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 Chicago
taxpayers will be hit with an extra $2 billion of city debt on top of property
tax hikes under Mayor Lori Lightfoot’s budget proposal, according to Crain’s
Chicago Business.
Lightfoot plans to borrow funds to provide short-term relief to the city’s
finances with the goal of saving $450 million this year and $500 million in
2021. For the next 30 years, it will cost taxpayers $207 million annually.
The mayor’s office says it will save $74 million long-term. Of this, $43 million
will be refinanced. These figures are based on 4% inflation rates, higher than
the current rates. Over the next 30 years of repayment, the rate will likely
vary.
This financial tactic is called a “scoop and toss.” It means the city borrows
more than it needs to after refinancing existing debt, but defers payments on
the new debt farther into the future, leaving others responsible for picking up
the tab.
Debt refinancing is a short-term revenue measure that does not
help close the structural deficit. The city can only rely on debt refinancing so
long as private bond buyers remain willing to purchase city debts.
Lightfoot also plans to borrow another $15 million that marijuana sales taxes
will repay. This is part of a deal with the Chicago Federation of Labor to avoid
laying off 350 union employees, which was originally the mayor’s plan. This plan
applies to workers making less than $100,000, meaning higher paid city employees
will still need to take furloughs. Positions that are currently vacant will
still not be filled.
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On top of the extra barrowing and a future debt
burden for taxpayers, Chicago residents can still expect a property
tax increase. Lightfoot is hoping for an extra $93.9 million from
property taxes and for rates to automatically increase with
inflation. An Illinois Policy Institute analysis found the average
Chicago homeowner will pay $104 to $255 more under this plan.
Lightfoot is also proposing a 3-cent gas tax
increase.
The real problem choking Chicago’s budget is pensions. In 2021,
pensions are set to take up 14.2% of the city’s budget. Starting in
2022, those contributions will be actuarially determined, meaning
investment losses will drive taxpayer costs higher. This means
pensions could grow to be an even larger part of the city’s budget,
in part because of losses from COVID-19.
Lightfoot called on state lawmakers to pursue meaningful pension
reform to help her city deal with this worsening problem, but did
not specify what reforms she wanted to see or call for a
constitutional amendment. Changing the constitution is the only way
for Illinois to truly alleviate the growing pension burdens on
municipalities.
Lightfoot should support an amendment to the state constitution just
as former Mayor Rahm Emanuel did that would makes changes to future,
unearned benefits to create a more sustainable system.
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