Mayor Lori Lightfoot said Monday that her 2022 budget proposal does not include "any new taxes, no reduction in city services, and no layoffs." [Don Vincent/The Daily Line]

Mayor Lori Lightfoot is proposing to use a combination of leftover tax-increment financing, federal aid from the American Rescue Plan and a smorgasbord of brightened cost and revenue projections to balance the city’s 2022 budget.

The $16.7 billion budget plan Lightfoot rolled out on Monday lacks much of the pain baked into her 2021 “pandemic budget,” which balanced the budget with a $94 million property tax hike and a host of hiked fees.

Lightfoot is proposing to close the city’s $733 million projected budget gap “without any new taxes, no reduction in city services, and no layoffs,” she said during her annual budget address in the City Council chamber. She added that the “foundation for this good news was set with the hard, but necessary choices of last year’s budget.”

But while her new plain avoids fee or sales tax hikes, it does call to raise the city’s property tax levy by about $77 million, including with an approximately $23 million hike tied to inflation. The higher levy, notched up to about $1.71 billion, also accounts for $25 million to pay down debt for last year’s $3.7 billion capital bond, which will fund the city’s five-year “Chicago Works” plan. And it includes another $28.6 million set to be reaped from expired tax-increment financing districts and new development being added to the tax rolls.

Related: Street makeovers, building upgrades set to accelerate in first phase of 5-year capital plan

The budget balloons the city’s flagship Corporate Fund to $4.9 billion, with other city funds combining for $5.7 billion and outside grants totaling about $6 billion. It represents an approximately 30 percent jump from the $12.8 billion spending plan approved for 2021.

Aldermen gave little indication after Lightfoot’s budget address of whether they were ready to support her plan, but several acknowledged the property tax increase packed far less peril than the budget they were asked to support last fall.

Ald. Matt O’Shea (19), who cited the property tax hike and a relative lack of police investments when casting his vote against last year’s budget plan, told The Daily Line on Monday that he “didn’t hear” the mayor address “what we are doing about this record violence.” Still, he conceded that “this is a much easier budget, as far as protecting the taxpayers, than last year.”

Related:  ‘Pandemic budget’ with $94M property tax increase narrowly approved by City Council

And Ald. Michele Smith (43), who has expressed reservations about foisting more property taxes on her already high-paying constituents, said residents in her Lincoln Park ward “certainly support” the capital plan that stands to contribute to the levy. And she celebrated the growth in the city’s tax base, which she said is “desperately needed in our city.”

“Making investments that grow our tax base, without burdening them with [tax-increment financing districts] and things like that, is how we actually restore our city,” Smith said. “So let’s see if this budget gets us on that path — that’s what we need to review.”

Chicagoland Chamber of Commerce president Jack Lavin wrote in a statement Thursday that local business leaders “applaud” the mayor’s plan to hike investments in economic development and social services, but he lamented that her  “proposal calls for the second consecutive increase in the property tax levy in two years, all at a time when businesses are seeing their property tax assessments skyrocket without any clear reason why.”

American Rescue Plan funding

City budget officials last month laid out a plan to set aside about $782 million from the city’s $1.9 billion share of American Rescue Plan funding to pay for core city services in 2021, allowing the city to cancel its previously planned $500 million “scoop-and-toss” debt restructuring plan that would have put future taxpayers on the hook for plugging the 2021 budget hole.

Related: Finance officials defend use of $782M in ARP to cancel ‘very expensive’ scoop-and-toss

The mayor now proposes to dip back into the federal funds to the tune of $385 million for 2022 to account for revenue the city might have otherwise picked up if not for the COVID-19 pandemic. Her plan also foresees using $152.4 million of the federal funds to plug revenue holes in 2023.

A review of “audited financial numbers” led city finance officials to blame the pandemic for about $1.4 billion in lost revenue in 2020 and another $500 million in losses in 2021, according to budget materials.

The revenue replacement funds will help fund about $17 million to boost staffing among 11 departments, especially the Department of Buildings and Department of Streets and Sanitation, according to officials. 

Beefed up revenue projections

Lightfoot is proposing to declare a surplus of $271.6 million from money raised by the city’s 132 tax-increment financing (TIF) districts, which cordon off property taxes to be used for capital projects. Chicago’s TIF districts pulled in more than $900 million combined in 2020, the last year for which Cook County Clerk Karen Yarbrough published records.

Related: Chicago to reap more than $900M in TIF this year as budget crisis looms

The city will only be able to pull $67.6 million from this year’s TIF surplus, with the rest divided among other taxing bodies like Chicago Public Schools, which will pull $150.2 million from the surplus.

While massive, Lightfoot’s move represents the smallest TIF surplus she has tapped so far. She declared an approximately $300 million surplus for the 2020 budget year and a $350 million surplus last year.

Related: County set to reap windfall from Lightfoot’s behemoth $300M TIF surplus

Budget officials also helped close this year’s budget gap by citing $62.6 million in “revenue projections that have improved” since the mayor published her budget forecast last month.

Department of Finance reports show that the city raked in about $1.7 billion in revenue through the first half of 2021, surpassing budget officials’ projections by nearly $89 million. The city’s transaction taxes brought in more than $51 million more than was budgeted in this year’s spending plan, and personal property replacement tax revenues exceeded projections by more than $106 million.

Related: Budget officials to recap 2021 spending, kick off battle over CPD budget in wide-ranging hearing 

‘Savings and efficiencies’

The mayor’s budget plan is leaning on $298.2 million in projected “savings and efficiencies” to close nearly half the city’s projected budget gap. They include:

• $46.2 million in “personnel savings,” including a reduced estimate of staffing costs related to the Fraternal Order of Police contract approved by the City Council this month. Budget officials credited “refinancing of debt and other funds” for allowing the city to “reallocate personnel” from the city’s Corporate Fund to other city funds, “freeing up Corporate resources.”

• $21.6 million in “healthcare savings,” which city officials claimed from “a combination of negotiating better reimbursement rates from…hospitals” and increased employee healthcare contributions baked into “recently negotiated” union contracts. Employee healthcare contributions remain a sticking point in follow-up negotiations with the Fraternal Order of Police.

Related: FOP contract on glide path to approval, but some key details remain unresolved

• The city will claim $75 million from Chicago Public Schools in the form of a pension payment toward the city’s Municipal Employees’ Annuity and Benefit Fund, plus another $24 million in “improved revenue collection from intergovernmental agreements.”

• Another $131.4 million scooped into the category of “improved fiscal management,” including $29.4 million in “fund balance and refinancing,” $67 million in “leveraging other available funds for legal costs,” $29.4 million in “fund balance and refinancing” and $10 million in higher-than-expected water and sewer tax collections.

Climbing the pension and ‘scoop-and-toss’ ramps

Lightfoot’s address on Monday nodded to the nearly $2.28 billion in contributions she is proposing for the city to make to its four pension funds, a $460.7 million step-up from last year’s contribution. The city is on a course to keep boosting its pension payments thanks to a state law requiring its pensions to be funded at 90 percent by 2045.

“With the Budget we are proposing, we will climb our pension ramp, which means that for the first time in our city’s history, all four pension funds will be paid on an actuarially determined basis,” Lightfoot said in her remarks. “This is huge.”

Smith delighted on Monday that city leaders are “getting our pension plans in order,” which she called “the number-one issue about which I’ve been concerned since I became alderman.”

Additionally during her address, Lightfoot said the city “will be climbing yet another ramp — the scoop and toss ramp,” as the city steps up payments to cover the city’s recent history of debt restructuring maneuvers.

Lightfoot’s plan calls for the city to pay $302 million in short-term debt amortization next year, up from $225 million in 2021 and creeping up to an $336 million payment in 2025. Overall, budget officials claim to “reduce total debt by $1.8 billion” between 2019 and 2025, a feat they credit to “implementation of a cash flow forecasting system, cash flow management and delayed new money borrowing.”

“As a result of climbing this ramp, we will be able to make investments that will reap economic and social benefits, as well as make Chicago a better place to live rather than just rolling over our credit card payments and building a mountain of debt,” the mayor said Monday.

Lightfoot is also following through on her pitch to refinance about $1.2 billion in bonds at a lower interest rate, a move officials expect to save the city about $254 million. The administration plans to use that money to cover the remaining outstanding cost of retroactive officer pay guaranteed under the Fraternal Order of Police contract.

Related: Police contract set for committee approval boosts reform efforts but tees up budget pain