+ Investments

The proposed budget for 2021 includes some new investments, notably for violence prevention and mental health crisis responders. Because of the significant loss of revenue caused by Covid-19, however, the budget includes a number of cuts—primarily focused on the elimination of vacant positions. Those cuts will be covered in a later section. Due to the work of the Chicago Federation of Labor, this year’s budget will not include layoffs in a way that will affect the delivery of city services such as garbage collection, rodent abatement, and road and alley resurfacing.

Public Safety

In 2020, following the murder of George Floyd, residents across the country called upon their city governments to reimagine public safety and to invest in services that address the root causes of violence and crime. As the economic toll of Covid-19 devastated our most vulnerable communities, we also saw a concerning nationwide uptick of gun violence. As a whole, the City Council set addressing these dual concerns as a top priority.

The largest new investment in this regard will be $36 million in violence prevention. Due to the Black Caucus’s advocacy, the proposed budget includes $11 million for violence-prevention efforts beyond the Mayor’s opening offer. In 2019, my office called for hearings on the work of violence prevention organizations like Chicago CRED and READI Chicago, which have relied upon data-driven models to reduce gun violence in targeted communities. We know that street outreach coupled with trauma-informed care and paid job training works; it’s the job of the government to scale up these and similar efforts, particularly at a time when gun violence in our city is cresting.

Next year, we will also be standing up a new crisis response program modeled after initiatives in San Francisco, Los Angeles, Denver, and Albuquerque. Crisis workers will be paired with paramedics to respond to mental-health-related 911 calls in which the presence of an armed police officer is not needed. However, the funding for this initiative—approximately $1 million—pales in comparison to the investment for which alderpeople and activists were advocating, as well as what our peer cities have budgeted. These funds will be shared with a separate pilot that the Mayor prefers in which mental health professionals respond with a police officer. It remains unclear precisely how that $1 million will be divided between the two initiatives and how many staff members will be hired.

The Chicago Police Department (CPD) received significant attention during this year’s budget season. CPD’s proposed budget is nearly $1.7 billion—approximately 39% of the proposed budget for the Corporate Fund (the City’s general operating fund), and $59 million less than CPD’s FY 2020 budget. Similar to other city departments, a number of vacant positions in CPD were eliminated. The Administration has observed that a lack of applicants has left CPD struggling to fill those positions, and that various requirements relating to Covid-19 and social distancing have affected the speed with which CPD trains officers. Next month, we expect CPD to release a staffing analysis that will provide residents and the City Council with detailed data and recommendations about the ideal staffing for various parts of the department, in particular its Bureau of Patrol.

Because officers were asked to work longer hours in response to this summer’s civil unrest, it is challenging to assess CPD’s progress in reducing overtime expenditures in response to the various recommendations identified by the City’s Inspector General in a 2017 audit. As a reminder, for most of 2019, CPD personnel did not adequately utilize existing systems to swipe in and out during their shifts, or to request and approve overtime, thereby contributing to over $133 million in overtime spending. The City Council should consider it a top priority to monitor progress with reducing overtime spending in 2021, as well as progress on the consent decree as we work to reduce the $100 million spent annually on misconduct lawsuits.

Housing

At certain points this year, my office saw a 500% increase in the number of residents reaching out for help finding emergency housing compared to the same period in 2019. The Aspen Institute estimates that 1 in 3 Illinois households are at risk for eviction by the end of the year. We have long had an affordable housing crisis, but never has it been more evident.

While Chicago has offered grants to qualifying homeowners and renters using CARES Act funds, the need has far exceeded the funding available. The FY 2021 budget will keep the City’s $5 million annual funding of the Low Income Housing Trust Fund (LIHTF) constant, so securing a progressive Real Estate Transfer Tax (RETT) with at least some of those funds earmarked toward housing and homelessness remains critical. The reality, however, is that in order to meet the unprecedented need, we need the federal government to provide additional funds.

In 2021, after we understand what support the federal government can offer, the City Council and the Mayor’s Office must work together to reassess our city’s housing needs. With the expiration of the Governor’s eviction moratorium looming, as well as the large number of individuals who are living doubled-up with family or friends and are therefore hard to find because they are not on the street or in a shelter, we must prioritize a more robust rapid rehousing approach that connects families and individuals experiencing homelessness with permanent housing options. Data shows that it is easier and more cost-effective to address problems relating to physical health, mental health, education, joblessness, trauma, and substance abuse when someone has access to stable housing.

Environment

Earlier this year, the City Council passed a resolution declaring a climate emergency in Chicago. And for good reason—our city’s lakefront is steadily eroding, our tree canopy is shrinking, and stormwater management is a growing challenge, given the fact that the last several years are among the warmest and wettest on record. The FY 2020 budget established a Sustainability Office within the Mayor’s Office, and earlier this year, the City hired a permanent chief sustainability officer. While the Sustainability office will include several additional staff in 2021, City government must do more to mount an effective response to the climate crisis. That starts with reestablishing the Department of the Environment, which should quarterback our efforts to expand our solar-panel and electric-vehicle-charging infrastructure, to establish a composting program and improve our dismal recycling rates, and to enable our city and residential buildings to be powered by renewable energy. An investment now is not only morally necessary, but would also result in cost savings in the long-term as we address core infrastructure challenges proactively.

City Services

Lastly, we continue to hear from residents about their frustration with long wait times for the delivery of core city services. Issues regarding street lights and other infrastructure issues will hopefully improve with the City transitioning to a smart grid by Fall 2021 and with a 14% increase in each Ward’s menu fund. Currently, each of Chicago’s 50 wards receives $1.32 million to spend on infrastructure improvements, without consideration of the ward’s geographic size or infrastructure needs.

Nevertheless, a number of City departments and bureaus lack the funding needed to provide timely services. It continues to take the Bureau of Forestry, for example, upwards of six months for a tree trim to occur, and over a year to plant a new tree. While I have procured trees with a portion of our Ward’s menu funds to help mitigate this issue, I worry about the impacts of the loss of two Forestry personnel in the proposed 2021 budget. Notably, in 2019, the Department of Streets & Sanitation (within which the Bureau of Forestry is housed) opined that the Department would need over a dozen additional tree trimming crews in order to undertake a proactive, grid-based approach to tree trims recommended by the City’s Inspector General.

Likewise, our office has gone without a Public Way Inspector since July of this year. Employed by the Department of Transportation, these inspectors (whose work is split between 4-to-5 wards at the best of times) are responsible for keeping private contractors accountable for construction taking place in the public way. We were informed that budget and hiring issues made it unlikely for the 47th Ward to have a dedicated Public Way Inspector in the near future. Not only does this situation mean that our constituents may need to endure more public way issues caused by private contractors—it has also forced our office staff and our Ward Superintendent to step in and use time they might otherwise spend on their regular duties to track down and keep accountable negligent contractors.

+ Revenue

In anticipation of a challenging budget year, I began engaging my aldermanic colleagues and the Administration on our preferred revenue proposals at the beginning of 2020—even before Covid-19 hit. Since then, the impact of Covid-19 on our municipal revenue streams and everyday Chicagoans’ bank accounts—and the corresponding need for creative and progressive revenue solutions—has been drastic.

The Mayor’s Office estimates that by the end of FY 2020, Chicago will have lost nearly $800 million in revenue due to Covid-19, and that for FY 2021, approximately 65% ($780 million) of the projected $1.2 billion budget gap is attributable to the pandemic. Chicago is not alone in this regard; cities across the country are projecting comparable budget deficits.

The statewide failure of the Fair Tax proposal also severely limits the city’s revenue options in the immediate future. Although 71% percent of Chicagoans expressed our desire to amend the Illinois Constitution to empower government to tax income in a progressive way, the continued existence of Illinois’s flat income tax prevents municipalities from crafting creative revenue solutions that reflect the widening wealth inequality here. For example, San Francisco voters recently passed via referendum a first-in-the-nation surcharge on companies whose CEOs are paid 100 times more than their median worker—something Chicago remains unable to do.

Debt Refinancing & Restructuring

The proposed budget includes $501 million in refinancing and restructuring. Refinancing allows the City to take advantage of historically low interest rates without extending the life of certain debts. Restructuring, however, is worrisome because it involves a form of “scoop and toss” whereby we extend the life of other debts—a frequently criticized practice of the prior two mayoral administrations.

To be sure, the severity of the financial challenges wrought by Covid-19 is unique, as is the speed with which those impacts set in. Moreover, when the federal government passed the CARES Act in March, it did not allow cities to use funds to replace the revenue lost as a result of the pandemic. If Congress passes another large stimulus package in 2021, hopefully it will allow Chicago and other municipalities to use at least some of those funds on non-Covid-related expenses. If it does so, I hope and expect that the City Council and the Mayor’s Office will use those funds to significantly reduce the “scoop and toss” restructuring.

Property Taxes

When looking at the $94 million property tax increase in the proposed budget, approximately $16 million of that amount is linked to new properties because of TIF expirations and new development. That’s common sense, and will not impact the taxes paid on existing properties. Similarly defensible is the use of new property tax revenue to fund badly needed capital improvements, so long as those projects are adequately vetted and benefit the entire community. Notably, in a 2017 audit of capital improvement spending, the Chicago Inspector General recommended that the City’s Transportation and Budget departments collaborate on the creation of a multi-year capital plan and associated funding strategies, which has occurred here.

What concerns me, however, is our continued reliance on property taxes when other responsible, less-regressive options remain available. Approximately $43 million of the proposed property tax increase is one-time in nature, and attributable to the shortfall between what the City levies for pension funds and the property tax payments it actually receives. We could avoid this increase by drawing more from our $900 million in reserves—the proposed budget has us taking only $30 million from this rainy day fund—and do so responsibly by replenishing the reserves with funds from the various TIFs that are scheduled to expire over the next 10 years.

That same approach could be used to avoid the remaining $35.4 million property tax increase tied to the consumer price index (CPI). Notably, rather than being a one-time increase, the FY 2021 budget proposes a CPI-related property tax increase every year through approximately 2058. I recognize the need for robust, structural reform to how the City brings in funding so that we do not confront the same problems year-after-year. However, I have deep reservations about locking-in our reliance on property taxes in such a dramatic way without first having a public conversation regarding realistic plans for closing Chicago’s structural deficit. Nor do I support committing Chicagoans to an annual CPI increase without making substantial, concurrent progress on progressive revenue options that can offset the burden our constituents will bear.

One such option is a Payment in Lieu of Taxes (PILOT) program whereby the City would ask large non-profits such as hospitals and universities to pay a portion of the property tax funds they would owe the City but for their non-profit status. Boston, for example, asks non-profits with $15 million or more in real estate holdings to contribute approximately 25% of what they would owe in property taxes, half of which can be provided as in-kind community benefits. The Mayor’s Office and much of the City Council appear open to this proposal; I sincerely hope it will be a feature of next year’s budget planning and proposal.

Another option concerns the Real Estate Transfer Tax. Rather than continuing to rely on the current flat tax on any real estate sale, let’s adopt a progressive rate structure whereby more lucrative sales would generate additional revenue. The Bring Chicago Home coalition continues to advocate for this revenue to fund additional homelessness services, with the Administration hoping it can be used to help fund our pension obligations. We can—and should—do both.

Other critical revenue options that should be explored include:

• Box/packaging fee: Before Covid-19, it was estimated that approximately 165 billion packages were shipped annually throughout the United States, which equated to about 1 billion trees. And as a result of the ongoing pandemic, this packages-based statistic may well have increased. Chicago should consider having companies that ship goods in boxes pay a fee based on the amount of cardboard they use, thereby discouraging them from producing unnecessary waste. In addition, such a tax may nudge many consumers to purchase goods from local businesses and pick up those goods in person, in lieu of making an online purchase with companies such as Amazon, which are generally weathering the current economic crisis successfully.

• Pension obligation bonds: Pension debt is a substantial piece of the City’s fiscal responsibility, and addressing the pension crisis thoughtfully and carefully is essential to the City’s long-term financial health. Part of this strategy can involve the use of Pension Obligation Bonds (POBs), which rests on the assumption that the bond proceeds will be able to achieve a rate of return that is greater than the interest rate owed over the term of the bonds. The Center for Tax & Budget Accountability (CBTA), among others, has advocated that the City issue several POBs over a multi-year period. In support of this proposal, CBTA has observed that between 1992 and 2014, POBs across the country in the aggregate achieved a robust rate of return. It bears emphasizing, however, that POBs do not come without risk, so additional analysis will be needed.

• Congestion fee: Last year, New York City approved a congestion tax that will charge drivers a modest fee to enter areas with high vehicle traffic using an EZ Pass system. (The tax has yet to go into effect, as the Federal Highway Administration has yet to provide the requisite approval.) Their tax is estimated to raise approximately $1 billion annually, which will in turn be used to borrow $15 billion to pay for upgrades to the area’s bus, subway, and commuter rail systems. Many other U.S. cities have been publicly considering a congestion tax as a way to reduce commute times as well as transportation emissions—now the largest contributor of emissions in the United States.
• Carbon tax: Several U.S. cities have implemented a carbon tax, including Boulder, Colorado. In Boulder, the tax is levied on city residents and businesses based on the amount of electricity they consume, and varies based on user classification. Boulder has generated approximately $17.3 million in revenue (approximately $1.8 million annually) from the tax, and estimates that 250,000 to 750,000 cumulative metric tons of greenhouse gas emissions have not been emitted as a result. Chicago should consider implementing some version of a carbon tax, paying special attention to ensure it is equitable and not regressive.

TIF Surplus

Earlier this year, the City declared a surplus of $304 million in TIF funds that have not been earmarked for a specific project. “Surplusing” means those non-allocated funds being returned to the corresponding local tax bodies—in this case, $76 million to the City’s Corporate Fund and $167 million to Chicago Public Schools, among others. Similar to last year, approximately $50 million in surplusable TIF funds will remain untouched. Although it may be prudent to sequester some of those funds to help offset cost overruns and unexpected expenses for previously approved projects, I believe we should surplus at least a portion of those funds. Indeed, as the lead sponsor of the TIF surplus ordinance, I firmly believe that we should surplus TIFs as aggressively, transparently, and regularly as possible.

+ Moving Forward

As challenging as conversations around the FY 2021 budget have been, the FY 2022 budget promises to be just as arduous, with a projected gap of $1.5 billion. And while that gap could shrink depending on when a Covid-19 vaccine is widely distributed and on the timing and scope of a second federal Covid-related stimulus bill, we must continue working to reshape financial and budgetary policymaking in Chicago. Accordingly, conversations within the City Council as well as between the Council and the Administration must extend beyond the typical 2–3 month-long budget season that kicks off in early September. Discussion and planning around revenues and efficiencies should be a year-round endeavor in which the City Council plays an active and co-equal role.

In 2020, anticipating a large budget deficit even without Covid-19, I began engaging the Administration in conversations about our preferred revenue solutions at the beginning of the year. I plan to do the same in 2021, and hope that we can work together to lay the groundwork to provide the type of structural reforms and progressive revenue solutions we need.

Finally, I commend the Budget Committee for hosting earlier meetings this year to dive into these complicated issues, as well as the Finance Committee for soliciting memos from alderpeople about their preferred revenue solutions. I hope that this type of engagement will be expanded upon next year.

+ New revenue, savings, and efficiencies

• $501 million from restructuring and refinancing existing debt
• $263 million in “improved fiscal management,” which includes enhanced fine and fee enforcement involving city vendors and other entities, as well as better debt collection practices
• $168 million in savings from lower healthcare plan rates, prior-year audits, and contract renegotiations
• $106 million from closing approximately 1,900 vacancies and furloughing certain city employees (approximately 1,000 vacancies will remain in the FY 2021 budget, with over 600 of those positions located in the Police and Fire Departments)
• $74 million by increasing the personal property lease tax, including tax on computer leases and cloud services, from 7.25% to 9%
• $43 million from a one-time property tax increase
• $38 million from fines, forfeitures, and penalties, including ticketing drivers who exceed the posted speed limit by 6 MPH or more, instead of the current 10 MPH threshold
• $35 million from a property tax increase tied to the consumer price index (CPI), which enables City Council to increase property taxes based on CPI annually
• $16 million from property taxes associated with growth in new properties
• $16 million from ending the annual transfer of ride-hail fees to the Chicago Transit Authority
• $14 million from shifting the cost of nearly 900 crossing guards to the payroll of Chicago Public Schools
• $10 million from increasing the gas tax from 5 cents to 8 cents

+ Substantial new investments

• $36 million in new funding for violence prevention ($10 million of which from remaining CARES Act funds)
• $1 million to be divided between law enforcement and non-law enforcement pilots for responding to certain mental health 911 calls
• $180,000 increase in each ward’s menu money fund to pay for local infrastructure projects