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Mayor Lori Lightfoot Proposes Property Tax Hike, Gas Tax Increase, Layoffs, Other Job Cuts To Close $1.2 Billion Gap

CHICAGO (CBS) -- Facing an unprecedented $1.2 billion shortfall for next year, Mayor Lori Lightfoot on Wednesday proposed a $94 million property tax hike, a 3 cents per gallon increase in the city's gas tax, hundreds of layoffs, and eliminating nearly 2,000 vacant positions.

The mayor's $12.8 billion budget plan also proposes an annual property tax hike that would be tied to inflation every year going forward. Lightfoot's budget documents note the city's property tax levy went virtually unchanged for nearly 20 years before former Mayor Rahm Emanuel pushed through a $588 million property tax hike in 2015.

However, even with at massive property tax hike, the city still has "the lowest residential property tax rate in Cook County, with an effective tax rate of 1.74 percent," the mayor's budget overview states.

Still, Lightfoot insisted the property tax increase she is seeking is "modest."

"Some had predicted that this budget would be predicated on hundreds of millions of dollars in new property taxes. Not so. And for the average Chicago home valued at $250,000, you will pay just $56 additional dollars for the whole year. That's right, just $56 new dollars per year," Lightfoot said in her budget address at City Hall.

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With no financial help on the horizon from Congress or the state, the mayor said the city must rely on making "shared sacrifices" to address the economic crisis created by the pandemic.

"We have faced a lot in 2020, and this year is far from over, and as this new year dawned, I certainly didn't think that my whole year would be marked by multiple tragedies and crises, back to back to back," Lightfoot said, citing not only the COVID-19 outbreak, but the widespread civil unrest spurred by the Minneapolis police killing of George Floyd, and multiple looting incidents across the city this summer.

"As Chicagoans, throughout our history, we have been tested, and we have repeatedly risen to meet and exceed every challenge," she added.

With so many unpopular options for balancing the budget, the mayor's spending plan will undoubtedly face a stiff challenge in winning the support of 26 aldermen for approval.

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Earlier this year, Lightfoot said a property tax hike and layoffs would be last resorts, but given the economic crisis, the mayor said her hand was forced by steep declines in tax revenues caused by the COVID-19 pandemic, which caused many businesses to shut down for months. Lightfoot said the city has seen a 77.5% drop in hotel tax revenue, 49.5% decline in amusement taxes, 47.8% drop in ground transportation taxes, 48.5% decline in gasoline taxes, and 35% decline in the city's share of sales tax revenues.

However, the mayor said even in the midst of the pandemic, a number of businesses have chosen to relocate to Chicago, particularly in the technology sector, and said she is confident Chicago will recover from the economic crisis just as it recovered from the Great Chicago Fire in 1871.

"So, in 2020, we have taken some punches. Some very hard body blows. Over the course of this very tough year we have been on the ropes, the referee has started the 10 count, a couple times," Lightfoot said. "But like Barney Ross, the 1930s fighter who grew up in the Maxwell Street neighborhood, we have gotten back up, legs stronger, steely focus, and a resolve to fight on. And fight on we must, and fight on we will."

In addition to the property tax hike the mayor is seeking, her budget plan would save $106 million by eliminating 1,921 vacant positions, including 614 vacancies at the Chicago Police Department. She also will require all non-union city employees to take five unpaid furlough days in 2021.

"I will lead by example and take those five furlough days myself," she said.

Lightfoot said she also is proposing 350 layoffs, but will delay any layoffs until March, to allow time for Congress to possibly provide funding assistance for state and local governments as part of a new COVID-19 stimulus package.

"This schedule will allow us to see if there's any new federal stimulus on the horizon, and we will continue to advocate vociferously for such a stimulus," she said. "This economic downturn has had a bipartisan impact and there must be a bipartisan solution. So, Congress, do your job, don't leave us cities and towns all across this country high and dry. Do your job that we sent you there to do."

The mayor said, if Congress does approve some financial assistance for the city, she will reduce the proposed layoffs accordingly.

"I told you many times over these last weeks that everything had to be on the table, and I struggled personally with the prospects of layoffs," she said. "I do not relish the prospect of unemployment for a single city worker."

Any layoffs, however, would not affect the Chicago Police Department, noting that the city's collective bargaining agreement with the police union would require any such layoffs to focus on officers with the least seniority.

"If we cut current jobs, we would be compelled to cut the youngest, most diverse, and well-trained officers in the department, and that is not in anyone's interest," she said.

The mayor also repeated her opposition to wider calls to defund CPD.

"While this term means different things to different people, in this moment in Chicago we cannot responsibly enact any policies that make communities less safe. Yes, I agree that the police cannot be the first and only responders on every call for help from our residents," she said. "That is precisely why in 2021 we will launch a pilot program borne of real research from subject matter experts that looks at a co-responder model that starts the process of building the infrastructure for alternative means of response."

However, the mayor said it would take time to test out such a co-responder model for the city before making it a permanent citywide effort.

"There are no magic wands to wave, no snapping your fingers, or catchy slogans, and whatever course we take must be tested on the streets of Chicago," she said.

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The budget plan also relies on saving $501 million by refinancing existing city debt by issuing $1.7 billion in general obligation and sales tax securitization bonds to take advantage of lower interest rates. In addition to the $501 million in savings for 2021, the refinancing plan is expected to generate $450 million in savings for 2020 and help close an $800 million budget gap for the current year.

Lightfoot also is declaring a $350 million in tax increment financing programs to help close the gap for 2021. The TIF surplus would provide $76 million for the city's corporate fund and $167 million for the Chicago Public Schools, but at the same time, Lightfoot is calling on CPS to reimburse the city for $40 million in school pension contributions the city typically makes for the district.

The mayor also proposed using $30 million dollars from the city's rainy day fund, but cautioned against using any more of the city's existing $900 million in reserves while the pandemic is still raging.

"We are not experiencing merely a rainy day. It is truly a rainy season, and we must continue to be prudent and cautious. This virus is very unpredictable, and we cannot afford to materially deplete our reserves now, particularly when it is far from clear that the folks in Washington, D.C., will ever be able to rise above their partisan divide," she said.

Lightfoot's budget also projects $262.6 million in savings from "improved fiscal management," such as enhanced enforcement of fees and fines, and improved debt collection practices; as well as $168.3 million from non-personnel savings, such as a renegotiated health care contract and a new audit and review process.

The mayor has warned that the 2021 budget process will likely be the toughest ever for aldermen, who will begin department budget hearings next week. Acknowledging the difficult choices they face, Lightfoot pledged her budget team would work with aldermen to address any concerns they might have.

"As the hearings commence, and the debate ensues, please remember to be kind to each other. We and you will not agree on every issue, but let's have this Chicago City Council budget season be a model for the nation on how democracy – as messy as it always is – can be filled with efforts to build bridges to each other and continue on our path toward that more perfect union," she said.

Following the mayor's budget address, the Chicago Federation of Labor urged Lightfoot to work with the city's labor unions to find alternatives to layoffs and other job cuts.

"These are unprecedented times, and Chicago's reliance on public services is as important as ever. This crisis should serve as a call to protect and strengthen critical public services as we examine the budgetary impact of COVID-19," Chicago Federation of Labor President Bob Reiter said in a statement. "Chicago's unions are actively working on identifying cost savings and efficiencies we believe would at least equal the budgetary impact of workforce cuts, obviating the need for furloughs, layoffs, or vacancy reductions. We look forward to collaborating on those ideas with the Mayor and City Council as the budget process moves forward."

According to published reports, Lightfoot had been seeking $200 million in cost savings from the city's labor unions as she crafted her budget plan.

The Grassroots Collaborative, a coalition of labor and community groups which have called for defunding the police and more progressive tax increases targeting wealthy individuals and corporations, said the mayor's budget proposals "do not reflect the values of Chicago neighborhood residents."

"Cutting jobs and raising property taxes and driving up rent while pouring money into failed policing-first strategies and allowing wealthy elites to continue to not pay their fair share is the same status quo priorities that have been destroying Black and Brown neighborhoods for decades," Grassroots Collaborative Campaign Director Theresa Yoon said in a statement.

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