they're going to be definitely a lot more of this summer.
Right. Yeah. Oh that's great.
In September on the other side of getting table to start
preschool.
I doubt if I should get on board with.
Speed us up.
Do we have do we have 9?
Are the meeting, um, of the subcommittee of Revenue is now
called, uh, to order. We will now have a roll call to
establish Quorum, uh, myself, chairman William Hall
present, uh, Vice chair, pat Dow,
Alderman, Daniel laspada.
Uh, older woman, Michelle Harris.
All the woman Julio Ramirez. All the women Janette Taylor.
Alderman, Ronnie Mosley Alderman. Mike Rodriguez.
Diego Mike. He's yeah, Alderman Byron cicho. Lopez my
brother Alderman. Walter Bernette vice mayor.
Uh, chairman Jason, Ervin.
Uh, all the woman Rosana Rodriguez, Sanchez.
Alderman, Bill Conway.
Quezada.
President, Andre Vasquez.
He's out. Almond. Timmy kitson.
And then Alderman, Matt Martin.
We have 9 present.
Including myself, we have a quorum at this time, we will
begin. Um with public comment period. Out of respect for
everyone's Time. Each speaker is limited to 3 minutes. Our
first speaker is Mr. George Blakemore.
Harrison, I'm still here.
Now, I want you to watch this clock.
He named 1 of the ultimate Conway.
34.
All the way down the mongering state.
They didn't lose any population out here.
In Brooklyn. Ward are in carry out, well, carry out some
gonna be indicted. What did that have to do with our
representation of our people? And while I'm talking, you
see there, ignoring me,
They they they it's evil here. It's corruption here, it's
from Mr. Playmore, get to another Point. What is this
meeting about? Starting on time. Time is money. Money is
time they start on end time.
On end time anyway, they gonna be taxing groceries, put
your glasses on Old Man. And what else they're gonna be
taxing groceries and they're gonna be, uh, uh, having sales
tax property tax, why they taxing, because they have stolen
money,
Money that have gone to these illegal immigrants.
Billions of dollars.
So they in the hole so they gonna make the the citizen pay
for that in taxes.
And and I'm Public Enemy Number 1 here.
Look out. My Minister gone so quick. Where are the black
people here?
Where are they?
That's why we have non-functional government here. You see
come way over that talking to her. I know both of them.
They, they knowing me.
But listening is something evil here. It's something
unamerican here and it's corruption Fraud and Abuse here.
And that's why they want to silence me putting out.
He's a crazy old man, but you was here, all of y'all, when
he man came here.
Yeah, that voodoo economics that goes on here with Pat dial
and all of y'all, the Black 1.
The white ones, the Hispanic, they all of you, but what so
egregious is that it's a 1 party system.
And you think it's in house, they all what a what is that
party that they perpetrate look at them hugging each other
over there. That Lopez that other man, they use to a bad
race of turn. I'm telling them this Lopez.
Not you, sir this 1 and that other that use that racial
remark.
And they still here and black folks voted for them to be
here.
The reason we at the top of the structure, economic the
black in a caste system because we have poor leadership. No
leadership.
I've seen them fight down here.
Thank you so much Mr. Blake Moore at this time. We will
have our second speaker. Patrick, um,
Patrick deer.
Patrick door. I'm sorry.
All right.
uh, good afternoon and
Revenue, I'll be brief. I'm Patrick door from the
hospitality Business Association of Chicago, a nonprofit
Chamber of Commerce for locally on bars and restaurants
here in Chicago. And uh, I wish I had some slides for you
or other handouts, but this is pretty close after the end
of Springfield session and couldn't get those together in
time. But if anyone has questions afterwards, happy to
provide it more information,
I'm reaching out today because I'm sure there are a variety
of Revenue ideas on the table, but specifically, it is time
for a subcommittee hearing on video gaming.
And locally owned bars and restaurants in the city of
Chicago or even our VFW and Veterans halls, there was a
city or sorry, there was an Illinois House. Hearing on a
bill to preempt the city ban on video gaming, on May 15th
at the State House.
Unfortunately, it did not go particularly well for this
city representative because again, and again, a bipartisan
Democrats, Republican City. Downstate, legislators were
asking why has the city not opted in for this revenue for a
decade while still getting money from the build Illinois
Road fund which is funded by video gaming taxes Statewide.
It created.
Interest in overruling City home rule Authority, a step
that the state house has traditionally loads to take.
There's a lot of money at stake for our Union friends. In
road construction infrastructure across the state on
projects here in Chicago and more could be created with
even a measured roll out on legalization of legal State.
Regulated video poker just last year, fiscal year 24, this
Cook County made 5 million dollars from just the emblems on
video poker machines in the casinos and in all the Suburban
locations, we have big budget problems ahead for the city,
but 5 million is welcome anywhere. And that's before the
revenue share from state license video poker.
Obviously we all expect because our liquor licenses are
quite High compared to the rest of the state that whatever
license the city council comes up with would also help with
the city budget problems.
The issue. Every time this comes up here in Springfield, is
the conversation goes around and around about what is
allowed under the City, Casino agreement. And this is why a
video poker video gaming hearing would be particularly
helpful by the subcommittee. There's no agreement on
whether BS has the right of first refusal to machines that
are airports. This seems like something that would be easy
to nail down.
We have less than 20 vfws in American Legions remaining in
this city. These machines are a crucial source of funds to
support these organizations across the state. But not here,
I would suggest to this body, at a minimum, as you as we
just listened to for 2 hours. Are desperately looking for
new sources of revenue. Consider a hearing on legalizing
these machines simply at the airports Beyond security where
it will not be easy to reach them for casual tourists, and
not siphon away from the casino. Thank
Thank you so much. At this time, we will have uh, Roberto
Casas.
Yes, uh, good afternoon. My name is Roberto Casas. I am a
resident of the 12th Ward formerly. The 15th, Ward
Alderman, haul, thank you for having us. I am with the
Chicago gig Alliance.
I wanted to give a little ride. Share 101 to the committee
people here. And at the end I'll talk about Revenue.
Uh, with regards to write share 101, our bill currently in
Workforce committee with talking about Fair pay. So
currently, if a right share driver takes you from City Hall
to O'Hare, it is paying the driver about 12 dollars for
that trip under our proposed bill that same fare would go
from 12 to a minimum of $40 for the driver.
Okay, the second plank of our bill Alderman Hall. Uh, is
regards to safety, okay. That's a second. Second plank of
our right trip. Bill currently in Workforce committee,
okay? With regards to safety, I want to say the following
The bottom line is 1 sexual assault is 1 too many, but for
Uber, 8,900 aren't enough to take action. This is a cynical
and it's heartening moved by a multi-billion dollar
Corporation to turn their backs on survivors rather than
Implement real change.
For years, Uber has checked the Box on safety.
But time after time, I failed to deliver for the victims,
it is clear that Uber will not stand up for these victims,
so, because they continue to maximize profits.
The final plank is with regards to revenue my friends and I
just sat through 3 and a half hours with regards to the
revenue committee. So let's talk about Revenue.
Our bill will unleash 5 million and 47 million into the
local economy per year that is 45.5. Million Unleashed to
the economy because we're going to be taking it back from
Silicon Valley. We're going to be taking it back from Wall
Street, and we're going to have to, we're going to have
have drivers with actual money in their pockets. 87,476
drivers are going to be making more money, they're going to
spend it in the local economy, they're going to be spending
it at Chicago Cubs, Bulls Bears games, they're going to be
spending it, in our local restaurants, they're going to be
spending the money here, we're talking about Revenue.
Here's a 547 million, but he myth that is ready to be.
Tapped, I asked city council to really consider voting for
our fair. Share ordinance, which will be going for
committee vote on Thursday, June 12th.
Chairman.
I yield the remainder of my time. Thank you so much. Um, at
this time, we are going to ask for Richard wardes.
Thank you, Richard.
My name is Richard Warz. I'm in Native Chicago and I'm
boarding raise here, 66 years. Some of you probably are
going to get sick of seeing me, but I'm a veteran. Giving
up is not my nature. I focus on my goal and the goal is the
fair share ordinance. The right share industry was founded
on the principle of partnership their term, a true
partnership, Uber and Lyft, portrayed this partnership from
the start, both companies seem to have forgot, the
definition of a partnership, they're cryptic and
unexplainable algorithm reflects their disingenuous and
manipulative business model. Drivers just want to provide
for their families basic needs Uber and Lyft cryptic
algorithms. Truly hinders the drivers and accomplishing,
this goal being deactivated without a thorough
investigation. Victimizes the drivers by false reports and
the destroys lives. Drivers lives are placed at risk every
single day.
Uber Lyft only have 1 business model churn and burn
inexperienced drivers less than 2 years. Do not yet know
how they are being taken advantage of uber and Lyft do not
not care about the driver. They'll always find someone
else. Their fair share ordinance, reflects a fair, and
Equitable system, how can you trust the system that has
glitches? Consider how these short changed? The EV drivers
after a promise of a b a bonus, dftc had to hit Uber with
the lawsuit over for over billing for Uber 1. Also the
revelation of the recent, overcharging of the congestion
tax, the alleged bonuses offered by lift. How do you see a
bonus? If you do not know the basic fare, what it would be.
The transparency of the fair. Share ordinance would make it
very clear. Uber and Lyft only make token, safety changes,
Uber and Lyft insists. That safety is part of the platform
safety for the driver. How about a picture of an
Initial or the acronym, doc, mom, baby many times. We don't
even get a name. Everyone has a picture ID to travel. How
about a picture of the requesting writer. The pin system is
meaningless picture of the potential writer in the drivers.
The only meaningful safety measure. Uber claims.
Uber has led the industry on safety from day 1 backed by
technology, transparency. And real accountability is the
recently attacked driver who has 19th to replace due to
meaningless, safety measures really in my humble opinion.
If you generally care about safety, it would be evolving
with the current times criminal behavior is always finding
holes. If Uber Lyft cared enough genuinely cared, they
would always be looking to improve safety. It is not Uber
and lifts responsibility to reduce crime. However, it is
their responsibility to reduce the opportunities for
potential criminal behavior. That take advantage of the
platform and its lack of meaningful. Safety measures we
asked you give full support for the fair share, ordinance
of work.
Thank you so much at this time, we will. Um, now hear from
Joseph n. Nigra, how do you say that my my, my apologies,
thank you, chairman, it's Negro, Joseph Nigro. Uh, I'm a
41st, Ward resident. I'm also a right share driver with 10
years and 27,000 rides of experience. This committee is
looking for taxes and other sources of revenue, uh, ways to
make up next year's looming, 1 billion dollar budget Gap.
There are 87,000 drivers in this city. We are categorized
as independent contractors that makes us 87,000 small
businesses.
I provided this committee a 2-page analysis prepared by
power switch action showing how much we are losing each
month. That the fair share ordinance isn't in place. Their
calculations show that our small businesses are missing out
on 40 to 50 million dollars per month in additional income
instead of that wealth staying here in the pockets of
Chicago and being spent locally and boosting Chicago's
economy that wealth is being extracted by defective glitchy
apps. That comes out to around $500 million per year, Uber
continues to raise fairs on passengers, while cutting
driver pay.
Research shows drivers took a 17% cut in 2023. And again in
2024
instead of the traditional taxi model, where money stays in
the community, moving from passengers to drivers and then
drivers spending that money locally a significant portion
of these increased passenger payments are actually sucked
out of the city.
Addressing this long-standing Revenue issue means a
long-term increase to the DA tax base for Chicago. We will
be doing our part to shore up the revenues of this city.
The fair share ordinance means, drivers will finally get a
well-deserved raise. Additionally, the ordinance protects
passengers from being overcharged by greedy, glitchy
algorithms, leaving more money in their pockets as well.
This rebalances, the system in favor of Chicago citizens,
not Silicon, Valley and Wall Street. It creates what I like
to think of, as a virtuous cycle. Chicago's wealth stays
here. Moving from passengers to drivers to other local
businesses. A rising tide that raises all boats.
Vote. Yes, for the fair share ordinance and help improve
the profitability of 87,000. Chicago small businesses.
Thank you.
Thank you so much. That's concludes our public comment
Alderman. Uh, Ronnie Mosley has requested to remotely
participate. At today's meeting for reasons, stated under
rule, provisions of rule. 59, can I have a motion, um, from
chair? Uh, chairwoman Dow to allow him to attend Mo, uh,
remotely.
Thank you so much. All those in favor, signify by saying, I
Although those opposed say nay believe that the eyes have
it and can we confirm that Alderman Mosley is with us
today.
President chair, good to hear your voice. Um, the 1 item we
have before subcommittee today is the subject matter
hearing to discuss maintaining the grocery tax in the city
of Chicago. As well as, uh, revenues requiring State
action, including sales tax on Services, the local
government, uh, dispersed, uh, distributive Fund, in the
personal property replacement tax. No votes will be taken
today. And for today's presentation, we have our CFO Joe
dorsky Bud.
Director of net Guzman here in the with us, on the Das
along. With norik, our Deputy CFO in the Box. We also have
the following City Representatives Giovani MAFO, our Deputy
budget, director of Revenue and Brian, uh, Carlson a deputy
director of Tax Administration. And so also, we have a
number of subject matter experts who will be providing
testimony in the Box as well and I'll take a moment to
allow them to introduce themselves. Neil James Elizabeth
power at this time.
Hello. Um, I'm Elizabeth Powers. I'm an associate professor
of Economics at the University of Illinois Urbana
and I'm also associate director and partnering scholar with
the Institute of government and public affairs at the
University of Illinois.
Hello, uh Neil James executive director of the Metropolitan
mayor's caucus.
Thank you. In addition to, we have Ralph Mary, the
executive director of the center for tax and budget.
Accountability also with Joe Ferguson, the president of the
Civic Federation.
Introduce yourself Joe Ferguson from Resident of the Civic
Federation.
Ralph from Market, Terry executive director of the center
for tax and budget accountability. Also, the ruble endowed
professor of public policy at Roosevelt University.
Thank you all so much following today's presentation by our
city, leaders and subject matter. Experts, we will have Q&A
from our subcommittee members. Uh, also I want to
acknowledge Alderman, David Moore, who is with us today as
well. And with that, I turn it over to our Chief Financial
Officer. Joe dorsky to begin today's presentation.
Good afternoon. Uh thank you Alderman haul for this
opportunity to present this subcommittee with information
necessary to understand as we shift gears over the summer
to plan for the city's 2026 budget.
As noted in my presentation, this morning, the city's
downgrade was tied to 1 Time. 1 time, stop Gap, measures to
balance this 2025 budget, and the lack of structural
Solutions. In a budget, will lead in this budget will lead
to further credit, deterioration, for the city. We want to
find ourselves on strong financial footing and can only do
so by extending Revenue measures that are ongoing in
nature. These are considered structural Solutions.
As we present this subcommittee, with Revenue proposals that
this body, and all of city council can vote to implement.
implement. We also, want to make sure there's a clear
understanding of how large of a portion of the city's
budget comes from revenue collected by the state, and not
controlled by local officials.
In 2025, almost 23% of the city's revenue is expected to
flow through the state of Illinois. These Revenue sources
include the personal property replacement tax, the State's
income tax and the sales tax.
With each passing budget cycle, the state attempts, to
divert funds, away from municipalities.
The city has and will continue to push for a higher
allocation of the pprt, and the local government
distributive, fund or LGT, these taxes and allocations were
put in place to help. Ensure municipalities would stay
whole as the state took away. The ability for local
governments to impose these taxes.
Over the course of this hearing, we will walk this
subcommittee through proposals. We believe this group needs
to understand from pushing for a return to 10% allocation
of the lgd F to measures. The state needs to take to stop
diverting funds away from municipalities from the personal
property replacement tax.
This subcommittee should also understand the importance of
a tax structure, tax tax structure that matches his tax
paying base and its spending efforts. We believe the state
sales tax code is out of date and needs to be updated to
match the reality of how households spend their dollars.
Today, our current sales tax is regressive taxing, lower
income houses.
House holds higher than those, who spend their earnings on
activities largely left out of the tax code.
Another tax, we want this subcommittee to understand, is
the grocery tax. The state plans to stop collecting this,
unless municipalities pass local ordinance to extend it
after January 1st 2026.
There are a few impact, these are a few impactful Revenue
sources within the city's control. And there are ones we
have to work to keep in place.
With that. I'd like to turn it over to Annette.
Good afternoon. Uh I was hoping to see if a few more of
your colleagues here. But, um, uh, we will push forward. So
good afternoon chair, Dow chair Hall, and members of the
revenue subcommittee. Thank you for inviting me to speak,
briefly on the city's Revenue outlook before you hear from
our expert panel.
As you know our latest forecast projects, a baseline gap of
roughly 1.1 billion, dollars for FY, 2026 potentially
rising to 1.6 billion. Once all variables are considered,
Even as these figures are updated. In the months ahead, the
magnitude of our budget challenge will remain substantial.
At the same time as you heard, uh, CFO dorsky mentioned
nearly 1 quarter of the city's corporate fund or more than
1 billion annually. Comes from State collected, revenue
streams,
That inter interdependence underscores why today's hearing
is. So important state policy changes have a direct and
immediate impact on our ability. To balance the local
budget and preserve essential programs.
Because we cannot control most state revenue. Me mechanisms
are ourselves. We must build a deliberate strategic
approach to advocacy for policy changes in Springfield.
As it relates to the lgd lgd fur, currently only 6.47% of
total state income tax collections is allocated to lgds
down from 10% before 2011.
Over the past 5 years, this shortfall has deprived Chicago
of roughly 1.2 billion in Revenue.
Every half Point, increase in lgf would generate about 35
million more each year for our corporate fund.
As it relates to pprt revenues decline dramatically in 2022
and are now more than 40% below. Budgeted levels.
Partly because of diversions and higher net loss deduction
caps which have squeezed local receipts.
Reinstating. A thousand 100,000 dollar cap and capping
diversions will restore predictability and help prevent
further erosion of this Revenue source.
You'll hear a lot about sales tax for services today.
as consumer spending shifts, increasingly towards Services,
Illinois's failure to modernize its tax base widens, the
gap between cities like ours who are in need and what we
actually collect.
Closing this loophole at the state level would allow
Chicago to tax a broader range of services. Yielding
material growth in our corporate fund receipts
Importantly, it would also provide spring filled with room
to lower overall rates without sacrificing Revenue.
Together lgd lgd increases pprt stabilization and sales tax
on service reforms could generate well over a hundred
million dollars annually for Chicago narrowing, our Gap and
giving us the flexibility to maintain and even expand key
services.
but it will take focused sustained advocacy by city council
the administration and our partners in the business and
nonprofit communities to make these challenges a real.
These changes are reality.
At the same time, we must reaffirm the grocery tax before.
The state's, uh, deadline of October 1st allowing that tax
to lapse in January, 2026 would cost the corporate fund an
estimated million dollars next year alone.
Further exacerbating, our billion-dollar plus Gap.
Nearly 200. Other municipalities in Illinois from Berwin to
Wheaton and Beyond have already voted to extend this
grocery tax. And as you will hear today, many more are
anticipated to follow suit.
If we fail to do the same, we will leave critical services
on The Chopping Block.
Finally while we pursue state level reforms and preserve
the grocery tax, we must think strategically about
diversifying our growing their fuerste and growing our
local revenue streams.
Corporate fund dollars, pay for everything from police fire
and 311 operations to street sweeping tree trimming and
other basic governmental administrative functions.
They also fund homeless Outreach, youth programming, senior
services, and other critical safety. Net programs.
As it relates to Public Safety roughly 1/3 of our corporate
fund supports the police department and its related pension
obligations without new, Revenue Staffing, training and
Community, Based programs could face cuts
We all talk about streets and sanitation. That also relies
on corporate fund Revenue to sweep more than 10,00 city.
Blocks weekly trim, thousands of Parkways trees, fill tens
of thousands of potholes and ensure our streets are clear
of snow.
Any decline in Revenue translates into slower street.
Cleanup deferred tree maintenance and more dangerous.
Roadway conditions.
But we also must recognize that the corporate fund supports
helping our most vulnerable residents every day. Those
dollars provide essential services, for our most vulnerable
Neighbors from shelter, beds for people experiencing
homelessness after school, programming, and mental health
counseling for at use at risk youth and meals for seniors.
These programs do not balance themselves. Without stable
Revenue, fewer families will be served in more. People can
end up on our streets.
In conclusion preserving the grocery tax building, a
multifaceted State policy strategy and intentionally
broadening our local Revenue base are all necessary steps
to prevent our budget Gap from growing and to protect
protect the services that make Chicago Chicago, Chicago
livable, safe and accessible.
I look forward to hearing from our invited speakers about
how we collectively pursue these reforms.
Today after an opening presentation from North Shake, our
Deputy CFO.
And from dyani mfo, the deputy budget, director of Revenue.
You will hear from a number of those experts.
Their expertise will help inform how we will make the best
policy choices. Both as both as it pertains to Springfield
and here at home so that we may continue funding the
services, our residents deserve,
I will be available for questions on today's presentations,
have concluded and with that, I'll turn it over to nor and
Giani.
chairman once acknowledge, uh,
um, because they said some very important information and
or the opening stapes, anybody that gave any written
opening statements, can you make sure we all get a copy? I
make sure that you get it. Thank you so much. Absolutely
chair wants to also recognize uh, Alderman Vasquez as well
as number Alderman, Cardona.
Good afternoon. Thank you, director. Guzman, uh, chairman
Dow chairs, all, uh, members of the committee. Um, as a,
and I mentioned, my name is Jeremy me. I'm deputy director
for the office of budget and management.
Uh we have a few slides here to table set uh and introduce
the speakers that we have here to talk about a few topics
uh to first just to emphasize the points that the director
uh recently made. This is a picture of the um budget
forecasts from last year. That was presented uh showing
that in 2026, the projected budget gap of 1.1 billion
dollars. That is a baseline projection for The Gap. Uh in
certain scenarios, it goes as high as 1.6 billion. There
will be an updated forecast published Advanced. Uh, the
budget cycle as it's done every year, uh, later this summer
and it just emphasizes here, uh, the situation.
Going forward that the Gap will then continue to increase in
projections uh for 27.
Uh, as mentioned earlier. So, today we'll look at a few,
items specifically related to state revenue collections. So
collections. So just 3 state revenue sources here to
revenue, state income uh, tax revenue or through the local
government distributed fund or lgd f. As we mentioned,
throughout the presentation and personal property
replacement tax or pprt. That's mentioned these 3 State
revenues alone make up 23% of corporate fund, budget of
revenues for 2025 these are State controlled items. Uh,
this makes the budget challenge a little bit harder for my
Revenue generating perspective.
As this is nearly a quarter of our revenues uh that the
state uh controls and the city is limited in its ability to
change, both the base and the rate on its in and of itself.
On top of that, the state revenue collections um in
addition to being a large portion of our budgeted revenues
have declined over time. So if you look, uh, specifically
this is driven by pprt their personal property replacement
tax, which is essentially uh corporate income search charge
tax. Uh, in 2022 that total between the 3 sources was over
1.5 billion dollars.
in the 2012, budget has dropped down to 1.3, uh, that is a
change or a loss of nearly 235 million in just a few years,
time, or a reduction of about 15%.
So the first topic that we will dive into here, uh, is the
grocery tax as mentioned by the director. So this would be
um, a continuation
Um, of a tax that is currently in place a little bit of
background on the timeline. So this was something that
started in 1990 as a 1% tax on groceries. This Implement
implemented by the state uh in 2022. This grocery tax was
suspended in temporarily in the wake of the co 19 pandemic.
Um, during that suspension uh it was uh decision of the
state that cities and towns would be made whole for that
Revenue. So the loss that we were talking about are
estimating today was not applicable back in 2022. The
decision was to make cities and towns hole for that loss.
Um,
in 2023, it was then reinstated, uh, in 2024. It was set to
terminate or expire, um, at the start of January 2026. And
so now it is with cities and towns to essentially reaffirm
or continue this tax that is already being collected.
For the grocery tax. Um the state does not specifically
estimate or collect specifically on grocery tax itself,
this has to do with how the grocery tax is reported. It is
co-mingled with a similar tax, that is applied to medical
drugs or medical devices.
And so on, on top of that, it is not collected at the
individual site level by cities and towns. Uh, so there is
not a precise estimate from the state about how much money
each city or town will lose. However, we are able to use
data from the state um and the makeup of some of that
Revenue to make certain assumptions about what that
estimated loss would be. And as the Director mentioned
earlier that estimated loss for 2026 is estimated to be
about eighty million dollars to the corporate fund.
Uh, this is something that impacts all cities and towns.
And so uh, over 200 and 202 cities in towns have reaffirmed
or continued. Uh, the grocery tax already, uh, with some
larger communities noted here. Uh, we worked in close
collaboration with the state in order to get this
information.
And so the timeline here, uh, for our cities and towns
specifically the city to approve or continue the grocery
tax so that the state has the amount of time to be able to
implement the tax before January before it expires is
October 1 uh, 2025.
Did you did you want to do it as we go along or did you?
That's fine. Go ahead.
I just want to make sure, I understand if we do want to
extend are the grocery tax in 2026.
Action needs to be taken.
Before budget season.
Formally begins based off of this October 1st deadline.
Correct October 1st is naughty. Lots of nodding, okay,
thank you.
And so at this time we're going to turn it over to our uh
speakers. So first. Um,
I will turn it over to Dr. Elizabeth Powers, um, who has
already introduced herself but just to kind of, um, provide
background, Dr. Elizabeth Powers associate professor in
economics Department. Uh, she's partnering scholar at the
University, uh, at The Institute of government public
affairs. And in fact, let's see, affiliate of the family
resiliency Center, both at University of Illinois or
managed champagne. Uh, Dr. Powers received her PhD from the
University of Pennsylvania and is a cumin graduate of
Vassar College with departmental distinction in economics.
Dr. Powers is in is an expert on uh, family, centered
policies and has assisted the Illinois Department of Human
Services in other policy actors as well. So, at this time,
I'll turn it over to Dr. Powers
Thank you. It's a pleasure to be here today to talk about
the grocery tax. Um, what I want to spend my time on is um,
um, to discuss popular arguments against the grocery tax
and, um, present some uh, evidence on the, um, on those
claims.
so as you know, the state collects a 1% sales tax on food,
drug and medical appliances um the food items uh that are
subject to this preferential 1% sales tax, instead of the
general sales tax, um are uh are delineated by the state.
And generally um, they can form to foods that would be snap
eligible, Wick eligible. So you should think of these as
healthy foods.
And as you know, the state, the state collects the sales
tax and then passes the entirety of the amount to
municipalities.
the state will no longer collect this tax for
municipalities, um, in January, as has been mentioned and,
uh, and uh, States, then must pass their own ordinances for
a grocery tax by October 1st.
Let me provide some background, um, that will be helpful on
food. Um, the USDA defines 2 categories, of, of food
purchases. Um, 1 is, uh, food at home. So food purchased
for consumption at home and the other is food away from
home, such as such as restaurant food. Um, the grocery tax
is a tax on food at home.
Um, food expenditures have grown relative to disposable
personal income over time. But this has largely been due to
growth in food away from home. Expenditures food at home,
expenditures have held fairly constant as a share of
disposable personal income at about um, 5.3% recently.
So there are 2 popular arguments um against a grocery tax.
The first is that it's a regressive tax and the second is
that it discourages um good nutrition.
So um, I uh, I, uh, distributed or a report I did is
distributed but I can, um, simply explained, um, Figure 1,
which shows the argument that, um, food expenditures are
regressive. So if you divide, um, households by income and
you look at the bottom 20% of household income, um, which
is has an average that group has an average income of about
16,000 dollars. Um, this group spends an average of about
3,600 dollars a year on food at home and, uh, that's about
20, that's over 20% of their, um, income.
now, as we look at higher income family households, um for
instance, the lower middle, the next 20% of households by
income, they have an average income of about 40,000 dollars
and they spend about 4,300 dollars on food. So that's
already a drop in the share of income. They spend on food
to about 11 and a half percent. You might have if we
continue up the income scale, um, reaching the highest
quent, the highest 20% of household, by income with an
average income of over 210,000 this group, only spends
about 3 and a half percent of its income on food at home.
So, this is the basis for the argument that the grocery tax
must be regressive.
Um, this second criticism of the grocery tax is that it
discourages good nutrition. And this is simply, um, basic
economics, when you tax an item, um it raises its effective
effective price and discourages purchases. And so the
that when you raise the um the uh grocery tax, the tax on
tax, the tax on food at home, people will shift into uh,
less healthy, food purchases, that is food away from home
purchases.
So, what is the evidence on these 2? Um, criticisms.
um,
the first is is uh, more nuanced. The regressivity of the
grocery tax is more nuanced than a simple look at grocery
expenditures relative to income. That's because uh, snap
purchases
Are not subject to any tax.
Um, 50% of people in in Illinois receive snap about 900,000
in, in Cook County, where there's data available and, um,
SNAP benefits account for more than 2/3 of food spending of
households, who are below the poverty line.
so for that reason, um very uh low income households, very
low income households because Illinois, SNAP rate of
participation is very good at 95% of those who are eligible
currently, um,
Mo, most of that most of the food purchases for that very
low, income group are not subject to the grocery tax.
so, for example, when you take account of the fact that,
uh, of of snap expenditures, um, the the uh effective tax
rate due to the grocery tax on the lowest um 20% of
households by income, is just 0.01% or that's a rate.
0.001.
So um when snap expenditures are taken into account the
bottom coin tile of income is largely exempt from the
grocery tax. Um, this grows as you move up the income scale
and fewer households are receiving snap, and therefore are
becoming subject to the grocery tax and that, so, in the
second quintile, these lower middle, um, income group. The
effective tax rate, um, is higher but is still very low at,
uh, 0.08%, which is a share that is, um, equal to 0.008.
Um,
Now, it is true. So the um,
From the point of view of the poorest households, snap is
not regressive now. Snap is slightly I'm sorry. The grocery
tax is not regressive. The grocery tax is somewhat
regressive at higher, um, at higher levels of income. So
once you move up the income, scale to the Low Middle Group,
which I explained has a, um, effective, uh, grocery tax
rate of 0.008%, you do get, um,
An effective tax rates, um, of 0.006% and 0.004%. I'm sorry
006 percent and 0.04% at the 2 high income quintiles. So
these rates are very, very low but there is a slight
regressivity. Um, once you get into the low middle and
middle income groups relative to the highest income groups,
so the um, conclusion, um, from this analysis is that once
you account for the fact that, um, that snap purchases are
tax exempt, um, very little of the grocery tax is paid by
the first quintile and that's within the context of very,
um, very small grocery taxes overall, as a, as a share of
income
So let me turn to the second argument, um, against the
grocery tax.
Which is that when you tax an item um people uh shift their
consumption into other types of items. So um,
so the um the USDA did a study on food substitution um in
response to this concern about grocery taxes that they that
they encourage less healthy eating um and they examine the
association between Grocery and restaurant taxes with
house.
Spending on Grocery and restaurant Foods. Um, for 3 groups
of households snap participating, households households
were appeared eligible for snap that were not participating
in snap. So you can think of those as um, quite low income
households and then ineligible households the better off
households.
They found that um snap participating households were not
if their consumption their split between food at home and
food away from home, was not affected by the grocery tax
and that's consistent um with the essential inoculation of
families on Snap against um taxes on food at home.
They did find that for um the non-participating eligibles
and snap. That is low-income households that were low
enough income to be eligible for SNAP. But not
participating, grocery taxes reduce spending on Foods Foods
at home but very slightly.
Um, what would amount to about, uh, $30 a year in in food
at home expenditures? Um, for that, uh, low, uh, middle
group of households,
so in conclusion, um,
It does appear from the evidence that snap uh receipt. Um
Um, has, uh, has uh, protects protects lowest qu, uh,
lowest income households against the grocery tax, um,
making it, uh, that making it, uh, not regressive. At the
bottom of the income scale.
There is some evidence of rigorous activity as you. Um
compare um households higher up the income scale um and
some substitution to food at home. Um if it were eliminated
for households somewhat up the income scale but um note
that when these effects exist, they are extremely small.
So finally, I'll just close um, with uh, the caveat um, or
an uncertainty about the future, which is that the
so-called um big beautiful Bill, uh would cut snap by 30%
30%, and so that include a reduction in federal
contributions for snap. Um, uh, new Provisions. That would
make it harder for parents of school-aged children to
receive snap. Um, removing legal immigrants from the snap
rolls, um, and applying means tests to items that were
formerly excluded from the snap means test. And so I just,
um,
You know, want to share that. There's a there's a bit of a
question mark um hanging over snap. Um nevertheless the
grocery tax is small and um I know that um, your balancing
competing concerns
Here. Thank you.
Thank you, Professor Powers. Next up, we're going to hear
from Neil James executive director of the Metro mayor's
caucus.
Um thank you for the uh introduction. Um the mayor's caucus
is a membership, organization of 275 cities Villages and
towns. In the Chicagoland region, our main purpose is to
purpose is to work together on issues of regional concerns
and work toward, a common goal of improving, the lives of
nearly 9 million people who call our region home.
1 of those issues arose. In 2024, when the proposal to
eliminate the 1% sales tax on growth series was introduced.
This was a major concern to those uh, communities who
relied directly on that revenue for, um, their Municipal
budgets and their, uh, services.
After negotiations, that lasted all session, local
governments were able to delay, the repeal of the grocery
tax until January 1st 2026.
And also we were successful in, providing home Rule and
non-home Rule units of government. The option of
reinstating the tax at the local level.
Which we did not have that Authority previously.
To date, there are over 200 communities, who have voted to
reinstate the grocery tax.
I anticipate, many many more who will do the same, uh, in
the coming months this summer.
Why? Because they need to keep their Municipal budgets
balanced and have uh, and prevent any uh, cuts to services
that their residents currently rely upon.
Thank you for this opportunity to briefly, share a bit
the grocery tax and how hundreds of communities throughout
the state are voting to reinstate it in their communities.
And I am happy to answer any questions. You may have. Thank
you.
Okay, in the interest of time I think we're going to hold
off on questions until the very end of the presentation and
we're going to switch things up just a little bit. Um I
know Joe, you said you had to leave by a certain time so
we'll move up our conversation um about sales tax on
services.
so,
Over the past few years, you've heard the city CFO
champion, this idea.
And remind us that we're far too long. A tax loophole has
existed in the state of Illinois.
This loophole benefits, High earners.
Those who spending is mostly on services and mostly
untaxed.
This chart gives you a quick look at how almost a century
ago.
When most sales taxes were set up, only a third of
consumers spending was on services.
Today, this share has grown to 2/3 of total spending.
As consumer habits changed Most states updated, their tax
policies to capture this change.
The state of Illinois has been slow to keep up.
When compared to our peers.
We tax far fewer services and have higher sales tax rates.
This is a look at a few service categories where
some where the city of Chicago has had to take lead to
modernize its local taxes to keep up with the changing
economic landscape.
While the state's in action has led to where we are today,
with a small base of taxpayers, that is stuck paying a
higher tax rate.
With that. I'm going to turn it over to Joe Ferguson
executive, president of the Civic Federation to give a few
remarks, thank you. Uh, good afternoon, chair Hall and uh,
chair dowel and members of the revenue subcommittee. Also
like to thank um, budget, director, Guzman and CFO, um,
jorki for the invite to speak here today. Um, we have
prepared remarks that span all of these topics, um,
For the sake of time, I'm going to focus on the sales tax
component of it and we'll submit our full remarks, uh,
through the chair or through. Um, the budget director. So
earlier this year, the Civic Federation in partnership with
the Chicago metropolitan Agency for planning the center for
tax and budget accountability, and the Illinois Economic
Policy Institute released a report calling for the state of
Illinois to recalibrate our generationally outdated sales
tax system that renders through its disproportionate
weighting on Goods. Um, uh, uh, and puts Illinois and all
of the units of government that rely on the sales tax out
of alignment, with our economy, and those remarks have
already been stated by a number of the speakers we
absolutely, um, uh, affirm that and the report affirms that
as well. Um, and it, it, it's out of alignment with our
economy and puts us at a comparative disadvantage to peer
states with respect to economic competitiveness to put a
fine point on it. Our sales tax system is constructed for
the economy as it.
Existed in 1960.
and because of that, it is burdensome regressive and fails
to meet the funding needs for the services, our city, and
our region require
Right now, the state levies 6.25% sales tax on Goods of
which 5% of that 6.25% goes to the state budget with the
remaining 1 and a quarter. Remitted to local governments,
counties municipalities and other local. Government
entities can also Levy sales taxes to produce revenue and
they do here in Chicago are combined sales, tax rates,
total. 10.25% with that additional 4% above the city's,
this, the state's Levy. Um, 1.25 for the city 1 1.75 for
Cook County and 1 Point 1 percentage point for the Regional
Transit Authority. However the sales tax system in
Illinois, primarily or uh, targets or overweight Goods,
rather than services and as the immediately preceding
remarks reflect. Our economy has substantially changed in
the balance, um, uh, of goods versus services and we have
not changed with it. Um, although and and equally
problematic
Although the state and the city Levy taxes on Individual
Services, um and I'll speak a little bit more to that in a
minute. In terms of numbers, these taxes are inconsistent
and limited to a small subset of consumer services 2 data
points. Help highlight, why this matters of the 176
possible categories of services that might be the subject
of a sales tax, Illinois, taxes, only 29 of them as
compared to the national average and an Ideal World, we
would all be at 29 but we don't live in an Ideal World, and
we all know that, the, the reference point is the national
average. While we are at 29, the national average is 58
categories of services. Uh among the other 48 46 states
with general sales tax. Second in 1960, the sale of goods
was 70% of our spending today, it is substantially less as
was just shown on the slide that was put put up, um, before
you all, which means we tax a narrow base. That is
Steadily shrinking by not taxing Services, more consonant
with their presence in our economy today. The city is
forced to rely on a distortionary sales, tax structure
leading to 3 problems. First the city's sales tax rate that
that 10.25% is 1 of the highest in the country. That's a
bad look and a worse reality for consumers and business
Behavior second, the higher rate does not translate to a
correspondence.
Li large amount of revenue for the city and other local
governments. Because the application of the tax does not
align with the economy today. Third, and of special concern
for Chicago, the sales tax as it stands is,
goods and taxable Services. While higher income households,
spend more of their income on discretionary non-taxed
Services by taxing Goods more than Services. As a matter of
waiting, we place a disproportionate share of the sales tax
burden on lower income earners.
Estimates from cmap and the ctba. Show that a sales tax on
Services, might generate as much as 127 million for the
city.
That is RIT large applied across the board. Um and so I
want to offer some cautionary words there um a sales tax
expansion will all but necessarily and appropriately
include exemptions and likely would be paired with a rate
reduction which would significantly decrease that. Number
however, expanding the sales tax base to include Services,
would make our tax structure. More Progressive and
sustainable over the long term, which is why the Civic
Federation believes such a move, should be actively studied
for implementation at a moment. When there is urgency to
find more Revenue, there are a couple of other important
caveats, I would like to
Stress. As a matter of policy, I would urge both the city
and the state. And we saw this during the conversation
about Transit reform. And there was a mad scramble to
discuss sales taxes. If it was something that was a switch,
that could be flipped the overall. Um, uh, so I would urge
both the city and the state to consider 1 reducing the
overall sales tax rate as part of a package to expand the
tax base to more services, a sudden expansion of the base
will significantly increase sales tax burdens, um and a
rate reduction, could go a long way towards balancing or
softening that, um, shocked. Um, the rate should be
sufficiently reduced to keep revenue constant while
expanding the base. And from that starting point sales, tax
revenue would grow gradually and sustainably in the future
second. As a matter of process, um, a cautionary word to
members of this committee that a sales tax on Services, is
not an immediate fix to Chicago's or the state's Revenue
challenges sales. Tax reform is not a
magic wand that will overnight solve problems. That were
decades in the making, such a tax will require a Statewide
impact and comparative analysis, study followed by
legislation from the state going back to um, there being
176 separate categories. You can generally rest assure that
for each 1 of those categories. There is an association and
for each of those associations, there is a lobbyist and so
it will be something of a Game of Thrones as to how this
actually happens.
Which is why, although it has been discussed. Periodically,
generationally multiple times. It just has not happened in
meaningful measure. If there is 1 blessing,
In the sort of Damocles that we are facing with respect to
Washington right now. It is the coupling of the urgency of
Transit reform with what is pending over all of us. Snap is
just 1 thing. Um, may result in that sense that this time,
we actually need to do it, but it will take time front end
and back end once there is legislation that, implements it,
it will take a couple of years for all of the mechanisms to
be in place to track it and collect it. So those are
cautionary words. Um, and essentially here, um, we believe
that this is 1 piece and I know my my my my uh, my partner
to the right here is going to be speaking specifically
about lgd fprt.
These are all things that require um, collaboration with
state at the highest level. But they are all necessary as
as part of a larger conversation that we believe is
critically necessary about realignment realigning, the
Illinois tax structure in whole sales. Tax is an important
part of it. Yes. Um, but the larger structure within which
it operates, it's also outdated, and this moment of
budgetary, pressures at all levels of government calls for
a long-term reset of revenue streams to achieve
This requires collaboration at the top as I noted, and in
addition to the sales tax, reset being discussed, the
elephant in the room, always is the property tax system.
These things all need to be discussed simultaneously, the
property tax system. While conceptually Progressive is
regressive in its current implementation and unduly
burdensome. Because so many units of local, government must
disproportionately rely on it to sustain core operations.
Um, and so all of this requires cooperation between the
and state at a level that I know that people at the front
front of the room are constantly engaged in conversation,
that needs to be elevated to um, the people at the top as
well. Um, and in the meantime, 42026 the budget 2026
budget, we should not be assuming sales. Tax reform will be
a flow through. This is why it's very important that the
mayor's um uh fiscal task force, was formed, both for the
purpose of looking at immediate potential solutions for
2026 and longer term. Solutions reporting out a year from
now, which actually should add to the conversation. About
sales tax reform among others. Thank you.
Thank you. Um, thank you so much.
So we will turn now to our next topic, which was uh,
previewed by the previous speaker, the local government
distributed fund. So this is the means by which, um, cities
and towns across the state, including Chicago, receive
income tax.
Uh, so this was this fund, that was established in 1969 as
part of the newly, enacted state income tax. Um, counties
and municipalities are all allocated a percentage of state
income tax to this fund. Uh, the initial, uh, idea was
until January 2011. Uh, 10% of total income tax collections
were dedicated to the lgd for distribution to all
municipalities and counties. Uh, when we talk about
What that looks like. Uh the current rate is 6.47 uh
percent on the individual income side, so that has cost the
city Chicago specifically 1.2 billion estimated in loss
Revenue, Over The Last 5 Years, we're talking about nearly
250 million dollars, annually. Uh, it is 1 of the largest,
uh, Revenue sources for the city and makes up nearly 10% of
the city's corporate, uh, fund annual revenue.
and as just like a general guide, every half a percent
increase in the lgd of share will lead to an additional 35
million or so in annual revenue uh to the city of Chicago
specifically to give you a sense. This is something that
impacts all cities and towns. So if you look at the chart
here on the since 2010, we're talking about a total of 33
billion dollars. If the rate was the initially established
10%,
Uh, what's actually happened is of the 33 billion, uh,
cities in towns. Have received 21 billion and 12 billion
had been foregone or lost for cities and towns. So when you
look at that, just specifically in 2024
Uh, it's 3.33 billion would be the 10% rate and uh 2.16 of
that has been actually allocated or received for cities and
towns in over 1.1 billion uh lost and that's from the
Illinois Municipal League uh graphic.
Uh so here just kind of recapping the current rate for the
individual um income tax rate 6.47%. So just looking at
this idea of half a percent increase, roughly increases,
uh, City revenues, 35 million, um, up to a 10% rate, we're
talking about 250 million dollars, and you see the scale
from there?
okay, next up, we've got the
1 1 moment. Want to recognize Alderman, Moore. Thank you,
chair. Because I, I was confused because when we were
talking, I heard the 6.4 7, and I heard the 8%, and when I
Googled, it said, 8% municipality, so I guess I'm lost
right? Right, that
So the current rate it's um the lgd impacts both individual
income and corporate income. The individual income rate is
6.47% so of the total income that's collected 6.47% goes to
cities and towns on the corporate side it's 6.85% it's a
little bit higher.
But that's the rate that is actually in place that cities
and towns collect. I think anything other than that would
be perhaps potentially proposals to maybe increase the rate
itself.
Oh, okay, even on the Internet is saying, the current is
8%, so and then I heard somebody say 8% here. So that's why
I just wanted to be clear. I don't know. All right. Thanks.
Thank you.
Next up, we're going to talk about the personal property
replacement tax in 1979, the state created, the personal
property replacement tax to replace Revenue. That was lost
by local governments. When the state eliminated personal
property taxes on individuals,
Revenue from this source is also collected by the state and
pay to local governments based on a formula.
The pprt makes up about 5% of the city's corporate fund
budget.
This Revenue Source has also seen State policy changes over
the years that have led to smaller and smaller amounts of
Revenue received by local governments.
3 State actions that we've identified include changes in
the percent surcharge, placed on incomes from different
types of Corporations and business entities,
Changes in the amount of losses that these entities can
claim.
And lastly diverting funds to pay for expenses. Not aligned
with the intent of this tax before ultimately remitting
money to local governments.
With that quick overview. I'd like to invite Ralph Mercury
to talk about, both the LGs and the pprt Ralph is the
executive director of the center for tax and budget
accountability.
The center has produced extensively, researched reports and
briefs over the years about both the pprt and lgd F
Hi, I'm Ralph Marty executive director of the center for
tax and budget accountability and will my PowerPoint be
coming up on the screen.
Great. So I want to start by providing a little context for
the for the city's General Revenue fund, its corporate
fund. If you look at the breakdown of the revenues that
feed the fund, there's a lot of little revenues, There's No
1, big revenue. And this creates both fiscal and political
challenges. I mean, you look at the different sources,
feeding the revenue fund, the corporate fund and only 1 of
them accounts. For even, 15% of the revenue, everything
else is below that so the corporate personal property
replacement tax together with the local government
distributed funds. You combine them that
Roughly 13 to 14% of the revenue going into the corporate
fund. When you have this significant number of small
Revenue sources feeding your main operating fund, your
fiscal challenge.
That's created is pretty simple. Most of these Revenue
sources don't grow with the economy over time. So as the
economy grows their revenue, growth doesn't quite keep up
creating a structural imbalance between your Revenue
growth, and your cost growth at the service at the city
level. That's number 1, number 2 politically, There's No 1
big tax. You could turn to like the state has the income in
sales to adjust and generate significant Revenue to come in
to deal with your fiscal problems. Instead you have to
adjust this 1 and that 1 in the third 1, in the fourth 1
and boy, does the media like to say that your nickel and
diming taxpayers when you do that, and it creates a public
perception that in fact, City decision makers are doing
something like that. When the reality is the corporate
fund, relies on all these smaller funds. All these smaller
Revenue sources. Yeah, so it's really important that the
city and the state
come to a much better place on those state-based, revenues
that do feed the general operations, the corporate fund of
the city. Because getting that right for all, local
governments makes a huge difference in how they can have
the fiscal capacity to meet the demands of the
constituents. They serve. If you go to the next slide,
you'll see that you have the ticker The Tick is right
there. I do. Yeah. You are a great American Constance did
that he did that he walked. Yes he just gave me control.
So if if you look at this, what you see is the other funds,
the other funds, that the city of Chicago have have grown
with the economy over time. Then you look at the red line
for the corporate fund, really not so very much. And recall
recall, this includes the significant federal dollars, we
got during the pandemic through the Biden Administration,
the ACA, and the cares act and other relief.
Me the spike in corporate personal property replacement,
tax revenue that I will explain the economic reasons for
but that flatlining. Pretty much in inflation adjusted
growth for the corporate fund explains why it's so
difficult for the corporate fund to keep up with the
obligations imposed on it. Remember,
Most public services are labor. Intensive police fire
Street, Sands these are labor intensive services so they
tend to grow at What's called the employment cost index and
inflationary measure over time tied to the cost of hiring
individuals to provide services.
This is struggling to keep up with the Consumer Price
Index, which, which is grows. It's a general inflation
rate, but it grows at a much slower rate over time than the
ECI. So, the revenues that feed the corporate fund for the
city of Chicago, simply don't grow with the economy and
that's because there's so many small non-economic based
funds. Look at that. So, the 2 re items that I'm really
going to be talking about are the personal property
replacement tax and what we want to look at their is
limiting Revenue diversions that the state is making we
want to reinstate uh uh tax deduction that this the state
of Illinois currently expanded on the net operating loss
deduction for corporations to its older level. And in fact,
we want to bring the tax share rate between the state
government and local governments back to its old level of
10%. So that's what we're going to talk about on the pprt
for the local government distributed fund. We're also going
to want to
Return that to Old rates. So let's get into the personal
property replacement tax prior to 1970, local governments,
actually assessed a tax on business assets equipment and
things like that. 42 States, still do that, but with the
1970 Constitution, local governments were prohibited from
levying this tax. Now it was replaced in 1979 with the
corporate personal property replacement tax and this is a
profit-based tax that businesses pay that's supposed to be
fully replacing the old local only
property tax imposed by local governments that's important.
it's not supposed to be creating revenue for the state
government, it's not supposed to be funding State
operations, the whole idea behind this was to replace a
local tax with a new Revenue Source tied to corporate
profitability. Now this was good for businesses by the way,
because a tax on equipment and inventory, those kind of
things a bit of a fixed cost. A business has to pay,
whether or not it's profitable, shifting, its burden to a
profit. Tax is really good for business because that's
something business only pays after it's making back
everything and invested in plant and equipment and
inventory and all that. So this change in policy was
actually good for business taxpayers. But to be very clear,
it was supposed to be something.
That only generated.
Local Revenue now. Recently, the personal property
replacement tax exploded. If you look through this chart
from 2013 to 2019, the pprt grew by an average of 0.02% per
year. That is not a big chunk of growth. Then you look at
2020 through 2023
Personal property replacement, tax revenue jumped by 241%.
That's 3.2 billion dollars. Why did this happen? There are
a couple of things going on, but from a business
standpoint, the big thing that was going on is we were in a
period of record inflation. In fact, we hit a 40-year
inflationary high in fiscal year 2023 businesses saw what
was happening to the prices of goods and services and they
price gouged. How do we know this corporate profits between
April of 2020 and December of 2021 increased by 54%?
In that 1 p short period of time. From all of 1979 to 2019
business profits, increased by 11.4%.
So you see this dramatic growth in business profitability,
in the context of record inflation?
According to Paul Donovan, who's the chief high wealth
Economist at UBS Bank? What businesses realized was
consumer spending was resilient during this period of
incredible, incredibly High inflation. And because of that
businesses could increase their prices at a level that was
far greater than the growth in their cost caused by
inflation and profit. Take, this is something that
traditionally happens whenever we have periods of high
inflation. It's not evil or moral Behavior, it just
happens. Businesses are profit motivated. This is what they
are supposed to do, but because the corporate personal
property replacement tax happens to be predicated on
business profits. It really accelerated the revenue
realized by local governments. And in fact, if you see the
next slide, this is the city of Chicago's. Take, look at
the jump from 2020 to 2021. It went from a hundred million
dollar.
Revenue source to a 600 million dollar Revenue source for
the city.
Ah, the house in days of high inflation.
But they're gone.
And so now all the projections are business profitability.
And you could see the downward slope in this graph is
returning to Historic levels. It's estimated that the pprt
will generate 275 million in fiscal year 2025. I'm thinking
it's going to revert back to the 200. Maybe 210 million
range as the economy normalises going forward, and that's
going to especially be the case. If in fact, we'd go into a
period of slower economic growth than initially anticipated
or even a recession and right now, all the projections are
because of certain actions happening in the Beltway, uh the
economy is in fact, slowing down and not performing at
quite a high level. So you can anticipate that this Revenue
source for the city, which really covered a lot of problems
in the last few years, because of that rapid growth in
corporate profitability is going to revert to its old level
200 million dollars. So making this Revenue
Source as robust as it could possibly be from a local
government standpoint makes all the sense in the world
because it's it is intended to be purely. A local
government revenue Source, not a state revenue source which
gets me to my next Slide the state of Illinois. You may not
know this also has its own fiscal problems.
And so because of that they said, hey we see this personal
property replacement tax revenue growing, we're going to
divert, that's the word. They use some of that Revenue to
cover. Our operational problems at the state of Illinois.
These diversions should not happen. Yes, the state should
be allowed to charge a relatively minor administrative fee
for collecting and remitting this Revenue source to the
local governments, but that's it.
Diverting Revenue that should be funding local governments
to instead cover the state's. Fiscal problems is not
appropriate and these diversions are not insignificant.
They've jumped from 5.8% of all pprt revenue in 2013 to
11.5% in the current fiscal year. That's a lot of money. In
fact, that costs the city of Chicago 37 million,
Of local Revenue.
Now.
1 reason. This is such a
Difficult thing for local governments to accept City of
Chicago. And its peers is pretty simple. The state of
Illinois has a revenue toolkit available to it. That
includes the income and sales tax to significant broad
General economic base taxes, local governments have nothing
like that.
To for the state which has a revenue toolkit available to
it. That will allow it to solve its problems rationally and
sustainably over time. You heard. Joe Ferguson talk about
expanding the sales, tax base to services, this should have
done that 20 years ago, but it's it's the right thing to
do, but they can do that.
What they should not be doing is trying to solve the
state's fiscal problems, on the back of municipalities like
the city of Chicago, period, end of story. So this
diversion practice needs to end second.
The state of Illinois does control, the tax expenditures,
tax breaks people call them that are given to taxpayers to
lower their burden 1. That they recently increased or gave
a bigger
Benefit to private, taxpayers was increasing the net.
Operating loss deduction carry forward. Last few years, had
a cap of a hundred thousand dollars. You could only carry
forward a hundred thousand dollars of your losses to offset
against your current profits. This year, they bumped it up
to 500,000, why it serves no.
Purpose, bringing that back down, will bump up the revenue
generated by a tax based on corporate profits. So that's
just a rational thing to do. It's something that should be
done. It's good for the state and it's frankly good for
this local Revenue source and then finally
All businesses. When the personal property tax was in place
paid the same rate on the personal property subject to the
tax. When they created this tax to replace it, they didn't
do follow through on that where every business plays the
same pays the same rate C, corporations are charged 2.5% of
their net taxable, profits s. Corporations are are taxed
that don't that, um,
What, what 1.5%? I lost my mind there for a second as our
our Partnerships. There's no reason for that and
From a business standpoint more and more businesses are
formed as either s Corps or CC Corps over time. The only
reason to incorporate is a cc Corporation. Now is if you
intend to go public at some point, if you don't intend to
go public, it makes all the tax sense in the world to
organize your business, as either an s or a C Corp because
you skip that level of corporate taxation under most state
and federal income taxes, right? So just making this rate,
the same 2.5% for all businesses. Brings the tax back to
what it was intended to be.
A replacement of the old personal property, Levy number 1
and number 2. Recognizes the reality that most businesses
these days are formed as CC Corps as as Corpse and llc's,
not corpse and then finally, there's a local government
distributed fund. So
This is where the state shares its income tax revenue with
local governments. That's hence the name relatively apt, it
had a 10% share rate. So after the state collected its
income tax revenue it would deduct from that, what it felt
it would need to cover refunds to taxpayers who filed and
that out of that net amount, it would share 10% with local
governments across the state based on their population.
In 2011 the state temporarily increased, its income tax
rate for individuals from 3 to 5 percent. Now they did this
because they were they were facing a really tremendous
budget problem. They were looking at a deficit approaching
12 billion dollars then and they said, all right. What we
need to do is cut into that deficit and so we don't, they
decided they didn't want local governments to share in that
Delta that growth in revenue generated by the increase from
from 3 to 5% in the personal income tax in from 4.85% up to
7% for the corporate income tax. They didn't want local
governments to share. So they cut the share rate to hold
local governments as if
That tax increase didn't happen, as if that state income
tax was still 3% for individuals.
Fast forward to where we are today, the state of Illinois,
While now it's fiscal problems are re-emerging in the
current budget is in the best Condition. It's been in in
over 30 years.
But in the interim time, is it got itself to fiscal Health?
What has it done to actually help the health of local
governments?
Let me think about it, nothing. Do you want me to think
about a little bit more? Nothing. And so, the problem here
is
The state government continues to slow down to local
governments, various unfunded mandates. You could look
across the board. They exist for every unit of local
government. It this year decided that it would generously
cut the grocery tax. Even though that wasn't a state
revenue Source, it's just a local Revenue source.
And it has so historically, underfunded K12 education that
school districts in Illinois have had to over assess on the
property tax to generate enough Revenue to fund schools.
And to to give you a comparison property taxes in Illinois,
currently cover roughly 62% of the cost of K12 education,
the national average or for property taxes to only cover
44%,
Illinois is the most Reliant state in America on property
taxes to fund schools because for Generations, the state
didn't bear. Its fair share.
but what that means for other local governments is the
property tax base, has been eroded that they could access
because school districts have to go after it.
To fund any sort of level of Education. Now, that's been
Somewhat addressed with the passage of the new school,
funding formula, that EBS, which is required the state to
put 300 million more into K-12 funding every year. But it
still has decreased this base available for municipalities
like City to like the city of Chicago to access. So it
makes all the sense in the world for the state which is now
in a pretty good fiscal condition has these major Financial
Tools in its kit, the income and sales tax to adjust and
fix its fiscal problems to go back to its historic share
rate of 10% on the local government distributed fund. If it
did that. That's 235 million dollars more for the city of
Chicago's corporate fund and no taxpayer pays a penny more
in taxes.
So I'm going to end their other than to say I I I agree with
the testimony provided by my colleagues. On this panel,
whether it was on the sales tax or the grocery tax that we
need to make these changes in Illinois. But but because of
the politics surrounding taxes, I teach a master's course
master's course on fiscal policy, there's an entire chapter
of the book. I use dedicated to the politics of taxes and
revenue because they are so different difficult.
It's really crucial that Chicago's key decision makers, in
the city council and the mayor's office work with state
representatives and state senators, to fix these
state-based Revenue sources that feed, local governments.
That is a positive path forward for Illinois, and
municipalities thank you.
Thank you so much uh Ralph before we um open it up for
questions. For those of you who've uh remained uh we have a
little bit more in this presentation and then again
colleagues you can uh ask whatever questions you all may
have.
Okay. I wanted to thank all of our speakers, especially, I
think professor of powers, who traveled, the farthest to be
here, she came in from Urbana Champaign this morning. Um,
as we've all heard today, the city has a structurally
imbalanced, budget expensive in our liabilities are
expected to grow faster than our Revenue collected.
Um we're not unique in facing these challenges as mentioned
before, but we are uniquely positioned to make some policy
changes.
And sound decisions to ensure that we bring the city back
to solid Financial footing.
Um, with that, I'd like to open it up to questions.
Uh, chair recognizes Alderman Moore.
Thank you chairman. I'm just so sorry and disappointed that
we had um, this on the same day as Finance. Um, I got a run
run and I have to go. I got a another commitment. This was
just too delicious. I'm telling you, and no seriously and
we may have to come back because there's so much, um, to
consume because I cannot wait till I get everybody's, um,
presentation. So I can go, um, through them. Um, but I, I
guess
I guess 1 of my questions is when we talked about the um
period of 2023 when we had um High inflation. I think
that's when we went to CPI. Um, for taxes as well to, uh,
well actually, we didn't because that 2020, right. I think
we went there, um, um, at that time. But tariffs, so what
I'm thinking about is when you say, we're not going to get
back there from a corporate standpoint with High. Um,
um,
High cost because I'm thinking that's going to be taking
advantage of through some of these tariffs. And I've seen
that in some instances where, um, corporates. They they're
blaming everything on the tariffs when they can possibly
keep some of the prices low but now they're bumping them up
because of that. So you don't you don't, you don't foresee
that happening because you said we're not going to be. I
foresee that happening but you're the expert. You don't
foresee that happening.
Tariff situation is so different than a situation of normal
inflation because the normal inflation just everything's
going up across the board. So consumers become somewhat
inured to watching those prices. Go up and as Paul Donovan
noted from UBS Bank
Their consumption patterns. Remain relatively constant
tariffs are different because they're singling out specific
Industries for excess costs and those Industries have to
remain cost competitive with their peers and they're
usually International Industries. So,
It's more difficult for them to profit, take in a tariff
scenario than in a scenario. When there is General
inflation, uh, driving things up across the board. Could it
happen in certain specific Industries? Maybe I we'd have to
do an industry by industry analysis, but because it singles
out particular Industries, for economic harm in effect,
it's far more difficult for those Industries to
utilize what's going on on their cost side to flip up their
price even more to profit take
To expand a little bit on on what Ralph was offering. Um,
uh, so we can't rely upon what happens. Um, both in terms
of the structure of the projected bump if you will and for
his continuity, it's not stable, it's not sustainable. And
so it might in a perfect world in an imperfect imperfect
World provide, this puff, this additional amount of money
but the underlying structural ills would then still be
kicked down the road. And that is what this conversation
is, is getting to that holistic conversation, um, that is
necessary. And so many of the things that, um, uh, Ralph
offered up in speaking to pprt and lgd F, you know, the
structural component with respect to, um, uh, uh, the
diversions, those would all stay in place temporarily. We
need to actually have the conversation about those that's 1
2 with
respect to all of this, all of these things. And and this
this sort of a takeaway from what Ralph was offering they
have the effect, not necessarily the intention but they
have the effect.
At the state level of imposing, a pressure on localities, to
increase property taxes. It's a stealth property tax
pressure and that we all know, from all of the people that
you represent, we're at a sealing in that regard. Um, and
that's a system that itself is in need of Reform. And so,
um, I appreciate the question and the potentiality of
tariffs, but tariffs aren't going to ride to the rescue for
the long term. Even if it was broad-based and then and then
my second question, um someone say it um the tax on
Services, which I support might generate 127 million. Um,
Versus what on the sales in. So, so and I I'm just trying
to find that. Yeah, so so, so so this is working off of the
the report of the coalitions And Ralph's organization was
part. Um, and it was it is headed by cmap overall. If you
were told apply it across the entirety of the 176
categories of services, the estimate is upwards of 2
billion at the state level and the city would benefited
that to the level of about 127 million above consumer
services. Specifically, yes. Um, uh, not Professional
Services. That's a critically important distinction to make
here otherwise That Game of Thrones will be visited on our
heads, um, immediately. But um, uh, but, um, that is a very
complex process. You're not going to do it.
Across the board. Um, and you actually don't want to do it
across the board because in many of these categories, there
will be um, um, uh, inequities that are visited within the
categories themselves. And so a lot of a lot of that 170
176 total, they will be accepted, they will be ruled out.
That's a political process. That's a lot of policy
decisions that need to be made. So that gross ends number
of 127 million or 2 billion. Overall, we need to sort of
keep our expectations modest about that as we work towards
a world of recalibrating these things to reflect the
economy. And I thought that was my last question, but you
just then threw in professional versus consumer service?
Let's, let's talk about that because I think we've been
using them the same and they sound like they're separate.
So when you say consumer services, give me example, when of
2 items, when you say consumer services,
Versus when well here. Because if I say,
When I'm thinking of Professional Service, I'm thinking of,
or when we say services in general, I'm thinking of a
barber shop. I'm thinking of a nail. So, are you calling
nail and barber shop consumer services and then
Professional Services accounting that I just want to be
clear. You you've got that exactly right. And and the
reason that those 2 things is really important to separate
them. Um, first of all, um, uh, different economies that
we're talking about altogether, but we want to do this in a
way that isn't just aligned with our economy, but
That does not put us at a comparative disadvantage.
To other regions other localities. If, if all the lawyers
and the accountants left Chicago, um, Believe It, or Not,
we'd actually have more problems. Um, and, uh, so these, so
that's why I use the term, um, uh, uh, comparative
We have to compare ourselves to other jurisdictions. And
when you look at the surrounding jurisdictions, um, uh, and
what they uh actually tax in the way of services.
None of them tax Professional Services and so once we start
doing that those professions leave, but the good news is
Iowa and Wisconsin are already taxed. All the services, the
consumer services, we feel should be taxed, neighboring
states, Iowa and Wisconsin and so haircuts long here, both
all that stuff is taxed in those States and there's this a
lot of rhetoric built up that. Oh, it's going to hurt
businesses or whatever. Whatever. No. It's not have you
seen bus loads of people from Iowa and Wisconsin coming
into Illinois to get their haircut, know you have it. Now,
if you've seen their haircuts, they probably should come
because there's this funny looking people, but they are not
coming to tax reasons. I didn't say that. And that's just
sort of 1 of the things that gets misplayed. I think the
other thing we have to emphasize is these are purely
consumer services, not business to business services, you
would not want to tax a business. That's, that's in the
wholesale industry. When it sells its product or service to
business, B, and then business B sells its service to
business C,
And business C, sells its service to business. D, what
you've just done is taxed 1, transaction 5 times, you've
pyramid your tax and that tax keeps getting handed on to
the next purchaser, in the line ultimately to the end
consumer. Making it very expensive for the end consumer and
making you less competitive in your state for products or
Services developed in state, or with a lot of the
development process in state. So really just focus on
consumer services and I feel if we did that and that's the
right thing to do from a tax policy standpoint uh we would
get to those figures that we cited.
Sam, I'm lost because now you I thought we were saying for
focus on the professional and not. Oh no. Now we think it's
no consumer. Its focus on the consumer but within within
within. And that would put us in on parity, with the the
comp with the jurisdictions, in which we're with, which we
are in economic competition, and that's why the reference
to say Wisconsin, um, uh, and other neighboring states. And
so, it's consumer, but with respect to Consumer and this is
why it's very complicated.
Many of those consumer services themselves.
Um uh uh, could have a regressive impact, um, because lower
income people use a higher proportion of their income
overall. For, for many of these, the ones that you just
named might be an example of that, all of these need to be
analyzed individually and in the Aggregate and in relation
to each other.
To get to that larger hole where we're balanced.
All right, we have to come back because I don't have time.
It's a very complicated topic as you as you have alluded to
but 1 that needs to be that's a fair thing to say we need
to dive into. So absolutely. And you can also get their
their cards too. To follow up with someone at 1 time. Oh, I
got it for instance, on speed down. I made, uh, I made a
mistake, uh, Alderman. Andre and Anthony, she had her hand
up first chairwoman now then uh, Anthony then Andre. So
sorry about that guy. Uh, thank you Mr. Chairman and I want
to thank the panel for being here today. I, um,
listening to you, I have
A heavy heart, you know? Because I think this is a heavy
lift and as needing requiring a seismic shift in
our tax policy.
And I want to be optimistic about it.
I don't know how to be.
uh, so I was wondering if you could speak to how
What kind of incremental or strategic plan?
Would you all recommend?
Uh, to see where our interests in the state's interests.
Align,
To move forward to turn this boat around. I mean, I've been
hearing a lot of discussion years past about the property
tax system and wanting to change it. So that the the
We could bring more parity to this uh our education system
and there's been no movement on that, right?
so, um,
how do you think about that? I I I I think it's very wise
to couple property tax relief with expanding, the sales,
tax base, to consumer services and cleaning up some of
these other fiscal things because you
I think Joe Ferguson correctly, said it was a stealth
property, tax increase hoisted on, local governments, when
the state underfunded K12 for Generations. Now, the new
evidence-based funding formula has
Helped the state's put in 300 million more every year
except for the first year of the pandemic.
Over and above the prior Year and that has somewhat
stabilized property tax revenue growth.
For school districts but we're still out of whack. So 1
real easy way to do this, is as the state gets more Revenue
in the door, for its coffers, it can replace a certain
portion of the property taxes, used to fund education, with
State based Revenue as part of an overall reform. And that
takes a lot of pressure off your local taxpayers because
you pick up your bill for the city of Chicago. What's the
biggest property tax item on it? It is CPS and it's like
that for every local community across Illinois. So,
relieving a component of that K12 funding and replacing it.
With state-based revenue is a win-win for taxpayers. It's a
win-win for school funding equity and it's the kind of
thing that will allow a big transformative change, like
expanding the state sales, tax base to services to gain
some political legs. And I know that there are a number of
legislators that are interested in the health of the city
of Chicago and its corporate fund and would be willing to
work with city council work with the mayor's office on
Crafting. A rational, strategic plan for making this kind
of transformational changes. Part of a bigger package that
has comprehensive tax reform.
And and without preempting, the work that has just been
started by the task force. Your question actually should
hang over the work with respect to the longer term um
analysis and recommendations, that they make and Report out
a year from now. Um and I would further add to that. Um,
that um we should not let a crisis go to waste the crisis
that may put us over the Tipping Point where we're no
longer speaking from Individual level government interests
in competition with each other.
Is 1 where Washington puts us in a situation where we
actually all have to come together and acknowledge that
this, that the structure itself is misaligned and open that
conversation. But I do believe the task force has an
extraordinary opportunity to actually amplify this and to
engage um uh, the state legislators and um City
legislators, you all together on the way to making the
recommendations that create that platform for longer-term
engagement and and and collaboration in a world in which
unfortunately when we're talking lgd for pprt, we are
talking Zero Sum games and the only way to get through that
is actually through dialogue.
Right. And then to you uh director Guzman have we considered
considered adding any state people to, uh, the mayor's
sustainability, uh, fiscal sustainability working group. We
have, um, we are in the midst of those conversations right
now directly with speaker Welch and, um, president Harmon.
um, as you know, uh, they just finished their budget cycle.
Um, and we were giving them a little bit of Grace, uh, to
get through that. But we will be adding them relatively
soon as well as um, uh, uh, rolling out the meetings with
the legislators and the co-chairs very soon.
Thank you very much. Thank you. Would like to, uh,
recognize Alderman. Anthony Quezada. Thank you, chair. Um,
thank you, everyone for your presentations. Um, Mr.
Ferguson, uh, you gave uh, hello, good afternoon. Uh, you
gave a uh example earlier about how our tax structure was
somewhat related to the 1960s or was kind of stuck in the
1960s. Can you re litigate that and what what you mean by
that? Basically in the n in the 1960s Services were a much
smaller portion of our overall economy. Um we were we were
weighted much more heavily to Goods, um, rather than
Services. We all know that that's changed and it's changed
in subtle ways. For example, a book, a paper book in 1960,
may not be a paper book today. It may be an ebook which
then raises a question of collecting of sales tax, but it's
all over the place. So,
Services are now a a much larger and predominant form of our
economy overall. And yet, we continue to maintain a sales
tax system. That focuses on a narrower base that overweight
Goods, which means, again a small base relative to the
economy overall 1. That is more regressive um rather than
Progressive and fair in distribution. And the result is
therefore we have to tax at a higher rate but collect less
money than would be the case if this was properly aligned
to our economy. Got it. Yeah, I I think the the you know,
this this kind of filling in the blanks and so many
different, I think narratives that we hear in our
communities, um, especially, you know, there's this 1
narrative that, you know, like Illinois or Chicago is the
most tax City or the most tax state. I think it's rather. I
think that's a full picture at the very binary narrative.
It's that it's a uh, inequitable, you know, tax burden
that's being concentrated in 1 area, rather than
being distributed among all the available things that we
should be looking at. And so I agree with you in that our
our tax structure is severely outdated, and that's why we
have this over. Reliance on property, taxes, etc, etc.
um, I was wondering if this working group wasn't
communication at all, what the property tax reform group in
Cook County,
Um, so there are a couple of things that we're doing. Um, I
actually have a meeting with um, the Cook County uh, CFO
and um, the uh, head of the Bureau of Economic Development,
uh, next week to talk about their property tax relief.
There are a couple of proposals that working group members
have related to property tax and property tax relief, um,
which will be, uh, discussed in litigated and and, uh,
debated, uh, within the working group. Um, we actually have
a meeting with cessor kagi pretty soon. Um, so all of that
is like happening at the same time, got it? Yeah, I would,
I would encourage uh, some Outreach to the president's
team. Um that was a working group that I was very much
engaged in. Uh, and I think that this, I think we need to
be looking at this conversation holistically. Um, so I
would definitely encourage that. Um, so
In regard to these, uh, services. And I heard, uh, you
mentioned some examples. Mr. Ferguson to my colleague,
Alderman Moore. Um, I'm surprised by Texas having so many,
uh, Services tax. Uh, I thought they were so pro market.
Uh, and or against taxes. Um, do you all have like a
breakdown analysis of of of those services that are taxed
and do we have any strong proposals on, you know, what
number we want to be? You know? Get
Heading toward. So there's a there, a couple of things. So
first of all, with respect to Texas and that was 1 of the
first things that struck me, when I sort of first saw saw
those statistics Texas, doesn't have income tax. That's
right. So, this is how they're compensated, this is how,
this is how, right that is provided, which is why looking
at the overall tax stack, and the burden on the same tax
base is really, really important. Um, and then um we
certainly can provide a list of the categories. Um and uh,
some of the, the, the comparisons, um, some of that is in,
um, the uh report that was issued under the opacities of
cmap working with the other organizations. Um, what I don't
think we would want to do
Is preemptively, suggest a focus and a particular area.
That's, that's a subject that is sort of, that's where the
complex complex analysis has to come into play. These
things have relationship to each other and relationship,
um, uh, relative to the neighboring and competing
jurisdictions, which we do not want to put ourselves in a
competitive disadvantage with because ultimately aligned
with many of the remarks that have been said in the
previous hearing and, as well as this 1, that ultimately,
the objective needs to be towards growth, right? Right. Yes
and Alderman. If I could just the comparison state-to-state
taxes, it's really difficult to do because taxes also has
this thing called an extraction tax that they assess on oil
that's pulled out of the ground, right? That generates tons
of money that they don't pay in Texas. We pay
So to get a really good handle on a comparison of
state-to-state tax burden, there's a group called The
Federation of tax administrators. The FTA, all they do is
they take the published audited, financial information of
state and local governments and pull it together. There's
no modeling as soon as someone's doing modeling, you have
to be worried about their assumptions and what's going in
there. But this is really brilliant because it's says,
look, here's the total dollars collected in every tax and
every fee by any unit of state or local government in
state, a
Here's personal income, according to the Bureau of economic
analysis in state. A, let's divide the taxes by income, to
get the percentage of income paid in taxes. And then you
could at least compare tax burden across the states because
the individual taxes and how they get there, the individual
fees, and how they get their, whether their state or local
really vary. And what you find when you do that is Illinois
ranks 24th in the nation in total state and local tax,
burden as a percentage of income. We're not hot. We have
the fifth largest economy of any state. We have a trillion
dollar plus economy, we have the 6, we ranked 24th in tax
burden, we're not a high tax state. Now when you isolate
out the property tax, we're always in the top 3 property
tax is a very
Difficult way to tax taxpayers. In fact, if you look at it,
since 1990 going forward property, tax revenue in, Illinois
is grown after inflation, by well, over 33% median, incomes
only grown by 11. So you have a tax burden growing at 3
times the rate of growth and income because of other flaws
in our tax policy. So getting these big flaws in our state
tax policy fixed, right. Make a huge difference for local
governments. Yeah, absolutely. That's that's great. Before
before you next question, Joe Ferguson has to leave. So
thank you so much. Thank you, Mr. Ferguson. Thank you for
speaking with that. Yep.
um, I that that just about uh, concluding my line of
questioning, you know, but I I I do want to uplift the fact
that in in addition to talk about talking about these
different types of tax restructuring and tax services, I do
believe that it is imperative that we still talk about
wealth redistribution. We are a wealthy State. We should be
looking at making sure that the the ultra rich in our
state. Hey, their fair share of taxes. We should be
re-examining a progressive state income tax. We should be
re-examining a corporate head tax. We should be
re-examining a financial transaction tax. This is an era of
a golden era for the wealthiest people in our state and in
our country. And a lot of the taxes that we're talking
about here today are still a burden on working-class people
on poor people on low uh on small businesses. Um and again
we all have our fair share to pay.
But we we continue to leverage, you know, this burden on,
working-class people, and poor people. Um, and I'm not
saying that we are doing that, that you are doing that or
that I'm doing that. But I'm just saying holistically that
is the analysis and the lived experience that people in our
communities have. And I just want to speak that into the
record that we should be really examining how we make the
wealthiest people in our state pay, their fair share. Thank
you, thank you so much. Uh, at this time, we would like to
acknowledge, uh, chairman Andre Vasquez,
thank you very much chairman. Um, I I appreciate the
conversation. I think
Struggling a little bit so I apologize. Um and looking at
what we're talking about, it feels like everything we're
discussing.
Is basically something that the state needs to do as
opposed to what city council can do but for the grocery
tags. So um, I guess I'm trying to figure out.
I think some months ago, um,
Kofa reached out to us for ideas. As far as Revenue, to
kind of, see what was happening there. And so I was just
curious when
That would be discussed or do we get any responses back?
Because it's it's
And I'm not putting this on anyone, but there's a little
bit of frustration that we're talking about things that
only the state can do after the state's already wrapped up
their conversation. So in some regard, it feels like a
conversation, we have every year, but
I I I just think we need to focus way more on what we can
actually control and do to figure out what options we have.
And so just wanted to get a sense of when we might have
those conversations related to the form that people filled
out. So yeah, so to that, to that end, uh,
Um, budget directed Guzman, what going detail but July. So
a lot of ideas got to go through a system of legality
Revenue, potentials. So so forth and so on, but she can
speak to more of that. Sure. And I as I always say, I never
think of things as a and or I always think of it as a both
and right. So we um as I think we have mentioned in our
monthly meetings with city council members are looking at
over 50, Revenue options. Um, some of those, uh, are going
to be ones that city council can put into play, others,
require, uh, State action. Um, I don't think that we
should, uh, talk about either of them at the exclusion of
the other. Because as Joe Ferguson rightfully noted, um,
state revenue requires consistent and sort of, um, um,
continual discussions at the state level. So at the same
time that we want to put forth, um, and provide research on
the city, uh, the ones that
The city has control over. We also want to make sure that
we're having these conversations and as you rightfully said
the city just wrapped. I mean the state just wrapped but
but the state will be again their conversations again in
November. And so we want to make sure that we're having
these conversations with you early and often so that we're
not only informing you but we're also uh getting your
feedback on on how we should move um as it relates to the
city, uh the city options. Um as we had mentioned in our
meetings with you, we will be providing you that research,
um, later this month, um ahead of the July, uh, Revenue
sub, uh, committee meeting um it does take time for us to
go through the analysis. Um, not only from a legal
perspective, but from an equity perspective thinking about
how much can we potentially, um, raise from a revenue. We
also have to talk to our departments who might be
instrumental in either collecting the revenue or um,
operationalizing that Revenue about what the costs side of
that could be as well. So all that to say, it does take
time to look at a number,
Of revenue streams and provide feedback. But um what we
committed to you was that we would have that full some
research and it just so happens that it's over 50 Revenue
sources that we would have that to you by June 20th. Okay?
Yeah, I appreciate that. I think
I think.
for those of us that have been here a while, we kind of
hear about the same state ones. And I think that's kind of
where some of my responses been, like we get our colleagues
colleagues who bring up real estate transaction tax and all
the other things, which we kind of know. I think to your
point finding ways that we, as a body, can partner more and
get to Springfield because I think
it feels like there's a lot of missed opportunities that
have occurred in the past 2 years. Whether we're talking
about Transit, which we just had to watch no funding come
towards or like when CPS is a priority, um, our own
deficits that we're seeing, I'm glad that the communication
is improving, because it hasn't always felt that way. So I
appreciate that. I think, um, Joe had something that she
wanted to. I wanted to add on to the, you know, um, you
know what you noted about this state revenues? Um, I think
it's really important that we're talking about them. Um,
there's a couple components 1 is, it's critical to our
Revenue framework.
and you know we talk a lot about how there's a few things
that are under our control um and but there's these broader
sets of big broad-based revenues that are going through the
state and under the state's control.
And while you know, of course, we at the city cannot
control them directly. I think coalescing around a
strategy.
Bringing the state into the working group that that Annette
is a leading and has put together um finding more ways to
communicate with the state, finding ways to really
strategize and advocate for these changes, you know, that
Ralph talked about. So clearly is extremely important for
us. When I look at what went on in the state legislature
this year, I have sort of 2 key. Takeaways 1 is I don't
really think their budgets balanced either. You know, they
scrambled to put some Revenue at the last minute because of
declining projections but I don't think it's really
balanced. Um number 2 they didn't deal with Transit.
The following point to that is, they know they need to deal
with a Transit. We have heard rumors that uh they may get
called back into session before the veto session.
I don't know if that's true or not but the fact that they
did not address uh that they did not address Transit. Um
and that probably the revenues are not truly balanced.
Argues for them coming back, which I think is also where we
need to think about.
Are there ways that we push? Some of what we think is
important to us now is that going to mean more lgd F and
pprt when they're trying to get more Revenue, probably very
hard to get that done immediately, but something like
expanding sales tax to Services is getting a lot of chatter
chatter downstate, um, more so than I would have ever
imagined, 2 years ago. When we started talking about it
here in these rooms. And when we think about sales tax or
Services, there's I think a some key components number 1.
Is that the equity play is extremely important. It is
regressive. How we only tax goods and not Services. If we
expand to services are we making it more Equitable by just
expanding the tax to services and taxing more?
Sort of theoretically, but the way we really make it more
Equitable is we expand a service and we lower the rate. We
know that folks in the governor's office also think that
that is a positive thing to do to expand the services and
lower the rate.
That creates a much more Equitable funding structure.
When we think about Transit what is Transit funding from
sales tax. So, if the state lowered their rate, a little
with an expansion, if we lowered our rate a little bit with
the expansion, maybe the county lowers, their rate, we can
deliver a lower rate,
To the citizens, the residents of this city.
And if CTA RTA, leave their rate the same that's going to
increase their funding. So I do think and maybe it's a hare
brain scheme and it has a 5% chance of success. I do think
there is a potential future or sales tax for services, is a
solution for the state, raising more Revenue, the city
raising more Revenue, more Equitable tax system, and really
providing a serious fix to Transit. So, that's my pitch on
why we we need to talk about it today because it, it does a
lot of things. And and that's why I think I want us to keep
it front and center lgd fprt. You know, that is how the
state keeps improving its position on the backs of Us and
other municipalities including CPS who relies on pprt. They
they don't get quite as much as we do, but it's very close.
So they have had their budget hit very hard by that. So
it's another thing to keep front and center. Yeah, I I
appreciate that. And, and whether it's a launch or not a
long shot or not.
But they're just fiscal and political realities to if the
federal government's, creating these kind of problems at
the state level and everywhere else.
There have to be adjustments made and that provides a
potential for Mutual wins. Like I I do completely
understand that, I think some of us watching kind of the
challenges in the relationship building between the city
and the state.
It's an added frustration and so I'm glad that there's some
work being done as you think about the long game of it. All
right. Um, I think
uh, question related to it, so
and, and
I don't even go to the casino. I'll start there. I don't
like gambling, I don't win once I lost 60 bucks an hour.
Never again, uh, you are no help to us, right? But we might
have to change that. I'm just saying, like, but video poker
comes up as the airports and everything else. Is that
something where you need state or can the city do it on
their own? We can do it on our own. Um, and just so, you
know, the, I think a gentleman said that we need to have a
subcommittee hearing on that that is the July sub Committee
hearing. So we will be talking about that at length again,
like not my jam but when you need Revenue, you got to
figure out all the above. Um,
I guess, okay.
so last year, when the state first started making the
changes related to grocery tax,
I recall talking to our colleagues and people in the
administration about passing something at that point to get
it done and it nothing moved. During prior to the budget,
which hadn't been included, in the budget, I think might
have gotten done.
In a way that's going to feel a lot easier than this year.
And so then hearing that like 200 or however many
municipalities already did it.
It's a bit frustrating and so I'm just curious as to what
conversations happened last year about the grocery tax. I
mean, we are, we are now but it just it was a missed
opportunity there and just didn't know if that had been a
conversation.
Yeah, I mean um and I I'm not asking you to pass it to to
Neil in a second because he has um, I I wouldn't say
municipalities all pass it like, at the same time that we
could have passed, a lot of them have passed it recently.
And a lot of them are going to be passing it over this
summer as well ahead of their budget Cycles too. Um, and so
it's a complicated, uh, discussion. Um, you know, first of
all I think there was, you know, a lot of work that had to
be done to make sure that we could pass it right that we
had the the home rule authority to to to do that. Um you
know,
I like to think a little bit more about what the
opportunities are in front of us and and and how we can
help shape the, the and inform the discussion, which is why
we brought both Neil and Elizabeth uh, here. Because I
think a lot of times, um, you know, we try to make this
harder than it it needs to be I mean we're talking about
keeping a tax that's already there in place. Um, and we
want to make sure that you have all the information
possible to to make that decision. Um, as it relates to
your constituents, um, were we talking about grocery tax?
We were, we were sort of trying to, you know, see if we
could get it reinstated in the state because
Again, the state is still going to collect it, the state's
not doing anything differently, uh, than what they're doing
today. Um, it it, you know, that it was never a tax that
they collected for themselves. None of the revenue goes to
them. They literally collected on our behalf, um, and, and
we'll still do that. Uh, and so for us it was how do we you
you know, continue to um uh uh provide the information
necessary to make the decision. But also, were there other
options that would help us replace grocery tax, uh, that
were a little bit, uh, less regressive. That was also some
of the things that we were thinking about um, and and we
are where we are today, which is, you know, the state
reinstate it. Um, you know we have overwhelming evidence
evidence that the the vast majority of the state is is
implementing it. Um, on the local level, um, the city of
Chicago, uh, it's a significant Revenue Source, um, in our
general fund that, uh, when we think about all the other
options that we have available to us, would be difficult to
do without putting something like a sales tax on services.
In place which also requires the state action to take?
Sure, no. I I appreciate that. So, I'll turn it to deal. He
can talk a little bit more about how the other
municipalities have gone about thinking about this, um, and
why so many have passed it. And I, I don't know, um, it's
sort of trickled out throughout the year of 2025, but,
Yes. Do you definitely correct in that? So probably a
majority of the communities have passed it, this spring. Um
I think there was there was a little bit of a lull. Uh
Uh, there was some chatter from the most communities in
regards to when they should do it a lot. If you there was a
municipal election, uh, that was, uh, forthcoming, uh, in
in the, in the spring. And so, uh, a lot of communities
waited until that time period. Yep. Completed to, to
implement it. But there were some communities that did
Implement in the late. Um, late winter months as well. But
not as many I would say probably, you know, of the 200
probably around 40 or so that uh were able to pass it
before uh, years in. But the majority have passed it since
that time period. And um as I as I stated in my comments, I
I definitely see a lot more communities from just from
conversations that we've had uh with our members uh, that
they will be passing it in these.
Summer months to come. So yeah. No. I appreciate it. I wish
we were 1 of them 40 at this point but I respect it. Thank
you for that. Um, well just 1 thing you just to to realize
that the the that grocery tax is still in effect. It just
goes it won't go uh be eliminated until the first is just
that's why I was making the case back in 2024. I was like
let's pass this thing and get it over with rather than
having to come back later when it becomes a lot more
challenging for members, right? I think even something like
I guess the pizza delivery tax being a story, right? That
just happened at the state. Those things kind of track a
similar theme, so when you bring up this, it then brings
back. Uh, you know,
Painful memories of soda tax. It's it's sometimes just how
neighbors think of it. So I know although they're
presenting like different points against it, right. Like in
the, in the presentation is really only 1, the neighbors
ain't trying to hear it. And so, I think that makes it
It's just a challenge. And so I just want to get an
understanding of like how other cities were doing it. And
so my last question,
uh and I will see, time is for my dear friend, Ralph who
year after year, after year, after year talks about pension
obligated bonds. And every time I bring it up every
Administration says, why we don't do it, and it drives me
crazy to the point that when people ask for support for
future budgets, I'mma keep bringing it up. So please, if
you share your take on pension obligated bonds, so I no
longer have to hear any more, push back about it and we
actually start doing something like it. I'd appreciate it.
Thank you very much. Okay, thank you so much.
I'm sorry.
Yeah, in the in the shortest response to that I could
possibly make as opposed to giving a 15-minute presentation
with a PowerPoint which is what I would prefer.
We'll get we'll get it next time we'll hook you up. Yeah.
utilizing a limited amount of pension obligation bonds
issued to over a period of time. So you don't worry about
the market risk you heard about from director Guzman right?
So you don't issue them all in 1 year, that's a mistake but
issuing out them out over a period of years and then
flattening and putting all that money into replace existing
debt.
And then flattening the repayment curve. We've won a ream
of the city's pension debt that saves. And I want to turn
to Annie 11 billion dollars saves 11 billion dollars
between now and the end of the ramp period and we'll get
all 4 of your pension systems funded at a higher level than
the current ramp gets them while saving 11 billion dollars
And as far as the risk associated with PBS, it's not really
new debt, it's recategorization of debt, I think. And net
Guzman said, this correctly when it was up there from debt,
you owe the pension systems to debt. You owe Bond holders.
Generally speaking, that debt is at a lower interest rate,
but the good news is the Boston College Center for
retirement. Security did a major analysis. This was done in
like 2016 or 17 of every pension obligation Bond issued in
America for like a 25 year period including the Great
Recession and the mild recession. Following the end of the
Cam. Boom. And what they found was even with a number of
pobs issued, the wrong way, I'll pick on governor bovich in
the 10 billion dollar. Pob he put out the window but only
utilize 7.3 billion to retire. Pension debt. He spent 2.7
billion that's bad. A number of governments did that San
Diego, Detroit whatever. Despite all that, they had a
positive internal rate of return. When you look at the cost
of paying the bond back versus the rate of return, they
generated for your pension systems. So these things are
relatively safe as long as you do them the right way, uh,
the amount of pobs that we would issue over the 5-year
period that I forget off the peppermint.
It's only 4.2 billion in bonds but over like a 4 or 5 year
period. So it wouldn't be a huge amount of bonds in any 1
year but what it allows you to do by front-loading your
pension repayment is to save billions of dollars. In this
case, 11 billion in interest costs over the period of the
ramp. So no tax increase needed to save that kind of money,
and that's why they can be as long as they're part of a
thorough plan part of a, a good approach to uh, finances.
Sure, if you could do the chair, send to Boston study or
any presentation you want. I think we'd greatly appreciate
it. Thank you very much and thank you chairman. And if I
could just uh respond to 1 comment that you made. Um, we
are looking at pinch and obligation bonds. Um, I don't want
you to think that ideas.
That you throw out, uh, chairman Vasquez are not taken,
seriously, they are, uh, some of this has to do with time,
um, to, to understand, um, understand markets and so forth,
But we, we we, uh, Ralph is actually presenting to the
working group on pensions and pension obligation bonds.
Yeah. And, and to be fair, it's not exclusive to y'all
literally every year I bring it up and everyone tells me.
Oh, the market fluctuation. And here's why we wouldn't do
it. So I don't think that it's not taking seriously, but me
not being the bond expert. I'm like, he's here in the room.
So let's hear those so I I do appreciate it. Thank you for
that.
Thank you so much all the men Conway.
Hey. Uh, first of all, yeah, I want to I want to thank uh
all of you for the for the education uh, here today as well
as the presentation, I missed some of the hearing but I
read every word of the presentation possible to go to slide
19.
And I'm sure I'm sure I missed this was explained. So the,
the 40% below budget is that because the nols or the nol
limitation or is there was that already budgeted in and
there's some other problem. Um, it you probably heard, um,
the state revised, its, uh, budget Revenue projections,
down a large part of that, with based on, uh, refocusing
uh Corporation, um, income tax. Um, and so, uh, you know,
we have to rely on the projections that the state puts out
every year I door, uh, as it relates to the income tax
based, uh, Revenue sources. And so we, we obviously budget,
Earlier than, you know, they do um and so our projections
are um based on something that they produced a little bit
earlier now but it it is that related to the nol issue or
no.
Lol stands for oh for the net, you know so you can only so
so don't take on a thousand of deductions anyway, yeah,
there are a couple of things that I think in Ralph can
can definitely go more into this. There's a couple of
things leading to the, uh, underperformance uh, in the
projections, uh, for this year 1 is the cap, um, and and
its effect on that also corporations, uh, based on what's
happening in the economy, um, at the national level are
seeing pressures on their, um, their uh, income, uh,
returns, uh, 2020 through 2022. We saw an over, uh,
performance in corporate, uh, profit based on consumer
activity and consumer Behavior. But also, as Ralph says,
uh, price gouging. Um, we also have a period of time where
the state was doing a Reconciliation between their um, uh,
pprt as well as their state income tax, uh, and that
reconciliation led to, uh, reductions in the distribution
amount to
Municipalities. But you've also got an issue where they just
redid their. They just finished their budget and they have
increased the number of diversions from Municipal, uh, uh,
uh, Revenue to State the state's budget. But Ralph, I'll
let you add any anything else that you'd like to to add as
a relation? I guess the follow-on question which may go
into that is, is there any
Idea that this is going to swing back unless that's just to
to ask you to, like, opine on the economy. Like, is there
any statutory reason? This know what you could expect is
this Revenue Source, even if they revise it to make it
better like fixing the net operating loss. Carry forward,
deduction Etc. We'll continue to decline, probably down to
the 200 to 220 million dollar range, just based on what's
happening in the economy. It it won't stay at the current
level. It'll, it'll continue to decline down from here and
and that's just because the historic rate of growth in this
Revenue source is 0.2%. So if you think about that and that
it grew by 241% over a 3 year period, you see that you had
sort of a major economic blip that we can't sustain. And so
if I might add the 3 things that Ralph, um, mentioned to
you, uh, as the, the things we'd like to see the state do
are the same things that we talked to state legislators
about. And again, as both we've said, Ralph said in, um,
Uh Joe Ferguson said these are conversations that take time.
Um but the 3 things that we're asking for is to make the
revenue Source a little bit more predictable when it comes
comes to a forecasting and then actual performance. So um
if you cap the diversions that the state can can take. It
just makes it a little bit more predictable for
municipalities to forecast their revenue, if you, um, make
consistent the rate at which the different types of, uh,
uh, uh, corporate organizations, are if that standardized
be 2.5%, then you can have a little bit more of a
predictability on the revenue source. And then, if you also
cap the loss of, uh, uh, that can be applied to positive
income. Then again, these are all things that lead to more
predictability, um, rather than swings. But as the state
continues to increase their diversions year over year as
the state, um uh has continued to um increase the cap loss,
uh, the loss cap.
Um, these things lead to that uh unpredictability for for
municipalities and particularly for institutions like CPS.
That's great. Well, it's well it's not a great news but
it's a great education. So thank you very much.
Thank you so much. That's all I got. Yeah. Chairwoman our
last question. Uh, 2 brief questions, uh, director. Guzman.
I know we're going to look at video gaming in June for July
or whatever.
Do you have a sense of what the revenue?
Amount for that might be, I'll let you take that 1.
And then my second question is to the Metropolitan Mayors
caucus, where are your offices located?
Let me go first, sure. Okay, that's easy. 1. Our office are
located at the Old Post Office.
433 West Van Buren in Chicago in Chicago. Yes, thank you.
Um, we have a consultant that we engaged, uh, to look at
uh opportunities for video gaming Terminals and revenues.
revenues and they've done quite a comprehensive analysis
for us. Um, they are in the final stages of cleaning that
a report that comes out. Um, soon, um, the, uh, sort of
uh, sort of initial takeaways from that are that the amount
of uh reduced activity in at the casino particularly in
um where we tax it over 20% versus the vgt activity that we
would tax it over. We would tax that 5.145% um would
essentially offset.
So that in um in the range they did like a low mid high and
in the mid-range we lose a small amount of money looking at
a 10-year Outlook period. And in the high, we raise a small
amount and then the low we give me a number so, huh. You're
not gonna give me a number? I, you know what? I just I want
to wait until we have it finalized but I mean, I can tell
you it's a single digit Millions on the best side over 10
years.
It's a it turns out to be not consequential.
Thank you so much. And, uh, with no further, uh, no further
business before the subcommittee can I get a motion to
adjourn?
So move all the women chairwoman Dow all in favor. Say I
All oppose say nay and the opinion of the chair that the
eyes have it. Thank you so much. The meeting is now
adjourned.