Candidates in the runoff race for Chicago mayor are trying to convince voters they will keep their pocketbooks a priority if elected, as growing property taxes and the city’s pension crisis cast long shadows across the campaign trail.
Cook County Commissioner Brandon Johnson said he will not raise property taxes if elected. Former Chicago Public Schools CEO Paul Vallas said he would cap the city’s property tax levy but has been less clear about whether that means he would not raise property taxes at all. A spokesperson said Vallas is “committed to not raising city property taxes.”
Johnson is proposing a slew of new revenues, mostly in new taxes on big businesses. Vallas, meanwhile, promises to use budgetary acumen to work within the existing budget’s bounds. Neither plan is fail-safe, with many revenue fixes that will require City Council or state approval, financial experts tell WBEZ.
In 2020, Mayor Lori Lightfoot and the City Council moved to tie the city’s annual property tax increase to the rate of inflation. The inflation-tied increase — which is capped at 5% and helps pay for the vastly underfunded pensions each year — is just one small piece of the tax bill puzzle.
Still, both Johnson and Vallas said they would nix the policy, with Vallas promising to “cap” individual property tax bills, though the city’s mayor only controls a portion of that bill.
In his mayoral bid four years ago, Vallas said he would limit property tax increases at 5% or the rate of inflation, whichever is less, according to his campaign website at the time. Johnson argues Vallas is leaving himself wiggle room.
“The truth of the matter is he has not put forth a budget plan, because when he put forth the budget plan four years ago he came in ninth place,” Johnson said at a recent debate. “So he decided to only put three sentences up on his website, because he’s gonna raise property taxes.”
Later in the debate, Vallas responded by saying: “I’m going to take a holistic approach and long-term planning approach to the budgets, and I’m going to look at all aspects of the budgets to ensure that we can meet critical needs while holding the line on property taxes.”
On his website, Vallas says “under NO circumstance” would he raise property taxes to pay city pensions — but he doesn’t say whether he would use increases for other purposes.
The candidates’ vows to forgo property tax hikes, or abandon the policy of linking them to inflation, is cause for alarm for some veteran fiscal experts.
“I don’t feel as if it’s a responsible fiscal position for the next mayor to take,” said Ralph Martire, executive director of the Center for Budget and Tax Accountability.
Lightfoot’s decision to tie property tax increases to the rate of inflation was fiscally responsible, “because that just keeps the value of that property tax revenue the same from year to year,” he said.
Rift over revenue ideas
Johnson has proposed several new or increased taxes to generate millions in revenue and make the “ultra-rich pay their fair share,” according to his website.
Among them is the reinstatement of the city’s so-called “big business head tax” — where large businesses that do the majority of their work in the city would pay up to a $4 tax for each employee. It was phased out by 2014, and Johnson estimates the new tax would bring in more than $20 million in revenue.
Johnson also pitches “strengthening” the city’s hotel accommodations tax and jet fuel tax, increasing the tax on the sale of high-end properties, implementing a tax on securities trading contracts and broadening the city sales tax to include professional services.
The Illinois Hotel and Lodging Association criticized that idea, saying “any increase in that tax would be a gift for the other cities we compete with for conventions.”
Vallas has said he does not support any of the above tax increases, though he has expressed his support for allowing video gambling in the city limits.
Johnson has already backpedaled from some of his proposals that have garnered criticism, such as a surcharge on suburban Metra riders that he estimated would bring in $40 million in revenue.
Vallas has proposed little in the way of new revenue streams for the city. But one idea includes creating a municipal bank — which would dole out loans and “capture the profit that private banks presently keep for themselves.”
‘Ugly reality’ of pensions, property taxes
One of the city’s biggest financial pressures facing the next mayor is an approximate $2.5 billion-and-counting pension payment it makes each year. The pension system is drastically underfunded after officials for decades skipped paying into the pot of money for teacher, police, firefighter and other municipal employee retirement funds.
“Part of the reason for the pension system being so underfunded today is tied to keeping property taxes flat,” said Amanda Kass, an assistant professor at DePaul University’s School of Public Service who researches public finance.
“It’s an ugly reality.”
Both Vallas and Johnson have committed to paying the city’s required pension bill even in the face of a fiscal downturn.
Johnson said he would do so without raising taxes by “auditing waste in government, prioritizing payments on our high-interest debts and spending smarter.”
Vallas has said he would use surpluses from Tax Increment Financing districts to fund pension obligation bonds — a tool the Chicago-based Government Finance Officers Association recommends against because of the bonds’ risky nature.
Vallas also floated using TIF surpluses to finance homelessness prevention services, and Johnson also mentions tapping TIF surpluses.
“But the TIF surplus itself is not exactly the kind of thing that you could rely on — the amount varies significantly from year to year,” Martire said. “So, it’s just not a reliable revenue source.”
Tessa Weinberg and Mariah Woelfel cover city government and politics for WBEZ.
