October 23, 2019 / 6:53 PM / 21 days ago

Chicago mayor avoids property tax hike to fill big budget hole

CHICAGO, Oct 23 (Reuters) - An $838 million funding hole in Chicago’s upcoming budget would be filled with a combination of cost-saving and revenue-raising measures, not a big property tax hike for now, Mayor Lori Lightfoot told the city council on Wednesday.

The mayor proposed an $11.65 billion all-funds fiscal 2020 spending plan, which includes a $4.5 billion core government budget, that she said relies more on structural solutions than one-time measures for balance.

“That means we not only created solutions to help put our fiscal house in order this year, we created solutions to ensure it stays in order for years to come,” Lightfoot said in her first budget address.

Lightfoot, who took office in May, has been grappling with the city’s largest deficit since at least 2001 and a teachers strike that canceled classes for a fifth day on Wednesday.

A chronic budget deficit and big unfunded pension liability have weighed on the city’s credit ratings, leading to high borrowing costs.

The biggest piece of Lightfoot’s budget-balancing puzzle involves the refunding of $1.3 billion of outstanding bonds to produce a one-time, $200 million savings.

The mayor is seeking approval from the Illinois Legislature for a graduated real estate transfer tax that would raise more money from the sale of higher-priced homes to generate an additional $50 million in the fiscal year that begins on Jan. 1.

Lightfoot also wants changes to a new state gambling law that authorized the city’s first casino, but imposed a fee and tax structure that was deemed to be too high, making the project unfeasible. Her legislative agenda includes unspecified help for Chicago’s underfunded pensions.

She warned of “painful” revenue choices if the state does not deliver. Her budget now heads to the city council for hearings.

Alderman Scott Waguespack, who chairs the council’s finance committee, acknowledged that a lot depends on the legislature, which returns to session next week, and that a property tax hike would be unpopular.

Laurence Msall, president of the Chicago-based Civic Federation, a government finance watchdog group, praised Lightfoot for closing the budget gap without a massive tax increase.

“I think it’s actually a strong effort by the mayor to try to navigate a difficult financial situation,” he said.

The budget relies on $352.2 million in new or higher revenue, including from ride-hailing, recreational marijuana, restaurant meals, and parking meters.

Reporting by Karen Pierog in Chicago Editing by Matthew Lewis

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