Chicago Mayor Lori Lightfoot’s proposed tax changes to a Chicago-based casino and the tax on property sales will have to wait for the General Assembly’s 2020 session.
Lawmakers adjourned their brief veto session Thursday without action on either. Lightfoot acknowledged the loss but said the city would continue to push for the measures when the legislature convenes in January.
“I feel optimistic given how far we came in a short period of time … and we will be back at it in January and I’m optimistic we will get it over the threshold at that time,” Lightfoot said during a public appearance Friday when asked about the city’s failed efforts.
The veto session is brief, held over three days in October and then from Nov. 12 to Nov. 14. Some Democratic lawmakers from Chicago-based districts opposed changes to the city’s real estate transfer tax without a commitment from Lightfoot to commit a big chunk of the funds for homeless initiatives.
The proposed 2020 budget is scheduled for a Nov. 26 vote. Lightfoot’s original plan to close a $800 million deficit relied on $50 million from the change, which would have taken effect midway through the year, and then $100 million in future years.
At the start of the week, the administration headed off council concern over the real estate transfer tax’s chances in the veto session by announcing a backup funding plan that relies on $15 million in additional debt restructuring savings, a hiring slowdown, and other cuts.
The administration then focused its legislative effort on changes to the casino tax structure that an independent consultant concluded were too onerous to draw a developer and financing. Despite an 11th hour push and revised tax structure negotiated between the city and representatives for Gov. J.B. Pritzker, the legislation stalled.
The 2020 budget doesn’t rely on casino dollars. The city is counting on the new revenue to help structurally balance its books, an effort chief financial officer Jennie Huang Bennett has said can be achieved by 2022 with the additional casino and real estate tax dollars and one that some rating agencies have said is crucial to the city’s credit profile. Market participants expressed concerns after Lightfoot announced her budget for its reliance on state action.
“The Chicago casino is still very much in the sight line thanks to the progress we’ve made with our state partners. While this delay does not impact the city’s FY 2020 budget, this fiscal challenge looms large for FY 2021 and thereafter. Thus, the heightened sense of urgency remains. A substantial percentage of the state’s vertical capital bill depends on the revenue from a Chicago casino,” Lightfoot said in a statement issued after the veto session ended late Thursday.
The casino’s link to the state’s six-year $45 billion capital package approved in the spring is considered the best selling point for lawmakers outside Chicago to eventually get on board a revised structure. That’s because revenue from six new casinos, with Chicago expected to generate the most, will help fund the “vertical” building projects in the capital plan.
Under a revised tax structure that surfaced Thursday, Chicago would reap about $200 million annually once the casino is up and running while Illinois could pocket $250 million. The city’s share is earmarked to go toward its police and firefighters pension funds. The city is saddled with $30 of net pension liabilities with rising payments straining city coffers.
The six-casino license expansion under the approved legislation is supposed to generate $360 million in upfront license fees and $630 in so-called one-time reconciliation fees. That fee would have been spread out for Chicago under the revised tax structure. Total other one-time bidding and license are factored in reach between $1.2 billion and $1.8 billion. The full gambling package that also included sports wagering and expanded video gaming was estimated to generate $2.7 billion in one-time revenues and then $470 million in recurring annual revenue.
