking the backs of working people with fines, fees and property taxes,” as he vowed in his inaugural address.
Property taxes are the city’s largest source of revenue and the most effective way for city officials to raise revenue and ensure expenses do not outstrip costs. Most other revenue generating proposals, like imposing a sales tax on services, not just goods, would require a change in state law.
Chicagoans’ property taxes last jumped in 2021, when former Mayor Lori Lightfoot raised property taxes by $93.9 million and passed a budget that automatically hiked property taxes to keep pace with inflation.
Johnson campaigned against those automatic property tax increases, forcing Lightfoot to drop a proposal to hike taxes by $42.7 million in 2023 just months before she lost her bid for reelection. Johnson’s first budget included no property tax hikes, even as the city’s expenses continued to outpace its revenues.
Chief Financial Officer Jill Jaworski said the $300 million property tax hike is equivalent to the increases Chicago property owners would have paid had their bills kept pace with inflation between 2019 and 2025, a period that included record-breaking increases in the cost of living as measured by the consumer price index.
Without the additional revenue, the city would be forced to lay off nearly 3,500 city employees, including 2,500 police officers and 650 firefighters, Jaworski said.
The property tax hike will allow the city to make an additional payment of $272 million to the city’s four underfunded pension funds for the third year in a row.
That will prevent the further growth of the city’s pension liabilities and save the city $3.9 billion by 2030, Jaworski said.
Johnson said the city cannot afford not to pay more than state law requires into its pension funds because of the city’s dire financial condition.
If the city cancels the additional pension payment, Wall Street ratings agencies could lower the city’s credit rating, making it more expensive for the city to borrow money, making Chicago’s financial hole deeper.
“Previous administrations have abdicated their responsibilities to secure [city employees’] retirement,” Johnson said. “Unfortunately, because there has been negligence over time, it has put us in the position, where if we are going to do right by the future generation, we have to make sure that we do everything that we can so that the future generation doesn’t have the same burden.”
Sigcho Lopez said the city should not make that additional payment and cancel the proposed property tax, calling for the city to prioritize protecting longtime Chicago homeowners.
But Ald. Maria Hadden (49th Ward), the co-chair of the Progressive Caucus, said the additional pension payment is not optional because it will help secure the pensions for longtime city employees.
“We owe people money,” Hadden said.
Ald. Jason Ervin (28th Ward), the chair of the City Council’s Budget Committee, praised Johnson’s spending plan as a fiscally responsible proposal that will ensure Chicagoans can rely on a steady level of city services.
“I don’t think we want to walk backwards in our responsibility to those who have given our city the ultimate scarfice,” said Ervin, adding that he supports the additional pension payment.
The city faces a $2.85 billion pension bill in 2025, according to city records, in order to comply with a state law that requires two of Chicago’s funds be funded at a 90% level by 2055 and the other two by 2058, ensuring they can pay benefits to employees as they retire.
How Johnson Proposes to Close the Gap
As his predecessors have done for a decade, Johnson relies on unspent property tax revenue in a pool of funds designed to fight blight across the city to cover a large chunk of the budget shortfall.
Johnson declared $570 million in tax-increment financing districts to be in surplus, a record-breaking amount that is 31% bigger than 2024’s surplus, which set the previous record.
That will send $132 million to the city and $311 million to CPS, with the rest heading to other taxing agencies, Jaworski said. Johnson’s plan calls for $54 million to be used to close the city’s budget gap.
No projects that are already underway or fully approved will be stopped, Johnson said.
The budget approved by the CPS board for 2025 counted on at least $160 million in surplus funds from the city’s TIF districts. That includes $62 million to cover the cost of the recently ratified SEIU Local 73 contract and $97 million for district operations.
The surplus declared by the mayor will give CPS an additional $151 million, enough to cover most of $175 million payment it is required to make into one of its employee pension funds.
But it will not be enough to cover the cost of new contracts with the Chicago Teachers Union and the union that represents principals.
Johnson has called for CPS to cover that shortfall with a loan while appealing to state officials for more money. But CPS CEO Pedro Martinez called that plan “exorbitant” and fiscally irresponsible. Martinez said he refused Johnson’s request to resign.
Martinez had called for the mayor to dip even deeper into the city’s TIF funds to solve CPS’ budget woes, but that would likely force long-planned redevelopment projects to grind to a halt and be deeply unpopular with downtown alderpeople.
Since the breach between the mayor and the schools’ chief became public, Johnson replaced all of the members of the CPS board. They could move to terminate Martinez as soon as Friday.
In addition to the TIF surplus, Johnson uses $139.6 million left over from previous years to close the budget gap and relies on projections that the city will take in $215.4 million more in tax revenues than expected at the end of August, according to the proposed spending plan.
The spending plan also eliminates 743 vacant positions, as part of “operational efficiencies” designed to save $247.6 million, according to the proposed spending plan.
In addition, Johnson’s budget calls for the city’s tax on alcohol sales to increase to keep pace with the increase in the cost of living, the first increase in 15 years, which is expected to raise $10.5 million, said Budget Director Annette Guzman. It will also cost more for people to park downtown in garages and to use valet parking services, Guzman said.
Johnson’s spending plan also calls for the city to change the way it levies a 7-cent tax on single-use paper and plastic bags. Since the tax was imposed in 2017, the retailer kept 2 cents in order to defray the costs of imposing the tax. Businesses will now have to remit the entire tax to the city, Guzman said.
Promises Unfulfilled
The mayor touted his first budget as a “down payment” on the promises he made during the campaign to invest in working-class Chicagoans by strengthening the city’s social safety net. But his second includes just $55 million for new initiatives, designed to help Chicago’s unhoused population, reduce violence and create jobs for Chicago’s youth.
The progressive groups who fueled his victory in 2023 will have to wait another year for the next installment.
There are no plans for the city to open any additional mental health clinics in 2025, according to the budget. Three new clinics opened during Johnson’s first year and a half in office. The spending plan earmarks $2 million to create a dedicated unit to dispatch 911 calls from those experiencing mental health crises, and to staff the city’s existing clinics.
Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]
