Annual Financial Analysis
Property Tax Expenditures

Property Tax Expenditures

While there are multiple taxing districts and levies reflected on a single tax bill (City levy, county levy, school district levy, park district levy, etc.), this section only discusses property tax expenditures directly associated with the City’s budget – the City levy and Library levy. Revenue from the City and Library property tax levies are used to pay debt service on general obligation debt, the City’s pension contributions, and for library operations. Property tax-derived revenue includes tax increment financing (TIF) revenue; however, TIF revenue must be utilized for specific types of expenses in designated areas and is not general purpose revenue. For more information on TIF, visit the TIF section of this report. Click here to view the TIF section.

Uses of City and Library Levies

The City‘s property tax levy is used to pay for debt service and pension contributions. Historically, in a limited number of years, a portion of the revenue from the City’s property tax levy was used for general operating purposes. The Library property tax levy supports operations, debt service and pension contributions associated with the Chicago Public Library. The chart below details the way in which property tax revenues were appropriated from 2006 through 2017.

In 2017, the City budgeted $397.99 million in property tax revenue to fund debt service payments, which is a $7.4 million increase over the amount budgeted for the 2016 property tax funded debt services payments. In 2016, the City budgeted $390.6 million in property tax revenue to fund debt service payments. The $7.4 million increase between 2016 and 2017 is the result of increased Equalized Assessed Value (EAV) due to new property from new construction and expiring or terminated TIFs. New property generates additional property tax revenue without increasing property taxes for existing taxpayers.

Beginning with the 2015 levy, the City adopted a four-year property tax increase dedicated to funding the City’s contributions to the Police and Fire pension funds. The 2015 levy increased by $318 million over 2014 to support the growing contributions to Police and Fire pensions. The 2016 levy increased by an additional $109 million, and 2017 and 2018 increased by an additional $53 million and $63 million, respectively.

The City’s 2016 budgeted pension contribution from property tax revenue to all four of the City’s pension funds was $786 million with $650.2 million budgeted collectively for the Police and Fire funds and a combined $135.8 million for the Municipal and Laborers funds. The 2017 budget includes $839.1 million in property tax revenue for these four pension funds – $703.3 million budgeted for the Police and Fire pension funds, and $135.8 million for the Municipal and Laborers’ pension funds, including $5.3 million from the Chicago Public Library property tax levy.

The City’s annual contribution to each of its four pensions is funded through property tax revenue along with operating fund revenues, including the enterprise funds’ proportional share of each year’s pension contributions. The City’s pension obligations and annual contributions across all revenue sources are discussed in greater detail in the Pensions section.

In addition to the amounts levied for City operations, the City levy includes amounts dedicated to the payment of bonds for City Colleges of Chicago and the Chicago Public Schools. In 2017 the City’s levy includes $36.1 million dedicated to the payment of bonds issued in 1999 and 2007 by the City on behalf of the City Colleges of Chicago. This amount is sometimes discussed as a part of the overall City property tax levy. However, because City Colleges of Chicago functions as a separate governmental unit, this portion of the levy is not discussed in detail here and is not included in the figures above.

The City adopted a separate levy to pay debt service on bonds issued to fund the construction and improvement of buildings for Chicago Public Schools (CPS). In 2017, this levy is $94.8 million. This levy is not discussed in detail here because CPS functions as a separate governmental unit and is not included in the above provided figures.

Library Funds

The City maintains a segregated fund to support the maintenance and operations of the Chicago Public Library system. Revenue to fund the library system comes from property taxes and an annual subsidy from the City’s corporate fund.

The portion of the City’s property tax levy dedicated to the library system increased each of the last three years as the City captured EAV from new property and expiring TIFs. The 2017 library property tax levy is $89.9 million which includes a portion of the library system operating costs, funding for debt service payments for the library capital program at $4.2 million, and a portion of the pension expenses associated with the library system at $5.3 million. More details on the system-wide costs of the library system and associated funding are included in the Library Fund portion of the Expenditure section.