Civic Federation serves up smorgasbord of options on revenue, cost-cutting to avoid property tax hike

The Civic Federation on Wednesday laid out a smorgasbord of revenue-raising and cost-cutting options to fill a combined $1.2 billion city budget shortfall this year and next, but urged Mayor Brandon Johnson to avoid serving a property tax increase as the main course.

Among the belt-tightening options are requiring city employees to take one unpaid day off every two weeks, cutting city executives' pay by 10%, eliminating more than 3,000 dormant city vacancies and suspending both non-critical capital spending and a supplemental pension payment that, in 2024, amounted to $307 million.

The revenue-raising menu includes taxes on retirement income, liquor, gasoline, checkout bags, ride-hailing services and city stickers. Also on the list: higher taxes on employment, hotel rooms, restaurant meals, amusements and home-sharing. The Civic Federation report also raises the possibility of imposing a congestion fee and raising the $9.50-a-month garbage collection fee.

Although a property tax increase is viewed as somewhat inevitable, Civic Federation President Joe Ferguson told the Sun-Times. it "should be literally the last resort,” at a time when property owners are already reeling from reassessment increases. The “commercial real estate sector has been hit hard,” too, which likely will shift more of the burden to residential property owners, Ferguson added.

“These are incredible burdens separate and apart from the city asking for property tax increases. Add to that, CPS relies on property taxes for a far greater portion of its overall operating budget and almost inevitably" will seek a property tax hike, said Ferguson, who landed at the Civic Federation after a long stint as the city's inspector general. Given all that, he added, "property tax increases are not tenable and, if you look at this budget, even in terms of short-term measures, we don’t need to go there.”

Budget Director Annette Guzman could not be reached for comment on the report and her spokesperson, Lakesha Gage Woodard, did not return phone calls or emails. The mayor’s office had no immediate comment.

Ervin opposes higher garbage fee as ‘regressive’ tax

Ald. Jason Ervin (28th), chairman of the City Council’s Budget Committee, said it’s abundantly clear: “We need to do something revenue-wise.” But he ruled out increasing a garbage collection fee that has been frozen since it was imposed in 2016.

“I don’t agree with raising it at all. I don’t even agree with the garbage fee. Garbage collection as a city service had been what it was for 50 years. That was the only time I voted against a budget in my tenure as an alderman — when they added a garbage fee, which is a regressive tax on some of our poorest citizens,” Ervin said. "No matter if they make $20,000 a year or $2 million a year, they’re paying the same thing. That doesn’t fit in a 2024 and 2025 structure,” he said.

Ervin said he would support “equitable” revenue options to eliminate a structural deficit that has forced the city to “go through these Hunger Games types of situations on an annual basis.” But he's not willing to pile more taxes on “already overburdened" low-income Chicagoans.

Ferguson first suggested the city start charging for garbage collection in 2011. Five years later, the City Council took him up on the idea, but at a rate far below other cities. It now brings in just $68.8 million a year — covering about 40% of the $167.2 million in annual costs.

“ If re-calibrated and aligned with our other peer cities, that’s another $100 million,” Ferguson said.

Ervin said the proposal for mandatory furlough days “sounds like” the Civic Federation wants to “shut down government.”

“When you begin furloughing, we lose such a level of efficiency, it hurts us greater in the long run. … The last time furloughs were done, while it did save funds, we lost more in efficiency. We lost more in ability of teams to work together,” the chairman said.

Back pay owed firefighters will be ‘extraordinary’

One of the more volatile ideas raised in the report is to “reduce and recalibrate” staffing in a Chicago Fire Department that now spends 70% of its time responding to calls for emergency medical assistance and only 30% on fire suppression.

Implied but not stated is the requirement, with some exceptions and variances, to staff every piece of fire apparatus with five CFD employees.

With firefighters working on an expired contract for more than three years, Ferguson argued there will never be a better time than now to slay that sacred cow, which he has pushed to confront for years.

The back wages owed when the contract is settled are piling up to an "extraordinary" amount, he said. "That needs to be brought to an end" and the contract settled. But, he added, the city also should at least consider taking the staffing requirement to arbitration. A harder line is needed "that actually realigns the department with the service calls, which are almost three-quarters emergency medical calls,” he said.

The supplemental pension payment over and above actuarial requirements was initiated by now-former Mayor Lori Lightfoot to rave reviews from Wall Street rating agencies. Johnson continued it, paying $307 million last year.

Suspending that extra payment for one year is another point of contention between the Ervin and the Civic Federation.

“We definitely need to keep pace with what the law is asking us to do and make the supplemental payment because we do not want our funded ratios to start sliding backwards,” Ervin said.

‘No more tomorrow’ to confront fiscal crisis

One thing is certain: Chicago’s financial day of reckoning has arrived. The Civic Federation’s tough-love report makes abundantly clear that the wolf is at the door.

After balancing his first budget with one-time revenue, Johnson must confront a harsh reality: $1.9 billion in federal stimulus money used to prop up and expand the city budget has run dry. A casino portrayed as the salvation for under-funded police and fire pensions is an “unreliable” revenue source in a “saturated gambling market.” And financial entanglements between the city and Chicago Board of Education must be resolved before a partially elected board is seated next year.

Exacerbating the crisis is the $2.8 billion 2024 contribution to four city pension funds that are “among the most poorly funded of any large city in the United States,” a mountain of city debt gobbling up 17% of net expenditures, a “staggering volume” of police misconduct cases and a migrant situation that while subsiding, remains unpredictable.

“The magnitude of this budget [shortfall] is equal to what we were facing during the pandemic without the benefit of federal support to carry us through. … There is no more tomorrow,” Ferguson told the Sun-Times.

“If you look ahead at the city’s own projections or 2026 and 2027, it only gets worse and the means of addressing that in the future become fewer. So we have to do the work now.”

Although eliminating some of the 3,000 vacancies the city has "no intention of filling," is presented as an option, 1,800 of them are in the Chicago Police Department.

Ferguson said he is not suggesting eliminating all — or any — police vacancies. He's simply saying a long-promised staffing analysis should be conducted to determine "what is absolutely needed for Supt. Larry Snelling to succeed." Only then will CPD stop "constantly blowing" its overtime budget, he said.