An emboldened City Council majority was poised to make a clean break with Mayor Brandon Johnson Tuesday, advancing its own plan to balance the 2026 proposed 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 midyear 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 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.
Revenue from an enlarged Downtown congestion fee zone was reduced by $39.4 million because the Council members canceled plans to apply the city’s 10.25 % amusement tax to rides on Uber and Lyft.
The proposal to lift the city’s 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 snowplows. 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 moneymaker at $416 million a year. It no longer would sunset the higher tax after one year, a move Johnson claimed 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 Chicago Teachers Union allies that they are a “corporate caucus” that has given a pass to businesses and wealthy Chicagoans.
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.” Another $92.6 million would come from enforcing Chicago’s Environmental Benchmark Ordinance and bolstering collections, in part, by selling long debt to collection agencies.
City Comptroller Michael Belsky questioned whether collection agencies would be interested in buying that long outstanding debt.
The opposition 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.
Former Finance Committee Chair Scott Waguespack said he and his colleagues worked through the weekend to fine-tune a budget that now includes “no grocery tax, no property tax increase and no head tax.”
Waguespack stressed what he called the “confidence we have in our revenue projections,” after vetting those numbers with former city budget and finance officials he called among the city’s “most preeminent finance experts.”
Although every budget is an estimate, Waguespack said, “Our budget is balanced. We’re ready to move to avoid a shutdown that many in the city feared.”
Ald. Rossana Rodriguez-Sanchez (33rd), Johnson’s handpicked chair of the Committee on Health and Human Relations, demanded to know where “efficiencies” could be made to generate $46.6 million in annual revenue.
“We know that we are down to the bone. It is really hard for us to get services. What is it that we are putting on the chopping block?” she asked.
Ald. Brian Hopkins (2nd) responded by saying federal pandemic relief funds were used to increase the city payroll by $1 billion and raise operating costs by 40%.
“That suggests that the opinion that we’ve cut to the bone is not valid. We can do more, and we must do more,” Hopkins said.
Newly appointed 35th Ward Ald. Anthony Quezada praised the opposition group for removing the garbage collection fee increase in its plan and restoring funding for 5,000 youth jobs. But he said he needs to know what safeguards are built into the alternative plan.
“If revenues do fall short, how do we ensure that youth jobs don’t get cut midyear?” Quezada said.
The Finance Committee is also 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 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.
This week, a negotiating session aimed at forging a compromise ended badly when the opposition group refused to show Johnson its numbers to prove that its alternative spending plan is balanced.
During a brief full Council meeting 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, it hopes, to defer and publish the alternative budget, and on Christmas Eve to pass it.