Finance Report: November 2019

Finance Report: November 2019

Finance Report
Type: 
News


City Budget Plan: Looks to the State

The 2020 budget for the city of Chicago is an $11.6 billion spending plan that does not involve raising property taxes—at least for now—but proposes other measures that will require changes in state law, such as allowing the city to raise the real estate transfer tax rate on properties over $10 million but reduce the rate for those under $500,000. Also on Springfield’s plate: a change in the way a proposed Chicago casino is taxed to make it more attractive for investors and operators. The budget includes spending cuts by means of zero-based budgeting, improving cash flow management, eliminating more than 3,000 vacant positions and a plan to refinance more than $1 billion of the city’s debt, and new taxes on restaurants and ride-hailing firms such as Uber and Lyft. 

General Assembly Blinks

A plan to change the tax structure for a Chicago casino did not pass muster in the General Assembly. It will be reintroduced in January. The plan would make a casino more financially feasible for operators. The current law imposes a 72% effective tax rate on casinos as well as fees for an application, license, and gambling positions. According to The Daily Line, the new plan would increase taxes on table and video games, allow operators to keep more of the revenue, and give operators more time to pay off fees. Once it’s up and running, a casino is expected to raise nearly $500 million in tax revenue for city, county, and state government and $215 million a year for Chicago’s fire and police pensions. 

City Government Committee Monitors Budget Hearings

During the weeks of October 28 and November 4, members of LWV Chicago’s City Government Committee attended hearings of City Council’s Budget Committee in person and watched live video streams of these meetings. Members were attentive to the participation of aldermen, concerns raised across several departments and the responsiveness of department heads and staff to questions.  

The committee will meet to share their observations and prepare a report as they plan for the January 11 briefing on Chicago's city budget. It is monitoring how quickly the videos of the hearings are posted to the website of the city clerk. —Margaret Herring, LWV Chicago City Government Issues Chair 

TIFS: Focus on Neighborhoods

TIF Surplus 

Chicago Mayor Lori Lightfoot’s budget declares a $300 million+ surplus from tax-increment financing districts (TIFs). By way of explanation, the city is able to channel money from TIF districts that is not slated for a specific project. This is known as declaring a surplus. The $300.2 million surplus in Lightfoot’s budget is the largest in Chicago’s history. It is $125 million more than the 2019 surplus and comes in part from a 12.5% increase in the equalized assessed property value following 2018 reassessments as well as a $588 million property tax increase from 2015. The surplus will increase the city’s bottom line by $31.4 million. 

TIF Targeting

On October 21, City Planning Commissioner Maurice Cox laid out a three-year plan that would use $250 million in TIF funding as well as Neighborhood Fund grants to develop commercial districts on the South and West Sides. 

As reported by Alex Nitkin in The Daily Line, the plan, called Invest South/West, targets ten neighborhoods that already have well-developed community plans, an active commercial area, and a nexus or intersection in what Cox called “20-minute neighborhoods," communities that give residents access to businesses, parks, and transit lines. 

The program will focus on Austin, Humboldt Park, North Lawndale, New City, Greater Englewood, Auburn Gresham, South Shore, South Chicago, Roseland/Pullman and the Quad Communities of Bronzeville, Oakland and Kenwood. 

In addition to TIFs, which are taxing tools for promoting development in blighted or at-risk areas, the three-year plan will make use of Neighborhood Opportunity Fund grants. The grants were created in 2016 as a matching program for businesses to invest in targeted neighborhoods. Lightfoot seeks to change the focus so the fund offers direct grants. 

Also involved is the Catalyst Fund, which was created three years ago. The Community Catalyst Fund, or Fund 77, reviews proposals from the private sector to create independent investment funds whose managers request city funding as well as private financial support for a community investment strategy. The $100 million Catalyst Fund has not yet made an investment. 

League to which this content belongs: 
Chicago