Politics

Mayor Brandon Johnson Calls for $68.5M Property Tax Hike, $165.5M Increase in Other Taxes to Close Budget Gap as Deadline Looms

(Michael Izquierdo / WTTW News)

Mayor Brandon Johnson’s administration briefed members of the Chicago City Council on Friday about his latest proposed spending plan for 2025, which would hike property taxes by $68.5 million and increase a host of other taxes and fees by an additional $165.5 million.

Johnson’s revised plan helps close a $337.4 million shortfall in the city’s $17.3 billion spending plan by hiking taxes and fees by a total of $234 million. The proposal is set to be considered by key city panels Tuesday, with a final vote by the City Council set for Friday, which is just 18 days before the deadline to avoid an unprecedented shutdown of Chicago government. 

The new plan comes after the City Council rejected Johnson’s first two proposals to raise property taxes in order to avoid draconian cuts to city services and thousands of layoffs. The City Council voted unanimously to reject his initial proposal to raise property taxes by $300 million and then quietly killed his second proposal to hike property taxes by $150 million.

It is unclear whether his third proposal will meet a different fate, even as time runs short.

Johnson’s proposal to increase property taxes by $68.5 million is tied to the increase in the cost of living during the past two years. During his 2023 campaign for mayor, Johnson promised not to raise property taxes, blaming the steep increases approved by his predecessors for making it impossible for longtime Chicagoans to stay in their homes.

The owners of a property worth $250,000 will likely pay approximately $50 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. 

The largest tax hike included in Johnson’s revised budget proposal would generate $128.1 million by an increase in the tax levied on software licenses, cloud services and other digital goods from 9% to 11%, records show.

Budget Director Annette Guzman said that tax is largely paid by large corporations, like Google, Amazon and Salesforce, rather than individual Chicagoans. Johnson has long supported efforts to shift tax burdens from individuals to corporations.

Other proposed tax increases would generate:

• $12.9 million by hiking the taxes paid by those who subscribe to streaming and cable television services from 9% to 10.25%.
• $11.3 million by hiking the tax paid by those who park in garages or use a valet service from 20% on weekends and 22% on weekdays and to 23.25% throughout the week.
• $8.1 million by charging a $3 surcharge on ride-hailing trips that start or end in the Central Business District between 6 a.m. and 10 p.m. on Saturday and Sunday. The current weekday surcharge would drop to $2.75 from $3.
• $5.1 million by charging shoppers 10 cents for each single-use paper and plastic bag at stores and allowing retailers to keep 1 cent to cover costs. The current tax is 7 cents, with store owners keeping 2 cents.

Johnson’s revised plan also relies on an additional $22 million in revenue, including $7 million in additional fines, most related to parking citations, records show.

The revised budget proposal eliminates a deeply unpopular proposal to hike alcohol taxes to generate $10.6 million, records show.

Johnson’s plan also cuts $90 million in spending, including $31 million in federal COVID-19 relief funds he had planned to use to restart the effort that sent $500 per month to Chicagoans living below the federal poverty line as part of a basic income program, records show.

Earlier this week, Johnson told reporters that he does not want to see that program cut, and urged Chicagoans to reach out to their representative on the City Council if they want to see the program survive.

An additional $29 million in federal COVID-19 relief funds that had been set to be used to help small businesses would also be cut under Johnson’s proposal.

Johnson has said he will not sign a budget that cuts city services or puts city employees out of work, and the revised proposal holds that line. The mayor’s new plan cuts $13.1 million he had proposed using to pay down the city’s debt and reduces the budget for the Department of Fleet and Facility Management by $3.1 million.

Kennedy Bartley, the managing deputy for external relations, said the proposal unveiled Friday is the result of a collaboration between the mayor and members of the City Council that remains true to the mayor’s values.

“An immense amount of work went on behind the scenes,” Bartley said.

The new plan also closes a $40 million gap created in recent weeks when state lawmakers failed to fix an issue with the taxes levied on prepaid cellphones, officials said.

The revised budget proposal earmarks $8.9 million to reverse deep cuts to the number of employees charged with implementing the federal court order requiring the Chicago Police Department to stop routinely violating residents’ constitutional rights known as the consent decree, bowing to intense pressure from advocates for police reform.

Those estimates assume that the employees who fill 162 positions set to be restored to the city’s 2025 spending plan will be paid significantly less than the average cost of a Chicago Police Department officer, who earns $150,000 annually, including benefits.

That cost of restoring the positions will be covered by an expansion of the city’s automated speed camera network into wards where City Council members have requested the cameras and a study by the Chicago Department of Transportation has found a need for speed reductions, Guzman said.

In all, the new cameras will generate $11.4 million, and cost $2.64 million to install, according to city projections.

CPD has fully met just 9% of the consent decree’s equirements in the more than five years since it took effect, according to the most recent report by the monitoring team.

If approved, city officials will earmark an additional $208.8 million for the reform effort in 2025, documents show. Between 2020 and 2024, the city set aside $667 million to implement the consent decree, but failed to spend at least a quarter of those funds every year, according to a WTTW News analysis.

The new budget proposal makes no change to Johnson’s plan to pay an additional $272 million into the city’s four underfunded pension funds. That will prevent the further growth of the city’s pension liabilities and save the city $3.9 billion by 2030, officials said.

If the city cancels the additional pension payment, Wall Street ratings agencies could lower Chicago’s credit rating, making it more expensive for the city to borrow money, making Chicago’s financial hole deeper.

S&P Global Ratings put the city on a negative credit watch before Thanksgiving, finding there is at least a one-in-two chance of a downgrade in the next 90 days.

Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]

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