Mayor Lori Lightfoot is poised to lower the boom on beleaguered Chicago taxpayers on Aug. 29 — by disclosing a shortfall that tops $1 billion — during a prime-time speech that, she hopes, will be carried live by some media outlets.
Before an audience likely to include civic leaders and community groups, the mayor will finally come clean about the size of the shortfall she inherited from Rahm Emanuel and what she intends to do about it.
So far, the new mayor has only described the deficit as “north of” the $740 million acknowledged by Emanuel’s chief financial officer.
She has refused to say more until she had potential solutions to present on the revenue and spending sides. That’s why she put off the preliminary budget for a month.
Now, she’s apparently prepared to deliver the bad news and hope the voters who gave her a 74% mandate are prepared to hear it.
City Hall sources said they expect the mayor to project the shortfall that tops $1 billion amount — not counting a looming, $1 billion spike in pension payments — to lay the groundwork for a slew of post-election tax increases and budget cuts.
She’s expected to lump together the structural deficit with debt service, pension payments, yet-to-be-negotiated pay raises for police officers, firefighters and teachers, and a parade of wrongful conviction lawsuits already filed or coming down the pike.
The kitchen-sink approach is not without risk. It would send red flags to Wall Street rating agencies, including Moody’s Investors Service, which still rates Chicago bonds as junk.
And if Lightfoot counts 250 legal cases in the pipeline as part of the budget shortfall, it’ll be on her to find the money to pay for it. She’ll also be forced to abide by those ground rules for the remainder of her tenure.
Last month, Lightfoot floated a long-shot plan to have the state take over the city’s $28 billion pension liability. Gov. J.B. Pritzker shot it down on grounds that it would drag the state’s already shaky bond rating into junk territory.
That left the mayor with precious few options, none of them good, even though Lightfoot will be helped somewhat by a $181 million surge in tax increment financing revenues.
• She can ask for state authorization to dramatically raise the real estate transfer tax she once earmarked to combat homelessness and solve the affordable housing crisis.
• She can increase property taxes in a way that targets wealthier, white communities, even though she promised to steer clear of the third-rail of Chicago politics until the broken assessment system is fixed.
• She can ask Pritzker and the Democratic-controlled General Assembly to extend the road to 90 percent funding of Chicago pensions and empower the city to help itself by imposing a service tax.
• She can hit the ride-hailing industry hard, just like she promised during the mayoral campaign, to reduce traffic congestion and level the playing field with Chicago’s shrinking taxicab industry.
• She can even revisit a scaled-down version of the $10 billion pension borrowing that Emanuel proposed as a way to save “as much as $200 million” in his successor’s first budget.
But first, Lightfoot will put her cards on the table as Chicagoans prepare to celebrate a Labor Day weekend that marks the unofficial end of summer.
Lightfoot has promised to tackle Chicago’s “mounting, looming, all-consuming” pension debt once and for all, even it turns her into a one-termer.
That’s saying something, considering that Chicagoans have already paid a $2 billion price just to help Emanuel chip away at a $28 billion pension crisis decades in the making.
Emanuel risked his once formidable political capital to identify dedicated revenue sources for all four city employee pension funds.
He more than doubled Chicago’s property tax levy for police, fire and teacher pensions; pushed through two telephone tax hikes for the Laborers pension fund; and phased in a 29.5% surcharge on water and sewer bills to bankroll the Municipal Employees pension fund, the largest of the four.
He persuaded the Illinois General Assembly to give the Chicago Public Schools a $450 million cash infusion and bankroll teacher pensions going forward.
But even with all of that — and hundreds of millions more in tax, fine and fee hikes and budget cuts —Lightfoot is prepared to argue that she inherited a mess even bigger than the one that former Mayor Richard M. Daley left behind for Emanuel.
