Mayor Brandon Johnson proposes $300 million property tax hike to help close $1 billion budget gap
CHICAGO (CBS) -- Mayor Brandon Johnson is proposing a $300 million property tax hike in 2025, going back on a key campaign promise, as he seeks to close a massive budget shortfall of nearly $1 billion.
This summer, Johnson projected a $982 million budget gap for next year, and later delayed his annual budget address by two weeks as his budget team worked on solutions. He is now proposing a $300 million property tax hike to help balance the budget for next year.
"This is tough. It is. It is something that I grappled with for weeks and weeks. We didn't take this decision lightly. I directed my budget team to look at all options at closing this budget gap, and when it came down to either mass layoffs, curbing vital city services, or an increase in property taxes, I would certainly much rather tax the rich, but I did have to make the choice to increase our property taxes," Johnson said in his budget address to the City Council on Wednesday. The mayor was referring to his failed bid earlier this to increase the transfer tax on million-dollar homes in order to raise more money for the fight against homelessness.
Johnson campaigned on a promise not to raise property taxes, saying in a campaign ad, "I'm the only candidate for mayor who won't raise your property taxes."
But the mayor now says he was left with no choice, given the city's massive budget shortfall, saying the alternative would be to seek a major reduction in city jobs and services.
"When I ran for office, I promised to tell people the truth, and that I would not support programs that we did not have funds for. And I'm gonna stick to that promise. We will pay the city's past and present bills, and we will not leave a legacy of unpaid bills to the next generation," he said.
The mayor's $17.3 billion total budget plan for 2025 will require 26 votes from the City Council by the end of the year to pass. By avoiding layoffs and furloughs for city workers, the mayor clearly is hoping organized labor will help him convince enough aldermen to back his budget plan to pass it by the deadline.
"Mass layoffs would hamper our ability to drive economic development and protect our most vulnerable – the people who provide and rely upon healthcare," Johnson said.
The mayor's proposed $300 million property tax hike would be the largest since the City Council approved a $588 million property tax hike under former Mayor Rahm Emanuel in 2015, a tax hike which was phased in over four years.
The mayor's office estimated the proposed property tax hike would mean a $72 increase in property tax bills for a $100,000 home, a $175 increase for a $200,000 home, a $276 increase for a $300,000 home, a $362 increase for a $400,000 home, and a $481 increase for a $500,000 home. Those tax hikes don't account for the impact of new property tax assessments that also will go into effect next year in Chicago, which could increase or decrease a home's taxed value. The estimates also don't account for any property tax hikes that also are being imposed by other government bodies.
Johnson faces an uphill battle in securing the 26 votes he'll need to pass his budget plan. Ald. Byron Sigcho-Lopez (25th), one of his closest allies, said he opposes the proposed property tax hike, saying the city should instead conduct an audit of the Chicago Police Department to find additional savings in its nearly $2.1 billion budget for 2025.
Sigcho-Lopez said there are additional vacant positions in the CPD budget that could be eliminated to cut the overall city budget. He also said the Johnson administration should consider a number of recommendations put forth by the Civic Federation earlier this month to help balance the budget.
"The Civic Federation has a long history of fiscally responsible solutions," he said.
Two weeks ago, the Civic Federation released a report recommending several options to avoid a property tax hike – including unpaid furlough days for city workers, pay cuts for city executives, suspending a $270 million supplemental pension payment, taxing retirement income, raising garbage collection fees, or imposing a new congestion fee.
Johnson said he understands the property tax hike would be painful for taxpayers, but he insisted it's better than the alternative of laying off city workers.
"I'm asking families to lean in and do a little bit more in order to make sure that their neighbors are not laid off, and to make sure that we don't have to cut vital city services. I know that across this city, working families make tough decisions every day. God knows that I do, and whether it's the cost of childcare, or paying utilities - certainly I know the challenge of paying utilities - and even going grocery shopping and buying food for your families, I know adding to those tough choices is not easy. This was the best option that I have at this time. It allows our city to move forward in a sustainable way. This is the start of a multi-year process that will finally get Chicago's finances back on track."
As part of his spending plan, Johnson is asking the City Council to approve $52 million to help connect young people to employment opportunities, $40 million to expand the city's current shelter system to 6,800 beds, $29 million to help households moving from temporary homeless shelters to stable housing, and $2 million to expand capacity at three new mental health clinics and to respond to mental health emergency calls.
Calling the tax hike proposal he's relying on to balance the budget a "very difficult decision" in a briefing before his budget address, Johnson blamed previous mayors for putting him in this position, by not doing more to meet the city's daunting pension obligations in past years.
"We have just had irresponsible administration after administration that has kicked the can down the road, and now it's in front of my door," he said.
The mayor's budget team said, without the proposed property tax hike, they would be forced to seek to reduce the city's overall workforce by 17%.
That would include a nearly 19% reduction at the Chicago Police Department, leading to fewer officers on patrol, longer response times, increased overtime costs, and less time off for officers. It would also require a reduction of more than 13% at the Chicago Fire Department, leaving the city unable to meet minimum staffing requirements for each firehouse, and leading to longer response times to fires and medical emergencies.
"Faced with a situation between laying off police officers and firefighters, versus making sure that we don't have to have those layoffs, you know this was a very excruciating process, but it's one that I recognize in this moment that the alternative is just not acceptable – reducing services and compromising our overall safety," he said.
Johnson, already facing a divided City Council – with 41 aldermen pushing back against his recent overhaul of the Chicago Board of Education – said he's not concerned about wrangling the 26 votes he'll need to pass his budget plan.
"I'm going to present a balanced budget. The City Council's job is to pass it," Johnson said. "Do I look worried?"
Johnson's budget team said the property tax hike would bring the city's total property tax levy to the amount it would have been if the levy had increased at the rate of inflation since 2019. However, Johnson himself had a hand in halting annual property tax hikes tied to inflation.
Former Mayor Lori Lightfoot had convinced the City Council to approve annual property tax hikes tied to inflation starting in 2021, but Lightfoot skipped that tax hike in her last year in office in 2023, and Johnson also skipped it last year.
Better Government Association President David Greising said implementing the automatic property tax hike tied to inflation last year would have helped Johnson with the upcoming budget process.
"That would have brought in extra revenue that the city could have used last year, could have maybe rolled over into this year, and so that wasn't available to him," Greising said.
Asked why he didn't seek to reduce his proposed 2025 property tax hike by demanding unpaid furlough days for city workers in 2025, Johnson said the city can't afford to reduce services.
"This budget speaks to my value system, and my value system is that we cannot afford to not only harm the services that the people of Chicago rely upon, but to cut to labor where are neighbors are being laid off and furloughed. No one in Chicago wants that," Johnson told reporters after his budget address.
The mayor's budget proposal will seemingly avert a clash with labor by not making any reductions to city staff, signaling the mayor likely hopes labor unions will help him get the votes he needs to pass his budget plan.
Johnson said he's willing to consider other revenue options that might be offered by the City Council or other groups as aldermen begin the process of digging into his budget plan through a series of meetings with city department heads.
Joe Ferguson, president of the Civic Federation, a nonpartisan budget watchdog group, said the pain of balancing the budget should be felt by everyone, not just taxpayers. Furloughs and eliminating vacancies are just some of the solutions he proposed.
"This is a moment of burden sharing," Ferguson said. "Starting with property taxes suggests that this isn't a burden-sharing moment. ... That's going to leave us in even worse shape for next year."
Even before the mayor presented his budget address, a group of 14 aldermen who are among the mayor's most vocal critics sent Johnson a letter, opposing any property tax hike to balance the budget.
"There's no way that we can negotiate on the property tax issue. This is not the time for a substantial property tax increase," said Ald. Brian Hopkins (2nd), one of the 14 aldermen who signed the letter.
"When you are in a community; and you're fighting and come from a marginalized, already disinvested community, and to say, 'Hey, residents, I'm going to raise your taxes,' they're going to kill me," said Ald. Monique Scott (24th), who also signed the letter.
In the same letter, the aldermen demanded the city's 2025 budget include the return of ShotSpotter gunshot detection technology, which the mayor shut down last month. They also want to create a new police district on the Southwest Side, keep the Chicago Police Department budget intact, finalize a contract with the city's firefighters, and more.
Some aldermen were briefed in advance on the mayor's budget plan, while others say they have been left in the dark. Ultimately, the mayor will need a majority of the City Council to get on board to pass his budget.
Ald. Timmy Knudsen (43rd), who was not among those who sent the letter to the mayor before his budget address, said the residents of his Lincoln Park ward already face high property taxes—which will continue to rise with the current reassessment.
"There's just not an appetite for a property tax increase," Knudsen said.
With a new property tax increase now on the table, all homeowners could be asked to take on even more.
"Naturally we need to figure out where we can make cuts to bring the budget back closer to where it was before pandemic," Knudsen said.
The mayor's supporters said avoiding layoffs is a fair trade for the extra tax dollars.
"The citizens are going to say that, 'No, we don't want those cuts. We don't want those reductions. We want to have services,'" said Ald. Jason Ervin (28th), who chairs the Budget Committee, which will spend the next few weeks reviewing the mayor's budget plan.
The mayor and the City Council have until the end of the year to pass a budget for 2025.
In addition to the $300 million property tax hike, Johnson has proposed declaring a record $570 million surplus in tax increment financing (TIF) funds, with $132 million of that surplus going to the city's budget. The rest will go to other government bodies in Chicago, including the Chicago Public Schools, which would get $311 million.
Johnson also is proposing $175 million in savings by not having the city absorb $175 million in nonteacher pension payments at CPS. The school district had covered those pension payments for the past several years, but did not include them in the current school year's budget plan, despite the mayor's demands.
After replacing the entire school board earlier this month, Johnson said he's confident the new school board will absorb that cost – particularly with CPS getting $311 million in surplus TIF funds it hadn't been counting on.
Johnson also is relying on nearly $140 million in surpluses from prior budget years to help the city fill its budget gap, along with eliminating 743 vacant full-time positions.