Mayor Lori Lightfoot’s pre-election budget includes a revised deficit of $305.7 million — $561 million lower than previous estimates — thanks to withheld federal relief funds and an improving economy, majors said Wednesday. assistants to the mayor.
The three women who lead the herd on the city’s finances have submitted their quarterly report to the city council’s budget and government operations committee, as required by a 2021 ordinance championed by Ald Town Centre. Brendan Reilly (42nd). The ordinance also requires monthly reports of projected income.
The latest report sets off alarm bells, despite signs that Chicago’s economy is recovering from the pandemic.
On the glass-half-full side of the equation is the fact that the city expects to close the books in 2021 with revenues $250 million higher than expected.
The main drivers are:
• A booming real estate market driven by historically low interest rates (until the recent increases orchestrated by the Federal Reserve). As a result, transaction and lease taxes are $201.3 million higher than budgeted.
• An improving labor market with tax revenues $57.5 million higher than expected.
• Increased consumer spending related to federal stimulus checks which boosted sales tax collections by $14 million, 22% above budget.
• And “increased business profits” related, in part, to a “legislative change in the timing of payments” that pushed municipal personal property replacement tax revenue by $170.7 million higher. above expected levels.
Even so, Chicago’s economic outlook isn’t as rosy as the picture Lightfoot painted during a recent speech at the City Club of Chicago, in which she attempted to lay the groundwork for her re-election campaign.
Transportation taxes are $53 million below budgeted levels, in part because much of the downtown workforce has continued to work remotely at least a few days a week.
Although hotel tax revenues have “begun to recover”, they are still “not fully restored to pre-pandemic levels”, according to chief financial officer Jennie Huang Bennett.
Conventions, general business travel and tourism have not fully returned. The perception and reality of downtown crime has not helped.
Aldus. Tom Tunney (44th), owner of Ann Sather Restaurants, was quick to point out, “like someone who lives it every day”, that inflation is a factor in these higher tax receipts.
“What we’re seeing is people going out and spending more money, not because they’re dining out more, but because it’s more expensive. It concerns me,” Tunney said.
“It’s inflation, which should help – unless it gets out of control.”
Aldus. George Cardenas (12th), deputy floor manager to the mayor, added: “I know we are resilient. But I’m also very concerned” about Chicago’s economy and its ability to rebound.
“Given that we have inflation and the Fed is now acting to control that, we could see a sharp stop to a lot of real estate activity,” Cardenas said.
“There are a lot of unknowns. … I don’t know if we are prepared for another crisis that may arise. … There are factors beyond our control.
Bennett openly acknowledged that while some key revenues are “seeing excesses over budget estimates,” other economic sectors are still recovering.
“Revenues from hotels, restaurants and tourism are still not there,” she said.
The CFO further noted that the impact of inflation and federal relief funds that Lightfoot set aside to balance his pre-election budget are “one-time in nature.”
“We don’t see this increase as consistent in any way,” Bennett said.
Budget Director Susie Park agreed that “some of these surpluses” in transactions, replacement of personal property and income tax revenues will not last.
“These are one-off bumps. We are very aware. It’s good for where we landed in 2021. But we treat it as such,” Park said.
Nearly a year ago, the three-year financial analysis that doubles as Chicago’s preliminary budget projected an $866.8 million shortfall for 2023.
Factoring in $152.4 million in withheld federal stimulus funds and $250 million in higher-than-expected tax revenue yields this revised shortfall estimate of $305.7 million.
Park also warned that this figure remains “very preliminary” and could easily increase.
“There’s going to be a lot of talk between now and … when we come out with the actual gap for 2023,” Park said.
“With our departments, some of our consumables – our materials and supplies with inflation – will increase in cost.”