Chicago Revenue Trails Estimate With Rebound in ‘Early Stages’
(Bloomberg) -- Chicago’s revenue for the first two months of 2021 was 0.6% below projections in the budget approved late last year, finance officials said Wednesday in their first quarterly update to the City Council since the pandemic began.
In a meeting of the Council’s Committee on Budget and Government Operations, aldermen and budget officials weighed priorities such as repaying debt taken on to close deficits and how to address community needs that have grown during the outbreak.
The discussions came amid a debate of how to spend an estimated $1.9 billion earmarked for the city, the nation’s third-biggest metropolis, in the American Rescue Plan. Budget officials said repaying borrowings used to bridge deficits is a priority, but several officials stressed the importance of assisting the city’s roughly 2.7 million residents more directly.
“It is still important to recognize that the city is in the early stages of our recovery from Covid-19 and that the predictability of the recovery is still uncertain,” Chicago Budget Director Susie Park said during the virtual meeting. “Subsequent waves may further impact various revenue streams.”
The city’s chief financial officer, Jennie Huang Bennett, detailed the severe economic fallout from the pandemic. Chicago has lost an estimated $1.7 billion in revenue across 2020 and into 2021, Bennett said.
The city has had to cut spending, raise taxes and use debt-refinancing and restructuring measures known as “scoop and toss” to close budget gaps of almost $800 million last year and $1.2 billion in 2021.
In the first two months of 2021, Chicago collected $263.2 million in revenue for its corporate fund, its main operating account, according to a quarterly budget report presented during the meeting. That tally is below the $264.8 million projected for that stretch and trails the $273.6 million collected during the year-earlier period, according to the report. Rising Covid-19 infections toward the end of 2020 delayed the recovery in sales, recreation, business and transportation taxes, Park said.
The city has started to draw on a $465 million line of credit from JPMorgan Chase & Co. to close the 2020 budget gap and had planned an additional $500 million in debt restructuring to close the 2021 deficit, according to budget officials. Park said the city wants to use part of the estimated $1.9 billion in American Rescue Plan funds to repay the debt taken out to close the 2020 budget gap and cancel a planned debt restructuring to close the 2021 deficit.
Alderman Jason Ervin said during the meeting that he understands the need to repay the debt but he’s hoping for some flexibility on how to use the federal aid given the “extensive amount of support” many Chicago residents will require.
The region’s jobless rate, at 8.8% in February, was more than double levels from a year earlier.
“We’ve got some fiscal challenges again ahead of us,” Ervin said. “It’s going to be a tough sell to say, ‘Hey, we are only going to take care of our needs as government and not necessarily look at the needs of the people, residents, citizens of the city of Chicago.”’
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