People march outside Chicago City Hall in 2019. (Stacey Wescott / Chicago Tribune)
For months, Mayor Lori Lightfoot declined to say how big of an impact the coronavirus was having on Chicago’s budget.
But on Tuesday, she announced that taxpayers face a shortfall of at least $700 million due to COVID-19, throwing the city’s precariously balanced spending plan out of whack.
“That’s a sobering number, and it presents a sobering challenge, any way you look at it,” she said.
City Hall estimated a $175 million revenue loss in March and April as the statewide stay-at-home order was in full force and the local economy tanked. Amusement, hotel, parking and restaurant taxes dipped. McCormick Place’s convention business plummeted after a series of cancellations. The airports saw fewer flights. Lightfoot aides projected similar losses for May.
To fill the hole in an $11.6 billion budget, the mayor said all options including property tax hikes and staff layoffs are on the table, though she hopes to deal with the problem without having to take such radical steps.
To start, Lightfoot said the city will attempt to use $100 million from refinancing debt earlier this year and will try to do more refinancing as well. She said the city will push off some projects and evaluate hiring priorities for 2020.
But, she said, the city needs to look at other options.
“Nothing about this moment is ordinary, and it will continue to require us to make some very difficult decisions,” Lightfoot said. “Our businesses have been suffering and many of our small businesses, unfortunately, have been forced to close.”
It’s unclear how much of the gap could be closed by an influx of $1.1 billion in federal CARES Act money. About 54% of the CARES Act money — $613 million — has to go toward specific expenses, while the city has more discretion to spend the other 46% as it chooses. The money has to be spent on COVID-19-related duties, however.
On Monday, Lightfoot administration officials said the city doesn’t have “imminent” borrowing plans and that the shortfall for 2021 could be more than $1 billion.
Complicating matters: The city is preparing for the possibility of a second surge in coronavirus cases later this year, which could further upend Chicago’s finances.
The city also is concerned about an uptick in cases due to protests and unrest following the Minneapolis police killing of George Floyd, Lightfoot said.
Given the unprecedented scale of the economic dislocation caused by the pandemic, freshman North Side Ald. Andre Vasquez said the $700 million budget shortfall estimate sounded “a little conservative.”
“I expected the number to be north of a billion,” said Vasquez, 40th. “So I’ll be interested to hear more about where that estimate came from.”
Vasquez was among a group of progressive aldermen who pushed their own budget priorities last fall, and he called on the Lightfoot administration to consider some of those now.
He pointed to the city collecting payments in lieu of taxes from nonprofits that often receive tax exemptions. He also said it’s time to revisit a corporate head tax on some companies, while acknowledging the city would need to thread a needle on levying such a per-employee tax.
“So many businesses have taken such a huge hit during the pandemic, we would need to look closely at only taxing those that have managed to weather it or thrive,” Vasquez said.
Vasquez said he wouldn’t be surprised if Lightfoot resorts to the politically toxic property tax increase. “If that were the case, we would have to make sure people were still getting a high level of city services,” he said.
Southwest Side Ald. Raymond Lopez, a frequent Lightfoot critic, called for the city to look inward instead of hiking taxes. He said the city should also consider legalizing video gambling to add a quick infusion of cash.
“Before anyone says even one word about cuts, increasing taxes or what have you, we really need to do a top-down true forensic zero-based budgeting for every department,\" said Lopez, 15th.
Far South Side Ald. Anthony Beale, another regular opponent of the mayor’s, said the mayor should have enacted a stiffer city hiring freeze months ago.
“Once again, we’re late,” said Beale, 9th.
West Side Ald. Jason Ervin, who chairs the City Council Black Caucus, said the city’s response to the budget hole will depend on where the shortfall is occurring.
“We need more detail on some of this, whether it comes in aviation, special events, some other area,” said Ervin, 28th.
“But it seems like every year, city departments go through an exercise where they’re doing less and less and less in terms of services,” Ervin said. “So depending on the specifics, we may need to make some very painful decisions.”
Chicago is no stranger to yawning budget deficits. Indeed, several months after Lightfoot took office last year, she held a televised speech to announce predecessor Rahm Emanuel had left her with an $838 million shortfall.
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