An emboldened City Council majority was poised to make a clean break with Mayor Brandon Johnson on Tuesday, advancing its own plan to balance the 2026 city budget without a corporate head tax, but with a revenue mix that includes a surprise 50% increase in Chicago’s 10-cent tax on shopping bags.
A renegade group of moderate and conservative alderpersons finally showed the hand they withheld from Johnson in an attempt to prove that their newly revised revenue plan includes conservative estimates that would not, as Johnson has claimed, set Chicago up for a mid-year budget shortfall.
The alternative revenue plan embraces Johnson’s proposed,15% tax on cloud computing, but includes no corporate head tax and no increase in Chicago’s $9.50 a month garbage collection fee.
Instead, it relies on $8.7 million in annual revenue by raising Chicago’s shopping bag tax by a nickel — to 15 cents a bag; $6.8 million by licensing newly legalized video gambling terminals; $39.4 million by broadening a downtown congestion fee zone and $6 million by taxing off-premise liquor sales.
The proposed liquor tax was cut in half — from 3% to 1.5% — to soften opposition from the hospitality industry.
The proposal to lift the Chicago ban on video gambling assumes that 80% of the 3,300 eligible establishments with off-premise liquor licenses will apply, but that the Illinois Gaming Board would take six to eight months to grant those licenses. The estimate therefore assumes that the city will receive no video gambling revenue in 2026, only $1,000 license fees from 80% of the eligible establishments.
The package also includes $29.3 million in revenue by selling advertising on bridge houses, city light poles and city fleet vehicles, including street sweepers and snow plows. Police and fire vehicles would be exempt. A proposed 10% tax on vacation rentals was dropped in favor of a negligible increase in license fees on short-term rentals arranged through Airbnb and Vrbo.
The 15% tax on cloud computing and equipment leases — up from just 9% a year ago — is the big money maker at $416 million a year. But unlike Johnson’s budget, the alternative plan would sunset the higher tax after one year. Johnson claims that sunset provision would raise Chicago’s anticipated 2027 budget shortfall from a relatively manageable $477 million to well over $700 million.
Nevertheless, the cloud tax allows opposition alderpersons to counter the claim made by Johnson and his allies in the Chicago Teachers Union that they are a “corporate caucus” that has given a pass to businesses and wealthy Chicagoans.
In fact, they claim the alternative plan generates 84% of its revenue from business and just 16% from individuals.
An advanced pension payment that Johnson cut in half would be fully restored to $260 million. That $139.9 million increase would be bankrolled, in part, by making $46.6 million in budget “efficiencies” outlined in the road map provided by EY, formerly known as Ernst & Young. Another $92.6 million would come from enforcing Chicago’s Environmental Benchmark Ordinance and bolstering collections, in part, by selling long outstanding debt to collection agencies.
The renegade group had hoped to scrap the mayor’s plan for a five-year, $166 million loan to cover retroactive pay raises for firefighters and paramedics, but ran out of money to pay for that decision.
The Finance Committee is poised to further tie the mayor’s hands by dramatically shrinking — from $3.8 billion to just $1 billion — Johnson’s plan to borrow money for capital improvements.
Vice Chair Bill Conway (34th), a former investment banker whose billionaire father co-founded the Carlyle Group, a prominent private equity firm, said Chicago is already saddled with more debt that any major city in the nation and doesn’t need to add to that mountain at a time when the city already has roughly $2.4 billion in capital authority that Johnson hasn’t used.
Johnson was also accused of withholding critical details of his proposed repayment schedule for the new debt. Earlier this year, the mayor struggled to pass an $830 million borrowing plan with a heavily backloaded repayment schedule that will end up costing Chicago taxpayers $2 billion over the life of the bonds.
Earlier this week, the one and only negotiating session aimed at forging a compromise ended badly when the opposition group refused to show Johnson their numbers to prove that their alternative spending plan is truly balanced.
During a brief full City Council meeting earlier Tuesday, the renegade bloc also set a revised schedule of meetings to avert a government shutdown. It calls for the Council to hold a rare Saturday meeting, they hope, to defer and publish the alternative budget, and on Christmas Eve to pass it.