CHICAGO (CBS) — Calling it a “fiscal mountain that we must climb,” Mayor Lori Lightfoot on Monday projected an $800 million budget shortfall for the rest of 2020, and a $1.2 billion deficit for next year, as the COVID-19 pandemic continues to take a severe toll on the city’s tax revenues.
The mayor said COVID-19 has caused the city to lose approximately $780 million in revenue, accounting for the vast majority of next year’s budget gap.
“This disease has forced a seismic disruption of our economy, and as a consequence our city’s finances,” Lightfoot said as she released the city’s budget forecast for 2021.
In addition to the massive budget gap for next year, Lightfoot said the city faces an $800 million shortfall for 2020, up from a $700 million deficit she projected in June.
Lightfoot said the city has seen a steep decline in tax revenue during the pandemic; particularly from hotel taxes, restaurant taxes, amusement taxes, and parking fees. Sales taxes and convention taxes also have taken major hits, with so many businesses closed for three months or longer — in some cases, permanently — and trade shows forced to cancel expositions at McCormick Place due to the virus.
“This disease has forced a seismic disruption of our economy, and as a consequence our city’s finances,” Lightfoot said.
Since the start of the pandemic, more than 900,000 Chicago residents have filed for unemployment benefits; and the city’s unemployment rate has skyrocketed from 3.6% in February to 12.6% as of Monday.
Lightfoot said many businesses also have suffered major damage due to looting in late May and early June, and again earlier this month.
“The damage that was done was not just about shattered windows and lost inventory. The criminals who broke into stores, helping themselves to somebody else’s property, shattered hopes and dreams and confidence in Chicago as a place that can sustain lives and livelihoods,” she said.
While Lightfoot offered few specifics on how she plans to close the 2020 budget gap, she said her budget team is looking at a personal property lease tax on computer leases as a possible new revenue source for the city. She also said the city also will turn to a large surplus in tax increment financing (TIF) that is meant to be set aside for development projects in blighted areas.
Last year, the city declared a TIF surplus of more than $300 million, the largest in its history, and Lightfoot said “we will work aggressively to surplus again this year.”
The mayor is scheduled to present a detailed spending plan for 2021 in October, when she will present her annual budget address to the City Council.
The city’s budget crisis comes at a time when the mayor’s relationship with aldermen appears to have grown increasingly strained. Several aldermen have criticized the mayor’s handling of widespread looting earlier this summer, accusing City Hall of being caught flat-footed, while Lightfoot has accused her most vocal critics on the City Council of grandstanding.
Offering an olive branch to her detractors on the City Council, Lightfoot admitted she needs to push herself harder to work with people who disagree with her.
“If you are focused on creating a better tomorrow for our residents, then I will be more intent on finding common ground with you. Reach out to me, and I will do the same,” she said.
The mayor said political discourse in general seems to have grown even more combative since the pandemic.
“Increasingly, we seem to have lost the ability to talk to each other, and our ability to work together towards common goals is becoming increasingly limited. The discussion has moved from how can we work together to how can we score points. We are losing our ability to see each other’s perspective. Too many of us ascribe the worst motives to anyone who is not agreeing 100% with our beliefs,” she said. “We need to change the tone of our discourse, and no better place to start than the process we will engage together over our fiscal future, and when I say we, that includes me as well.”
The city’s massive budget hole comes after Lightfoot and the City Council last year already closed an $838 million gap in the 2020 budget without a significant property tax hike or layoffs by relying a mix of one-time revenue sources and smaller targeted tax increases.
The mayor said city officials have already identified $550 million in solutions for the $800 million budget shortfall this year; including leveraging up to $350 million from federal coronavirus relief legislation, and at least $200 million from refinancing existing debt. Lightfoot said she expects to close the remainder of the 2020 budget shortfall through “continued efficiencies” and “spending controls,” as well as additional borrowing and federal funding.
Although Lightfoot did not mention a possible property tax hike for 2021 during her prepared remarks, she said afterward that all options must remain on the table, including a tax hike and layoffs, though she said those are a last resort. The mayor said she would do everything she can to avoid laying off city workers.
“I’ve been very clear that when it comes to those two things – property taxes, layoffs, and furloughs, those are at the end of my list of tools and options,” Lightfoot said.
According to the most recent city data, there are 32,928 city employees. Overall, City Hall workers have been spared pink slips since the start of the pandemic.
“If there’s a billion-two hole coming up this year in the corporate budget, you’re going to have to reduce the personnel,” the non-partisan Civic Federation’s Laurence Msall told CBS 2 Political Investigator Dana Kozlov. “That’s an unprecedented level of cutting.”
That means reevaluating and reprioritizing city services – something that could impact residents and businesses. Msall said Lightfoot cannot cut her way out of this shortfall, but he does not think tax hikes are the answer either.
“When we’re seeing so few workers coming downtown, we’re seeing people havin a difficult time paying their property taxes, to try to go to Chicagoans and say we’re going to raise taxes in the midst of a pandemic and a double-digit unemployment seems unlikely,” Msall said.
Lightfoot said the city is in discussions with organized labor unions to discuss any potential solutions to the city’s budget crisis.
“As we navigate this crisis together, you have my word, anything that we will do will involve engagement and collaboration. No proposal is set in stone, and we welcome all ideas, and your partnership,” she said.
One of the city’s biggest budget items in the $11.65 city budget is the Chicago Police Department. Lightfoot has said defunding the Police Department as part of reforms is not on her radar, but acknowledged the city needs to do more to fund social service programs that can help reduce crime by addressing its root causes.
“Some framing of this important discussion poses a binary choice; either fund the police or fund communities. That is, in my estimation, a false choice,” Lightfoot said, adding the city must fund both CPD and invest in social service programs like mental health services, homelessness prevention, and affordable housing.
However, Lightfoot said she agrees that the city needs to reexamine who is best equipped to respond to various calls for help, noting that for too long, the reflexive answer has been the police, when they might not be properly trained to handle some situations.
“Let’s dig in and have that discussion, and let’s be thoughtful and kind along the way,” she said.
The mayor said the city’s financial struggles during the pandemic serve as proof Congress must authorize funding to assist state and local governments that have lost significant tax revenue.
“This is a calamitous financial crisis, bipartisan in it impact, and we need a bipartisan solution. We cannot let the policymakers in Washington, DC, fiddle while our country burns,” she said.
Lightfoot acknowledged the city cannot count on Congress to provide the funding Chicago and other municipal governments are hoping for, and said her budget team is preparing for every contingency.
President Donald Trump and even some members of Congress have made comments in the past that Chicago doesn’t deserve money because its problems existed pre-pandemic. It is a notion that Msall rejects just as Mayor Lightfoot does.
“It’s not a bailout for Chicago or Illinois, it is basically recognizing every city in the United States; every state in the United States lost revenue,” Msall said.
Monday evening, the mayor’s budget team kicked off a weeklong series of virtual town hall meetings designed to allow Chicago residents to offer input and help craft possible solutions.
Budget Director Susie Park, Chief Financial Officer Jennie Huang Bennett, and City Council Budget Committee Chair Ald. Pat Dowell (3rd) kicked off “Budget Week” live on Facebook at 6 p.m. on Monday with the “State of the Budget.”
Park will then host four other virtual town hall meetings Tuesday through Friday at 6 p.m. on Facebook, with various department heads, to discuss individual agency priorities and city finances.
The meetings will be held from 6 p.m. to 7 p.m. each day next week.
Monday, Aug. 31:
State of the Budget with Susie Park, Budget Director; Jennie Huang Bennett, Chief Financial Officer; and Alderman Pat Dowell, Chairman of the City Council Committee on Budget and Government Operations
Tuesday, Sept. 1:
Public Safety with Susan Lee, Deputy Mayor of Public Safety
Wednesday, Sept. 2:
Human Services with Commissioner Lisa Morrison Butler, Department of Family and Support Services; Commissioner Dr. Allison Arwady, Department of Public Health; and Commissioner Rachel Arfa, Mayor’s Office for People with Disabilities
Thursday, Sept. 3:
Infrastructure with Commissioner Randy Conner, Department of Water Management; Commissioner John Tully, Department of Streets and Sanitation; and Commissioner Gia Biagi, Department of Transportation
Friday, Sept. 4:
Neighborhood and Economic Development with Commissioner Maurice Cox, Department of Planning and Development; Commissioner Marisa Novara, Department of Housing; and Commissioner Rosa Escareno, Department of Business Affairs and Consumer Protection
The mayor’s office also is launching an interactive website for residents to submit budget questions for each of the meetings, and to provide other feedback on the city’s finances for 2021. The city also will send out a multilingual survey seeking feedback about city government programs and services most important to taxpayers.
CBS 2 Political Investigator Dana Kozlov contributed to this report.