Here is an edited transcript of the conversation:
David Greising, BGA President: As you look back on the whole budget process, what do you consider the toughest decision you had to make?
Chicago Mayor Lori Lightfoot: How to get a balanced budget without significantly raising property taxes.
BGA: Avoiding property taxes was an objective right from the start. Tell me about that.
LIGHTFOOT: It’s the thing I’ve heard wherever I go. We certainly heard it as a consistent theme throughout the budget town halls, in the survey, and at events around the street.
It’s become the third rail in a significant way, in part because we just ended in 2018 the largest property tax increase in the history of the city. There has been a lot of ink spilled about the unfairness of a property tax assessment system. In July, a lot of people got their new assessments, and for many it went up exponentially. I know mine did.
BGA: There is a rule of thumb some politicians have that in the first year, that’s the time to make the toughest decisions, so they have three years to let it play out. It sets them on a trajectory that makes subsequent budgets easier to deal with. Did you make any effort to make this that kind of a budget?
LIGHTFOOT: There are people who tried to give me that advice, that if you’re going to do a property tax increase, do it now. As if people will try to forget. No one will forget. Certainly not anyone who will run against me in a reelection.
We tried to do everything we could to live up to the guidelines I set as a candidate. To look inward first, to look for every way that we can to make government run much more efficiently, and really try to drill down on saving there first. And only after going through that process, then we would look at progressive revenue sources. And that’s the process that we followed.
BGA: Were you surprised at the amount of money that was found–$200 million in savings— through zero-based budgeting?
LIGHTFOOT: I worked for the city before. It didn’t surprise me. And I think there probably is more that we can find and we will.
BGA: Will that be an annual process?
LIGHTFOOT: I can’t say it will be an annual process, but we are going to hold people much more accountable in a way that they manage the budgets they have. I know from having worked in city government that budgets were regarded in many instances as guidelines, but not mandatory, that managers weren’t held accountable for meeting their marks. That’s not going to be the way in which we govern.
BGA: You’ve already sent out a memo, during the summer, about reducing overtime and absenteeism. What is your messaging around budget discipline, and how do you plan to enforce it?
LIGHTFOOT: I wanted to make sure that people were very, very clear about what is important to me. It’s not only the memo I sent out. I raised this issue at one of our very first cabinet meetings, that we were not going to be in a world in which there was no accountability for management.
There is a monthly report on absenteeism. There are certain job categories and departments that are chronic abusers of absenteeism and of medical roll abuse, and yet the commissioners did nothing. The report also shows whether or not any actions were taken and if so what they were. And report after report showed that the commissioners effectively ignored the reports that were coming out.
I wanted to reinforce in their mind that ignoring it was something that they were doing at their peril.
BGA: What sort of actions have you taken to underscore that?
LIGHTFOOT: I start with emphasizing the priority and importance, and hoping that you get compliance. But if we don’t get compliance, then the people who are out of compliance are going to come down and sit with me. And if that doesn’t change, then there are going to be changes in the people who sit in those seats.
Debt Refinancing and Structural Savings
BGA: Let’s talk about refinancing. You found a lot of money, $200 million, with the refinancing of debt this coming year…
LIGHTFOOT: Yeah, interest rates are incredibly low, so just like a homeowner who when you see that you are at X rate and the market is below that materially, you refinance. And that’s essentially what we did.
BGA: Jennie Huang Bennet, the city’s chief financial officer, told me she sees potential savings of between $50 million and $100 million a year from refinancing in subsequent years, based on the debt maturities that come about. But it just so happens that in 2023, there are no maturities, so that as you prepare your election-year budget, your 2023 budget, you’re not going to be able to rely on something like this.
LIGHTFOOT: That may be so.
BGA: Does that concern you, given the timing?
BGA: It’s a pretty substantial part of this budget, and at $50 million to $100 million a year, it’s pretty substantial going forward. And that’s against the face of pension numbers that by that time will be up by nearly $1 billion a year.
LIGHTFOOT: Keep in mind that by that time we’ll have a casino up and running that provides a dedicated income source to police and fire pensions, which means that the moneys that we’re now devoting to those from the corporate budget will be available for other purposes. And I also expect that certainly by 2023 we should be able to see a substantial decrease in the amount of settlements and judgements that is related to the police department. I think we will see substantial savings in the amount of moneys that are spent on workers compensation. And police overtime as well.
Those are big drivers of our costs, all of them. If we make a substantial dent in that, we will have saved an enormous amount of money year over year.
We didn’t look at, ok, how do we solve this year’s budget and not look at the out years. Sixty percent of this year’s budget is solved with structural solutions that will redound in the out years because we’re looking at the out years.
There are big ramps that keep climbing for many years to come, so we had to start now with many changes that will last for many, many years, way past the horizon. If we get the kind of structural fixes that we need in place, we think that, very soon, we’ll actually get to a place where we’ll have a budget surplus. That would be quite something.
Building the Mayor’s First Budget
BGA: If we can take a step back to talk about this process, tell me about your direct involvement in this. How you organized this work.
LIGHTFOOT: I plugged into the budget back during the transition when I found out we had a billion-dollar hole. I plugged in pretty direct, after I picked my jaw up off the floor.
It started with, ok, we’ve got this massive hole. We’ve got this massive team that was working on this issue starting from the very beginning, meaning the beginning of the transition. We began working hand-in-hand with Mayor Emanuel’s team to understand the magnitude of the challenges we would be facing.
After that, we started looking at a range of different options. Jennie came to us during the transition, and (Budget Director) Susie Park, and they were really on board before I was sworn in.
That work has continued from day one: What are we really looking at in terms of the magnitude of the problem? That was the initial work. After that, we started looking at what is it we can do internally, with the guidelines of let’s look internally first. How can we make things run more efficiently?
And we were doing this simultaneously with what do we have in terms of revenue options. I had feelings about a lot of them one way or the other, so we started to winnow down both the size of the gap and what the options were that were out there.
The Challenge of Maintaining an Equity Agenda
BGA: When we look at the spending side, the numbers that are out there: For example, $10 million for affordable housing and homelessness, against the size of the overall budget, how do you feel about the amount of money you’ve been able to devote to your equity agenda?
LIGHTFOOT: Keep in mind, we’ve doubled the amount of money we’re spending on homelessness. We’ve made substantial increases in the amount we’re spending on mental health and violence reduction initiatives. That’s on top of what historically has been spent. So we’re doing increases, not starting from zero and then adding. I want to make sure that’s clear.
Look, I feel good about what we’ve done in the environment we’re operating in—an $838 million budget hole for next year. If we weren’t really still focused on making investments in human capital and otherwise, we could have said these all go by the wayside and we can’t afford it. That would have been the easy thing to do.
What we tried to do instead is, we said, ok, we’ve got this responsibility to close the budget gap, but let’s do it in a way that speaks our values, that is focused on equity, and making the kind of investments we know are important, that really start to move the needle on areas that are important to us, like violence, like homelessness, like mental health, like affordable housing, like economic development.
BGA: In your speech, you mentioned the Invest Southwest Initiative–$750 million over three years—there is not a spending item in the budget that allocates that money. How does that work?
LIGHTFOOT: That’s money and projects that were already in the pipeline. That’s using TIF dollars, that’s the Neighborhood Opportunity Fund, that’s using potentially Catalyst Fund dollars and repurposing that focused on these commercial corridors that we feel we really can catalyze the investments, not only by the city but then attract private investment as well.
My hope is that this will be well over $1 billion when it’s all said and done, because we’ve harnessed private investment as well.
BGA: Sometimes when I’ve talked to people about economic development and TIFs in particular, they say you can put TIFs in some of these neighborhoods and that still won’t attract investment capital.
LIGHTFOOT: Well, we’re not just doing that. I really have to credit both Samir Mayekar, our deputy mayor for economic development and neighborhoods, as well as the team at planning, Maurice Cox and Eleanor Gorski. They have done a lot of hard work in looking at the economic buying power in some of these neighborhoods.
For example, you look at the Austin neighborhood. A lot of people would look at Austin and they’d think poor, violent, lack of investment, not much going on there. Absolutely not true. You look at the buying power in Austin, and literally hundreds of thousands of dollars a year are going to Oak Park because the Austin neighborhood doesn’t have the amenities to support the kinds of things that people need.
It’s called leakage, and we see that happening all over the city, and particularly in these corridors and neighborhoods that we’re focused on. So when we are presenting that data to potential corporate investors, to retailers and so forth, they’re actually surprised to see that there is that buying power in these neighborhoods.
BGA: You already announced this $10 million investment from BMO. Are there other such programs in the works right now?
LIGHTFOOT: Yes. Am I going to tell you what they are? No. There are other announcements we will be making, there are other people interested in making investments.
We found we needed to land the process first, in order to convince people. We also thought it was important that we demonstrate to potential investors that we as a city had skin in the game. We weren’t just saying, ‘Please, please, please, put a store here. Do this, do that.’ We were putting our money where our mouth is and we were leading this effort.
BGA: I’d like to ask about the Department of the Environment. The BGA did some reporting about what happened after Mayor Emanuel eliminated the department. You said during the campaign and you’ve reiterated since that you plan to reinstate that. It’s been unclear exactly what you plan to do.
LIGHTFOOT: Given the size of our budget deficit for next year, what we’ve decided to do is to have an office that sits in the mayor’s office. There are pieces of the Department of the Environment that get dispersed to other city agencies, and because of that, no one made it a priority. Having somebody who leads that initiative in the mayor’s office, and pulls together all those different pieces that have been to the winds, we’ll have much more focus on leading on environmental issues. That’s what that concept is.
BGA: The BGA did its reporting, then the Inspector General did a report that built on what we found. Are you saying that those issues addressed in those two reports will be addressed?
LIGHTFOOT: In terms of having a single point of contact and a lead on environmental issues for the city, yes, that issue is addressed.
We have just not been present on a range of different issues. The City of Chicago ought to be present not only on issues that are unique to the city, but we need leadership on our lakes, we need leadership on climate change. We need to be performing a leadership role on environmental justice issues that are not just city specific but regional issues and really national issues as well.
When you don’t have one person who speaks on environmental issues for the city, there are lots of missed opportunities for us.
BGA: Who will that one person be?
LIGHTFOOT: I haven’t hired anybody yet, but we’re in the process of sourcing that person. They’ll be situated in the mayor’s office.
BGA: But you won’t create a department for that purpose?
LIGHTFOOT: We want to take this initial step and see where it goes. You’ve got to crawl before you walk, then walk before you can run. Then we’ll look to see what more we need to do to augment it in the out years.
City Response to Freedom of Information Act Requests
BGA: I wanted to ask about the city’s response to Freedom of Information Act Requests. You during the campaign were strong on FOIA issues. As you may know, after the Tribune published a lead-in-the-water investigation, the BGA sued for some records of city communications done on private devices, similar to what we did during Mayor Emanuel’s administration. The city has rejected our FOIA and forced us to sue.
LIGHTFOOT: What I feel about this is, we have a lot of lawsuits pending. What I’ve asked the corporation counsel to do is to evaluate all those lawsuits to make sure that the things we are contesting are really consistent with our values.
My view is that I think we still have a long way to go, but ideally, I’d like to get to the point that a ton of information is available, so that cuts down on the need to even file FOIAs, let alone get to the point of a lawsuit.
The Need for Pension Reform
BGA: On pensions, do you today have a plan in mind, a broad outline, of how you get to, year- over-year, a billion dollars more in annual pension payments?
LIGHTFOOT: It starts for us with the casino, because casino revenues are dedicated to police and fire pensions. And helping us climb that ramp is critically important. The real estate transfer tax is something else that we’re looking to.
But we also need to have a real conversation at the state level around real pension reform, not just for municipalities, but for the state itself. And that’s why I have been in conversation with mayors across the state to talk about that issue, to raise a chorus to say to the governor and the state legislature, we have to get something done.
Now there are some incremental steps to be taken. The governor’s task force recommended the consolidation of police and fire pension systems downstate, primarily on investment and administrative functions, and that’s a step in the right direction. But there’s much, much more that has to be done.
BGA: You’re talking about reforms at the administrative level. But I haven’t seen you specifically say that a constitutional amendment, the constitutional language, ought to be on the table.
LIGHTFOOT: The governor has been very clear that he does not favor a constitutional amendment.
BGA: What about the Mayor of the City of Chicago?
LIGHTFOOT: Well, I’m dealing with the political realities. We need to make structural reforms. That’s very clear. There are a lot of ways in which that can be accomplished. But I think that we have to at least start the process of having a conversation about what those tools and options are.
As you well know, there was this huge effort that was made at what turned out to be the end of the Quinn administration. Forces gathered, legislation was passed, signed by the governor, went up to the state supreme court and then got shot down twice. Then more recently, there was a First District appellate decision here regarding the Park District. And it’s almost like people retreated to their neutral corners, but the problem didn’t go away. It got worse. So, we have to reengage. And whatever it takes to reignite that conversation, I’m all for.
BGA: It sounds like you’re saying up to and including, if the politics worked, constitutional reform.
LIGHTFOOT: I’m very clear that the governor is opposed to a constitutional amendment. I think that makes it very difficult if not impossible. So, short of that, we have to look at what other options are on the table. There are some interesting ideas, I won’t go into them here, but where we have to start is let’s open up the conversation. Let’s get people to realize there is this sense of urgency.
When you look across the state, take the city of Peoria or other cities downstate that have raised their property taxes to the max, that have cut back on city services, laid off, sold assets, and are still awash in pension debt, we are bankrupting the future of the state if we do not deal with this issue head on. This isn’t just a problem with Chicago, it’s a problem with municipalities across the state.
BGA: The governor introduced a progressive tax, and didn’t introduce a constitutional amendment on pension reform. Would you have liked to see the governor do those both at once?
LIGHTFOOT: What I would have liked to see is a concerted effort to tack pension reform for both the states and municipalities. Whatever form that takes. We need to open up the conversation again. We need to have a sense of urgency about it, and we need to come up with real solutions.
BGA: The problems in downstate cities has been an overlooked part of the story in many respects.
LIGHTFOOT: It will be interesting to see what happens in the veto session about the consolidation bill, because interestingly, the fire guys are for the consolidation. The FOP statewide is adamantly against it. It’s like, yeah, but you do know that these are bankrupt, right? And they need some help.
The pension dynamics are fascinating.
The practical matter is that if you don’t rein in the size of the growth in pension liabilities, all of these other things are just nibbling around the edges.
Police Superintendent Eddie Johnson’s Job Security
BGA: Your back-and-forth with President Trump while he was in town was interesting.
LIGHTFOOT: You knew he was going to say something outrageous.
BGA: Your shout-out to Johnson during the budget speech came as a surprise, given the conversation in the city about Johnson’s job security during the summer and beyond.
LIGHTFOOT: Here’s what I think about that. The guy stepped into the breach at a time when our city could have easily come apart. Let’s not forget that cities all over the country were literally burning down in relation to police-involved shootings and the like. And he stepped into a huge void. He calmed the city, and I think he did a lot to bring people together. That was important and valuable, and I don’t ever want to diminish that.
Look, there is more that needs to be done, and we will get it done. But I can’t ignore the fact that he did the city an incredible service, and he did it while—the guy had a kidney transplant in the middle of all this, right? So, I try to take the long view on things. We all have strengths, we all have weaknesses. But he did a huge service to the city at a really difficult time, and I’m not going to forget that.
These last three years that he has been superintendent, there have been some highs but there also have been some incredible lows, and the average life expectancy of a big-city police chief is about three-and-a-half, four years, and he’s inching toward the outer edge of that. When you’re talking about police, and you’re talking about the leader of a really complicated, complex institution like the Chicago Police Department, you have to have a broad lens by which you view every issue.
BGA: And if you were going to make a change, you would make a change in the fall ideally as opposed to next year. And what you’re saying and what you said during the budget speech leads to the conclusion that maybe you’re planning to stay with Supt. Johnson for the foreseeable future.
LIGHTFOOT: Well, look. I think it’s important that the leadership at the top is stabilized. I need officers to focus on their daily mission. I don’t need them worrying about palace intrigue.
Eye of the Storm
BGA: How are you holding up?
LIGHTFOOT: I feel like I sit in the eye of the storm, where I know there is a lot raging around me. My goal is to always remain calm, and focused, so that we make rational decisions, not stuff that’s spur of the moment and reactive.
It’s hard to do, but that’s what I try to focus on every day. My team needs to see me as calm, and the public needs to see that as well.